Five measures brokerages are taking that you can adopt to fight discrimination and foster inclusion.

Since the killing of George Floyd in May, the topic of systemic racism has galvanized the nation’s attention. Many real estate professionals are becoming part of the movement for change. Here are five measures brokerages are taking that you can adopt to fight discrimination and foster inclusion.

1. Examine diversity in your office, and make sure many different voices are represented in the discussions you have at work. Brokerage leaders can create a task force to address racial disparities that may be present within the company.
2. Adopt policies that stand firmly against discriminatory practices and offensive communications, including inappropriate social media posts.
3. Develop partnerships with key community players like city councils, chambers of commerce, police departments, and health care facilities to help mobilize ideas for change.
4. Partner with local Black-owned businesses to help promote them and share referrals.
5. Learn from history. Research the historical real estate practices of redlining, steering, and blockbusting so you and your team are aware of where the industry has been. Find NAR resources for creating a more inclusive business at magazine.realtor/inclusive-plan.

Sources: Sandra Butler, AHWD, Sibcy Cline Inc., Cincinnati; Raelenna Ferguson, Realty Executives Edge; Cape Girardeau, Mo.; John Graff, AHWD, SFR, Ashby & Graff Real Estate, Los Angeles; Julia Israel, AHWD, Keller Williams Integrity Realty, Minneapolis; Nate Johnson, AHWD, GRI, Real Estate Solutions, St. Louis

©National Association of REALTORS®
Reprinted with permission

Minimizing the chance of liability claims against your brokerage and your clients starts with clear communication about those risks.

During the pandemic, of course you want to serve your clients to the best of your ability while being attuned to health and other risks. Minimizing the chance of liability claims against your brokerage and your clients starts with clear communication about those risks. While you should always consult with your broker and an attorney to assess the risk and the effectiveness of addenda and other contractual language, here are general guidelines on legal forms related to the pandemic:

Hold harmless agreements: In general, a hold harmless agreement protects a party from liability if another party is injured on their property or is injured during an inherently dangerous activity. In the case of a pandemic, where the effects of the associated disease are not only widely known but also widespread, easily transmitted, and unlikely to show symptoms for days after exposure, proving causation could be difficult from a legal standpoint.

Purchase agreement addenda: Coronavirus closures and other government orders in March left many practitioners scrambling for an addendum to the purchase agreement that specifically addressed potential delays related to the pandemic. Many brokerages and REALTOR® associations have created these addenda, which extend the closing date if necessary, and address other issues including the potential unavailability of inspectors or appraisers; a party’s inability to travel to sign documents; a party being subject to a mandatory quarantine; and closings of or delays in relevant government and business services, such as deed recorders, lenders, and title or escrow companies, necessary to close the transaction. View a sampling of such forms by downloading “2020 Legislative Meetings RMIC Workgroup Forms & Addendums” at nar.realtor/RM-RMIC.

©National Association of REALTORS®
Reprinted with permission

Resources from NAR can help you develop more inclusive business plans.

Your association can help you make real strides toward a more inclusive business. For a decade, the National Association of REALTORS® Code of Ethics has gone beyond the law when it comes to fair housing. But many real estate practitioners are looking for ways to make a deeper and more visible commitment to equality. Resources from NAR can help.

1. Display the Equal Housing Opportunity logo on your company windows and in advertising. Decals, as well as a customizable poster, are available from the REALTOR® Team Store(link is external), or download the logo from nar.realtor.
2. Write a diversity and inclusion statement to promote as part of the personal or company mission. NAR’s statement says, in part: “We fully embrace perspectives from all walks of life—regardless of race, ethnicity, gender, religion, age, sexual orientation, gender identity, disability, national origin, socioeconomic status, political affiliation or any other qualities by which we may define ourselves. We commit to bringing out the best in ourselves, uncovering our hidden talents, and celebrating differences in our day-to-day interactions. These beliefs are essential as we serve our members who help fulfill the dream of home and property ownership in America.”
3. Be open to self-examination. For insights into how your mind perceives and responds to differences, check out the fascinating, no-cost workshop from NAR, “Bias Override: Overcoming Barriers to Fair Housing.” This 50-minute video program was developed in partnership with the Perception Institute, an organization that worked with other professionals, including judges and teachers, to overcome implicit bias. Watch the video, and use the online tool to test your own implicit biases.
4. Adopt the Equal Professional Service Model(link is external) for your practice. Developed by NAR, the model has four key steps that should be applied consistently in interactions with buyers:
   
   • Do I use systematic procedures?
   • Do I have objective information?
   • Has my customer set the limits?
   • Have I offered a variety of choices?
    
