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On February 12, 1995, a combined $19.9 million settlement was reached that ended three lawsuits brought against Edina Realty over "dual agency" status, the situation that arises when the same real estate firm represents both buyer and seller. In this landmark case, the plaintiffs alleged that Edina Real Estate Company failed to adequately disclose the consequence of dual agency to consumers, including that buyers could become privy to confidential information passed on by the seller's agents. In addition, the plaintiffs felt that the laws governing real estate licensees failed to address and provide rules and regulations regarding disclosure to consumers regarding who an agent was actually representing.

As a result, most states and Canadian Provinces have enacted laws which requires real estate licensees to disclose, before any confidential information is shared, how they can work with a buyer or seller.

So, what does this have to do with us? The answer is that we, as buyers and sellers (and tenants and landlords), are entitled to know what representation and Agency Laws (that governs representation), means to you, the consumer. To accomplish this, most state and provincial real estate laws require disclosure and explanations of how a real estate agent can work with a buyer before talking about what could be confidential information.

First, some definitions you will see in agency disclosure documents

Law of Agency – This covers how a real estate agent can work with you. As defined here by The National Association of Realtors® , “The law of agency in a real estate transaction defines the legal relationship between real estate professionals and their clients". Each state has its own agency laws that set forth the duties that real estate professionals owe to their clients and customers as well as what disclosures need to be made to these buyers and sellers. Traditionally, most states relied upon the common law of agency to define the scope of the agency relationship, but in recent years some states have adopted the “transactional brokerage model” where the agency relationship is defined by statute. A majority of states allow a real estate professional to represent both sides in the transaction as a “dual agent” if the clients consent to the relationship”.

Client - Refers to someone who has entered into a written agreement with a real estate broker to represent them in the purchase and/or sale of a property.

The real estate agent that represents you has a fiduciary duty ( in some states Fiduciary Responsibility) to their client which includes –

Confidentiality - A real estate agent can not disclose to others anything said in confidence, as long as it is legal. As an example, the listing agent has been told by his seller that he will take $10,000 less. An agent representing the buyer asks if the seller will take less? The listing agent is obliged to tell the buyer's agent that the seller will accept the listing price. The same goes for a buyer that tells their agent they will go higher, if necessary. The buyer agent can not disclose this to the seller or listing agent.

Care (reasonable) – The real estate agent must use reasonable care to protect a client’s property and/or information shared with the real estate agent.

Obedience - The real estate agent must follow lawful instructions of your client so when a buyer agent asks the listing agent “ how much will their seller take”, your answer is “the listed price” as this follows the lawful instructions as outlined in the seller’s listing agreement with the listing agent. Unfortunately, this is not always the case.

Accounting An agent is responsible for the safe keeping of money of others. This includes depositing the funds of others in a “trust” or “escrow” account as dictated by state and local real estate laws.

Loyalty Your client comes first!

Disclosure - You are obligated to provide all information to your client which would influence the buyer’s decision to go forward on the purchase or sale of a property. As an example, you represent a buyer and just learned that zoning was approved for a proposed quarry on land near the home your client is interested in purchasing.

CustomerSomeone who has not entered into a representation agreement with a real estate licensee.

Dual Agent (Agency)This is where the real estate firm represents both buyer and seller such as when a buyer is interested in a home listed by the same firm (or branch office, in some states).

In such instances, the dual agent’s loyalty would be divided between both clients of the firm (buyer and seller). Under these circumstances, your agent would be obliged to treat both buyer and seller fairly and equally and cannot help you gain an advantage over the other party. In other words, they can not advise you or represent you, except for accountability, as defined above, and honestly. For buyers, this is a very important factor when you work with an agents whose firm also represents sellers.

Designated Agent (Agency) – This is an expansion of Dual Agency, where by the broker in charge can “designate” an agent to represent the buyer and another agent to represent the seller, allowing each client the benefits of full representation. In most states, the real estate firm must have a written Designated Agency policy in place.

Transaction Agents -Transaction agents assist buyers and sellers in real estate transactions without representing any party's financial interests. They act as neutral third parties in real estate deals but are still bound to act according to the law and industry ethical principles. This option is not available in all states.

