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www.McKissock.com/ILRE 1-800-328-2008 Table of Contents All 12 Hrs Continuing Education for $10380 Illinois Real Estate Professionals $ 95 3 Illinois Core A: (3 hrs) $25.95 value 75 Fair Housing, Agency License Law and Escrow 24 Illinois Core B: Legal Issues (3 hrs) $25.95 value

39 Real Estate Safety: (3 hrs) $25.95 value Protect Yourself During a Showing 52 Niche Marketing: Narrow Your Focus (3 hrs) $25.95 value Interested in additional 70 Proctored Exam Instructions course topics? 71 Book & Individual Course Evaluation Form 72 Illinois Real Estate CE Registration Form No problem! In addition to Correspondence, you 73 Illinois Real Estate CE Assessment Answer Sheet can also take your CE via Online Courses. Check out these NEW online topics: • Know the Code: Your Guide to the Code of Ethics

• It’s High Tide you Got the Complete Your Courses in Two Easy Steps... Facts about Homeowner’s

Step 1: Submit the Practice Quizzes • The Basics of Land At the end of each course there is a 10 question practice quiz. Management Submit your practice quiz: • Register and complete the Online Correspondence exams at: McKissock.com/ILRE • Fax your Registration and Completed Exam Answer Sheet to: Visit www.McKissock.com/ILRE 1-814-723-0281 to view our entire course library and start your CE today. Step 2: Proctored Exams Once McKissock has received your practice quiz you may schedule your Proctored Exam. Illinois licensing regulations outline that successful completion of the Have questions? course requires the licensee (that's you!) pass a proctored exam for each course Give us a call at 1-800-328-2008. with a minimum score of 70%. Please reference page 73 of this book for complete exam details.

Your education solution. Illinois Core A: Fair Housing, Agency, License Law and Escrow 3 CE Credit Hours - Mandatory (Approval #:564.002398)

This course is designed to fulfill the core A requirement for Illinois real estate professionals. This course will take you through all the subjects mandated by your state’s Real Estate Commission, and included instruction in Fair Housing, Agency, License law and Escrow.

Chapters: • Chapter One: Agency • Chapter Two: Fair Housing • Chapter Three: License Law and Escrow

Learning Objectives: • Define agency relationships, including designated agency and dual agency. • Identify duties to clients and customers, including duties after termination of agency agreements. • Define minimum services required for exclusive brokerage agreements. • Describe agency disclosure requirements. • List the federal fair housing laws, including the Americans with Disabilities Act. • Discuss Illinois Fair Housing laws and the behaviors that are considered discriminatory. • Explain discrimination in advertising, dealing with client or customer questions, and the importance of record keeping. • Explain recent additions to the License Act. • Identify general disciplinary actions and causes. • Discuss requirements for escrow accounts, including handling, maintaining, disbursing, and the disciplinary actions related to escrow.

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Illinois Core A: Fair Housing, Agency, License Law and Escrow 3 In Illinois, licensees are presumed to be the designated agent of the consumer with whom they are working, unless the sponsoring broker and Chapter One: consumer have entered into a written agreement for another type of agency agreement, or unless the licensee is performing only ministerial acts on behalf of the consumer. Ministerial acts are those acts performed by a Agency licensee for a consumer that are informational or clerical and do not rise to the level of representation.

As indicated above, the Illinois License Act makes a presumption of Overview designated agency. That is, it is presumed, unless a written agreement providing another type of representation is entered into between the broker • Section 15-5. Legislative intent and consumer, that the designated agent(s) represents the client to the • Section 15-10. Relationship between licensees and consumers exclusion of other affiliated licensees within the brokerage firm. • Section 15-15. Duties of licensees representing clients • Section 15-25. Licensees relationship with customers Designated agency and ministerial acts will be discussed in detail later in • Section 15-30. Duties after termination this course. • Section 15-35. Agency relationship disclosure • Section 15-40. Compensation does not determine Agency • Section 15-45. Dual agency Confidentiality • Section 15-50. Designated agency An important aspect of any agency relationship is confidentiality. Licensees • Section 15-75. Minimum Services have a statutory duty to their clients to maintain confidentiality. Protecting confidential information is a primary purpose of the law of agency.

Section 15-5. Legislative Intent A designated agent may disclose to his/her sponsoring broker (or persons specified by the sponsoring broker) confidential information of a client for Common Law is derived from tradition, customs, and sometimes the purpose of seeking advice or assistance for the benefit of the client in judicial decisions. The Illinois General Assembly recognized that the regard to a possible transaction. application of common law of agency relationships sometimes resulted in misunderstandings and consequences contrary to the best interest of the The sponsoring broker or his/her specified representative may not public. Because the real estate brokerage industry has a significant impact disclose such confidential information, unless otherwise required by this on the State’s economy, and because of the State’s need to provide specific Act or requested or permitted by the client who originally disclosed the legal guidelines, addressing the relationships between real estate licensees confidential information. and consumers, Article 15 of the License Act replaced common law duties with specific, statutory duties of licensees. What Constitutes Confidential Information Article 15 does not prescribe or affect contractual relationships between Confidential information means information obtained by a licensee from broker and the affiliated licensees. a client during the term of a brokerage agreement that meets any one of these criteria: Article 15 does serve as a basis for private rights of action by consumers • Was made confidential by the written request or written instruction and licensees. This private right of action does not extend to other Articles of the client. of the Act. • Deals with the negotiating position of the client. • Is information which if disclosed could materially harm the nego- tiating position of the client. Section 15-10. Relationships Between Licensees and Consumers Confidential information includes, but is not limited to: An agency relationship is created when a person (buyer or seller, , • The minimum price the seller-client will accept. or tenant) delegates to another person, the agent, the right to act on his/ her • Maximum price the buyer-client will offer. behalf in business transactions with third parties (customers). • Information relating to the seller-client’s motivation to sell. (i.e., pending divorce, health issues, job transfer). • Information relating to the motivation of the buyer-client. Principles governing agency relationships: (i.e., current home has sold and must buy quickly). • Both parties must agree to form the relationship. • Urgency of seller-client or buyer-client. • The relationship is fiduciary – meaning the agent owes certain du- ties to the principal, as we have previously discussed. Example: An agency relationship can be created by either an oral or a written Broker Betty called to set up an appointment to show her buyer client agreement between the principal and the agent. It can also be implied from a . Betty told the listing agent, Sam, that her buyer was being either words or actions. Implied (accidental) agency exposes the licensee to transferred to the area and needed to purchase a property in the next couple legal and financial risk. Although agency can be created orally, it would be of days. in the best interests of all concerned to have the relationship clearly defined with a written agreement. In fact, The Illinois License Act specifically Sam told Betty to show his home and encourage an offer, because the requires a licensee to advise a consumer in writing, no later than beginning sellers were going to lose a home they had an offer on if they didn’t sell to work as a designated agent, that a designated agency relationship exists their existing home soon. (unless another written agreement exists between the sponsoring broker and consumer providing for a different relationship), and the name(s) of In this situation, both Betty and Sam disclosed confidential information his/her designated agent(s). about their clients.

4 Illinois Core A: Fair Housing, Agency, License Law and Escrow The rule of confidentiality could conceivably be waived if one of the Section 15-15. Duties of Licensees following is true: • The client permits the disclosure of the information by word or Representing Clients conduct. Franchises may dictate your legal structure but as an independent you • The law requires the disclosure. will The License Act stipulates that a licensee representing a client owes • The information becomes public through a source other than the that client certain duties. These duties include performing the terms of licensee. the brokerage agreement. The licensee is obligated to perform specific duties outlined in the brokerage agreement, whether a listing agreement Other points to keep in mind regarding confidentiality include: or buyer agency agreement, agreement, or tenant • Confidential information does not include material information representation agreement. about the physical condition of the property, regardless of the agency relationships involved in the transaction. • Every brokerage firm should have a company policy in place that Duties to the client also include promoting the best interests of the client. addresses how confidential information must be handled. The The Act specifies that the agent is obligated to promote the client’s best sponsoring broker is responsible for company policy requirements. interest as opposed to a licensee’s or any other person’s self-interest. ♦ Brokerage firms must secure their files in such a manner that confidential information cannot be accessed by any person who Duties to the client encompass seeking a transaction at the price and terms is not representing that particular client. It is particularly impor- stated in the brokerage agreement or those acceptable to the client. It also tant to have procedures to protect confidential information with requires that licensees present all offers and counter-offers to or from the regard to teams. Teams should either: client until , unless that right is waived by the client. ◊ Have separate phone lines, file cabinets and have no access to each other’s files, or Licensees have a duty to their client to disclose material facts concerning ◊ Have all team members be dual agents any time members the transaction known to the agent unless the information is confidential of the team represent both sides of the transaction. client information. The License Act specifically omits from the definition • Managing brokers who list and sell or who manage and rent prop- of material facts physical conditions that do not have a substantial adverse erties must put procedures in place to protect confidential informa- effect on the value of the real estate, fact situations, or occurrences. If the tion. facts are physical in nature and would have an effect on the health or safety ♦ The managing broker could declare himself/herself to be a of the resident, or would affect the price the buyer would offer or the seller dual agent when both sides of the transaction are in- but would accept, those facts would be considered material. this is not required by the Act. ♦ If the managing broker is involved in the transaction as the listing or selling broker, he/she should not give advice to the Disclosure of latent defects poses another issue for a licensee. A latent defect other licensee involved in the transaction, is a hidden flaw, weakness or imperfection on a property which a seller ♦ The managing broker must always remain neutral when giv- knows about but the buyer cannot discover by reasonable inspection. ing advice to licensees. ♦ If the managing broker assisted an affiliate licensee, obtained Although Illinois licensees have no duty to discover latent (hidden) defects, confidential information, and later becomes involved in the they are required to disclose known latent defects. The Illinois Appellate transaction, he/she must become a dual agent. court case, Munjal v. Baird and Warner, Inc. et al., 2nd Dist. (1985), • Example: Managing Broker Bill assisted affiliated licensees Jane determined that licensees have no duty to discover latent material defects if and John with a difficult offer on John’s listing. The transaction the seller has not disclosed these defects prior to the sale. fell apart, and later Managing Broker Bill wrote an offer on John’s listing. Bill must be a dual agent because he has confidential infor- mation about John’s seller which he obtained while assisting with The issue of stigmatized property in recent years has been a popular topic the previous offer. for discussion. Stigmatized are those properties that have an undesirable reputation due to an associated unpleasant occurrence, such as All confidential information must remain confidential, even after the a murder, suicide, perceived ghosts, drug traffic, or gang violence. Due to agency relationship ends. the potential liability, a licensee should seek legal advice when dealing with such properties.

The disclosure of sexual offenders living in a neighborhood is an issue CHECK YOUR UNDERSTANDING... more frequently faced by licensees now than in the past. At the federal level, Megan’s Law is known as the Sexual Offender Act of 1994. This Act Q1: How may agency relationship be created? requires offenders to notify law enforcement when they change address and/ Q2: What information does the Illinois License Act require a licensee or employment locations. to provide to a consumer prior to beginning to work as a designated agent? Listing agents have no legal duty to disclose the location of known sex offenders in a neighborhood to a potential buyer. However, if the topic A1: Agency relationships may be created by either an oral or does come up in conversation, a competent agent should refer a buyer client written agreement. They can also be implied by words or actions. to the public record. If doubt arises, the agent should consult with his/her broker and the broker may consult with an attorney. It is also critical that the A2: Although agency can be created orally, the Illinois License licensee is aware of the sponsoring broker’s policy with regard to disclosure Act requires advising a consumer in writing, no later than of sex offenders or other facts that stigmatize property. Some companies beginning to work as a designated agent, that a designated agency have a form that is given to all potential buyers explaining that the licensee exists (unless another type of agency agreement exists). does not always have knowledge of sex offenders in any area, and the form provides contact information for law enforcement offices who can provide the information.

While the listing agent is not required to disclose items that stigmatize a property, he/she can disclose items with the seller’s permission. The listing

Illinois Core A: Fair Housing, Agency, License Law and Escrow 5 agent could be harming the sale of the seller’s property, or potentially changing a licensee’s duty under common law as to negligent or fraudulent reducing the value of the property, by disclosing the fact that stigmatizes misrepresentation of material information. the property. It is important for the licensee to know the firm’s policy, and if representing the seller, to obtain the seller’s permission before disclosure.

As a buyer’s agent, a licensee may choose to inform the buyer if the licensee Section 15-25. Licensee's Relationship with knows that the property is stigmatized. Disclosure to a buyer will depend Customers on the sponsoring broker’s policy. The buyer may consider the information Although a customer is not represented by the licensee, the licensee owes material in making a decision. the customer certain duties. The licensee must treat customers honestly and not negligently or knowingly provide false information. Licensees No cause of action shall arise against a licensee for failure to disclose that have a duty to disclose to prospective buyers, in a timely manner, all latent an occupant was afflicted with HIV, AIDS, or any other medical condition, material adverse facts regarding the physical condition of the property that that the property was the site of an act or occurrence that had no effect on the are known by the licensee and that could not be discovered by a reasonably physical condition of the property. diligent inspection of the property by the customer.

Another duty of licensees is to “timely account” for all money and property The licensee is not liable for providing false information to the customer if received by the licensee in which the client has or may have an interest. that information was provided by the licensee's client and the licensee had no actual knowledge that the information was false. Promoting the best interest of the client also involves exercising reasonable skill and care in the performance of brokerage services. This requires that A client's agent may provide assistance to a customer by performing the agent use care in obtaining accurate information, in writing the contract ministerial acts. Performing ministerial acts for the customer does not create and other documents, and verifying that all details of the transaction are a brokerage agreement with the customer. Ministerial Acts are covered in covered. detail later in this course.

Example: Broker John listed a house on the edge of town. He indicated on the Section 15-30. Duties After Termination of property’s profile sheet that the property was on city water, when in fact, it Brokerage Agreement had a private well. John did not exercise “care.” Certain duties are owed to the client after termination of the brokerage The client’s agent has a duty to obey all specific, legal directions of the agreement. Additional duties could be specified in a written agreement client, exercise reasonable skill and care in providing brokerage services to between the parties (broker and client), but the following duties are always the client, and comply with all applicable statutes and regulations, including present after termination, expiration, or completion of the brokerage fair housing and civil rights. agreement: • Accounting for all monies and property relating to the transaction. • Keeping confidential all confidential information received during To recap: A licensee’s duties to his/her client include: the term of the brokerage agreement. (It is important for licensees • Performing the terms of the agreement. to remember that confidentiality does not end with the brokerage • Promoting the best interests of the client. agreement). • Exercising skill and care. • Keeping confidential information confidential and complying with all applicable statutes and laws. An example of confidentiality duty surviving the brokerage agreement: If listing agent Jane's listing expired, and now Jane has an offer on the property she previously had listed, Jane could not disclose to her buyer or In addition to specific duties of the licensee, Section 15-15 also clarifies anyone else any confidential information that she obtained while she had some situations that are permissible by the licensee or do not provide the property listed. liability to the licensee. • A licensee does not breach a duty by showing alternative properties to prospective buyers or tenants, by showing properties in which the client is interested to other prospects, or by making or prepar- ing contemporaneous offers or contracts on the same property. Note that licensees must provide written disclosure to all clients CHECK YOUR UNDERSTANDING... for whom the licensee is making contemporaneous offers, and the clients must be given the option of being referred to another des- Q1: What are the duties of a licensee regarding disclosure of latent defects? ignated agent. This requirement applies to licensees working with tenants as well as buyers. Q2: What are the duties of a licensee regarding disclosure of stigmatized • A licensee does not breach a duty to the client by working on the properties? basis that the licensee will receive a higher compensation based on a higher selling price or cost. ♦ Example: Buyer Agent Sally enters into an exclusive buyer agency with her buyer, and the buyer agreed to pay Sally a com- A1: Licensees have no duty to discover latent defects, but they are mission based on the sale price of the property. The higher the required to disclose known latent defects. sale price, the more commission Sally will receive. • A licensee is not liable to a client for providing false information if A2: Licensees have no duty to disclose that a property is stigmatized that information was provided to the licensee by a customer unless due to murder, suicide, ghosts or sex offenders. The listing broker may the licensee knew or should have known the information was false. disclose with permission of the seller. A buyer's agent would probably disclose the information if known. Although the statutes replace common law, one can see that the common law fiduciary duties are included in the statutory duties. This section is not 6 Illinois Core A: Fair Housing, Agency, License Law and Escrow Section 15-35. Agency Relationship Disclosure Example: A licensee could represent a buyer client and be paid a commission by the Definitions pertinent to agency disclosure: seller through the listing broker's MLS agreement. • Client: person represented by the licensee. • Customer: person not represented be the licensee, but for whom the licensee may be performing ministerial acts. • Consumer: someone who is seeking or receiving licensing activity (real estate services) . Section 15-45. Dual Agency Dual agency is an agency relationship in which both the seller and Licensees are required to advise a consumer in writing, no later than purchaser, or and lessee, are represented by the same licensee. In beginning to work as a designated agent of the consumer, that a designated Illinois, a licensee may act as a dual agent only with the informed, written agency relationship exists (unless there is a written agreement between consent of all clients. the sponsoring broker and consumer providing for a different brokerage relationship), and the name(s) of the client's designated agent(s). Undisclosed dual agency is a violation of the License Act. The disclosure must be made prior to the licensee acting as a dual agent. Required dual This written disclosure may be part of the brokerage agreement, or may be agency language is stipulated in Section 15-45 of the Act. a separate document. The required dual agency disclosure indicates to the consumer that The client's agent must discuss with the client the sponsoring broker's representing more than one party in a transaction presents a conflict of compensation and policy regarding cooperating with brokers who represent interest, and that licensees may undertake dual representation only with the other party. written consent of all parties. The disclosure also advises the client as to what a licensee can and cannot do as a dual agent. In review, Agency requires certain disclosures to client: • material facts related to the property. Dual agency exists when a real estate firm or a real estate licensee represents • agency relationships. both the seller and the buyer or the landlord and the tenant in the same • compensation sources. transaction. Because the goals of the buyer and the seller (or the landlord • agent's interest, if any, in property. and tenant) are different, this type of representation can easily result in a • agent's and/or company's interest (more than 1%) of any entity re- conflict of interest for the broker. ferred by agent. Effectively serving as a dual agent is extremely difficult, if not impossible. Remember that agency must be disclosed (or non-agency) prior to the Since an agent owes fiduciary duties to the principal, a dual agency situation consumer sharing confidential information. Disclosure should be well in puts the agent in the middle of a situation in which he or she is required to advance of but never later than, the preparation of an offer. balance the interests of two principals. The interests of each client could be vastly different, and sometimes completely opposite. Disclosure to Customers The confidential information of one client may be vital to the bargaining The licensee must disclose to the customer in writing that the licensee is not position of the other. What if the seller tells the agent that he is willing acting as the customer's agent. This disclosure must be made no later than to take $5,000 less than the asking price? This is key information for the the preparation of an offer to purchase or lease but at a time intended to buyer, but a dual agent is prohibited from sharing it. prevent disclosure of confidential information by the customer.