5. Earn NAR’s At Home With Diversity® certification. This day-long, interactive workshop—recently retooled—offers a wide range of insights and exercises to help you not only provide equal service but also transcend racial and cultural differences. Bonus: The program is available for continuing education credit in many states and counts as an elective credit toward several NAR designations.

For more resources—including information on diversity and inclusion grants available to local and state REALTOR® associations—visit nar.realtor/diversity.

©National Association of REALTORS®
Reprinted with permission

Not only do social distancing, masks, and good hygiene during showings keep you and your clients safer, these steps help you manage legal risks.

Not only do social distancing, masks, and good hygiene during showings keep you and your clients safer, these steps help you manage legal risks. Sellers were more likely than buyers to sue their broker or agent if they or a family member became infected with the coronavirus soon after a home showing, according to a May survey of 1,040 buyers and sellers by the Engagious public opinion research firm. Among the findings:

38%

The percentage of buyers who indicated that they would be very likely to sue their broker if they became sick with COVID-19 after learning that a resident of the home they had visited had contracted the disease.

48%

The percentage of sellers who indicated that they would be very likely to sue their broker if one of their visitors contracted the coronavirus soon after a showing.

29%

The percentage of ­buyers who indicated that they would still consider suing, even if they had signed a release holding their real estate broker harmless if they or a family member contracted COVID-19.

41%

The percentage of sellers who indicated that they would still consider suing, even with a signed release.

58%

The percentage of buyers who were willing to waive their right to sue the seller or their agent for COVID-19–related claims.

©National Association of REALTORS®
Reprinted with permission

Fair housing lawsuits are one tool for addressing illegal discrimination in the real estate and mortgage credit industries.

Fair housing lawsuits are one tool for addressing illegal discrimination in the real estate and mortgage credit industries, though the bar is high for determining liability. Cases alleging discrimination in lending practices were highlighted in NAR’s 2019 Legal Pulse report. Here’s a summary of three notable cases:

1. The city of Miami Gardens, Fla., sued mortgage lender Wells Fargo alleging that it had engaged in discriminatory or predatory lending in violation of the Fair Housing Act between 2004 and 2008, citing its use of redlining and reverse redlining tactics. The city asserted that Wells Fargo denied credit to particular neighborhoods based on race (redlining) and of “flooding a minority community with exploitative loan products” (reverse redlining).

Result: Miami Gardens was unable to prove that it suffered an injury as a result of alleged redlining and reverse redlining by Wells Fargo. The court determined that “the undisputed evidence confirmed that none of the 153 loans originated by Wells Fargo [within the limitation period] foreclosed.” Thus, the city could not have suffered an injury as a result of any of these loans.

2. The U.S. Department of Justice filed a civil complaint against First Merchants Bank alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act committed between 2011 and 2017. The suit alleged that the bank engaged in unlawful redlining by not providing mortgage credit services to majority Black areas in Marion County, Ind. The complaint further alleged that the bank failed to have any branch locations in majority Black areas, refused to market in majority Black counties, and had a disproportionately low number of loan applications and loan originations from majority Black neighborhoods.

Result: The parties filed a settlement agreement. In it, the bank denied the allegations but agreed to take all actions necessary to ensure that it offers and provides all persons with an equal opportunity to apply for and obtain credit, retains an independent third-party consultant to assess its fair lending risk management program, maintains a fair lending monitoring program, and provides training to all employees.

3. Prince George’s County and Montgomery County, Md., filed suit against Wells Fargo for alleged predatory and discriminatory residential mortgage lending, servicing, and foreclosure practices in violation of the Fair Housing Act. In the complaint, the counties alleged five categories of injuries: foreclosure processing costs; the increased cost of municipal services; economic injuries to the counties’ tax bases; lost municipal income; and non-economic injuries.

Result: The court held that the counties sufficiently pleaded claims associated with foreclosure processing costs but found the alleged non-economic injuries were too far removed from the alleged discriminatory conduct to have been plausibly caused by Wells Fargo.

©National Association of REALTORS®
Reprinted with permission

Force majeure is a contractual clause relieving one or both parties of obligations because of circumstances beyond their control.