Some things you need to consider

Now that you understand the basic terms you will see in agency disclosure documents, here are some tips that you should consider.

Most state real estate regulations require a broker to furnish and review the real estate commission approved disclosure statement at the first “substantial” contact, before asking for or receiving your confidential information.

If the form requires your signature, it is not a binding contract, its’ simply an acknowledgement that you received and reviewed this document. It’s for your protection only.

If a real estate agent does not represent you, anything you say to the agent, will be shared with the other party, as most states require a licensed real estate agent to represent at least one party in a real estate transaction.

Most established real estate agents will not work with buyers without an exclusive buyer representation agreement. Just like listing agents, their time and experience will be a positive benefit for you. With that said, a professional agent will work without a contract for a few hours based on the expectation that they will be considered as your buyer agent.

If you are buying a home, use an Exclusive Buyer Agent ( go to NAEBA.Com or let us do this for you through our concierge services) to find those working in your area. This will avoid the inherent conflict of interest associated with a real estate firm that also represents sellers. Just like all real estate agents, they are compensated by the seller.

If the state where you plan to buy a home permits transactional brokerage, go online, and review the actual law and disclosure rules to protect yourself from conveying information to the other party.

In closing, please make sure that your agent reviews these disclosures with you before sharing any confidential information with them.

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Updated: Apr 15, 2022

One of the major areas of stress in the home buying process is the mortgage approval process on a home you wish to buy. Since you are not quite ready to contact a lender (which, in most cases, you’ll need to do before contracting for a home), it seems to make sense that you might want to review the mortgage underwriting process and understand the mathematical calculations a lender uses to qualify you financially. As most of us will be applying for a conventional mortgage loan, we will show you in the following paragraphs how the underwriting process works as well as how the lender determines the payment amount you would be approved for. Information on government and specialized mortgage programs will be covered in later posts. What will a lender look for in underwriting your mortgage loan? When you apply for a mortgage, the lender will look at 3 major areas – Your credit – Your credit history is the number one underwriting criteria that lenders look at. They rely on your credit scores, which “grades” you on the way your handle money and pay your obligations. The agencies that provide this information are Equifax, Trans Union and Experion. As this is the lender's number one criteria used in their decision process, You should check your credit score from all three agencies to check for inaccuracies, so they can be addressed before hand. These reports are free once a year or if you are turned down for a loan. It’s also important to check for inaccuracies so they can be addressed before hand.

Your Down Payment - This is the dollar amount, before closing costs, that you plan to invest towards the purchase of your home. Lenders will usually require mortgage insurance or a guarantee, in the case of VA loans, that protects the lender if you are putting less than 20% down.

Your Verifiable Income - This represents the income that you reported on your tax returns for the past 3 years. It is iportant to note that the lender will not count income that has not been reported on your tax returns, so be prepared, in advance, to provide documentation to confirm your income.

Determining the maximum payments a lender allow you to pay As noted above, the lender will only use income that has been verified through your tax returns and other supporting documentation. Therefore, the maximum payment will be based on your verified gross income.

Here’s how the process works –

Your Down Payment - This is the dollar amount, before closing costs, that you plan to invest towards the purchase of your home. Lenders will usually require mortgage insurance or a guarantee, in the case of VA loans, that protects the lenderif you are putting less than 20% down.

The lender uses 2 qualifying ratios - Mortgage Payment to income ratio – The lender does not want you to pay more than 28% of your gross monthly income towards your total mortgage payment which includes the mortgage principal and interest payment, monthly real estate taxes, monthly homeowner’s insurance premium, monthly HOA and/or condominium dues, and, if applicable monthly private mortgage premium.