Even the fairest and most careful of agents would have extreme difficulty In Illinois, a written document is not needed to create an agency relationship. in giving undivided loyalty to both parties, or in other words, representing Illinois law makes it clear that an agency relationship and liability of the the interests of both parties fully and equally. licensee can be created by actions – creating an implied or accidental agency. Because of the issues outlined previously, dual agency must be disclosed to both the buyer and the seller. Both parties must agree in writing to the dual However, under Section 1450.195 of the Illinois Administrative Code, all agency relationship. Informed consent is necessary from both the buyer and exclusive brokerage agreements, including all exclusive listing agreements seller in the event of dual agency, as this arrangement is ethical ONLY if and exclusive buyer brokerage agreements, must be in writing. both parties agree to it.

Section 15-40. Compensation Does Not Important Points About Dual Agency Determine Agency A Dual Agency Consent Agreement is required in the event of dual agency The License Act makes it clear that compensation does not determine an in Illinois. The Act dictates the language that must be used on this form and agency relationship. The payment or promise of payment of compensation the licensee cannot change that language. Click here to link to the License does not determine that an agency relationship exists. Compensation and Act and view the required language in Section 15-45. agency are not related. • This written confirmation must be presented to each client at the time he or she enters into a brokerage agreement but may be signed Example: by the client at that time or at any time before an agent acts as a dual agent. A licensee could show a for-sale-by-owner property to a buyer client without • Either client has a right to change his/ her mind and request another representing the seller. The licensee would be performing ministerial acts agent. for the seller. The licensee could be paid by the seller. • A licensee acting in a dual agency capacity must obtain a written confirmation from the clients of their prior consent for the licensee to act as a dual agent. The licensee should obtain this confirma- Illinois Core A: Fair Housing, Agency, License Law and Escrow 7 tion at the time the clients are executing any offer or contract to In Illinois, the sponsoring broker has a contractual, statutory relationship purchase or lease in a transaction in which the licensee is acting with his/her company's clients, not an agency relationship (unless he/she is as a dual agent. also listing agent or selling agent or otherwise involved in the transaction).

A licensee may not serve as a dual agent in any transaction in which he or she has an ownership interest in the property, or in which he/she has an ownership interest in an entity which is a party to the transaction. Section 15-75. Exclusive Brokerage • If an agent refers a client to another agent in order to avoid a dual Agreements agency situation, that agent must give written notice in order to receive any compensation for the referral. The Act states that all exclusive brokerage agreements must specify that the sponsoring broker, through one or more sponsored licensees, must provide, at a minimum, all of the following services: Even when dual agency has been avoided, an agent must provide written • Accept delivery of and present to the client offers and counterof- notice to all clients, when he or she is writing offers for more than one fers to buy, sell, or lease the client's property or the property the buyer on the same piece of property (contemporaneous offer). client seeks to purchase or lease. Keep in mind that all offers and counter-offers should be presented as soon as possible. • Assist the client in developing, communicating, negotiating, and presenting offers, counteroffers, and notices that relate to the offers Section 15-50. Designated Agency and counteroffers until a lease or purchase agreement is signed and all contingencies are satisfied or waived. According to the Act, "designated agency means a contractual relationship • Answer the client's questions relating to the offers, counteroffers, between a sponsoring broker and a client under Section 15-50 of this Act in notices, and contingencies. which one or more licensees associated with or employed by the broker are designated as agent of the client". These services are not required if the contract is non-exclusive, such as in the case with an open listing. Also, if these minimum services are So, a designated agent is a person who is authorized by the managing broker not included in an agreement, it will be presumed to be a non-exclusive to act as the agent of a specific principal in a transaction (either the seller agreement. or buyer). Once this authorization has been given, that designated agent is the only licensee within that company who has agency, or fiduciary, responsibilities toward that principal. The designated licensee becomes the Multiple listing services (MLS) typically accept only exclusive right to sell EXCLUSIVE agent of the client. However, if there are personal assistants and exclusive agency listings into their service. or a team of licensees working with a particular client, there could be more than one designated agent for that client.

Designated agency is not only permitted in Illinois, but it is assumed in CHECK YOUR UNDERSTANDING... this state. Q1: What are the minimum duties required for all exclusive brokerage Designated agency results when two separate licensees within the firm agreements? are designated as legal representatives of the principals to the transaction. This is not considered a dual agency situation, nor is the managing broker Q2: If these minimum duties are not included in the agreement, what is the considered to be acting in the capacity of a dual agent. result?

Designated Agency The Act requires that at the beginning of the agency relationship: A1: Minimum required duties of exclusive brokers agreements include: • The client receives documentation in writing that a designated • Accepting delivery of presenting offers and counteroffers. agency relationship exists, unless there is written agreement be- • Assisting the client is development, communicating, negotiating tween the sponsoring broker and the consumer providing for a dif- and presenting offers and counteroffers until an agreement is ferent brokerage relationship. signed and all contingencies are satisfied or waived. • The written confirmation shows the name of the designated agent • Answering client questions regarding offers, counteroffers, (or agents). notices and contingencies.

The written disclosure can be included in a brokerage agreement or be a A2: If these minimum requirements are not included in the agreement, separate document. it will be presumed to be a non-exclusive agreement.

The managing broker is responsible for keeping records of these disclosures given to clients. He/she is also responsible for protecting confidential information disclosed by a client to his/her designated agent. Summary/Review A designated agent may disclose to his/her sponsoring broker (or someone In Illinois, licensees are presumed to be the designated agent of the specified by the sponsoring broker) confidential information of a client for consumer with whom they are working. the purpose of seeking advice or obtaining assistance for the benefit of the client, but that information cannot be disclosed by the sponsoring broker Although Illinois has replaced common-law fiduciary duties with the or specified individual unless otherwise required by law or permitted by statutory duties of an agent, the statutory duties include the common-law the client. fiduciary duties.

8 Illinois Core A: Fair Housing, Agency, License Law and Escrow Licensees owe customers the duties of honesty and disclosure of material Since the last half of the 20th century, there have been an increasing defects. number of remedies provided under this act. Title VIII of the Civil Rights Act of 1968, also known as the Fair Housing Act of 1968, prohibited discrimination in housing based on race, color, religion or national origin. Duties remaining after termination of the brokerage agreement are In 1968 in a landmark decision, the Supreme Court in Jones v. Mayer ruled accounting for all money and property, and keeping confidential information that discrimination on the basis of race is strictly prohibited. This means confidential. there can be NO EXEMPTIONS OR EXCEPTIONS with regard to race.

Licensees must disclose to customers, in writing, that they are not the Title VI of the Civil Rights Act of 1964 was enacted to prohibit customer's agent, and the disclosure must be made no later than the discrimination on the basis of race, color, or national origin in programs preparation of an offer but at a time to prevent disclosure of confidential and activities receiving federal financial assistance. information.

In 1974, the Housing and Community Development Act added sex to the Compensation does not determine agency. list of protected classes.

Dual agency requires written, informed consent of all parties, and And in 1988, the Fair Housing Amendments Act added handicap and confirmation when becoming a dual agent. familial status.

Exclusive brokerage agreements must contain certain minimum required Based on these laws, the list of protected classes of the Federal Fair services. Housing Act are: • Race • Religion • Color • National origin • Sex • Handicap • Familial status

Chapter Two: 1988 Amendments As we said, the 1988 amendments added handicap and familial status to the Fair Housing list of protected classes. Let's look more closely at these protections. Disability or Handicap If a person has a physical or mental disability or handicap (including hearing, mobility and visual impairments, chronic alcoholism, chronic Overview mental illness, AIDS, AIDS Related Complex and mental retardation) that substantially limits one or more major life activities, has a record of such a • Fair Housing Law – Important Legislation disability or is regarded as having such a disability, a property owner may • Requirements for New Buildings not: • 1988 Amendments for Familial Status • Refuse to let the person make reasonable modifications to the • Fair Housing Enforcement dwelling or common use areas, at his or her expense, so he or she • Americans with Disabilities Act can use the housing. (Where reasonable, the landlord may permit • Illinois Human Rights Act changes only if the person agrees to restore the property to its origi- • Exceptions to the Illinois Human Rights Act nal condition when he or she moves). • Illinois Real Estate License Act of 2000 • Refuse to make reasonable accommodations in rules, policies, • Local Fair Housing Laws practices or services if necessary for the disabled person to use the • Types of Discriminatory Behavior housing. • Advertising Awareness • Advertising and Discrimination For example: A building with a "no pets" policy must allow a visually- • Writing Advertising Copy impaired tenant to keep a guide dog. • Responsibilities • Providing the Right Information • Record Keeping Requirements for New Buildings Fair Housing Law – Important Legislation In buildings that are ready for first after March 13th, 1991, and have an elevator and four or more units: Fair Housing Law first began with the Civil Rights Act of 1866 which • Public and common areas must be accessible to persons with dis- prohibited discrimination in housing based on race. However, at that time the abilities. federal government did not provide solutions, and the individuals involved • Doors and hallways must be wide enough for wheelchairs. had to provide their own remedies. Because those being discriminated • All units must have all of the following: against had limited access to legal help, many victims of discrimination ♦ An accessible route into and through the unit. were left without recourse. ♦ Accessible light switches, electrical outlets, thermostats and other environmental controls. ♦ Reinforced bathroom walls to allow later installation of grab bars.

Illinois Core A: Fair Housing, Agency, License Law and Escrow 9 ♦ Kitchens and bathrooms that can be used by people in An Administrative Law Judge (ALJ) will consider evidence from both the wheelchairs. complainant and the respondent. If the ALJ decides that discrimination oc- curred, the respondent can be ordered: • To compensate for actual damages, including humiliation, pain and If a building with four or more units has no elevator and will be ready for suffering. first occupancy after March 13th, 1991, these standards apply to ground • To provide injunctive or other equitable relief, for example, to floor units. make the housing available to the complainant. • To pay the Federal Government a civil penalty to vindicate the These requirements for new buildings do not replace stricter standards that public interest. The maximum penalties are $10,000 for a first vio- apply in state or local law. lation and $50,000 for a third violation within seven years. • To pay reasonable attorney's fees and costs. • In addition to or instead of filing a complaint with HUD, a person may file a suit in a state or federal court within two (2) years of 1988 Amendments for Familial Status the alleged violation. Unless a building or community qualifies as housing for older persons, If the court finds that discrimination has occurred, the person filing the it may not discriminate based on familial status. That is, it may not complaint may be entitled to: discriminate against families in which one or more children under 18 live • Actual damages. with one of the following persons: • Punitive damages. • A parent. • Attorney's fees and costs. • A person who has legal custody of the child or children. • The designee of the parent or legal custodian, with the parent or custodian's written permission. Americans with Disabilities Act Familial status protection also applies to pregnant women and anyone Another important piece of legislation that licensees should become securing legal custody of a child under 18. familiar with is the Americans with Disabilities Act (ADA) which became effective in 1992. Exemption: Housing for older persons is exempt from the prohibition against familial status discrimination if one of the following conditions ADA mandates that persons with disabilities have equal access to jobs, exists. public accommodations, government services, public transportation and • The HUD Secretary has determined that it is specifically designed telecommunications. It prohibits discrimination in the "full and equal for and occupied by elderly persons under a Federal, State or local enjoyment of goods and services" provided by public places, including government program. hotels, shopping centers and offices, and it applies to the lease and operation • It is occupied solely by persons who are 62 or older. of commercial facilities. • It at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that demonstrates the intent to house persons who are 55 or older. Since most real estate firms are public places, they fall into ADA's definition of a public accommodation. Brokers should evaluate how this applies to physical changes they might need to make to their office space to accommodate both employees and clients. In addition, licensees should Fair Housing Enforcement alert their commercial and investor clients to the existence of the law and the need to have their professionally evaluated and their offices The federal Fair Housing Act is administered by the Office of Fair Hous- inspected for compliance. ing and Equal Opportunity (FHEO) under the direction of the secretary of Housing and Urban Development (HUD). The owner of a might have to make changes to a building to bring it into ADA compliance. Such changes might include: Any person who believes he or she has been discriminated against may file • Adding ramps to the front entrance or accessible parking spaces. a complaint with HUD within one (1) year of the alleged act. HUD can also • Widening doorways or aisles. initiate a complaint on its own. • Installing elevators. • Improving restroom facilities by adding wider stalls, higher toilets When HUD receives a complaint, it will start an investigation. Within 100 or grab bars. days, HUD will determine if there is reasonable cause to charge discrimina- tion or it will dismiss the complaint. Violations During the investigation period, HUD can attempt to resolve the complaint The Department of Justice may file lawsuits in federal court to enforce by getting assurance from the person against whom the complaint was filed the ADA, and courts may order compensatory damages and back pay to that he or she will remedy the alleged violation. This is called conciliation. remedy discrimination if the Department prevails. The Department of A conciliation agreement must protect both the person filing the complaint Justice may also obtain civil penalties of up to $55,000 for the first violation and the public interest. If an agreement is signed, HUD will take no further and $110,000 for any subsequent violation. action on the complaint. However, if HUD has reasonable cause to believe that a conciliation agreement is breached, HUD will recommend that the Attorney General file suit. It's important for investors and commercial clients to understand the impact of the ADA. Owners of small businesses that serve the public must remove physical "barriers" that are "readily achievable," which means easy to More on Enforcement accomplish without much difficulty or expense. The "readily achievable" If the case goes to an administrative hearing, HUD attorneys will litigate requirement is based on the size and resources of the business, so larger the case for the person filing the complaint. That person may intervene in businesses with more resources are expected to take a more active role in the case and choose to be represented by his or her own attorney. removing barriers than small businesses.

10 Illinois Core A: Fair Housing, Agency, License Law and Escrow The ADA also recognizes that economic conditions vary. When a business • Marital status has resources to remove barriers, it is expected to do so; but when profits • Military status are down, barrier removal may be reduced or delayed. Barrier removal is an • Unfavorable (but not dishonorable) discharge from military service ongoing obligation – the owner is expected to remove barriers in the future • Sexual orientation as resources become available. • Order of protection status

New Construction and Renovation According to the Illinois Human Rights Act, it is considered a civil rights violation for anyone to commit any of the following actions based any of If a client is planning to build a new facility or modify an existing one, he the established protected classes: or she needs to consult the ADA Standards for the specific requirements. • Refusal to engage in a with a person. Renovations or modifications are considered to be alterations when they • Change the terms or privileges of a real estate transaction. affect the usability of the space, for example, installing a new display • Refusal to negotiate. counter, replacing fixtures or flooring, or replacing an entry door. However, • Refusal to receive or transmit an offer. simple maintenance such as repainting a wall is not considered an alteration • Publicize an application form that shows intent to discriminate un- by the ADA. lawfully. • Offer solicitation, acceptance, usage, or retainer of a listing of A model home in a is not normally required to property, KNOWING there is intent to unlawfully discriminate. comply with the ADA. However, if the home is also the development's • False representation that a property is not available for sale, rental, sales office, the area where the sales are conducted must comply with ADA inspection, or lease when it really is. since it is a public accommodation. • Purposely not telling someone about a property.

NOTE: Many communities also have State or local accessibility codes enforced by local building inspectors. When a local accessibility code exists, the owner must follow both the code and the ADA requirements. Exceptions to the Illinois Human Rights Act As with many rules, there ARE exceptions to the Illinois Human Rights Act. They are as follows: CHECK YOUR UNDERSTANDING... • Private owners of single family homes are exempt IF they own less than three single-family homes; IF they or a member of their family was the last current resident of the home; IF the home was Q1: What is the significance of the Jones v. Mayer ruling? sold WITHOUT a real estate licensee; AND IF the home was sold Q2: What is significant about the Fair Housing Amendments Act of 1988? WITHOUT using discriminatory advertising. Q3: Describe the exemption that exists for familial status discrimination. • Reasonable federal, state, and local restrictions regarding the num- ber of occupants for a property are allowed. Q4: If a person feels like he or she has been discriminated against, how long • Religious organizations MAY limit those or buying to those does that person have to file a complaint? persons of the same religion, but ONLY if the religious mem- bership is not restricted on the basis of race, color or national origin. A1: Jones v. Mayer ruled that discrimination on the basis of race is • Private rooms in private homes that are occupied by the owner or strictly prohibited, which means there can be NO EXEMPTIONS OR his family are exempt. EXCEPTIONS with regard to race. • Rental properties MAY allow discrimination based on sex in the event of roommates who share a common bathroom or bedroom. • Anyone who has been convicted of illegal manufacturing and/ A2: It added handicap and familial status to the list of protected classes. or distribution of controlled substances IS NOT protected by this Act . A3: • Housing for older persons is exempt if one of the following con- • "Housing for older persons," which is housing that's intended for/ ditions is exists. occupied ONLY by those over 62 years old, OR intended and oc- • The HUD Secretary has determined that it is specifically designed cupied by those 55 or older, and have at least 80% of the units oc- for and occupied by elderly persons under a Federal, State or lo- cupied by at least one person in that age group are exempt. cal government program. • It is occupied solely by persons who are 62 or older. • It houses at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that dem- Illinois Real Estate License Act of 2000 onstrates the intent to house persons who are 55 or older. According to Section 15-15 of the Illinois License Act of 2000, licensees have the responsibility when working with clients to comply without A4: With HUD – within one year of the alleged act In state or federal limitation to all fair housing and civil rights statutes. court – within two years of the alleged act Section 25-40 of the License Act deals with exclusive state powers and functions and municipal functions.

