Iowa Supreme Court says it all boils down to possession of the property.

One of the most common hazards at a showing? Slip and falls—and the lawsuits that might follow. But the particular circumstances of a case can have a big effect on the legal outcome, as demonstrated by a recent Iowa lawsuit in which a prospective buyer’s fall on the property didn’t result in broker liability.

The case: After she slipped, fell, and injured herself on the icy driveway at a vacant for-sale home, prospective buyer Amanda DeSousa sued the homeowners, Matthew and Melissa Fynaardt, and the listing brokerage, Iowa Realty. Neither the Fynaardts nor the Iowa Realty broker were at the property that morning.

DeSousa, who visited the property with her buyer’s agent, alleged the defendants were negligent because they didn’t warn her about or remedy the icy driveway. Iowa Realty argued it owed no duty because it didn’t own the property, none of its agents were there at the time and the danger was obvious. But DeSousa argued there was a material fact as to whether the list- ing broker controlled the property.

The ruling: The Dallas County District Court denied Iowa Realty’s motion for summary judgment, saying a jury could plausibly find the brokerage should have cleared the area.

Iowa Realty appealed the denial to the Iowa Supreme Court. The argument on both sides turned to whether the listing broker had a duty to protect prospective buyers from hazards on a property as the “possessor.” Relying on state precedent, the court noted that a land possessor is someone who:

• Occupies and controls the land
• Is entitled to immediate occupancy and control, if no one else is
• Had occupied and controlled it, if no one subsequently became a possessor

The court reversed the lower court’s decision, ascribing a duty of safety only to the homeowners as “possessors” of the property. The justices noted that Iowa Realty’s sell- ing role didn’t entitle the brokerage or its agents to occupy or control the property, likening the situation to vacationing homeowners leaving their keys with a neighbor. The court held that scheduling a showing doesn’t transfer control, so Iowa Realty couldn’t be held responsible for DeSousa’s injuries. While the court didn’t explicitly say so, it can be inferred from the language of the decision and from past case law that had the listing broker been there, the court might have found him liable in a “dual possession” capacity because he was conducting business on behalf of the owner.

Best practices: The case centered around an accident that followed an overnight winter storm, not a condition that could have been known in advance by
the listing agent. However, if there are known property hazards in a listing, it’s important for the listing broker to review them with the sellers and note them in the MLS. That’s especially important for vacant properties. And keep those insurance policies up-to-date.

©National Association of REALTORS®
Reprinted with permission

The steps you need to take if you receive a fair housing complaint.

If you’ve ever been on the receiving end of a fair housing complaint, you know how badly it can rock your world. Whatever the circumstances, you’ll have a better outcome if you take a serious, straightforward approach.

Start by contacting your attorney. Then, call your local or state association’s legal hotline for advice on next steps. You’ll want to gather records of all contacts you’ve had with the complainant. That’ll be easier to do if you have a system for keeping track of all your client interactions, including e-mails, text messages, and signed agreements and contracts.

Once an investigation starts, it’s important to stay out of the way and let the investigators find out what happened, says Idaho practitioner Steve Osburn, who faced a complaint against his former company.

In 2008, a local fair housing group charged that one of his agents tried to steer sales in a new housing community toward people 55 and over. The Intermountain Fair Housing Council in Boise was performing testing in the community, which the developer had been advertising as an active-adult community, though it did not qualify for the Housing for Older Persons Act exemption to the Fair Housing Act. Osburn—at the time broker-owner of Windermere Real Estate/Capital Group Inc. in Boise—says the complaint was slim on details, and he was confident the agent had done nothing wrong. He fully cooperated with the U.S. Department of Housing and Urban Development’s investigation. “You don’t want to push too hard against the complaint or the investigation,” he says. “You don’t want to look like you have something to hide.” 1:21

The council dropped its claim with HUD but, nevertheless, filed a $300,000 lawsuit against Osburn’s company. During the discovery phase, Osburn’s attorney showed that HUD hadn’t found evidence of wrongdoing by the agent. The attorney said HUD was about to side with Osburn when the council dropped its claim. Osburn settled the lawsuit for $500 and admitted no wrongdoing.

“From a broker’s perspective, educate your agents frequently and talk about fair housing openly so they have good information,” says Osburn, now a broker-associate with Better Homes and Gardens 43˚ North in Meridian, Idaho. “Second, never roll over and just accept a complaint—but do allow the investigation to get the facts.”

©National Association of REALTORS®
Reprinted with permission

The meticulous work of drafting a new ethics rule will pay off in clarity for our profession and the public.