Your Debt-to-Income Ratio - The lender does not want you to pay more than 36% of your monthly income towards your total mortgage payment and other recurring monthly payments which includes the mortgage Payment calculated above, auto lease and/or financing payments, student loans and minimum payments applicable to all credit cards, even if paid in full each month and other installment payments. Both ratios can be adjusted at the discretion of the loan underwriter based on your overall financial history, credit, length of remaining payments, job stability and income growth potential. Figuring the maximum payment you can qualify for Step 1 – Calculate your Mortgage Payment to Income Ratio (how much of your gross income can be used for a mortgage payment). For this illustration, we will use $6000 a month as your verifiable income. While the underwriter can us ratios as high as 40%, we'll use the base ratio of 28%. Simply take your gross monthly income of $6000 and multiply by .28 (the decimal equivalent of 28%). This will give you a figure of $1680 which can be used for your mortgage payment. Step 2 – Calculate your Debt-to-Income Ratio (how much of your gross income can be used for all your recurring payment) As in Step 1, we will use your $6000 a month as your verifiable income - Included in this calculation are the following - Monthly mortgage payment as calculated in Step 1, Auto lease and/or financing payments, Student loans, Minimum payments applicable to all credit cards, even if paid in full each month and any other recurring payment obligations. While the underwriter can use ratios as high as 45%, we'll use the base ratio of 36% – Simply take your gross monthly income of $6000 and multiply by .36 (the decimal equivalent of 36%). This will give you a figure of $2160 which can be used for your mortgage payment and other recurring payments.

How do I figure out if I will qualify for a mortgage? Let's look at this example from one of our viewers This couple found a home listed for $375,000 that they want to buy. The real estate taxes are $2904 per year, HOA fees are $55.00 per month, and Homeowners’ insurance is $1104 per year. They are putting 20% down ($375,000 X .20 = $75,000), therefore, mortgage insurance is not required. Based on their verified income of $6000 per month, will they qualify for the $300,000 loan they will need to buy this home? Step 1 - Calculate your mortgage payment. To determine your mortgage payment, simply go on Google and search for “mortgage calculator”. There are dozens available for free. In this example, we have used a calculator provided by U.S. Mortgage. To use this calculator, click here and fill in the following; Mortgage amount $300,000 (House price less down payment), Mortgage term in years 30, and Interest rate per year 3.125% – current rate as of date of this post, click enter on your keyboard . In this example, the monthly mortgage payment is $1285.13. To this, input the annual real estate taxes and annual home owners insurance premium and monthly HOA fees. In this illustration, this totals $389 / month. To complete this calculation, add the $389 recurring debt to the mortgage principal and interest payment of $1285.13 which comes to $1674.13 per month. To figure out if you qualify for the mortgage using the mortgage to income ratio, divide your monthly income by .28 (28%). In this example, this comes to $5982 which means that you would qualify under the mortgage payment to income ratio. Step 2 - Calculate your total recurring payments to determine if you qualify under the second ratio, the Debt-to-Income Ratio. In this example, this couple had the following recurring monthly payments, an auto loan of $309, a student loan $136, and minimum payments on two credit cards $30. To figure out if you qualify for the mortgage under the Debt to Income Ratio, divide the monthly income by .36 (36%). In this example, this comes to $6000. Since the mortgage payment plus your recurring monthly payment obligations totals $2149, this couple financially qualified under both ratios. The ratios we used are ultra conservative and are flexible assuming you have a stable income and a good credit history. Should you not qualify under these ratios, there are many excellent programs out there that in most cases can mean that you still can buy that dream home. It is important to know that most sellers are going to require a pre approval letter (which means that you income, assets and credit have been underwritten by the lender) with an offer, so contact a to a reputable mortgage banker or credit union, not a mortgage broker, who will furnish this letter at no cost to you (except possibly the credit report). As always, if you need further guidance, just contact us.

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You arrive at the home and discover that the bookcases in the great room, the microwave in the kitchen and the gas grill are not there. What happened?

To answer this all-too-common issue, you need to be aware of what is personal and what is real property. There is a difference.

Real property is permanently affixed to the home and designed that way. Personal property, on the other hand can be easily removed by simply unplugging the item and unscrewing the water line to the ice maker on the refrigerator.

Items considered personal property are not generally included in the sale while real property is.

Let’s look at the following items and identify which is personal and which is real property

Top Bottom

Real Personal Real Personal

The top grill is likely personal property as demonstrated by the wheels which imply that it can be easily moved as well as its’ connection to a portable propane tank.

If, however, this grill is permanently connected to a gas line which was installed by a plumber, it would be considered real property which would remain with the home.

The bottom grill is likely real property as it is in the ground and does not contain any reasonable ability to move. Having a portable gas supply would not alter the real property status of the grill as it’s intent was to be a permanent installation as evidenced by the attachment to the ground.