Illinois Human Rights Act As stated, nothing in the section affects or impairs the validity of the powers granted to any municipality by the Illinois Municipal Code to enact In addition to federal Fair Housing Law, Illinois has enacted the Illinois ordinances to: Human Rights Act for state-level protection against discrimination. In • Prescribe fair housing practices. addition to the classes protected under the federal laws, Illinois has added • Define unfair housing practices. these classes: • Establish Fair Housing or Human Relations Commissions and • Age (can't discriminate against anyone over the age of 40) standards for the operation of these commissions in the administra- • Ancestry tion and enforcement of such ordinances.

Illinois Core A: Fair Housing, Agency, License Law and Escrow 11 • Prohibit discrimination based on race, color, creed, ancestry, na- Fair Housing laws also prohibit these activities: tional origin or physical or mental handicap in the listing, sale, • Blockbusting – Making a profit by inducing owners to sell by assignment, exchange, transfer, lease, rental, or financing of resi- telling them that persons of a protected class are moving into the dential property. neighborhood which will have detrimental results, such as the low- • Prescribe penalties for violations of such ordinances. ering of the property values, an increase in criminal behavior or a decline in the quality of the schools in the area. Blockbusting – also called panic peddling or panic selling – includes subtle as well as obvious actions or inducements. Local Fair Housing Laws • Steering – Channeling homebuyers toward or away from homes in Local jurisdictions can add additional classes to protect against discrimina- certain neighborhoods in order to preserve or alter the makeup of tion. Under the Chicago Fair Housing Ordinance, source of income was that neighborhood. Some examples of steering would be showing added to the already existing federal and state protected classes we have a white couple properties in areas that are occupied only by other discussed on previous screens. whites or showing African-American buyers homes that are in inte- grated areas or areas occupied only by African Americans. • Redlining – Restricting the number of loans in certain areas of a Violating the Chicago Ordinance community because of its racial or ethnic makeup. The usual justi- Under this Ordinance, any owner, lessee, sublessee, assignee, managing fication for redlining is that the lender wants to limit the risks in a agent or other person, firm, corporation, or real estate broker, who violates deteriorating area. The lender then discriminates against the whole or fails to comply with any of the provisions of this ordinance, will be pun- class of risks rather than distinguishing among the individual risks. ished by a fine in any sum not exceeding $500.00. In an effort to help lenders meet the needs of the persons in their respective The ordinance also says that the aggrieved party is permitted to pursue communities, including low-income persons, the Community Reinvest- such other and further legal and equitable relief to which he or she may be ment Act requires the periodic evaluation of a lender's lending record. In entitled at his or her own discretion. a process known as filtering down, dwellings that were formerly occupied by middle- and upper-income families decline in quality and value and be- More on Local Laws come available to lower-income families. Lenders are encouraged to make loans on these properties to lower-income families to prevent the deteriora- It would not be practical for us to try to outline every Illinois city and its tion of the community. local Fair Housing laws in this course. It's up to you to take the time, as a broker, to investigate your own city and what is being done locally by the government to encourage Fair Housing practices across the board.

From Evanston to Springfield, you'll find that more and more Illinois city CHECK YOUR UNDERSTANDING... governments are taking a stand on this issue in today's real estate industry. Q1: What did the Illinois Human Rights Act do? Q2: List three activities that are considered discriminatory in real estate. Q3: What is blockbusting? Types of Discriminatory Behavior Q4: What is redlining? Discriminatory activities in real estate include: • Refusing to sell, rent or negotiate with any person who is a member A1: It added state-level protection against discrimination and named ad- of a protected class. ditional protected classes. • Changing terms, conditions or services for different individuals as a means of discrimination. A2: • Refusing to sell, rent or negotiate with any person who is a mem- • Stating or advertising that the property is restricted. ber of a protected class • Telling persons that a property is not for sale or rent when it is. • Telling persons that a property is not for sale or rent when it is • Denying membership in any (MLS) or any • Denying membership in any multiple listing service (MLS) or broker's organization. any broker's organization • Using discriminatory advertising.

Discrimination in Mortgage Lending A3: Blockbusting is making a profit by inducing owners to sell by telling them that persons of a protected class are moving into the neighborhood These practices are also considered discriminatory. which will have detrimental results. • Refusing to give a loan.

• Refusing to provide loan information. A4: Restricting the number of loans in certain areas of a community be- • Giving different terms for loans, such as interest rates or fees. cause of its racial or ethnic makeup. • Discriminating when doing a property appraisal. • Refusing to purchase a loan. • Setting different conditions for a loan purchase.

In mortgage lending, keep in mind that it is also illegal to: • Threaten, coerce, intimidate or interfere with anyone exercising a Advertising Awareness fair housing right or assisting others who exercise that right. • Advertise or make any statement that indicates a limitation or pref- Compliance with anti-discrimination laws is critical when doing advertising. erence based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory adver- Discriminatory advertising is defined as advertising that indicates a prefer- tising applies to single-family and owner-occupied housing that is ence, limitation or discrimination based on race, color, religion, handicap, otherwise exempt from the Fair Housing Act. sex, familial status or national origin. But it is sometimes difficult to know what actually constitutes discriminatory advertising.

12 Illinois Core A: Fair Housing, Agency, License Law and Escrow It is probably safe to say that any advertising that describes the property For example, phrases such as complex with chapel or kosher would be considered acceptable, while advertising that describes buyers meals available are not discriminatory. could be considered discriminatory, especially if the buyers are from a pro- tected class. NOTE: A licensee can use common terms that relate to religious holidays, such as Santa Claus, the Easter Bunny or St. Valentine's Day, or phrases Dealing with Race, Color or National Origin such as Merry Christmas and Happy Easter without violating discrimina- tion laws. If a licensee uses words that describe the housing, the current or potential residents or the neighbors or neighborhood in racial or ethnic terms, he or she will create liability for discriminatory advertising. Dealing with Handicap A licensee should never write a real estate advertisement which contains For example, phrases such as white family home or no Irish are discrimina- explicit exclusions, limitations or other indications of discrimination based tory. on handicap.

However, if the licensee creates ads which are racially neutral, he or she For example, phrases such as no wheelchairs, able-bodied persons only, no will have no liability. deaf or no handicapped parking are considered to be discriminatory.

For example, phrases such as master bedroom, rare find or desirable neigh- On the other hand, advertisements that include descriptions of the property, borhood are not considered discriminatory. services or facilities, or neighborhoods are not considered discriminatory advertising. NOTE: Ads with human models showing all one race, all able-bodied, all one gender are illegal. There has been at least one major lawsuit in Illinois For example, a licensee could use phrases such as great view, fourth-floor over billboards with all white models. walk-up, walk-in closets, jogging trails and walk to bus-stop without violat- ing anti-discrimination laws.

A licensee could also describe in an ad the conduct that is required of resi- Advertising and Discrimination dents without it being viewed as discriminatory. Dealing with Sex or Gender For example, a licensee could use the phrases non-smoking or sober. If a licensee writes an ad for a single family home or a separate unit in a It is also within the law to write an ad that gives descriptions of accessible multi-family dwelling, the ad must not have an overt preference for or limi- features, such as wheelchair ramp. tation of any person that is based on gender. Dealing with Familial Status For example, an add should never read males only, men only, women only, As we've seen with all of the other protected classes, when writing an ad, females only or other like phrases, unless the ad is describing shared living a licensee should never state a precise preference, limitation or discrimina- areas or homes used exclusively as dormitories by educational institutions. tion that is based on familial status. Advertisements may not contain limi- tations on the number or ages of children, or state a preference for adults, There are some terms that may appear on their face to be a reference to sex, couples or singles. but since they are commonly used as physical descriptions of housing units, they are not considered by HUD to be discriminatory advertising. For examples, a licensee should never use phrases such as couples only, empty nesters, single person, no families, mature individuals or senior dis- For example, the term mother-in-law apartment falls into the category of count. nondiscriminatory terms. As we discussed on the previous screen, advertisements that include de- Also, the term master bedroom is not a violation of either the gender or race scriptions of the property, services or facilities or neighborhoods are not discrimination provisions, so it too can be used freely. considered discriminatory advertising.

Dealing with Religion For example, a licensee could use phrases such as two bedroom, cozy, If a licensee creates an ad which is explicit in its preference for or limitation family room, no bicycles allowed or quiet streets without violating antidis- of any particular religion, the ad is discriminatory. crimination laws.

For example, licensees should never use phrases such as no Jews or Chris- In light of what we have just discussed, it's important for licensees to view tian home. any advertising from the perspective of all the protected classes. When composing advertising, licensees should ask themselves how they would Advertisements which use the legal name of an entity which contains a feel if they were a member of a minority and were reading the ad. This is religious reference or ads which contain a religious symbol, standing alone, a good guideline to help in determining whether or not the licensee should may designate a religious preference. publish the ad.

For example, the name Roselawn Catholic Home or a picture of a cross could imply a preference for someone of that religion.

However, if the licensee uses a disclaimer in the ad - such as the statement Writing Advertising Copy "This Home does not discriminate on the basis of race, color, religion, na- tional origin, sex, handicap or familial status" - it will not be considered As you have just seen, it can be a challenge to create advertising that does discriminatory advertising. not use some discriminatory words or phrases. Words that are not gener- ally recognized as being discriminatory can be, so it's important to become If a licensee creates an ad which contains descriptions of properties or ser- familiar with those phrases that you should avoid. vices which do not indicate a preference for the kind of person who would use those facilities, the ad would not be considered discriminatory. In 1995, the Department of Housing and Urban Development (HUD) which enforces fair housing laws sent some guidelines to its staff to help the when

Illinois Core A: Fair Housing, Agency, License Law and Escrow 13 investigating allegations of discrimination. The memo addressed some Important Note words and phrases which are not acceptable to use and others which, if Violations of fair housing laws carry penalties and fines, so brokers must used, would not constitute a violation or be considered discriminatory. be careful about avoiding these violations. Fines, hearings and court ap- pearances will cost a firm both time and money and will negatively impact The HUD memo addressed only a small set of possibilities, but it seems to the firm's operation. There is also the issue of the firm's reputation, which indicate that the staff should not move complaints forward if the ads ap- would suffer greatly if violations are filed and proven. Many errors and peared reasonable and did not favor or disfavor a protected group. omissions liability policies do not cover fair housing issues. Organizations have published lists of words to help write ads that will not be discriminatory. One particularly good list was compiled by the Miami Valley Fair Housing Center, Inc. in Dayton, Ohio. Here is the link for the "Fair Housing Advertising Word and Phrase List", http://www.mvfairhous- ing.com/ad_word_list.php, copy and paste this into your search bar. You Providing the Right Information can print a PDF copy or the list from a link on the list. In the world of fair housing and real estate, there certainly are myriad chal- lenges. Every day you will face fair housing issues, sometimes, without realizing it. Seemingly innocuous questions or comments from your buyers and sellers can open the proverbial can of worms before you know what's Responsibilities happened. Managing brokers have a responsibility to comply with fair housing poli- cies. They must maintain a fair housing office. A managing broker should take these steps to ensure compliance with fair housing laws. You have to stay on your toes and be aware of what's happening. There are • Follow the suggestion of the National Association of REAL- some typical questions that are most likely asked of you frequently -- possi- TORS® and post a sign which states it is against company policy bly even every day. So let's discuss some of those issues and give you some as well as state and federal laws to offer any information on the help in formulating good answers. racial, ethnic or religious make-up of a neighborhood or to restrict the listing, showing or giving of information on the availability of We know you've probably been faced with questions that are outside your homes for any of those reasons. realm of expertise or knowledge. Although you likely already know this, • Prominently display in all offices the Equal Opportunity Poster it's best to refer such questions to people who are experts in those fields. that the Department of Housing and Urban Development (HUD) Try to limit yourself to discussing aspects of the home, selling, buying and distributes. Note: While not legally required to be posted in broker- listing properties. age offices, if the poster is not displayed and the broker is accused of discrimination, failure to have it displayed is considered prima For example, questions about local schools, the ethnicity in a certain area, facie evidence of discrimination. Here is the link, http://www.hud. or any similar questions should not be answered by a real estate profes- gov/offices/fheo/promotingfh/928-1.pdf, for a copy of the "Equal sional. If you consistently refer buyers to experts who can answer these Housing Opportunity Poster" for you to view or print out if desired. questions in a factual way, you can minimize your housing liability. • Maintain the concept of fair housing in all forms of advertising. (We'll discuss advertising guidelines in more detail later in this unit). More on Answering Questions • Provide ongoing training and education to all affiliated licensees What if a buyer asks you a question about the minorities living in a specific by holding seminars and workshops, watching videos and bringing area? It would be inappropriate and dangerous for you to answer this ques- in guest speakers. Appropriate training is also available through tion. You could be in a lot of trouble for doing so. NAR, state and local boards and real estate schools.

However, you could refer the buyer to experts in this field -- someone who More Responsibilities would actually be in possession of the demographics in a particular area. Managing brokers should also do the following: This way, the buyer gets a factual answer to his or her question, and not • Report blatant misconduct by other licensees. This can prove to be your opinion, which may or may not be a representation of the true statis- a very uncomfortable situation for a managing broker, but when vi- tics. Even if your opinion is fairly accurate, you are safest to avoid answer- olations are obvious, the behavior should be reported to the proper ing questions of this nature. authority. • Put a system in place to monitor the activities of all affiliated li- Your Opinion censees with regard to fair housing compliance. Ask licensees to keep records of all prospects, their qualifying information and the If a client asks you a specific opinion question, such as, "Would you live in prospects reactions to the property they were shown. Review the this home or this neighborhood?" it is illegal to voice an opinion based on records periodically to help identify any situations where the li- race, religion, color, national origin, sex, handicap, familial status or any of censee may be in violation of fair housing issues. the protected classes. It is okay to make factual statements based on various • Include a Fair Housing Policy for their office in the Policy and features within the home. Procedures Manual. The same applies to questions you may receive about your opinion of the Broker's Responsibility neighborhood. If you make comments about the neighborhood's features in relation to their location within the city, closeness to shopping or other Licensees share in the responsibility of complying with fair housing laws. benefits, that's okay. Make sure your voiced opinions do not relate in any Licensees should: way to race or any of the other protected classes. • Know the fair housing laws and their responsibilities for compli- ance. • Act in accordance with the law at all times. Questions About Ethnic Makeup • Learn to keep clear and accurate records. You may run across a buyer who is genuinely interested in living in an area • Attend fair housing training seminars periodically. where he will be surrounded by members of his own race. If someone asks • Know the resources to use if misconduct needs to be reported. for the "black" or "Jewish" areas, what do you do?

14 Illinois Core A: Fair Housing, Agency, License Law and Escrow Well, for one, you need to explain to the buyer that you, ethically and le- agendas along with a "sign-in" sheet that shows which licensees gally, cannot recommend housing based upon the race, religion, color, na- were in attendance at the meeting. tional origin, sex, handicap, or familial status makeup of the neighborhood. • The fair housing policy should be in the firm's policy and proce- dures manual. Ideally, the broker will require affiliated licensees to sign that they have read and understand the policy. Remember, selecting properties based on the ethnic makeup of the neigh- borhood could easily bring about a "steering" charge against you. Record Retention Listing Agreements According to Section 1450.755 of Illinois Administrative Code, a broker must retain all of the following records for five (5) years: • Escrow records. A real estate professional should make it clear from the beginning that his • Transaction records for all residential, property management, and or her brokerage does take fair housing laws seriously. Before even enter- commercial transactions. ing into a listing agreement, a real estate professional should explain the • Employment agreements. importance of fair housing compliance and secure a commitment to this be- • Records reflecting the payment of compensation for the perfor- fore agreeing to list the house. This way, if the seller chooses not to follow mance of licensed activities. the fair housing laws, the agent or broker can refuse the listing.

The broker must also retain licensee records for five years after licensee's This discussion and the listing agreement should make it clear that the association with broker is terminated. agent will observe five rules in dealing with the listing and resulting pro- spective buyers. • The prospective buyer will only be described in terms that do not include race, religion, color, national origin, sex, handicap, familial CHECK YOUR UNDERSTANDING... status or other protected-class status. • The prospective buyers will be identified not by name but by oc- Q1: How is discriminatory advertising defined? cupation, present residence, or other characteristics of the buyer which could not identify them as members of a protected class. Q2: Why is it not prudent to describe buyers in ad copy? • The facts of the offer should be carefully documented so that the Q3: Give two examples of words or phrases that would be considered broker cannot be charged with failure to present the offer in a fair discriminatory and two that would not, with regard to sex/gender when and nondiscriminatory manner. writing an ad. • The listing will be terminated if the seller refuses to consider an of- fer because the prospective buyer is a member of a protected class. Q4: What would you say to a Hispanic buyer who tells you he wants to • The supervisor and broker will be informed of any suspected at- see homes that are located only in predominantly Hispanic neighborhoods? tempts by the seller to illegally discriminate.

Questions About Buyers If, as a real estate professional, you are posed questions about the buyer A1: Discriminatory advertising is defined as advertising that indicates a that have nothing to do with the sale, you have to handle the situation care- preference, limitation or discrimination based on race, color, religion, fully. If you are asked about the color, religion, ethnicity, familial status or handicap, sex, familial status or national origin. other "protected class" characteristics of the buyers, you must tell the seller it is inappropriate for you to give out such information. The seller cannot A2: Advertising that describes buyers could be considered discriminatory, withhold property from a "protected class" individual, and the real estate especially if the buyers are from a protected class. professional must definitely not be involved, should this happen. If so, both the seller and the agent or broker could be found in violation of the law. A3: • Discriminatory - males only, women only • Non-discriminatory - mother-in-law apartment, master bedroom In the same way, the seller cannot, legally, decline to show a property to minorities or members of other protected classes. Both the seller and the A4: You need to explain to the buyer that you, ethically and legally, real estate professional could be sued for violating fair housing laws. cannot recommend housing based upon the race, religion, color, national origin, sex, handicap, or familial status makeup of the neighborhood.