Nothing matters more to a service profession than public trust. REALTORS®, whether specializing in sales, appraisals, property management or other disciplines, need to be trusted by members of the public in order for our services to be valued and considered beneficial to society.  

In recent times, no topic has tested the public trust more than the issue of appraisal bias, and specifically appraisal bias against people of color.  

It is deeply troubling to me, and to appraisers in general, to hear stories in which families are affected in such a way that they feel they must hide who they are in order to obtain a fair valuation. No one should ever have to go to such lengths.  

The Appraisal Standards Board takes the issue of appraisal bias very seriously. An independent board of the Appraisal Foundation, ASB is tasked with writing and updating the professional appraisal standards used in every state and territory of the United States. The Appraisal Foundation is a nonprofit entity that was granted the authority by Congress to be the keeper of these standards, known as the Uniform Standards of Professional Appraisal Practice.  

Over the last several years, the ASB has been working on clarifying standards regarding discrimination that go beyond the existing requirement of simply not performing an assignment with bias. The ASB is getting closer to adopting these enhanced ethical obligations, with the goal of maintaining public trust in the profession.  

As a third-generation member of the National Association of REALTORS®, I understand the need for strong ethical standards to govern our profession, as well as the need for REALTORS® to understand and uphold them. Furthermore, in order to maintain the public’s trust, we must allow the public to see our standards and understand them as well. The work the ASB is doing will result in clear and enforceable standards that everyone, both within our profession and outside of our profession, will be able to understand.  

When making changes to USPAP, the ASB releases a document known as an exposure draft to the public. The draft shows what the ASB proposes to change within USPAP, as well as ASB’s rationale for proposing the change. The ASB solicits feedback on exposure drafts from various stakeholders including appraisers, regulators, federal agencies, lenders, educators, professional organizations and consumers. Based on that feedback, the ASB may decide to adopt the changes or may make additional revisions and issue a subsequent exposure draft. No change to USPAP may be made without exposure and public comment.  

At our public meeting last month, the ASB announced that, in response to feedback from the public, we are continuing to work on the proposed edits to the USPAP ethics rule. This rule specifies the personal obligations and responsibility of the individual appraiser. The ASB will continue this engagement so that the revised rule and accompanying guidance will clearly convey the prohibition against illegal discrimination.  

Four exposure drafts have been released to date, and a fifth one will be released soon, most likely within the next few weeks. (Watch The Appraisal Foundation’s website(link is external) for updates.) Making revisions to USPAP is an intense and exacting process, because it is imperative that the ethical and performance standards for the valuation profession be clear and enforceable. This process demonstrates the ASB’s commitment to drafting precise, clear and direct language.  

There’s a light at the end of the tunnel. When our work is finished, USPAP will include language in the ethical standards that will enhance public trust and allow for those both within the profession and outside the profession to understand the obligation for equal treatment under the law.

©National Association of REALTORS®
Reprinted with permission

Home buyers or sellers may back out of a home sale for any number of reasons, but lawsuits are a real risk. Know how to protect yourself.

Most real estate professionals have had a client with cold feet back out of a deal at the last minute. Maybe the client got psyched out over finances or is dealing with a life-changing circumstance that prevents him or her from following through on a sales contract. Whatever the case, you need to make sure that when you cancel a contract, you’re not breaking your fiduciary responsibilities.

While only 5% of sales contracts nationwide were terminated in January, according to the most recent REALTORS® Confidence Index, that figure was at 16% last July—the highest rate in the previous two years. The midsummer spike was attributed to a sharp rise in mortgage rates, which scared off many buyers at the closing table. The latest Window to the Law video from the National Association of REALTORS® addresses the legal considerations you should keep in mind in case you’re involved in a canceled contract.

Even though signed purchase contracts are legally binding, they often include an exit plan if one party wants to back out. A home buyer, for example, may be able to cancel a contract because of a contingency or during an attorney review period. Canceling a contract can become trickier when the reason falls outside of the agreed-upon contingencies. But unfortunate circumstances, such as a job loss or change in household status, may result in the need to cancel.

In every transaction, real estate professionals can help their clients understand the acceptable “outs” to avoid the risks of losing escrow money or even facing a lawsuit, NAR staff attorney Mike Rohde says in the Window to the Law video. “Every contract has an implied duty of good faith and fair dealing, which means parties must act honestly, cooperate with the other party and not discourage or hinder the agreement’s completion,” he adds. Breaching this duty could jeopardize a buyer or seller’s legal rights and lead to litigation. “And as a fiduciary, an involved broker’s actions or inaction may be scrutinized when a contract is terminated.”