Best Guidance

Clarify, in writing, that this grill is or is not included in the sale which should be stated in the purchase agreement.

How About These Microwaves?

Top Bottom

Real Personal Real Personal

The top microwave is likely personal property as it sits on the countertop and is movable and is powered by a standard wall outlet.

The microwave at the bottom could be either real or personal property. It appears to be permanently installed making it real property which would convey with the home.

However, be cautious if there is trim at the bottom of the unit. If this is the case, it may be part of the cabinetry designed to accommodate a standard microwave powered by a standard 110-volt outlet, making it personal property.

Best Guidance

In the case of the bottom microwave, clarify, in writing, that this wall unit is or is not included in the sale and should be stated in the purchase agreement.

Is this Flat Screen Personal or Real Property?

What About the Sound Bar?

If the flat screen is “hard wired” into the wall and is permanently attached to the mounting bracket, the wide screen would be considered real property and would have to remain.

If the TV is secured to the bracket by a designed attachment from the wide screen and is plugged into a standard wall, the flat screen would be considered personal property which would not remain when the property closes.

The same would hold true for the sound bar


From this photo, it appears that the television and sound bar are costumed wired to each other making both items real property that would remain with the home.

Best Guidance

It is essential that there is a clear written understanding as to whether the widescreen and sound bar are included with the sale of the home. This is one of the newest area of disputes between buyers and sellers as to who has the right of possession.

Is this Mounting Bracket Personal or Real Property?

Since the bracket is mounted to the wall, it is real property and would remain after closing. It is not uncommon for a buyer to request the removal of the bracket and wiring as well as related repairs.

Best Guidance

Having a clear written understanding as to who is responsible for this work is essential. Better yet, if practicable, remove the bracket and make repairs before placing the home on the market.

Is this Wall Unit Personal Property?

Can it be easily removed without any damage to the wall?

If it can, it is personal property as it is not attached to the wall assuming that the flat screen TV can be easily moved. If not, this could represent a "gray" area, so put the possession agreement in writing.

Is it bolted or otherwise mounted to the wall?

If it is mounted to the wall, this Wall Unit is considered part of the home and is real property

Best Guidance

Clarify, in writing, that this wall unit is or is not included in the sale and should be stated in the purchase agreement.

Some other thoughts

In all my Best Guidance comments, I have stated that all agreements be reduced to writing. In most states and provinces, under what is known as the Statute of Frauds, all agreements related to real estate must be in writing to be enforceable in a court of law. Even if you can produce 5 people that witnessed the agreement to include the "refrigerator", a court would not be able to enforce this valid and legal agreement because it was not in writing.

Relating to the included refrigerator, lawn mower, etc., you need to clearly identify these and other included personal property by specifying the make, model and serial number for each personal item that conveys with the home.

One of my earliest career “lessons” involved an agreement stating that “the lawn mower in the tool shed would be included in the sale of the home”. The one that was visible was a 1-year-old, 48” zero radius lawn mower. Allegedly, a second mower, a 12-year-old, 22” push type unit, was also in the shed, but was covered. Since details of the lawn mower were not reduced to writing, the seller got away with this unethical substitution. So don’t forget the details..

When it comes to included security systems and water softeners, verify that the seller actually owns this and similar equipment and is free of any contractual monitoring, maintenance and other obligations. It is common practice for these suppliers to require a 5-year monitoring and/or maintenance contract in exchange for the installed systems. So, protect yourself and verify that you are not obligated or bound by such contracts.

Last, but not least, drapes, curtains, plantation shutters and blinds. Drapes and curtains are easily removable and are generally considered personal property. If you must have these, then specify this when making an offer and make sure it is included in the purchase agreement.

Blinds and plantation shutters are intended to be permanent and are usually custom made for the home. The same goes for shades, whether standard or custom. Therefore, these items are considered real property that remains after closing.

Many state approved purchase contracts have stipulations incorporated in their purchase contract regarding these items. If not, especially with plantation shutters, blinds and custom shades, which can be very pricey, specify whether these are included in the sale.

Being diligent and precise regarding what’s included in the sale and what is not, will save you a lot of stress and frustration.

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