Record Keeping Summary/Review As we mentioned on an earlier screen, managing brokers should put a sys- Fair Housing law first began with the Civil Rights Act of 1866 which tem in place to monitor the activities of all affiliated licensees with regard to prohibited discrimination in housing based on race. The list of protected fair housing compliance. Here is a short list of things to consider: classes of the Federal Fair Housing Act is: • It would be a good practice for an employing broker to have a com- • Race pany form for interviewing/qualifying buyers as a way of proving • Religion that all buyers are treated equally and that buyer, rather than the • Color licensee, is setting the parameters as to where to live. The broker • National origin should keep that questionnaire with answers in the client's file. • Sex • If a seller attempts to discriminate, the broker should document • Handicap that information, including his or her refusal to be a party. If a bro- • Familial status ker releases a listing because a seller insists on discriminating, the broker would document that and what steps were taken as a result. • The managing broker should also keep agendas of meeting in Any person who believes he or she has been discriminated against may file which he or she reviewed fair housing laws. Even though not re- a complaint with HUD within one (1) year of the alleged act. quired by law, it would be prudent for the broker to have these

Illinois Core A: Fair Housing, Agency, License Law and Escrow 15 In addition to or instead of filing a complaint with HUD, a person may file Recent Changes to the Real Estate License Act a suit in a state or federal court within two (2) years of the alleged violation. of 2000

The Americans with Disabilities Act mandates that persons with disabilities Since 2012, several changes in the License Law have become effective. have equal access to jobs, public accommodations, government services, These changes are mainly in the areas of licensing and license renewal. public transportation and telecommunications. Licensing In addition to federal Fair Housing Law, Illinois has enacted the Illinois As stated in Section 5-27 of the License Act, applicants who wish to obtain Human Rights Act for state-level protection against discrimination. In a broker's license must meet the following requirements: addition to the classes protected under the federal laws, Illinois has added • Be of good moral character. these classes: • Successfully complete a four-year course of study in a high school • Age or secondary school approved by the Illinois State Board of • Ancestry Education or an equivalent course of study as determined by an • Marital status examination conducted by the Illinois State Board of Education • Military status which will be verified under oath by the applicant. • Unfavorable discharge from military service • Be 21 years of age; however, a broker may be 18 years old if he or • Sexual orientation she has a minimum of 4 semesters of post-secondary school study • Order of protection status as a full-time student or the equivalent, with major emphasis on real estate courses, in a school approved by the Department. Local jurisdictions can add additional classes to protect against • Complete 90 hours of instruction (15 hours of case studies/ discrimination. situational type in classroom or other interactive delivery method). • Take and pass the written exam. • Submit an application with sponsoring card and fee. Fair Housing laws also prohibit these activities. • Blockbusting • Steering NOTE: An individual holding an active license as a managing broker may • Redlining return the license to the Department along with a form provided by the Department and that person will be issued a broker's license in exchange. It would be inappropriate and dangerous for a licensee to answer questions about the minorities living in a specific area. The licensee should refer the buyer to experts in this field -- someone who would actually be in possession of the demographics in a particular area. Managing Broker Licensing Managing brokers should put a system in place to monitor the activities of Section 5-28 of the License Act of 2000 states that applicants for a all affiliated licensees with regard to fair housing compliance. managing broker license must meet the following requirements: • Be 21 years of age. • Be of good moral character. • Have a high school diploma or equivalent. • Have been licensed at least 2 of the 3 prior years as salesperson or broker. • Complete 165 hours of pre-license education: 120 broker pre- Chapter Three: license and 45 additional hours completed in the year before applying for managing broker license. The additional hours must focus on brokerage administration and management and include License Law and Escrow at least 15 hours in the classroom or by other interactive delivery method between the instructor and the students. • Take and pass exam. • Submit application with sponsor card and pay fees. Overview According to Section 5-28(c), no applicant can act as a managing broker • Broker Licensing for more than 90 days after an appointment as a managing broker has • Managing Broker Licensing been filed with the Department without obtaining a managing broker's • Auctioneer Licensing license. • Broker License Renewal for 2014 • Continuing Education • Expiration of Brokerage Agreement • Payment of Compensation • Reliance on Advisory Letters Auctioneer Licensing • Disciplinary Actions Not Related to Escrow According to Section 5-32 of the License Act, an auctioneer licensed under • Requirement for a Physical or Mental Examination the Auction License Act who does not possess a valid and active broker's or • Employment Agreements managing broker's license, or who is not otherwise exempt from licensure, • Ministerial Acts may not engage in the practice of auctioning real estate, except as provided • Unlicensed Assistants here. • Section 1450.750. Special Accounts - Overview • Special Accounts - Escrow • Disputes Regarding Escrow Monies The Department will issue a real estate auction certification to applicants • Maintaining Escrow Accounts who: • Disciplinary Causes Related to Escrow • Possess a valid auctioneer's license under the Auction License Act. 16 Illinois Core A: Fair Housing, Agency, License Law and Escrow • Successfully complete a real estate auction course of at least 30 hours approved by the Department, which covers the scope of More License Act Changes and Revisions activities that may be engaged in by a person holding a real estate Continuing Education auction certification and the activities for which a person must hold a real estate license, as well as other material as provided by the Section 5-70(l) of the License Act states that, except as specifically Department. provided in this Act, continuing education credit hours may not be earned • Provide documentation of the completion of the real estate auction for completion of pre- or post-license courses. course. • Successfully complete any other reasonable requirements as The approved 30-hour post-license course for broker licensees will satisfy provided by rule. the continuing education requirement for the pre-renewal period in which the course is taken. The auctioneer's role is limited to establishing the time, place, and method of the real estate auction, placing advertisements regarding the auction, and crying or calling the auction. Any other real estate brokerage activities must The approved 45-hour brokerage administration and management be performed by a person holding a valid and active real estate broker's or course will satisfy the 12-hour broker management continuing education managing broker's license under the provisions of the License Act or by requirement for the pre-renewal period in which the course is taken. a person who is exempt from holding a license and who has a real estate auction certification. Expiration of Brokerage Agreement The language of Section 10-25 has been revised as shown below in bold. An auctioneer who conducts any real estate auction activities in violation of this Section of the Act is guilty of unlicensed practice. The Department may revoke, suspend, or otherwise discipline the real estate auction certification "No licensee shall obtain any written brokerage agreement that does of an auctioneer who is adjudicated to be in violation of the provisions of not either provide for automatic expiration within a definite period the Auction License Act. of time or provide the client with a right to terminate the agreement annually by giving no more than 30 days' prior written notice. Any written brokerage agreement not containing such a provision shall Advertising for the real estate auction must contain the name and address be void. When the license of any sponsoring broker is suspended or of the licensed real estate broker, managing broker, or a licensed auctioneer revoked, any brokerage agreement with the sponsoring broker shall who is providing brokerage services for the transaction. be deemed to expire upon the effective date of the suspension or revocation." A person licensed as a real estate broker or managing broker is not required to obtain a real estate auction certification in order to auction real estate. Payment of Compensation The following was added to Section 10-5 regarding compensation:

"(e) Notwithstanding any other provision of this Act, a sponsoring broker may pay compensation to a person currently licensed under Broker License Renewal for 2014 the Auction License Act who is in compliance with and providing services under Section 5-32 of this Act." By April 30th, 2014 all broker licensees must have completed the continuing education (CE) requirements and applied to renew their license through the Illinois Department of Financial and Professional Regulation (IDFPR). The Reliance on Advisory Letters specific requirements depend on how and when the licensee received his or her Illinois broker license. Section 25-14 states the following:

Brokers who were licensed under the new 90-hour pre-licensing "Licensees or their representatives may seek an advisory letter from requirements whose first license expires April 30th, 2014 must: the Department as to matters arising under this Act or the rules • Complete and pass the 30-Hour Broker Post- License Course promulgated pursuant to this Act. The Department shall promulgate before April 30th, 2014. rules as to the process of seeking and obtaining an advisory letter • Submit the renewal application with the appropriate licensing fee and topics and areas on which advisory rules will be issued by the to IDFPR by April 30th, 2014. Department. A licensee is entitled to rely upon an advisory letter from the Department and will not be disciplined by the Department for actions taken in reliance on the advisory letter." NOTE: These licensees have no other CE requirements for this renewal period.

Brokers who transitioned from a salesperson license or were licensed as a broker before February 1st, 2012 must: CHECK YOUR UNDERSTANDING... • Have taken 12 hours of CE between May 1st, 2012 and April 30th, 2014. The 12 hours must include a minimum 6 hours Core CE (3 hours of which must be Core A and 3 must be Core B) and a Q1: What is the role of a licensed auctioneer? maximum 6 hours of elective CE. • Submit the renewal application with the appropriate licensing fee Q2: What is the renewal requirement for brokers who were licensed under to IDFPR by April 30th, 2014. the new 90-hour pre-licensing requirements whose first license expires April 30th, 2014? Brokers who were licensed under the new 90-hour pre-licensing requirement on or after February 1st, 2014 do not need to renew in 2014. Q3:What is the renewal requirement for brokers who transitioned from a The license renewal deadline for those brokers is April 30th, 2016 and salesperson license or were licensed as a broker before February 1st, 2012? the only hours required for the 2016 renewal will be the 30-Hour Broker Post-License Course.

Illinois Core A: Fair Housing, Agency, License Law and Escrow 17 A1: The auctioneer's role is limited to establishing the time, place, and his/her possession that belong to others. method of the real estate auction, placing advertisements regarding the • Failing to furnish copies upon request of documents relating to a auction, and crying or calling the auction. real estate transaction to a party who has executed that document. • Failure of a sponsoring broker to timely provide information, sponsor cards, or termination of licenses to the Department. A2: • Complete and pass the 30-Hour Broker Post- License Course be- • Engaging in dishonorable, unethical, or unprofessional conduct of fore April 30th, 2014 a character likely to deceive, defraud, or harm the public. • Submit the renewal application with the appropriate licensing fee • Employing any person on a purely temporary or single deal basis to IDFPR by April 30th, 2014. as a means of evading the law regarding payment of commission to non-licensees. A3: Have taken 12 hours of CE between May 1st, 2012 and April 30th, • Commingling the money or property of others with his/her own 2014. The 12 hours must include a minimum 6 hours Core CE (3 hours money or property. of which must be Core A and 3 must be Core B) and a maximum 6 hours • Permitting the use of his/her license as a broker to enable a of elective CE. Submit the renewal application with the appropriate salesperson or unlicensed person to operate a licensing fee to IDFPR by April 30th, 2014. without actual participation and control. • Any other conduct that constitutes dishonest dealing • Displaying a "for rent" or "for sale" sign on any property, or advertising a property or sale or rent, without the written consent of an owner or owner's duly authorized agent. • Failing to provide information requested by the Department within Disciplinary Actions Not Related to Escrow 30 days of the request. • Using a blind ad. The brokerage name and franchise affiliation (if As stated in Section 20-20, the Department may refuse to issue or renew any) must be included in all advertising. a license, place a licensee on probation, suspend or revoke any license, • Influencing or attempting to influence a seller, purchaser, occupant, reprimand, or take any other disciplinary or non-disciplinary action the landlord, or tenant in a way that tends to promote racially or Department deems necessary, or impose a fine not to exceed $25,000 for religiously segregated housing or in a way that retards, obstructs, any one or a combination of the following causes: or discourages racially integrated housing. As "keepers of the • Fraud or misrepresentation in applying for or obtaining a license or land", licensees have an obligation to provide equal opportunity license renewal. Note: The license renewal form includes questions in housing. regarding school loans, child support and Illinois taxes being paid • Engaging in any act that is in violation of Article 3 of the Illinois current. Answering those questions or any other question on the Human Rights Act, whether or not a complaint has been filed. renewal form untruthfully can result in disciplinary action. • Inducing any party to a contract of sale, lease, or brokerage • Conviction of, plea of guilty or nolo contendre, to a felony or agreement to substitute a new contract. misdemeanor involving dishonesty, fraud, larceny, embezzlement, • Negotiating a sale, exchange or lease directly with any person or obtaining money, property or credit by false pretenses, in Illinois if the licensee knows that the person has an exclusive brokerage or any other state or jurisdiction. agreement with another broker unless specifically authorized by • Inability to practice with reasonable judgment, skill or safety as a that broker. result of physical illness, including but not limited to, deterioration • When a licensee is also an attorney, acting as the attorney for one through the aging process or loss of motor skill, or mental illness of the parties in the same transaction in which the attorney is acting or disability. as a broker or salesperson. • Conducting real estate business in a retail establishment, if not • Advertising or offering free merchandise or services if any separated from the main retail business in a separate and distinct conditions necessary to receive the merchandise or services are not area. disclosed in the same ad. • Disciplinary action of another state or jurisdiction if at least one of • Disregarding or violating any provision of the Land Sales the grounds for discipline is the same as or equivalent to one of the Registration Act of 1989, the Illinois Time Share Act, or the rules grounds for discipline in Illinois. that enforce those Acts. • Engaging in real estate activity without a license or after the license • Violating the terms of a disciplinary order issued by the Department. is expired or while the license was inoperative. Note: Practicing • Paying or failing to disclose compensation in violation of the Act. without a license (including an expired or inoperative license) can • Requiring a party who is not a client of the licensee to allow the result in a fine of up to $25,000 in addition to other disciplines. licensee to retain a portion of the escrow moneys for payment of the • Cheating or attempting to subvert a licensing exam or continuing licensee's commission or expenses as a condition of release of the education exam, or aiding or abetting an applicant to do so. earnest money. Licensees may not hold earnest money "hostage" • Advertising in a way that is inaccurate, misleading, or contrary to for the payment of commission. the Act. • Disregarding or violating any provision of the Act or Rules, or • Making substantial misrepresentation or untruthful advertising. aiding someone else in doing so. • Making any false promises that are likely to influence, persuade • Failing to provide the minimum services required by the Act for or induce. exclusive brokerage agreements. • Pursuing a continued and flagrant course of misrepresentation or • Habitual or excessive use or addiction to alcohol, narcotics, making of false promises through licensees, employees, agent, stimulants, or any other chemical agent that results in a licensee's advertising, or otherwise. inability to practice with reasonable skill or safety. • Using misleading or untruthful advertising, or using trade name • Enabling, aiding, or abetting an auctioneer, as defined in the or insignia of membership in a real estate organization when the Auction License Act, to conduct a real estate auction in a manner licensee is not a member. that is in violation of this Act. • Acting for more than one party in a transaction (acting as a dual agent) without written notice to all parties. Undisclosed dual agent is not only a license law violation, it exposes the licensee to legal problems. • Representing or attempting to represent a broker other than the sponsoring broker. • Failure to account for or remit moneys or documents coming into

18 Illinois Core A: Fair Housing, Agency, License Law and Escrow Requirement for a Physical or Mental this written employment agreement with the licensee must be that licensee's sponsoring broker. Examination • Every sponsoring broker must have a written employment When enforcing the disciplinary section of the License Act, the Department agreement with each licensee the broker sponsors. The agreement may require a licensee under investigation for an alleged violation to submit shall address the employment or independent contractor to a physical or mental examination. Section 20-20(e) reads as follows: relationship terms, including without limitation supervision, duties, compensation, and termination. • Every sponsoring broker must have a written employment "In enforcing this Section, the Department or Board upon a showing of agreement with each licensed personal assistant who assists a a possible violation may compel an individual licensed to practice under licensee sponsored by the sponsoring broker. This requirement this Act, or who has applied for licensure under this Act, to submit to applies to all licensed personal assistants whether or not they a mental or physical examination, or both, as required by and at the perform licensed activities in their capacity as a personal assistant. expense of the Department. The Department or Board may order the The agreement shall address the employment or independent examining physician to present testimony concerning the mental or contractor relationship terms, including without limitation physical examination of the licensee or applicant. No information shall supervision, duties, compensation, and termination. be excluded by reason of any common law or statutory privilege relating • Notwithstanding the fact that a sponsoring broker has an to communications between the licensee or applicant and the examining employment agreement with a licensee, a sponsoring broker physician. The examining physicians shall be specifically designated by may pay compensation directly to a corporation solely owned by the Board or Department. The individual to be examined may have, at that licensee that has been formed for the purpose of receiving his or her own expense, another physician of his or her choice present compensation earned by the licensee. A corporation formed for the during all aspects of this examination. Failure of an individual to submit purpose herein stated in this subsection shall not be required to to a mental or physical examination, when directed, shall be grounds be licensed under this Act so long as the person who is the sole for suspension of his or her license until the individual submits to the shareholder of the corporation is licensed. examination if the Department finds, after notice and hearing, that the refusal to submit to the examination was without reasonable cause.