For example, if a home seller backs out, a buyer could try to pursue any number of avenues if they think there was a breach of contract. A buyer could try to receive liquidated damages specified in the contract or compensatory damages calculated by actual economic losses. The buyer also could cite specific performance by asking a court to require the parties to complete the originally agreed-upon transfer of property. 

To avoid these risks, Rohde urges real estate professionals to advise their clients about the importance of contingencies and meeting deadlines as well as the risks of waiving contingencies. Also, “avoid casual communications with other parties via text or email, and assure amendments are in writing and signed by all parties to avoid doubts about enforceability,” Rohde adds. And be careful not to overstep your duties. “While you may understand the terms of the agreement, your state law and Article 13 of the Code of Ethics prohibit the unauthorized practice of law,” Rohde says. “Filling in state-approved forms with factual data is generally permitted. However, use caution when interpreting or amending contract provisions. Your state may have statutes governing specific procedures for effectuating a notice of termination or the disbursement of disputed escrow funds.”

©National Association of REALTORS®
Reprinted with permission

More than 50 years after the federal ban on housing discrimination, upholding the law’s spirit remains a challenge. Here’s how to be a fair housing leader.

Sandra Butler refused to let it slide when a seller she represented made what felt like a discriminatory comment. The seller thought the buyers, who had foreign-sounding names, were trying to negotiate for too many repairs. “I know how these people are, and they always want something for nothing,” Butler recalls the seller saying.

Butler is African-American. So was her client. And she didn’t want the seller to “think this conversation could be had because we look alike,” she says. Instead of flatly admonishing her client, Butler turned the conversation to fair housing law. “I said, ‘I don’t know the buyers or what they look like. I just know they are ready, willing, and able to purchase, and it’s our duty under the law to make your property available to them,’” says Butler, a sales associate with Sibcy Cline, REALTORS®, in Cincinnati. The deal ultimately fell apart over negotiation terms, but Butler was satisfied that she’d made her client more aware of a seller’s responsibility to abide by the federal Fair Housing Act, which prohibits inequitable treatment in the sale, rental, and financing of homes based on race, color, national origin, religion, sex, disability, and the presence of children.

Each April, REALTORS® celebrate Fair Housing Month to commemorate the law, which was passed in 1968 and amended in 1988. Yet more than 50 years after its passage, racial and religious tensions continue to dominate national conversations and stoke heated rhetoric in presidential politics. Is that tension having an effect on real estate sales? Apparently not. Housing discrimination is the exception today, according to a REALTOR® Magazine survey of National Association of REALTORS® members. Of the 2,300 respondents, more than 80% said they had not encountered housing discrimination in their market.

That’s great news. And yet, fair housing challenges remain. Violations—and government efforts to enforce the law—continue. Nearly 10% of respondents to the survey said they had encountered discrimination in their markets, 18% of those saying it happened within the past month or “earlier this year.”

Fair housing organizations receive about 25,000 to 30,000 complaints each year, according to the National Fair Housing Alliance, a coalition of privately run fair housing groups. Yet, testing suggests there are many more instances of discrimination—the NFHA estimates about 3.7 million annually. The U.S. Department of Housing and Urban Development has conducted thousands of tests in recent years, employing housing organizations to send testers out to view for-sale and rental properties as a means of determining whether landlords, lenders, agents, and others in the real estate community treat protected classes differently.

Cliff Long, CEO of the Birmingham Association of REALTORS® in Alabama, says discrimination in the rental process is the biggest issue in his market. When he was relocating to Birmingham three years ago, he experienced it firsthand. Long, who is African-American, says several landlords wanted him to produce financial records before they would show him rental units—a practice that fair housing groups say is often aimed at minorities only. Having just taken the top job at the association, Long decided not to file a complaint.

Nearly all respondents said if they encountered potential discriminatory language or actions, they’d likely address it the way Butler did—by engaging in some straight talk about the law with their client. Less than 3% of respondents to the survey said they’d file a complaint, and less than 1 percent said they’ve ever filed a fair housing complaint.

Putting Your Training to Work

As an NAR member, you’ve made a commitment to equal treatment—not just because it’s the law but as part of the REALTORS® Code of Ethics. NAR requires that members stay up to date on the Code, completing training at least every four years. In addition, states and localities often have their own fair housing laws, so state and local associations administer specific fair housing training for their members. Typically, licensees are required to take a two- or three-hour course every two to four years.