Force majeure (“strong force” in French) is a contractual clause relieving one or both parties of obligations because of circumstances beyond their control. It’s lately become a hot topic in real estate.

The doctrine may be invoked by tenants (primarily commercial) who are having difficulty coming up with rent, landlords who could not perform a service during the force majeure event, or contractors or vendors to justify project delays. While it’s too early to assess how courts will view such claims connected to the pandemic, legal experts offer insights about how such provisions may be presented in contracts and whether pursuing claims makes sense.

• Pay attention to the wording and facts in an agreement to consider whether a force majeure claim seems viable.
• Then, check to see if the clause specifies circumstances such as “epidemic,” “pandemic,” “quarantine,” “acts of government,” or general language such as “any cause whether similar or dissimilar to the foregoing.”
• Attempt to settle disputes out of court. Courts are likely to be backed up for a long time with criminal and other matters of greater urgency.
• If you do pursue a court case, don’t assume a decision in one state will bolster (or weaken) your claim. States may interpret a similar set of facts differently. Force majeure is very specific to the contract at hand, which influences courts, even within state.

©National Association of REALTORS®
Reprinted with permission

Procuring cause issues can be confusing. Here’s how to avoid disputes.

Key Takeaways:

• To earn a commission, a broker must be the procuring cause of the sale.
• There is no one definitive factor to determine procuring cause but rather the interplay of many factors.
• If a procuring cause dispute is inevitable, allow the sale to close and determine resolution afterward.

It sounds simple enough: To earn a commission, a broker or agent must be the procuring cause of the sale. But misunderstandings can arise about how that term applies in some transactions. Knowing the factors that establish procuring cause can help you avoid disputes and deliver better client service.

Determining Procuring Cause

NAR’s Arbitration Guidelines, created pursuant to Article 17 of the REALTOR® Code of Ethics, define procuring cause as “the uninterrupted series of causal events which results in the successful transaction.” In practice, the broker whose efforts set off that unbroken chain of events will be regarded as procuring cause.

Which practitioner do you think is the procuring cause in this scenario?

A buyer contacted broker Jim to show her several homes over a period of weeks. The buyer liked one home, and asked broker Jim to reshow the property to her and her mom, dad, and sister. Broker Jim showed the property a third time to the buyer, her dad, and a plumbing inspector. As they were leaving the home, the buyer said she would email broker Jim to follow up. A few days later, broker Jane, who had not shown the property, called broker Jim and offered a 25% referral fee, as broker Jane wrote an offer on the property for the buyer, which the seller then accepted.

If you think broker Jim is the procuring cause, you’re falling into the common trap of believing it’s based on one definitive factor—in this case, showing a property. Many more facts, including follow-up communication with the buyer, the buyer’s motivations, and how broker Jane entered the picture, should be considered.

Like the scenario above, most procuring cause issues arise when two cooperating brokers claim they’re entitled to the buyer’s side commission. Article 17 requires REALTOR® principals to submit procuring cause disputes to mediation and arbitration. An arbitration hearing panel will consider all relevant details of the underlying transaction, guided by a number of factors to determine procuring cause. Those may include: 

• The nature and status of the transaction.
• Roles and relationships of the parties.
• Initial contact with the buyer.
• Continuity and breaks in continuity.

What’s important to keep in mind is that it’s the interplay of these factors that indicates procuring cause. One factor alone will not decide a case.

Avoiding a Dispute

Being aware of the factors that affect procuring cause can assist real estate professionals in their day-to-day dealings with clients. Here are tips to help avoid a dispute:

• Ask prospective buyers if they are working with another broker and whether they signed an exclusive representation agreement.
• Always use a buyer brokerage agreement. Attend open houses and tour model homes with buyer clients, and sign in as their broker.
• Stay in contact with buyer clients, keep a communications log, and, when they’re interested in a property, ask if they want to write an offer.
• If you discover you’re writing an offer on a property that buyers saw with another broker, ask the buyers why they didn’t pursue the property with the other broker.

When a dispute is unavoidable, don’t interfere with the transaction. Allow the sale to close. Then, the cooperating broker who believes he or she is the procuring cause may request mediation and, if that is unsuccessful, may file an arbitration request with the local REALTOR® association. To learn more, visit nar.realtor and search for “procuring cause.”

©National Association of REALTORS®
Reprinted with permission