If the Department or Board finds an individual unable to practice because of the reasons set forth in this Section, the Department or Board Ministerial Acts may require that individual to submit to care, counseling, or treatment by physicians approved or designated by the Department or Board, as Ministerial acts are those acts that a licensee may perform for a consumer a condition, term, or restriction for continued, reinstated, or renewed that are informative or clerical in nature and do not rise to the level of active licensure to practice; or, in lieu of care, counseling, or treatment, the representation on behalf of a consumer. They are not agency acts and do not Department may file, or the Board may recommend to the Department to form an agency agreement. file, a complaint to immediately suspend, revoke, or otherwise discipline the license of the individual. An individual whose license was granted, Examples of ministerial acts include without limitation: continued, reinstated, renewed, disciplined or supervised subject to such • Responding to phone inquiries by consumers or inquiries from terms, conditions, or restrictions, and who fails to comply with such consumers walking into a licensee's office concerning the avail- terms, conditions, or restrictions, shall be referred to the Secretary for a ability and pricing of brokerage services or price or location of determination as to whether the individual shall have his or her license a property. Providing this information is not an agency act. Also, suspended immediately, pending a hearing by the Department. describing a property or the property's condition in response to a consumer's inquiry is a ministerial act. In instances in which the Secretary immediately suspends a person's • Attending an open house and responding to questions about the license under this Section, a hearing on that person's license must be property from a consumer. Use caution to ensure the attendees convened by the Department within 30 days after the suspension and know they are not currently being represented, at a time to prevent completed without appreciable delay. The Department and Board them from sharing confidential information. shall have the authority to review the subject individual's record of • Setting an appointment to view the property. treatment and counseling regarding the impairment to the extent • Accompanying an appraiser, inspector, contractor, or similar third permitted by applicable federal statutes and regulations safeguarding party on a visit to a property. the confidentiality of medical records. • Completing business or factual information for a consumer on an offer or contract to purchase on behalf of a client. • Showing a client through a property being sold by an owner on his An individual licensed under this Act and affected under this Section or her own behalf. shall be afforded an opportunity to demonstrate to the Department or • Referral to another broker or service provider. Keep in mind that Board that he or she can resume practice in compliance with acceptable referring an existing client to another licensee to avoid dual agency and prevailing standards under the provisions of his or her license." requires that the licensee provide the client being referred written notice.

Employment Agreements Section 10-20 of the License Act makes the following points regarding Unlicensed Assistants sponsoring brokers and employment agreements with their affiliated According to Section 1450.740 of the Act, licensees may employ, or licensees: otherwise utilize the services of, unlicensed assistants to assist them with • A licensee may perform activities as a licensee only for his or administrative, clerical or personal activities that do not require a license. her sponsoring broker. A licensee must have only one sponsoring Compensation for unlicensed personal assistants cannot be transaction broker at any one time. based. • Every broker who employs licensees or has an independent contractor relationship with a licensee shall have a written employment agreement with each such licensee. The broker having An unlicensed assistant, on behalf of and under the direction of a licensee, may engage in the following administrative, clerical or personal activities.

Illinois Core A: Fair Housing, Agency, License Law and Escrow 19 Note: This is not an all-inclusive list; it is meant to be illustrative: CHECK YOUR UNDERSTANDING... • Answer the telephone, take messages and forward calls to a li- censee. Q1: What are some of the disciplines the Department may impose for • Submit listings and changes to a multiple listing service. violations of the License Act? • Follow up on a transaction after a contract has been signed. • Assemble documents for a closing. Q2: When enforcing the disciplinary section of the License Act, what can • Secure public information from a courthouse, sewer district, water the Department do if there is reason to believe that a licensee is unable to district or other repository of public information. practice with reasonable judgment or skill? • Have keys made for a company listing. Q3: With whom must a sponsoring broker have employment agreements? • Draft advertising copy and promotional materials for approval by a licensee. Q4: Who is responsible for the actions of an unlicensed assistant? • Place advertising. • Record and deposit earnest money, security deposits and rents. • Complete contract forms with business and factual information at the direction of and with approval by a licensee. • Monitor licenses and personnel files. A1: The Department may refuse to renew a license, place it on probation, • Compute commission checks and perform bookkeeping activities. suspend or revoke a license, reprimand, or take any other disciplinary • Place signs on property. action the Department deems necessary, or impose a fine of up to $25,000. • Order items of routine repair as directed by a licensee. • Prepare and distribute flyers and promotional information under A2: The Department may require a licensee under investigation for an the direction of and with approval by a licensee. alleged violation to submit to a physical or mental examination. • Act as a courier to deliver documents, pick up keys, etc. • Place routine telephone calls on late rent payments. A3: The sponsoring broker must have written employment agreements • Schedule appointments for the licensee (this does not include mak- with all affiliated licenses, including independent contractors and ing phone calls, telemarketing or performing other activities to so- licensed personal assistants. licit business on behalf of the licensee.) • Respond to questions by quoting directly from published informa- tion. A4: The licensee who employs the assistant is responsible for those • Sit at a property for a broker tour that is not open to the public. activities the assistant performs under the licensee's supervision or • Gather feedback on showings. direction. • Perform maintenance, engineering, operations or other building trades work and answer questions about that work. • Provide security. • Provide concierge services and other similar amenities to existing tenants. • Manage or supervise maintenance, engineering, operations, build- Section 1450.750. Special Accounts - Overview ing trades and security. • Perform other administrative, clerical and personal activities for Escrow monies include all monies, promissory notes or any other typeof which a license under the act is not required. financial consideration, and specifically include earnest money and security deposits; except security deposits in which the person holding the deposit is the sole owner of the property being leased or sold. An unlicensed assistant of a licensee may not perform the following activities: Rent money paid to a licensee to be transmitted to the owner is not • Host open houses, kiosks, or home show booths or fairs considered to be escrow money. Money held in a custodial account for • Show property. transmittal to a licensee's client pursuant to a written agreement (i.e., a • Interpret information on listings, titles, financing, contracts, clos- contract for ), is not subject to escrow rules. ings or other information relating to a transaction. • Explain or interpret a contract, listing, lease agreement or other There is no requirement for sponsoring brokers to maintain an escrow real estate document with anyone outside the licensee's company. account. They may, instead, arrange for earnest money and other escrow • Negotiate or agree to any commission, commission split, manage- monies to be held by a title company or other third party. ment fee or referral fee on behalf of a licensee. • Perform any other activity for which a license under the act is re- Sponsoring brokers who accept escrow monies must maintain and deposit in quired. a special escrow account separate from personal or other business accounts, all escrow moneys entrusted to them while acting as the real estate brokers, Any licensee who employs an unlicensed assistant is responsible for the escrow agents or as the temporary custodians of the funds of others. assistant's actions taken under that licensee's supervision direction. Security deposits must be maintained in an escrow account for the duration Any licensee who permits, aids, assists, or allows his or her unlicensed of the lease, unless the tenant waives the requirement in writing. Any such assistant to perform any activity which requires a license will be in violation waiver included in the lease must appear in bold print. of the Act.

Stenographic, clerical, maintenance, engineering, building trades, security or office personnel not directly engaged in the practice of real estate Section 1450.750. Special Accounts - Escrow brokerage are not required to be licensed. Escrow accounts must be non-interest bearing, unless otherwise required by law or unless the principals to the transaction specifically require, in A licensee is prohibited from acting as an unlicensed assistant for any writing, that the deposit be placed in an interest bearing account. In that licensee other than his or her sponsoring broker or a licensee sponsored by case, the principals must stipulate to whom the interest is paid. the sponsoring broker.

20 Illinois Core A: Fair Housing, Agency, License Law and Escrow A sponsoring broker may maintain more than one escrow account. All Disputes Regarding Escrow Monies accounts must be in a federally insured depository. In the event of a dispute in writing over the return or forfeiture of any escrow monies held by the sponsoring broker or if a sponsoring broker has Commingling is, of course, prohibited. Each sponsoring broker may deposit actual knowledge that any party to a transaction contests or disagrees with only escrow monies received in connection with any real estate transaction an anticipated disbursement of escrow monies held by that broker, he or into an escrow account. The sponsoring broker may not deposit personal she must continue to hold the deposit in his/ her escrow account until one funds in an escrow account, except he or she may deposit from his/ her of the following occurs: own personal funds, and keep in any escrow account, an amount sufficient • He/she has a written release from all parties or their duly autho- to avoid incurring service charges relating to the escrow account. The sum rized agents consenting to the disposition, in which case the escrow must be specifically documented as being for service charges, and the monies must be disbursed according to the terms of the written sponsoring broker must have proof available that the amount of his/her own direction no later than the next business day after the sponsoring funds in the escrow account does not exceed the minimum amount required broker's receipt of the last required written release. by the depository to maintain the account without incurring service charges. • A civil action is filed, by either the sponsoring broker or one of the parties, to determine its disposition, at which time payment may be The sponsoring broker must provide a receipt to the payor of any escrow made into court. funds and retain a copy. • The funds are turned over to the State Treasurer or such other ap- propriate State agency or officer designated pursuant to the Act or the Uniform Disposition of Unclaimed Property Act because of in- All escrow monies must be placed in the sponsoring broker's escrow activity of the account or inability to locate the parties, or inability account not later than the next business day following the transaction. of the parties to reach a resolution. A transaction exists once an accepted is signed or lease agreed to by the parties. If a branch office transmits escrow monies to the main office rather than maintain an account, those funds must be If an interpleader action is filed by the sponsoring broker, and the broker transmitted by the branch office to the main office not later than the next is authorized by real estate contract to withdraw from the escrow account business day following the transaction. The main office must deposit the those amounts as may be necessary to reimburse the sponsoring broker for monies received from the branch office not later than the next business day costs and reasonable attorney's fees associated with that action, excluding following receipt of the funds from the branch office. costs and attorney's fees associated with that broker's attempt to collect a commission or fee. The sponsoring broker must keep all escrow monies on deposit in an escrow account until a transaction is consummated or terminated, and Abandoned Funds disbursement must be according to the terms of the contract and must be Brokers may disburse unclaimed escrow monies that are deemed abandoned made not later than the next business day following the sponsoring broker's to the Office of the State Treasurer provided the following conditions are receipt of notice of the consummation or termination, or otherwise in met: (1) funds were not disbursed from the normal consummation of the accordance with the written direction of all principals to the transaction or transaction, nor from any other written directions of the principals, nor as their duly authorized agents. the result of a court order, and, (2) there has been no notice of any claim filing in court, and (3) six months have elapsed after the receipt of a written Commissions or fees earned by a sponsoring broker must be disbursed by demand for the escrow monies from one of the principals or principals' that broker from the funds deposited in an escrow account no earlier than agents to the transaction. the day the transaction is consummated or terminated and not later than the next business day after the transaction is consummated or terminated, or More Escrow Rules otherwise in accordance with the written direction of all principals to the transaction or their duly authorized agents. Affiliated licensees should IMMEDIATELY give earnest money checks to their sponsoring broker. The sponsoring broker who serves as an escrow agent must notify all principals in writing if a principal fails to tender escrow moneys, when a Brokers must always be able to account for any client or escrow funds, principal's payment is dishonored by the financial institution, or when there as well as important documents. If the IDFPR asks to see escrow records appears to be a deficiency in the amount of the deposit. or other records that are stored onsite, they must be supplied within 24 HOURS of the request. Other records must be available within 30 days. The sponsoring broker cannot keep escrow money for commission. He/she may not withhold, for any period of time, any authorized disbursement of Escrow records must be retained for five years, with the records for escrow moneys due to any claim for a commission or compensation to any immediate prior two years being maintained in the office location. licensee. The broker may sue for unpaid commission, but cannot withhold escrow money.

Transfer of escrow monies to the closing agent for the transaction may be made up to 2 business days prior to the scheduled closing. If prior to Section 20-20. Disciplinary Causes Related to the consummation or termination of the transaction, the sponsoring broker Escrow receives written direction from all of the principals to the transaction or their duly authorized agents agreeing to a disbursement of the escrow monies, IDFPR may take disciplinary action if the sponsoring broker: that broker must disburse the escrow moneys according to the written • Fails to account for or remit any monies or documents coming into directions no later than the next business day following the sponsoring his/her possession that belong to others. broker's receipt of the last required written direction. • Fails to maintain and deposit into a special account, separate from personal and business accounts, all escrow monies belonging to others that are entrust to a licensee, unless: ♦ Disbursed prior to consummation or termination under one of the following conditions:

Illinois Core A: Fair Housing, Agency, License Law and Escrow 21 1. in accordance with written direction of the principals impose a fine not to exceed $25,000 for any one or a combination of alleged to the transaction or their duly authorized agents, violations. 2. in accordance with directions providing for the When enforcing the disciplinary section of the License Act, the Department release, payment or distribution contained in any may require a licensee under investigation for an alleged violation to submit written contract signed by the principals or their to a physical or mental examination. duly authorized agents, 3. pursuant to a court order; or The sponsoring broker must have written employment agreements with all affiliated licenses, including independent contractors and licensed personal ♦ Deemed abandoned and transferred to the Office of the assistants. State Treasurer as unclaimed property. Escrow money may be deemed abandoned if not disbursed as indicated above, in the Any licensee who employs an unlicensed assistant is responsible for absence of notice of filing of a claim in court, and if 6 months those activities the assistant performs under the licensee's supervision or have elapsed after the receipt of a written demand for the es- direction. crow money from one of the principals or their duly authorized agent. Sponsoring brokers must have an escrow account, or may arrange for a • Fails to make available to the Department escrow records and re- third party such as a title company to hold escrow funds. lated documents within 24 hours of request by the Department. Escrow accounts must be non-interest bearing and held in federally insured depository.

Broker commissions must be disbursed from the escrow account no earlier CHECK YOUR UNDERSTANDING... than the closing of the transaction and no later than the next business day after closing. Consider this situation: A branch office of Classic Realty took an earnest money check on Thurs- The sponsoring broker may not withhold escrow funds for payment of day. The offer was accepted on Friday. The following Monday was a legal commission. holiday. The branch office does not have an escrow account but instead delivers any escrow funds to the main office. The sponsoring broker must hold escrow deposits until: • He receives written release from all parties or Q1: When must the branch office have the earnest money to the main office? • It is turned over to the courts (an interpleader action is filed) or • It becomes unclaimed property (5 years, or 6 months after receipt Q2: When must the sponsoring broker deposit the earnest money into his/ of a written demand from one of the principals or their authorized her escrow account? agent).

Sponsoring brokers must retain records for five years, including ledgers, journals, monthly reconciliation statements, and master escrow account A1: The branch office must insure that the main office receives the logs. earnest money no later than Tuesday (Monday was a holiday).

A2: The sponsoring broker must deposit it by the end of the following business day (Wednesday).

Summary/Review The Department will issue a real estate auction certification to applicants who possess a valid auctioneer's license under the Auction License Act, successfully complete a real estate auction course of at least 30 hours approved by the Department, and provide documentation of the completion of the real estate auction course.

The auctioneer's role is limited to establishing the time, place, and method of the real estate auction, placing advertisements regarding the auction, and crying or calling the auction.

By April 30th, 2014 all broker licensees must have completed the continuing education (CE) requirements and applied to renew their license through IDFPR.

Continuing education credit hours may not be earned for completion of pre or post-license courses.

The Department may refuse to issue or renew a license, place a licensee on probation, suspend or revoke any license, reprimand, or take any other disciplinary or non-disciplinary action the Department deems necessary, or

22 Illinois Core A: Fair Housing, Agency, License Law and Escrow Illinois Core A: Agency, License Law and Escrow ~ Practice Assessment Questions ~

Select the best answer for each question and mark your answers on the Student Assessment Sheet (last page of book) or complete your assessment online at www.McKissock.com/ILRE

1. What is the overall legislative intent behind the enactment 6. The ______is represented by the licensee, whereas of Article 15 of the Real Estate License Act of 2000? a ______is either represented by another agent or a. To govern agency contracts represents themselves. b. To promote stability in the market a. Customer; client c. To apply common law to agency relationships b. Customer; agent d. To increase bureaucracy in real estate c. Client; agent d. Client; customer 2. A licensee should always obey the instructions of their client, unless: 7. What action would NOT be considered a breach of duty a. The instructions are illegal or obligation on the part of the licensee? b. The action doesn't make sense a. Showing alternative properties to prospective buyers c. The instructions make the sale difficult b. Showing properties in which the client is interested to d. The licensee doesn't agree with the client other prospective buyers c. Working on the basis that the licensee will receive higher 3. What is NOT needed in order to form an agency fee based on a higher selling price agreement? d. All of the answers shown a. Client b. Compensation 8. Licensees working with customers may: c. Broker a. Reveal the maximum their client is willing to pay for a d. Written documentation property b. Not have any contact with the customer outside of the 4. Broker Tom has a written agreement with buyer Jon. office Jon is purchasing a property from seller Eric. As part c. Only perform ministerial acts of the purchase agreement, Eric will be paying Tom's d. Have a fiduciary relationship with the customer commission. With whom does Tom have an agency relationship? 9. Which of these fiduciary obligations does not necessarily a. Eric end with the termination of an agency agreement? b. Jon a. Loyalty c. Both Eric and Jon b. Obedience d. Tom's sponsoring broker c. Confidentiality d. Disclosure 5. In which type of agency relationship would a licensee represent both the buyer and seller in the same 10. What must be included with the agency relationship transaction? disclosure? a. Dual agency a. That a designated agency relationship exists, unless b. Designated agency otherwise specified c. Listing agency b. The sponsoring broker's compensation d. Subagency c. The name of the designated agent d. All of the answers shown

Illinois Core A: Fair Housing, Agency, License Law and Escrow 23 Illinois Core B: Legal Issues 3 CE Credit Hours - Mandatory (Approval #:564.002261)

This course is designed to fulfill the Core B requirement for Illinois real estate professionals. The course will cover three distinct, yet important, topics for real estate professionals: antitrust, fair housing, and short sales. Participants will begin the course with an in-depth look at antitrust. Students will discuss both the Sherman and Clayton Acts, as well as the Illinois Antitrust Act. The course will outline the most common antitrust violations in real estate and discuss the potential penalties for violation. Students will then move into a discussion on fair housing. The course will give a brief history on fair housing legislation before moving on to some of the more recent amendments that have been made. Specifically, the course will focus on the 2008 amendments to the Americans with Disabilities Act and their effect on the real estate industry. The course will conclude with a discussion about short sales and how real estate professionals can educate their clients about the pros and cons of a short sale. Students will conclude the course with an examination of the recent mortgage relief programs and how they benefit homeowners.

Chapters: • Chapter One: Antitrust • Chapter Two: Fair Housing • Chapter Three: Short Sales

Learning Objectives: • Compare and contrast the Sherman and Clayton Acts. • Identify the most common antitrust violations in real estate. • Discuss potential penalties for antitrust violations on both a state and federal level. • Recognize how fair housing has been modified as new classes of protection are added. • Contrast the difference between the original and amended definition of "disability". • Identify those actions that are prohibited by fair housing laws. • Identify the impact of a home's appraisal value on the bank's consideration for a short sale. • Discuss the bank's options for minimizing loss. • Explain the tax implications of the short sale deficiency.