So there’s little doubt that when clients ask questions about quality of schools, local demographics, and neighborhood safety, you know to refer them to reliable information sources for answers rather than give your opinion. Resist the temptation to skirt the subject, says Mabel Guzman, CIPS, a sales associate at @properties in Chicago. You’re not teaching them anything by being coy. Be frank about why you can’t answer certain questions. Seize the opportunity to explain fair housing laws and why it would be illegal to offer your opinion.

Curiously, more than 30% of respondents to REALTOR® Magazine’s survey said they don’t talk about fair housing issues with buyers and sellers. Whether that’s because they don’t encounter discriminatory behavior or because they’re too uncomfortable to challenge that behavior is not clear. It can be tempting to overlook questions or statements from clients in order to avoid an awkward exchange that could affect your business relationship. Addressing such issues in a nonconfrontational way, with fair housing law as the framework, can help.

The Challenges Ahead

When you’re working with first-time buyers, particularly from new immigrant populations, you may need to actively educate your clients about fair housing law. Immigrants are an increasing target for discrimination in real estate, contends Lisa Rice, NFHA executive vice president, and many are unfamiliar with their rights under the law. “If no one is mean or disrespectful,” she says, “it’s not the first thing on your mind that maybe that house wasn’t made available to you because you were being discriminated against. Trained real estate practitioners can recognize discrimination and be part of how we bring awareness to the public.” The Alliance expects to see a rise in national origin–related cases in the coming years, Rice says.

As a Muslim woman living in the South, Firdaus Rahman, CRS, GRI, a sales associate at RE/MAX Partners in Mobile, Ala., admits she’s worried that Islamophobia—a hot-button issue in the 2016 presidential race—is becoming more acceptable and leads to unfair treatment. Rahman has been teaching fair housing and diversity courses through the Alabama Real Estate Commission since 2002, but the curriculum doesn’t go deeply into religion. She says the training needs an overhaul to reflect new issues surfacing in the field.

“You have to understand where people from different cultures are coming from,” Rahman says, adding that sensitivity to certain holidays and holy days is an important part of working with clients.

Also, because some cultures don’t participate in banking and savings in ways that are customary in the U.S., landlords, lenders, and real estate practitioners may have to educate their clients about U.S. customs or even adjust their expectations. “When immigration reform begins, we’re going to need a lot of education,” Long says. “You can bet fair housing is going to be front and center, and we’re going to be in a bad position if we’re not ready to tackle this issue. I’d like to play a proactive role rather than a reactive role.”

Brokers can take the lead on that front and establish relationships with local fair housing organizations to get a better look at the issues facing local markets. After the NFHA filed discrimination lawsuits against several brokerages nationwide in 2007, including one in the Detroit area, Michigan REALTORS® partnered with fair housing groups around the state to bring regulators and practitioners together. The association developed a program to allow brokers to be voluntarily tested by fair housing groups for informational purposes, hoping it would foster more collaboration on training in the industry. “Part of the testing was about demystifying our relationship with fair housing centers,” says Brian Westrin, the association’s director of legal affairs. “There was a lot of unknown there about whether brokers could reach out and bring fair housing centers into their office for education.”

Addressing the Affordability Barrier

One of the underlying goals of fair housing law has been ending segregated housing patterns in the United States, but census data show the law has fallen short. So last year, President Barack Obama announced a new rule requiring local governments that receive federal housing funds to report how they use those funds to foster more integrated communities.

Lack of affordable housing can perpetuate segregation when it prevents protected classes from moving up the housing ladder. It’s a problem facing cities across the country, but none more acutely than San Francisco, where the median price was $940,000 in the fourth quarter of 2015. That’s why REALTORS® there have banded together to come up with solutions to the growing affordability crisis.

The real estate industry in San Francisco relies heavily on all-cash buyers—many from Asia—which pushes up prices and leaves other groups at a disadvantage, says Eugene Pak, president of the San Francisco Association of REALTORS® and sales manager at Climb Real Estate. One of SFAR’s primary goals this year is to work with local officials on a program to fast-track the permitting process for residential developments that will deliver a certain percentage of affordable units. It currently takes eight to 15 years to build a large development because of the intense permitting process, Pak says. “We don’t only care about the needs of our millionaire clients,” he adds. “We believe in housing for all.”

The country has come a long way over the past half-century when racial steering and disparate lending practices were common. And REALTORS® are on the forefront. But in an increasingly diverse country—where taking the first step toward buying or even renting can be a daunting task—you have an opportunity to do more: Teach your neighbors about what fairness in the real estate transaction looks like and empower those who’ve faced prejudice to challenge unequal treatment. Are you making the most of your platform?

©National Association of REALTORS®
Reprinted with permission