Staging services
What is home staging? There is a home stager in the community who also shows properties, conducts open houses, posts ads on the Internet, etc., for FSBO properties. Is this legal without a real estate license?
The goal of home staging is to enhance the appearance of a property to encourage buyers to purchase the property at the best possible price. Often staging is thought of as the reorganization of the seller’s personal property: decluttering, depersonalizing and updating the look of the home to make it more appealing to buyers. Improvements can include painting, landscaping, and moving or purchasing furniture and accessories. Such staging services do not require a real estate license. If, however, a person is engaged in real estate brokerage, including showing, advertising and negotiating the sale of the property for commission, a real estate license would be required. For more information and articles on home staging, please see the National Association of REALTORS® Field Guide to Preparing and Staging a House for Sale at www.realtor.org/library/library/fg303
Maintenance agreements
An out-of-town seller wants the agent to list his house. Because he is out of town, he wants the agent to mow the lawn and shovel and plow snow. Can these services be legitimately performed by a listing agent under a listing contract?
The agent must distinguish between the types of services the seller is asking him to provide: some are real estate brokerage services and some are property management or maintenance services. To provide real estate brokerage service in listing the property and negotiating a sale, an agent must have proper authority, which is created with the listing contract. For property repair or maintenance services, an independent contract may be negotiated. Alternately, an agent could arrange for snow removal and mowing and address these arrangements in the listing contract, i.e., including language that the seller will reimburse the agent for any out-of-pocket costs for snow removal, lawn cutting, etc. The agent may consult with the broker to determine if the maintenance agreement should be entered into with the broker/firm or if it is an independent agreement between the agent and the seller.
For further discussion of limiting the scope of non-brokerage services and ordering services for parties, review pages 10-14 of the May 2004 Legal Update, “Avoiding Liability When Signing and Making Referrals,” at www.wra.org/LU0405, and pages 7-9 of the May 2007 Legal Update, “Referrals to Service Providers,” at www.wra.org/LU0705.
Paying for services
A listing agent purchased furniture for more than $500 to stage the home on behalf of the sellers. There was a verbal understanding that she would be immediately reimbursed by the sellers. An invoice of the items purchased (and other items provided by the agent) was provided to the sellers. The sellers have since informed the agent that they do not have enough money to reimburse the agent until the house sells. The agent knows this is a short sale and there may not be funds at closing. Can the agent put a lien on the property if the listing expires without a sale?
When an agent provides services or products that are for the staging of the home, these are not real estate brokerage services. It would appear in this situation the agreement to purchase furniture and accessories was independent of the listing agreement. Therefore a separate, preferably written, agreement or contract may be entered into for such services. The contract can identify the parties, services, payment and other material details. The services would not appear to fall under the lien law, so the agent may need to pursue payment in small claims court if the sellers cannot or will not make the payments as agreed.
Advertising incentives
The agent wants to include several services in her listing packages, different from those of her company. She would like to offer free services such as flowers, 3-hour professional cleaning service and interior design/staging. What type of disclosures in the agent’s advertising must be included in her newspaper, magazine, radio and TV ads?
Wis. Admin Code § RL 24.04(2)(b) requires a licensee to advertise under the name of the employing broker. Thus, even though this is an agent’s marketing program, the company name, or properly filed trade name of the company, must be included in all advertisements. The agent may review office policy to see if there are any additional company advertising polices that apply.
Incentives may be offered to sellers and/or buyers to induce them to sell or purchase real estate. Seller incentives can be offered as staging or cleaning services or flowers, as suggested. The advertising must give the potential seller a clear and thorough understanding of the incentive’s terms and conditions. Standard of Practice 12-3, which interprets Article 12 of the Code of Ethics, provides that, “REALTORS® shall be careful at all times to present a true picture in their advertising and representations to the public. ...” Standard of Practice 12-3 states, “The offering of premiums, prizes, merchandise discounts or other inducements to list, sell, purchase, or lease is not, in itself, unethical even if receipt of the benefit is contingent on listing, selling, purchasing, or leasing through the REALTOR® making the offer. However, REALTORS® must exercise care and candor in any such advertising or other public or private representations so that any party interested in receiving or otherwise benefiting from the offer will have clear, thorough, advance understanding of all the terms and conditions of the offer. ...”
This standard assumes the omission of even one detail will cause the advertisement to present less than a true picture. This may be disputable should someone bring an ethics complaint concerning an ad for party incentives that does not contain every detail — the issue will be whether there is a true picture of the offered incentive in the ad. An ad that states, “see broker for details,” however, is like a red flag waving in the face of a competitor who lives by the Standards of Practice — it may be seen as an admission that less than a true picture has been disclosed in the ad.
Advertising services
An agent wants to advertise local services on her company website. The agent wants to include a mortgage company, staging service, home inspector and some other related services. These are companies that the agent has experience with and recommends to all of his clients. Is the agent violating any laws by putting them on his company website?
The agent must first determine if the other services are settlement services as defined by RESPA. Cooperative advertising between settlement services providers, i.e., a real estate company and a mortgage broker, must comply with strict RESPA rules, which prohibit unearned referral fees between settlement service providers. The agent can limit or avoid such claims if the advertised settlement service providers are paying a proportional share of the advertising costs.
A broker referring service providers to consumers can also incur liability based on claims of negligent hiring and supervision. It is best to include multiple service providers and allow the consumer to make inquires and engage the services directly. For tips on the proper way to make referrals, review page 9 of the May 2004 Legal Update, “Avoiding Liability When Signing and Making Referrals,” at www.wra.org/LU0405, and page 8 of the May 2007 Legal Update, “Referrals to Service Providers,” at www.wra.org/LU0705.
Negligent hiring
The agent listed a bank-repossessed property that included a swimming pool. The bank asked that the pool be drained for insurance reasons so the agent hired a contractor to drain the pool. Draining the pool caused irreparable damage, which a pool expert would have known. The property was sold to a buyer who was primarily attracted to the property because of the swimming pool. The buyer said she has had four pool inspectors there and they all said the pool is damaged only because it was drained. Can the agent be liable for the damage to the pool?
Yes, this situation demonstrates how an agent may incur liability for negligent hiring of workmen on behalf of a seller client. The buyer may make a claim against the agent for damages based on the agent’s negligent hiring of an unqualified person to drain the pool. Clients and customers sometimes ask REALTORS® to retain contractors on their behalf. Sometimes the party is pushed for time or may simply believe that this is part of the agent’s job. However, this practice may pose serious legal risks for the licensee and should be avoided if possible. If the broker must retain a contractor for a party, it is critical that this request be handled properly. Using a service request form may limit broker liability. More information about avoiding negligent hiring liability and a sample Service Request form is available in the May 2004 Legal Update, “Avoiding Liability when Signing and Making Referrals,” at www.wra.org/LU0405.
Tracy Rucka is a Staff Attorney for the WRA.