Customer Testimonial "Continuing education finally made enjoyable. You'll never sit through classes again. McKissock is the only way to go." ~ Will

24 Illinois Core B: Legal Issues centuries old form of a contract whereby one party entrusts its property to a Chapter One: second party. The property is then used to benefit the first party. The law attempts to prevent the artificial raising of prices by restriction of Antitrust trade or supply. In other words, innocent monopoly, or monopoly achieved solely by merit, is perfectly legal, but acts by a monopolist to artificially preserve his status, or nefarious dealings to create a monopoly, are not. Put another way, it has sometimes been said that the purpose of the Sherman Overview Act is not to protect competitors, but rather to protect competition and the competitive landscape. Antitrust is a term that many people associate with large corporations. Brokers need to be aware, however, that it is relatively easy for those in the "The purpose of the [Sherman] Act is not to protect businesses from real estate industry to commit an antitrust violation without even realizing the working of the market; it is to protect the public from the failure what they're doing. In this chapter, we hope to help clarify the antitrust laws of the market. The law directs itself not against conduct which is and give licensees the knowledge and skills to avoid finding themselves on competitive, even severely so, but against conduct which unfairly tends the wrong end of an antitrust suit. to destroy competition itself. This focus of U.S. competition law, on protection of competition rather than competitors, is not necessarily the only possible focus or purpose of competition law. For example, it • Antitrust has also been said that competition law in the European Union tends • The Sherman Antitrust Act (Section 1 and Section 2) to protect the competitors in the marketplace, even at the expense of • The Clayton Act market efficiencies and consumers." • Violations which are Most Common in the Real Estate Industry • Illinois Antitrust Law Section 1: Trusts, etc., in restraint of illegal trade: Penalty • Penalties for Antitrust Violations Every contract, combination in the form of trust or otherwise, or conspiracy, • Compliance Policies in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or if another Antitrust person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court. Antitrust Laws and Unfair Business Practices are designed to promote the policy and practice of COMPETITION. Some of the symptoms of a lack Section 2: Monopolizing trade a felony: Penalty of competition are higher pricing and diminishing quality of a service or • Every person who shall monopolize, or attempt to monopolize, or product. combine or conspire with any other person or persons, to monopo- lize any part of the trade or commerce among the several States, or Real estate brokers compete with one another to obtain listings of homes with foreign nations, shall be deemed guilty of a felony, and for sale. At the same time, they often cooperate with one another to secure buyers for those listings. This dual situation of competition and cooperation, • On conviction thereof, shall be punished by fine not exceeding which is unique to the real estate industry, can present many opportunities $10,000,000 if a corporation, or, if any other person, $350,000, or for antitrust violations. by imprisonment not exceeding three years, or by both said punish- ments, in the discretion of the court.1 In light of this risk, the National Association of Realtors (NAR) has produced a 16-minute video entitled "Antitrust and Real Estate" which can be obtained through NAR. This informative video explains the basis for NOTE: The emphasis of this Act is to prohibit the restraint of trade to allow antitrust laws and how they pertain to you, as a real estate professional. for greater competition. The foundation for federal antitrust laws is the Sherman Act of 1890.

The Sherman Antitrust Act The Sherman Antitrust Act requires the United States Federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by the United States federal government.

Despite its name, the Act has fairly little to do with "trusts." Around the world, what U.S. lawmakers and attorneys call "antitrust" is more commonly known as "competition law." The purpose of the Act was to oppose the combination of entities that could potentially harm competition, such as monopolies or cartels. At the time of its passage, the trust was synonymous with monopolistic practice, because the trust was a popular way for monopolists to hold their businesses, and a way for cartel participants to create enforceable agreements.

In 1879, C. T. Dodd, an attorney for the Standard Oil Company of Ohio, had devised a new type of trust agreement to overcome Ohio state prohibitions 1An update to the Act has increased the maximum amount of the fine paid by both a against corporations owning stock in other corporations. A trust is a corporation and an individual.

Illinois Core B: Legal Issues 25 The Clayton Act The traditional compensation model in real estate is for the seller to agree to a commission amount with the listing broker. This broker would place the The Clayton Antitrust Act of 1914 was passed by the U.S. Congress as an property into the MLS and offer a certain split of the commission to coop- amendment to clarify and supplement the Sherman Antitrust Act of 1890.It erating brokers or agents that successfully bring a buyer. was drafted by Henry De Lamar Clayton. Clayton was a Congressman from Alabama who served in the House from 1897 to 1915 and later became a Any agreements between companies that would attempt to set or control the federal judge. amount or percentage of the splits offered in a market would very likely be a per se violation of antitrust statutes. This law specifically prohibits leases, sales, contracts for sale, or other con- ditions, agreements, or understandings that have the effect of substantially Any agreements between companies that would attempt to fix the mini- lessening competition or creating a monopoly in a line of commerce. Price mum or maximum time frame for listings or just about any other contractual fixing, price discrimination, tying, and exclusive dealing are covered by items in a listing agreement would likely be per se violations also. this law. If a competitor is discounting commissions and several companies or bro- An amendment to the Clayton Act was enacted by Congress in 1936 to kers agree that they’ll allow that competitor to show their listings, but set strengthen standards prohibiting price discrimination, which were seen as a different coop rate for this competitor because they don’t like the lim- ineffective. This amendment, known as the Robinson-Patman Act, makes ited service model they’re working with, this would also , very likely, be discrimination in price, services, or facilities unlawful for both sellers and deemed a per se offense. buyers when it has a tendency to create a monopoly, to restrain competition, or to violate trade regulations. It’s considered a per se offense when the government has deemed it definite and egregious damaged to the free trade of another. A per se violator cannot The Clayton Act is a civil statute (carrying no criminal penalties) that was even present a defense as a whether it was damaging, whether it restrained passed in 1914 and significantly amended in 1950.The Clayton Act pro- trade or not. They’re left with only whether they committed the offense or hibits mergers or acquisitions that are likely to lessen competition. Under not. the Act, the government challenges those mergers that a careful economic analysis shows are likely to increase prices to consumers. Here is an example of an imbalanced commission split: A listing broker offers 1% to the buyer’s broker who sells his or her list- The Act seeks to assure that suppliers of products treat buyers even-hand- ings. Yet the broker seeks 3% of the commission when he or she sells the edly. It requires that buyers be given an equal opportunity to participate in listings of other brokers who have 6% total commission. certain types of seller programs relating to the resale, such as advertising and promotional programs, and that such benefits be disbursed to buyers on This splitting structure discourages cooperation from other brokers and in- equal terms in proportion to their participation. The Clayton Act also is en- creases the likelihood that the broker can sell his or her own listing. forced by the Department of Justice. The Federal Trade Commission (FTC) has co-jurisdiction with the DOJ to enforce this Act, although the DOJ has Conspiracy to Boycott exclusive jurisdiction to enforce its criminal aspects. Also, each individual The conspiracy to boycott happens when a group of competitors agrees not state is considered a "person" under the Act. A state may file an antitrust ac- to deal with another firm or when brokers collectively decide not to deal tion as an injured party, seeking injunctive relief or damages. with a third party in order to eliminate competition. Here is an important distinction: Individuals each have the right to choose whom they will and will not do business with. It is the collective action of a group which is prohibited Violations which are Most Common in the Real by antitrust Laws. Estate Industry The purpose of the boycott, either explicitly or implicitly, is to eliminate the Conspiracy to Fix Prices firm as a market competitor or to cause the firm to abandon the discount or It is a violation of both State and Federal Antitrust Laws for there to be ANY alternative marketing strategies. agreement between competing real estate brokers to fix the prices that each will charge to a third party. Let’s look at some examples, which are prohib- With new real estate business and commission pricing models being tried ited, regarding Conspiracy to Fix Pricing: all the time, most agents or brokers have experienced a competitor in their • Brokerage A and Brokerage B agreed to charge all their clients x% market doing some type of commission discounting, fee for service, or oth- commission on all listings. er types of alternative pricing models for real estate services. • Brokerage A, Brokerage B, and Brokerage C agreed to pay a set amount to outside brokers for any referral. The conspiracy to boycott may also apply if real estate professionals were • A licensee tells her clients that her brokerage charges 6% commis- to boycott a vendor. In many areas, the newspaper business had contracted sion on all their listings and that all other brokers charge the same to one major daily or weekly publication in each market area. There are real amount as it is a “standard” in the industry. estate agents and brokers that lament the lack of competition and the high If two or more companies or brokerages agree to set their pricing or com- advertising costs. mission rates, they have violated the law and the penalties can be severe. Agents and brokers in any setting, business or social, should take great care If a group of the local real estate offices grouped together, even very infor- to never even discuss commission rates in any context. It’s much better to mally, and pulled their advertising in an effort to force a change of policies be safe than sorry in this case. and/ or advertising rages on the newspaper, they would most likely be guilty of a per se offense of the antitrust statutes. Imbalanced Commission Splits Let’s look at a couple of examples: Licensees need to be especially careful of imbalanced exploitative splits Over a lunch meeting, Broker A from XYZ Realty and Broker B from when cooperating with other licensees on listings. An exploitative split is ABC Realty agree not to show the listings of ADC Realty. They further one that: state that if no other brokers will show the ADC Reality listings, then • Minimizes the licensee’s cost of cooperation with other licensees. ADC Realty should be out of business in no time. This is a conspiracy to • Maximizes the licensee’s commission because he or she sells his boycott in order to eliminate competition. or her own listings. • Maximizes the licensee’s commission when he or she sells other

licensees’ listings. 26 Illinois Core B: Legal Issues A couple of brokers are having lunch and discuss the new commission While price fixing arrangements are prohibited by the Act, price discrimina- discounting company in town. They both agree that it’s a bad thing for tion is not necessarily a violation. Price discrimination is only a violation business and that they’re not going to show that broker’s discounted list- of the Act when it is predatory in nature and is the result of a concerted ings. They’re probably guilty of a per se offense and couldn’t even argue refusal to deal or a conspiracy. There is no violation if a person simply did otherwise in court. not obtain the services at a lesser price as negotiated for by another person.

If you’re in a meeting or even a social gathering, and the conversation turns Illinois has adopted both a Consumer Fraud and Deceptive Business Prac- toward any of these topics, you should leave the area immediately. It would tices Act and the Uniform Deceptive Trade Practices Act. The Consumer probably also be wise to make it known that the possibility of violation is Fraud Act prohibits intentional unfair acts, practices, and methods of com- why you’re leaving. petition, and deceptive acts or practices such as fraud or misrepresentation in the conduct of trade or commerce. Even if no person actually has been misled or deceived, such deceptive practices are unlawful. In construing Illinois Antitrust Law the Act, Illinois courts consider interpretations of the Federal Trade Com- mission Act. The Illinois law also identifies particular acts that are viola- Illinois' Antitrust Act is based mainly on the federal Sherman Act which we tions, including wrongfully advertising a service as "factory authorized." discussed earlier. The Illinois Act prohibits monopolization, price fixing, The Uniform Deceptive Trade Practices Act enumerates various acts that tying agreements, exclusive dealing, and any other conduct that unreason- constitute deceptive trade practices, including any conduct that "creates a ably restrains trade or competition. The Act also prohibits any conspiracy likelihood of confusion or misunderstanding." between competitors to fix prices, control the supply or sale of products or services or to allocate customers or markets, and any violations of these To state a cause of action under the Consumer Fraud Act, there must be: (1) prohibitions are considered per se violations of the Act. Additional viola- a statement by the seller, (2) of an existing or future material fact, (3) that tions of the Act include: was untrue, regardless of the defendant's knowledge or lack of knowledge • Contracting, combining, or conspiring in a way that unreasonably of its falsity, (4) made for the purpose of inducing reliance, (5) on which restrains trade. the victim relies, and (6) that resulted in damages to the victim. An adver- • Attempting to acquire a monopoly. tisement, for example, is deceptive on its face if it creates a likelihood of • Excluding competition or fixing prices. deception or has the capacity to deceive.1 • Entering into an exclusive dealing agreement which substantially. lessens competition or would tend to create a monopoly.

A note about tying agreements: tying agreements occur when a party agrees to sell one product, but only on the condition that the buyer also purchase Penalties for Antitrust Violations a different product (in real estate, this could occur if a broker enters into an agency agreement with a buyer, but only on the condition that the buyer Penalties under the Sherman Act purchase from a company that the broker owns). The cus- tomer may not want the product or can buy it elsewhere at a lower price. The Sherman Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers. The Not all tying or product bundling arrangements are unlawful, but require- Sherman Act also makes it a crime to monopolize any part of interstate ments like these are illegal if they harm competition. Tying agreements are commerce. illegal per se when the party has enough economic power, as it pertains to the tying product, to restrain a substantial amount of commerce in the tied product. An unlawful monopoly exists when only one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with In the real estate industry, courts have applied tying law to "list backs" anti-competitive conduct. The Act is not violated simply when one firm's where a sale of property is conditioned upon the agent obtaining the listing vigorous competition and lower prices take sales from its less efficient com- for a future sale. Courts have also found it unlawful for developers to refuse petitors -- that is competition working properly. to sell a lot unless the builder/buyer agrees to use the developer's broker when the property is conveyed to the occupant. Sherman Act violations involving agreements between competitors are usually punished as criminal felonies. The Department of Justice alone is The courts have applied tying law to a developer who allegedly required empowered to bring criminal prosecutions under the Sherman Act. For of- that homes be purchased through the developer's wholly-owned escrow fenses committed before June 22, 2004, individual violators could be fined company. It should be noted, however, that in some instances, an individual up to $350,000 and sentenced to up to 3 years in federal prison for each or entity may offer financial incentives to use additional services instead offense, and corporations could be fined up to $10 million for each offense. of mandating the purchase of a tied product. Such incentive offers are less likely to be antitrust violations. For offenses committed on or after June 22nd, 2004, individual violators can be fined up to $1 million and sentenced to up to 10 years in federal Tying agreements are not specifically addressed by the Illinois Antitrust prison for each offense, and corporations can be fined up to $100 million for Act. However, the Illinois Supreme Court has concluded that the legislature each offense and be placed under court-ordered supervision for a period of intended for the Act to deal with tying agreements "harshly." up to 10 years. Under some circumstances, the maximum fines can go even higher than the Sherman Act maximums to twice the gain or loss involved. Under Illinois law, a person or business has the right to deal, or refuse to deal, with whomever they choose, as long as that choice is made indepen- The Department of Justice - The U.S. Attorney General may enforce crimi- dently. It is when a person or business collaborates with another in order to nal or civil antitrust violations. Civil action may be investigated by the FBI reduce competition that antitrust issues arise. In order for there to be an "ex- and criminal actions may be investigated through a grand jury. clusive dealing" agreement which violates the Act, there must be an express or implied agreement between two parties to shut out a competitor, and the agreement must have a substantial anticompetitive effect on the market. 1 You may view the full text of the The Illinois Antitrust Law at this site: http://www.weblocator.com/attorney/il/law/antitrust.html#180

Illinois Core B: Legal Issues 27 Private Causes of Actions - Persons or firms that have been injured by An- Compliance Policies titrust Violations may recover treble (three times) their actual damages and reasonable attorneys' fees. An injunction may be placed to prohibit further The nature of the real estate business, with its constant interaction between activities. industry competitors, makes it alarmingly easy to violate antitrust laws. As such, every broker is affected by the law, whether he or she is aware of it The Federal Trade Commission (FTC) - A complaint filed with the FTC or not. Awareness is vital, and brokers who do not implement strict office could result in an extensive investigation and a cease and desist order could policies to assure compliance with antitrust laws place themselves at risk. be placed upon the person or firm in violation. It is impossible to cover every potential antitrust problem. There are, how- Court Supervision - The courts may have the right to supervise, for up to 10 ever, steps you can take to protect yourself and your office from antitrust years, the business that has been convicted of a violation. violations: • Have every office member read and acknowledge receipt of a copy of your office policy dealing with antitrust compliance. Loss of Brokerage or Real Estate License - It is possible for a brokerage or • Include antitrust training as part of every new salesperson's and a licensee to lose its or his or her license to practice real estate. broker's training. • Establish a relationship with competent legal counsel, and seek le- If you have an antitrust problem or complaint, you can contact the Federal gal advice before you take action whenever you are unsure of what Trade Commission at: the law requires. • NEVER engage in any conversation that puts you in the vulnerable E-mail: [email protected] position of being implicated in activities that restrain trade in any Mail: Federal Trade Commission way. • Never make derogatory comments about a competitor. Bureau of Competition-H374 • Never have discussions regarding commission splits or payment Washington, DC 20580 of referral fees unless discussing a particular transaction with the Phone: 1-877-FTC-HELP (1-877-382-4357) other broker involved in the transaction. • Never imply or suggest that commissions are set by a group of brokers or any other group. The Illinois Attorney General's Office has been granted exclusive enforce- ment authority when it comes to antitrust violations. The Illinois Attorney General's Office may pursue enforcement through both criminal and/or civil And a final word... The following, and similar phrases, should be avoided proceedings. The Illinois Antitrust Act confers upon the Attorney General because they often spark antitrust activities: with all the powers and duties vested by law in the State's Attorneys with re- 1. "This is the rate that every firm charges." spect to criminal prosecutions. The Act also provides the Attorney General 2. "I'd like to drop my commission, but no one else in the MLS will with civil subpoena powers in order to require parties to appear or to pro- show your house unless the commission is X%." duce documentation to the Attorney General prior to the filing of a civil suit. 3. "The best way to handle Broker X is to not do business with her." The Act empowers the Attorney General to petition the Illinois circuit 4. "Why is Broker X advertising here? This is our territory." courts to convene a grand jury to investigate possible criminal violations of 5. "You shouldn't sign with Broker X, because nobody does business the Act. The only violations subject to criminal penalties are: with him." • Price fixing • Limitations on production 6. "Let's not deal with Broker X; she's not a professional because she hires part-timers." • Allocation of markets, customers, and products • Exclusive dealing agreements 7. "Let's agree to always split commissions like this..." 8. "I bet they would drop their discount program if we refused to do These violations are considered Class Four felonies and are punishable by business with them." a fine of up to $100,000 for individuals and $1,000,000 for corporations. 9. "Before you decide to list with ZYX Realty, you should know that because they are "discount brokers", other agents will not show The Act also empowers the Attorney General to seek civil penalties for an- their listings." titrust violations. The Attorney General may impose a maximum fine of $50,000 to every individual and $100,000 to every corporation who violates the Act. These fines are in lieu of any other penalty for a violation of the Act and are in addition to civil damage actions. In addition, the Attorney Gen- eral may seek other civil relief including injunctions, divestiture of property and dissolution of business.

The Attorney General may also bring a civil action on behalf of counties, municipalities, townships, or other subdivisions to recover damages. If the civil action is successful, the State and all other private plaintiffs may re- cover damages for any violation of the Act.1

1http://www.ag.state.il.us/publications/html/antitrust.htm

28 Illinois Core B: Legal Issues The Fair Housing Act Chapter Two: The real change in fair housing came in 1968, a year that is considered the birth of modern fair housing. In March, the Kerner Commission Report said Fair Housing that America was heading for two societies that were separate, but unequal.1

In addition to the assassination of Rev. Martin Luther King Jr., two historic events occurred that year that forever changed the housing market. Overview Our focus for this chapter will be on Fair Housing legislation. Specifically First, in April, Congress enacted the Fair Housing Act (Title VIII of the we will look at some of the amendments and changes that have been made Civil Rights Act of 1968). This Act bans discrimination on the basis of race, since the Fair Housing Act was first introduced in the 1960s. We will have color, religion and national origin in most types of housing transactions. a lengthy discussion on the 2008 amendments to the Americans with Dis- The Act also contains a variety of remedies to attack housing discrimination abilities Act, which focused primarily on clarifying and strengthening the including private discrimination. definition of "disability." We will conclude the chapter with a look at some of the other significant changes that have been made to the Fair Housing Then, on April 4, Dr. Martin Luther King, Jr. was assassinated. The ensuing Act. debate led to a swift passage of the Fair Housing Act (Title VIII of the Civil Rights Act of 1968), just 7 days later. • Fair Housing Legislation • The Fair Housing Act and Amendments to the Fair Housing Act Second, in June, the U.S. Supreme Court rendered its decision in Jones v. • Federal Fair Housing Amendment Act Alfred H. Mayer Co., and held that the Civil Rights Act of 1866 banned pri- • Americans with Disabilities Act vate, as well as government, racial discrimination in housing. Thus the 1866 Act was given new life, and could be used to fight racial discrimination. • Additional protection if you have a disability • Requirements for new buildings • Housing Opportunities for Families The Fair Housing Act outlaws a variety of private discriminatory acts, in- cluding refusal to rent or sell, discrimination in the terms of sale or rental, • Prohibited Actions blockbusting, and discrimination in advertising and in the use of real estate • Significant Recent Changes services.2

The Fair Housing Act prohibited Discrimination in most types of housing Fair Housing Legislation on the basis of: • Race In 1962, President Kennedy signed Executive Order 11063, entitled "Equal • Color Opportunity in Housing." It prohibited discrimination in the sale, rental or • Religion use of all residential housing that was owned operated or financed by the • National origin federal government. It had good intentions but little real impact on the hous- ing market in general, as it lacked judicial enforcement. In 1974, Congress passed the Housing and Community Development Act, which added "sex" as another prohibited basis for discrimination. This pro- In 1964, Congress passed Title VI to the Civil Rights Act of 1964, which hibited sexual harassment, but not discrimination for sexual orientation. prohibited discrimination in public accommodations, in all federally as- sisted programs, and in employment on the basis of: Also, in 1974, the Fair Housing Act was expanded to include prohibition • Race of gender discrimination. Later that year the Equal Credit Opportunity Act • Color was passed by Congress, which prohibited credit discrimination in housing • Religion based on the basis of: • Sex • Race • National origin • Color • Religion Likewise, this didn't have much effect because it did not prohibit discrimi- • National origin nation in the private housing market. • Gender or marital status • Age President Lyndon Johnson introduced fair housing legislation in 1966. It languished in Congress and was debated for about three years. Throughout the years there have been several additions to the FHA that have made it more effective and inclusive. For this exercise, we will take a look at some of these changes and give some perspective as to when they An important case was heard in California in 1967. Reitman v Mulkey con- were implemented. cerned a husband and wife who were refused the right to rent a property because of race.

The legal issue was "whether Article I, Sec. 26 of California Constitution, prohibiting state from denying right of any person to decline to sell, lease or rent his to such person as he in his absolute discretion chooses, 1Video - Kerner Commission Report: http://www.pbs.org/moyers/journal/03282008/ would involve the state in private racial discriminations to an unconstitu- watch.html Courtesy of: Bill Moyers of The Journal (PBS) - March 28, 2008-- tional degree and deny to any person the equal protection of the laws within the meaning of the 14th." 2Video - http://www.history.com/videos/fair-housing-act#fair-housing-act Courtesy of: Fair Housing Act. (2011). The History Channel website. Retrieved 4:28, April 13, 2011, from http://www.history.com/videos/fair-housing-act

Illinois Core B: Legal Issues 29 Federal Fair Housing Amendment Act Congress believed the requirements of the definition were well understood. Within the framework established under the Rehabilitation Act, courts treat- HUD has played a lead role in administering the ed the determination of disability as a threshold issue, but focused primarily Fair Housing Act since its adoption in 1968. The on whether unlawful discrimination had occurred. However, after the pas- 1988 amendments, however, have greatly in- sage of the ADA, the focus of court decisions shifted to whether the individ- creased the Department's enforcement role. First, ual claiming that s/he had suffered discrimination was protected by the law. the newly protected classes have proven signifi- cant sources of new complaints. Second, HUD's expanded enforcement role took the Department beyond investigation and conciliation into the area of mandatory enforcement.

Complaints filed with HUD are investigated by the Office of Fair Housing and Equal Opportunity. If the complaint is not successfully conciliated, the office determines whether reasonable cause exists to believe that a discrimi- natory housing practice has occurred. Where reasonable cause is found, the parties to the complaint are notified by HUD's issuance of a Determination, as well as a Charge of Discrimination, and a hearing is scheduled before a HUD administrative law judge. Either party - complainant or respondent - may cause the HUD-scheduled administrative proceeding to be terminated by electing instead to have the matter litigated in Federal court. Whenever a party has so elected, the Department of Justice takes over HUD's role as The ADA Amendments Act of 2008 was intended to overturn two contro- counsel seeking resolution of the charge on behalf of aggrieved persons, versial decisions interpreting the ADA. The Supreme Court's decisions im- and the matter proceeds as a civil action. Either form of action - the ALJ posed a stricter standard for determining disability in: proceeding or the civil action in Federal court - is subject to review in the U.S. Court of Appeals. • Sutton v. United Airlines (130 F.3d 893)[4] - which stated that im- pairments must be considered in their mitigated state, and • Toyota v. Williams (224 F.3d 840)[5] - which stated that the stan- The Fair Housing Act covers most housing. In some circumstances, the Act dard for determining whether an individual was eligible for protec- exempts owner-occupied buildings with no more than four units, single- tion under the law must be demanding. family housing sold or rented without the use of a broker, and housing oper- ated by organizations and private clubs that limit occupancy to members. After the Court's decisions in Sutton and Williams, lower courts often found that an individual's impairment did not constitute a disability. As a result, in many cases, courts never reached the question whether discrimination had occurred. Americans with Disabilities Act Americans with Disabilities Act -1990 - ADA as amended in 2008 Through these rulings, the Supreme Court and lower courts created a situa- tion in which individuals with physical or mental impairments that affected The ADA Amendments Act of 2008 is an Act of Congress, effective Janu- them significantly enough to have been considered "substantially limiting a ary 1st, 2009, that amended the Americans with Disabilities Act of 1990 major life activity" under the case law interpreting the Rehabilitation Act, (ADA) and other disability nondiscrimination laws at the federal level of were not considered as qualifying for protection under the ADA. the United States. These included individuals with impairments such as: The Amendments Act was a response to a number of decisions by the Su- • amputation preme Court that had interpreted the original text of the ADA. Because • intellectual disabilities members of the U.S. Congress viewed those decisions as limiting the rights • epilepsy of persons with disabilities, the Amendments Act explicitly reversed those • multiple sclerosis decisions. It also rejected portions of the regulations published by the Equal • HIV/AIDS Employment Opportunity Commission that interpret Title I (the employ- • diabetes ment-related title) of the ADA. The Amendments Act makes changes to the • muscular dystrophy definition of the term "disability," clarifying and broadening that definition • cancer and therefore the number and types of persons who are protected under the ADA and other federal disability nondiscrimination laws. It was designed to strike a balance between employer and employee interests. In 2004, the National Council on Disability, an independent federal agency charged with making recommendations to the President and Congress, is- sued a report called "Righting the ADA." This report detailed the various The Amendments Act requires that courts interpreting the ADA and other ways in which the courts had misinterpreted Congressional intent and lim- Federal disability nondiscrimination laws focus on whether the covered en- ited the reach of the ADA and proposed legislative language to restore this tity has discriminated, rather than whether the individual seeking the law's intent. Chief among the misinterpretations identified in the report was the protection has an impairment that fits within the technical definition of the scope-of-coverage problem - i.e., the narrowing of the ADA's definition of term "disability." The Act retains the ADA's basic definition of "disability" "disability" to exclude many individuals that Congress intended to protect as an impairment that substantially limits one or more major life activities; from discrimination. a record of such an impairment; or being regarded as having such an im- pairment. However, it changes the way that the statutory terms should be interpreted. The Amendments Act explicitly overturns the controversial Supreme Court decisions in Sutton and Toyota, rejecting the high burdens imposed by the Court in those cases, and reiterates that Congress intends the scope of the When Congress passed the ADA in 1990, it adopted the functional defini- ADA to be broad and inclusive. The Amendments Act retains the ADA's tion of disability from Section 504 of the Rehabilitation Act of 1973. This definition of disability as a physical or mental impairment that: was done, in part, because after 17 years of development through case law, • substantially limits one or more life activities 30 Illinois Core B: Legal Issues • a record of such impairment policies and procedures, for such persons. • being regarded as having such impairment • The law clarifies that the authority granted to three specific Federal agencies to issue regulations interpreting the ADA includes the au- However, it clarifies and expands the definition's meaning and application thority to issue regulations implementing the definitions contained in the following ways: in Sections 3 and 4 of that Act. • The Amendments Act deletes two findings in the ADA that led the • The AMENDMENTS ACT makes conforming amendments Sec- Supreme Court to restrict the meaning and application of the defini- tion 7 of the Rehabilitation Act of 1973, (information can be found tion of disability. on page 6 of this document) and to Title I of the ADA itself.

These findings were that "some 43,000,000 Americans have one or more To conform the employment-related provisions of the ADA with physical or mental disabilities" and that "individuals with disabilities are a parallel provisions of Title VII of the Civil Rights Act of 1964, the latter discrete and insular minority." The Court had treated these findings as limit- amendments change the language of Title I to provide that no covered entity ing how other provisions of the ADA should be construed. shall discriminate against a qualified individual "on the basis of disability." • The law provides that the definition of disability "shall be con- strued in favor of broad coverage of individuals under this Act, to The United States Court of Appeals for the District of Columbia Circuit held the maximum extent permitted by the terms of this Act." on July 21, 2009, that the Amendments Act does not apply retroactively.

It retains the terms "substantially limits" and "major life activities" from the original ADA definition of "disability," but makes clear that Congress intended the terms to impose less- demanding standards than those enunci- Additional Protection if You Have a Disability ated by the Supreme Court in the Toyota case. It also states that the EEOC's regulatory definition of "substantially limits" was overly strict. If you or someone associated with you: • The law prohibits consideration of mitigating measures such as • Has a physical or mental disability (including hearing, mobility medication, assistive technology, accommodations, or modifica- and visual impairments, chronic alcoholism, chronic mental ill- tions when determining whether impairment substantially limits a ness, AIDS, AIDS Related Complex and mental retardation) that major life activity. substantially limits one or more major life activities. • Has a record of such a disability. • Is regarded as having such a disability. The related text of the Amendments Act explicitly rejects the Supreme Court's holdings in Sutton and its companion cases that mitigating measures must be considered in determining whether impairment constitutes a dis- Your landlord may not: ability under the law. The Amendments Act also provides that impairments • Refuse to let you make reasonable modifications to your dwelling that are episodic or in remission are to be assessed in their active state. or common use areas, at your expense, if necessary for the disabled • The law provides additional direction on the "major life activities" person to use the housing. (Where reasonable, the landlord may that must be substantially limited in order for an impairment to be permit changes only if you agree to restore the property to its origi- a disability: the Act lists specific examples of major life activities, nal condition when you move). rather than leaving that phrase open to interpretation, as did the • Refuse to make reasonable accommodations in rules, policies, ADA of 1990. practices, or services if necessary for the disabled person to use the housing.

The non-exhaustive list of major life activities in § 4(4)(a) of the amended ADA includes (information can be found at the end of page 35 of this docu- Example: A building with a "no pets" policy must allow a visually impaired ment): tenant to keep a guide dog. • caring for oneself. • performing manual tasks. Example: An apartment complex that offers tenants ample, unassigned • seeing, hearing, eating, sleeping, walking, standing, lifting, bend- parking must honor a request from a mobility-impaired tenant for a reserved ing, speaking, breathing, learning, reading, concentrating, thinking, space near their apartment if necessary to assure that they can have access communicating and working. to her apartment.

The Amendments Act also lists major bodily functions, including, but not However, housing need not be made available to a person who is a direct limited to: threat to the health or safety of others or who currently uses illegal drugs. • functions of the immune system. • normal cell growth. • digestive, bowel, bladder, neurological, brain, respiratory, circula- tory, endocrine, and reproductive functions. Requirements for New Buildings

The law removes from the "regarded as" prong of the disability definition In buildings that are ready for first occupancy after March 13th, 1991 and (the third prong of the definition) the requirement that an individual demon- have an elevator and four or more units: strate that the impairment that he or she has, or is perceived to have, limits a • Public and common areas must be accessible to persons with dis- major life activity in a way that is perceived to be substantial. abilities. • Doors and hallways must be wide enough for wheelchairs. Under the Amendments Act therefore, an individual can establish coverage under the law by showing that he or she has been subjected to an action pro- All units must have: hibited under the Act because of an actual or perceived physical or mental • An accessible route into and through the unit impairment that is not transitory and minor. The law also explicitly states • Accessible light switches, electrical outlets, thermostats and other that although individuals who fall solely under the "regarded as" prong of environmental controls. the definition of disability are protected from discrimination, entities cov- • Reinforced bathroom walls to allow later installation of grab bars. ered by the ADA are not required to provide accommodations, or to modify • Kitchens and bathrooms that can be used by people in wheelchairs.

Illinois Core B: Legal Issues 31 If a building with four or more units has no elevator and was ready for first In Addition: It is illegal for anyone to: occupancy after March 13th, 1991, these standards apply to ground floor • Threaten, coerce, intimidate or interfere with anyone exercising a units. These requirements for new buildings do not replace any more strin- fair housing right or assisting others who exercise that right gent standards in state or local law. • Advertise or make any statement that indicates a limitation or pref- erence based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory adver- tising applies to single-family and owner-occupied housing that is Housing Opportunities for Families otherwise exempt from the Fair Housing Act. Unless a building or community qualifies as housing for older persons, it may not discriminate based on familial status. It may not discriminate against families in which one or more children under the age of 18 live with: Significant Recent Changes • A parent. • A person who has legal custody of the child or children. The Housing for Older Persons Act of 1995 (HOPA) makes several changes • The designee of the parent or legal custodian, with the parent or to the 55 and older exemption. Since the 1988 Amendments, the Fair custodian's written permission. Housing Act has exempted from its familial status provisions properties that satisfy the Act's 55 and older housing condition. Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18. First, it eliminates the requirement that 55 and older housing have "significant facilities and services" designed for the elderly. Second, HOPA establishes "good faith reliance" immunity from damages for persons who Exemption: Housing for older persons is exempt from the prohibition in good faith believe that the 55 and older exemption applies to a particular against familial status discrimination if: property: • The HUD Secretary has determined that it is specifically designed • if they do not actually know that the property is not eligible for the for and occupied by elderly persons under a Federal, State or local exemption. government program. • if the property has formally stated in writing that it qualifies for the • It is occupied solely by persons who are 62 or older. exemption. • It houses at least one person who is 55 or older in at least 80% of the occupied units, and adheres to a policy that demonstrates intent to house persons who are 55 or olde.r HOPA retains the requirement that senior housing must have one person who is 55 years of age or older living in at least 80 percent of its occupied units. It also still requires that senior housing publish and follow policies A transition period permits residents on or before September 13th, 1988, to and procedures that demonstrate intent to be housing for persons 55 and continue living in the housing, regardless of their age, without interfering older. An exempt property will not violate the Fair Housing Act if it includes with the exemption. families with children, but it does not have to do so.

A HUD rule published in the April 2nd, 1999, Federal Register implements the Housing for Older Persons Act of 1995, and explains in detail those Prohibited Actions provisions of the Fair Housing Act that pertain to senior housing. In the sale and rental of housing: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status Changes were made to: or handicap: • Enhance law enforcement, including making amendments to crimi- • Refuse to rent or sell housing. nal penalties in section 901 of the Civil Rights Act of 1968 for • Refuse to negotiate for housing. violating the Fair Housing Act. • Make housing unavailable. • Provide incentives for self-testing by lenders for discrimination • Deny a dwelling. under the Fair Housing Act and the Equal Credit Opportunity Act. • Set different terms, conditions or privileges for sale or rental of a See Title II, subtitle D of the Omnibus Consolidated Appropria- dwelling. tions Act, 1997, P.L. 104 - 208 (9/30/96). • Provide different housing services or facilities. • Falsely deny that housing is available for inspection, sale, or rental. • For profit, persuade owners to sell or rent (blockbusting). • Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.

However, housing need not be made available to a person who is a direct threat to the health or safety of others or who currently uses illegal drugs.

In mortgage lending: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status, or handicap (disability): • Refuse to make a . • Refuse to provide information regarding loans. • Impose different terms or conditions on a loan, such as different interest rates, points, or fees. • Discriminate in appraising property. • Refuse to purchase a loan. • Set different terms or conditions for purchasing a loan.

32 Illinois Core B: Legal Issues losses; doing so protects the lender from continued loss. Lenders will Chapter Three: always view short sales as a potential way of mitigating their own losses, but will not consider the homeowner's plight or emotional situation.

Short Sales In other words, a short sale is an arrangement where the homeowner offers, and the bank agrees to accept, less than the total amount owed to pay off the home. The "deficiency" is the difference between the amount owed and what the bank collects at the short sale. Much of the confusion about short Overview sales arises from the deficiency that is created when a short sale is granted and arranged by a lending institution. The chapter will emphasize that a real estate professional must understand the process and the pitfalls of using short sales to market a home and detailed the benefits to the homeowner, the lender, and the real estate professional. We will give an example of what the short sale process may look like. Short Sale Deficiencies Finally, the chapter will discuss some of the recent options homeowners have to avoid . Lenders that agree to negotiate a short sale have several options to consider when finalizing their decision. The deficiency can be "forgiven" by the • Short Sale Defined lender, though that is not as much of a gift as it appears. Typically, the • Short Sale Deficiencies deficiency is treated as a loss by the bank, but it becomes income for the • The Bank, the Borrower and the Real Estate Professional borrower. That is, the lender will send a 1099 tax form for this deficiency amount (that amount they wrote off on their books) which is now considered • Short Sale Example income for the seller/homeowner and has income tax implications that The new agent with a new approach are real and relevant. President Bush signed into law The Mortgage Debt Next steps Relief Act of 2007, which alleviates the income tax requirements for The Conclusion certain situations. The Mortgage Debt Relief Act of 2007 generally allows Final analysis taxpayers to exclude income from the discharge of debt on their principal Deficiency residence only. Debt reduced through mortgage restructuring, as well as Borrower benefits mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. benefits Bank benefits This provision applies to debt forgiven in calendar years 2007 through 2012. • The Program Up to $2 million of forgiven debt is eligible for this exclusion ($1 million • The Home Affordable Refinance Program if married filing separately). The exclusion does not apply if the discharge • The Home Affordable Modification Program is due to services performed for the lender or any other reason not directly • Home Affordable Foreclosure Alternatives (HAFA) Program related to a decline in the home's value or the taxpayer's financial condition. • Foreclosure Alternatives Program It would be prudent to refer specific questions to a qualified tax expert to ensure a transaction qualifies for this tax relief or income tax exemption. Lenders also can choose to file a judgment for the deficiency, which will be reported on the borrower's credit report for 10 years. The judgment can Short Sale Defined be reported as "satisfied" or "unsatisfied"; obviously, satisfied is preferable. If it is unsatisfied, it means that a court has ruled in favor of the lender, A short sale in real estate occurs when the which may then try to collect the debt owed through techniques such as outstanding obligations (loans/mortgages) wage garnishing. The lender also can demand that the borrower sign a note against a property are greater than for what with attractive terms. (The bank is in a position to believe that getting its the property can be sold. Short sales are a way loss returned without interest over a period of years is better than receiving for homeowners to avoid foreclosure on their nothing). homes and still be able to pay off their loan by settling with their lender. It is important to This process is being referred to as an arrangement because the definition remember that homeowners do not have to be of the process depends on the bank that holds the loan. Though there are behind on their mortgage to request a short common procedures, every bank does it differently and is not required to sale for their home. The most important thing follow any particular formula or rule when analyzing and approving a short to remember is that the homeowner/real estate agent must be able to clearly sale request. If you take part in a short sale, it's crucial you assume nothing demonstrate that the home cannot be sold for the amount of the current lien. until you have the bank's policies in writing.

This bears repeating. NEVER ASSUME THAT A DEBT OWED TO A The situation seems simple: real estate can be accurately valued. But can it? LENDER IS GONE UNLESS THE DETAILS OF THE RELEASE OF An appraisal is a "snapshot" of a home's value at one moment in time. In a THAT DEBT ARE GIVEN IN WRITING. market with rising prices, the appraisal is less relevant than it would be in a market where prices are falling. This is because any inaccuracy will be in the bank's favor, minimizing its exposure to risk. That is why appraisals are Example examined even more carefully when real estate, as a whole, struggles. Much Someone who had done a short sale had a first mortgage and a second of the bank's decision is contingent on the accuracy of the value opinion position lien. The bank agreed to the short sale, which ended up being generated by a professional appraiser. It is for this reason that when a short enough to pay off the first loan, but not the second. The deficiency was the sale is considered, anyone involved in the process needs to recognize the balance of the second mortgage. Because the bank agreed to the short sale, significance of the appraised value on the bank's decision to agree to a short the seller assumed she wouldn't have to worry about the deficiency from the sale. second mortgage. So it is a shock to her that the bank is pursuing her for the deficiency. Short sales are a process that basically creates no real winners. The value of the technique is that it attempts to moderate the losses for both lender and REMEMBER, the lender(s) will always want ALL their money accounted homeowner. The lender's goal shifts from maximizing profits to minimizing for somehow. That is, they will send a 1099 tax form, attempt to file a

Illinois Core B: Legal Issues 33 judgment, or attempt to set up a new unsecured lien for the homeowner to A real estate agent's best offense for meeting sales objectives in a struggling pay after the home sale. NEVER assume something is written off unless real estate market is to use his or her knowledge and retain a flexible you have a formal, signed, written, unconditional release of lien and/or approach to business. Short sales can be complicated and may require a bit judgment from the lender specifically stating that no further action to collect of micro-management, but they are also profit situations that are appealing this debt will be taken. when business is slow and consumer sentiment is negative. At some point, the market will rebound and it is highly likely that those whom the real estate agent helped through difficult times will remain loyal clients and develop into a solid referral base - the real estate salesperson's most important tool. The Bank, the Borrower and the Real Estate Professional When weighing the available options, it is important to make sure that fees typically included in real estate transactions are an integral part of Within their lending units, banks have the analysis. Real estate professionals can be invaluable to homeowners, divisions that handle workout or hardship as closing costs are specific to localities and states and are typically well situations. In struggling markets, these known to those selling real estate. Closing costs will include title and divisions are expanded to handle the volume, escrow fees (if the seller is responsible for any portion of them, which but don't expect the lender to make the will depend on your county), attorney fees, a portion of unpaid property process simple or easy. Workout divisions are taxes, re-conveyance fees, notary fees, delivery fees, documentary fees, designed to minimize losses for the bank, and and/or transfer fees. While this is not an exhaustive list, it provides enough many employees receive a commission on the assistance to understand what is relevant. amount they save the bank by minimizing the bank's deficiencies during short sale situations. In other words, they are Keep in mind that if the situation appears very poor from the bank's rewarded for pushing the limits in the bank's favor. While this fact should perspective, bank representatives have the ability to negotiate each and not be surprising, it should never be a reason to decide against an attempt every closing fee should they find that it would be in the bank's best interest. to negotiate a short sale. All it means is that the borrower must be fully The most successful short sale negotiators are those who have enough prepared for a strategic financial battle. The more educated and prepared the education and experience to determine when to push for those concessions borrower is, the greater the chance of a favorable outcome. and when to hold back. With the tremendous volume of loan defaults as a result of the current real estate market decline, lenders will not agree to "officially" consider a short REO as a Specialty sale until there is a formal offer. This means that the bank will not consider In response to a very real need, there have been many associations that the situation completely until a certain amount of information is submitted; have begun to educate and support those real estate professionals who want at least enough for them to make a decision that can be justified, either way, to specialize in REOs. These organizations provide a valuable source of from their perspective. Before your short sale is approved, you'll have to tools and resources for those enmeshed in the complex world of short sale submit an application, hardship letter, financial statements, tax returns, pay transactions. These organizations can facilitate REO sales opportunities by stubs, the purchase agreement from the buyer, and perhaps more, depending providing REO listings as well as the ability to interact with other REO on the lender. agents throughout the country using forums.

This is the part where the real estate professional can be an integral part of Some of these companies can help teach you how to redefine new marketing the solution to what appeared to be an unmanageable problem for a seller. strategies to increase sales and reduce marketing time. These associations Armed with knowledge about the short sale process, a salesperson can can help real estate agents improve their standard of REO marketing so you facilitate a short sale and earn a commission on a home that was previously will be a first choice in REO Management and sales in your local market. perceived as un-saleable. As in a typical sales transaction, educating the They can help you achieve your goal to sell the property in the least amount client will aid the process and help resolve a situation that could have led of time at the highest recovery price. to something significantly more undesirable. It is worthy to note that short sales have become a mainstay in the real estate market. In some markets, short sales may represent upwards of 20% of the listing inventories. The number of potential within your market may differ, but their impact on real estate is very real and most likely will remain for several Short Sale Example years to come. Introduction Mr. and Mrs. O’Neill purchase their home in 2004 for $250,000. It was a How does the Real Estate Agent Profit? part of a fast-growing suburb that had seen tremendous growth during the When there is a formal request for a short sale commitment from the bank, past decade. Their real estate agent had advised them that the home had real estate agent commissions are usually included if a real estate agent is appreciated over 10% just during the time from Phase l to Phase lV of the involved in the deal. Be ready for the bank to counteroffer to lower your development, the phase in which they were purchasing. commission. Again, being properly prepared for this counteroffer and understanding the process is an agent's best strategy for avoiding the need The specific financial data for this purchase is as follows: to modify his or her commission. • Purchase Price: $250,000 • Down Payment $25,000 • Mortgage Amount: $225,000 Real estate agents can also "hunt" for short sales by talking to clients who • Real Estate Taxes: $ 2,400 have had their homes listed for a long time without success. This is usually indicative of either a poorly marketed home or an inappropriately priced Unexpectedly, Mr. O’Neill was laid off from his job as economic conditions one. Or it can be the product of the homeowner being in what is known as declined in his industry. The O’Neills understood they could no longer an "upside-down" position; that is, the mortgage balance is larger than the afford to live in their home and were completely willing to move to a more value of the home - a perfect opportunity to apply the short sale technique. affordable one. They spent their entire savings to keep their debts current By proactively reaching out to homeowners who feel they have no, or while they waited for their home to sell. During the time they had their limited, options, the real estate professional can find many viable sales home on the market, they began to realize that the market was changing, situations. He or she can explain the short sale process and help the owner and there was no activity on their home. There were very few potential negotiate with the lender to get the house sold and the debt relieved,and the buyers even as the O’Neills lowered their home price to below what they agent earns a commission. had bought if for, four years earlier.

34 Illinois Core B: Legal Issues The O’Neills’ options were slowly dwindling. Their savings were now gone Borrower Benefits and, while Mr. O’Neill had found temporary work nearby, his new salary The O’Neills benifited from this situation in a number of ways. They were was not nearly sufficient to support his family in this home. They had begun no longer in a home that they could not afford. The fact that they had to realize that the value of their home was below the current balance of their maintained their minimum payments allowed their credit profile and score mortgage: $223,893. to remain unaffected by this difficult situation. They began to rebuild their lives with a renewed sense of home and confidence. The New Agent with a New Approach When their listing agreement expired with their current agent, they were Real Estate Agent Benefits contacted by another agent asking them if they had been informed of the The real estate professional took the dire situation and, with a bit of process known as a short sale. Neither homeowner was aware of the process ingenuity and perseverance, created a viable real estate transaction. The but remained receptive and set up a meeting with a new agent. This real real estate agent was part of a sale that originally appeared un-workable, estate professional spent most of their meeting gathering facts about the but ultimately created and earned commission. In addition, she found a way O’Neills’ current financial position. She discovered that: to help the homeowners by affecting the sale that gave them the chance to • The current mortgage balance was $223,893. start over. • The real estate taxes were current, but about to be delinquent unless Bank Benefits circumstances changed. The lender understood that the difference between the home’s value and • Mr. O’Neill had been working, but was not in a position to afford the mortgage balance was going to be the same whether or not the bank the home he could support with his previous job. agreed to a short sale. If the bank did not agree to a short sale, it would have • The O’Neills had used all their savings while their home was on to begin a foreclosure proceeding and incur a great many legal expenses, the market. which would have increased their losses. By agreeing to the short sale, the • They were very open to reducing the price, and in fact had done so. lender had the ability to minimize its losses by avoiding the only other The current price was the balance of the mortgage, and they could option to eventually recoup its investment: foreclosure. not understand how they could lower the price, as they had no as- sets to make up the difference. • They had maxed out their credit cards but remained current by pay- Through this example is somewhat simplified, the fundamentals are ing minimum balances. substantially universal. Usually there are emotions that impact the process • The real estate agent added one fact: and the bank can be resistant, or even downright reluctant, to agree to a short • The value of their home was realistically $180,000. sale. But given the bank’s ultimate goal of minimizing losses, it is evident that it really did not have any other choice but to agree to this arrangement Next Steps as it WAS IN THE BANK’S BEST INTEREST. Near the end of the meeting, the agent provided and explanation of a short sale and remarked that the O’Neills could be prime candidates for this technique. She also informed them that they just needed to find a legitimate buyer with a serious offer. The Making Home Affordable Program The Making Home Affordable program (MHA) was introduced in March With a new perspective and fresh approach, they put the house back on of 2009 and aims at providing assistance to as many as 7 to 9 million the market at $180,000, and within days several potential buyers showed homeowners, making their mortgages more affordable and helping to serious interest. With these offers in hand, the agent returned to the O’Neills prevent foreclosures. to finish educating them about the short sale process. She requested that they put together a package containing a letter explaining their current financial situation, documentation of their current assets and income, and an authorization for her to work on their behalf. The Home Affordable Refinance Program The MHA is split into two smaller programs, each aimed at providing help The agent, armed with the serious offer and proper documentation, to homeowners in different ways. The first off-shoot program is The Home approached the lender and submitted the required information. Within Affordable Refinance Program. a week, the lender acknowledged receipt and outlined the next steps, following analysis of the situation to determine what the lender would find acceptable. The Home Affordable Refinance Program will be available to an estimated 4 to 5 million homeowners who have a good payment history on an existing The Conclusion mortgage owned by or . Normally, these borrowers At some point, the bank understood that it, too, was in a financially negative would be unable to refinance because their homes have lost value, pushing situation not so different from that of the O’Neills. Initially, the bank’s offer their current loan-to-value ratios above 80%. Under this program, many to the homeowners indicated acceptance of the $180,000 offer, but the of these homeowners will be able to refinance their original loans to take O’Neills would have to pay the closing costs. The O’Neills contacted an advantage of today's lower mortgage rates, or to refinance an adjustable-rate attorney to fight this part of the lender’s offer. The attorney was successful mortgage into a more stable mortgage, such as a 30-year fixed rate loan. and, even after paying his fee; the O’Neills were now in a position to sell their home through a shortfall. The goal of the refinance effort is "to provide access to low-cost for responsible homeowners suffering from falling home prices." The goal Final Analysis is to provide refinancing of Fannie Mae loans that will allow responsible • Mortgage Balance: $223,893 borrowers to find a more solvent position by reducing their monthly • Closing Costs: $3,098 payments or by refinancing from a more risky loan structure (such as • Agency Fees: $ 5,800 interest-only or short-term ARM) to a more stable product. The solutions • Total: $ 229,791 will provide mortgage refinances for current LTVs up to 125%, and • Selling Price: $ 180,000 flexibilities. • Deficiency: $ 49,791

The borrowers received a 1099 Tax Form from their lender in the amount Eligibility Requirements of $49,791. This was their notice that they may be subject to certain income In order to be eligible for the Home Affordable Refinance Program, a taxes.

Illinois Core B: Legal Issues 35 homeowner must meet all of the following requirements: 2. Do not qualify for a trial mortgage modification as defined by the • Must be the homeowner of a one- to four-unit home. "Making Home Affordable Program". • Must have a loan owned or guaranteed by Fannie Mae or Freddie 3. Have not completed successfully the trial period during the initial Mac. phase of their modification. • Must be current on mortgage payments. 4. Have missed at least two consecutive monthly payments during the modification period of the "Making Home Affordable Program".

"Current" means that the homeowner hasn't been more than 30 days late on Fundamentally, the issue of being able to keep the home is not an option, their mortgage payment in the last 12 months. and HAFA provides a way in which the homeowner can avoid a foreclosure • Must owe the same or less on the mortgage as the current value of on his or her record through either (1) a short sale or (2) a deed-in-lieu of the house. foreclosure.

One of the most significant aspects of HAFA is that the bank agrees that any A person may be eligible if their first mortgage does not exceed 125% of deficiencies that are a part of the short sale or deed-in-lieu are forgiven; that the current market value of the home. For example, if the property is worth is, the borrower will begin again with a clean slate. Under HAFA, once the $200,000 but the person owes $250,000 or less on the first mortgage, they lender accepts a short sale or deed-in-lieu, the loan balance is considered may still be eligible. cleared. In addition, banks do not have to verify a borrower's financial information or analyze income ratios before considering him or her for HAFA.

The Home Affordable Modification Program As of December 28th, 2010, HAFA guidelines have been updated. These changes will increase the number of borrowers who may be eligible to The second off-shoot program of the MHA is the Home Affordable participate in the HAFA program which should also expedite the number of Modification Program. The Home Affordable Modification Program creates potential approvals. These changes include the following: a defined loan modification process through which borrowers who are in default, at risk of imminent default, or in foreclosure can have their loans (1) Relocation reasons no longer need to be connected to employment modified to a more affordable monthly payment equal to a target 31 percent opportunities or meet distance requirements. Borrowers are allowed of their monthly gross income. to have moved up to 12 months before certain dates in the HAFA process but may not have purchased another home. Eligibility Requirements In order to qualify for the Home Affordable Modification Program, (2) Banks are no longer required to assess if the borrower's total homeowners must meet the following requirements: monthly mortgage payment exceeds 31% of gross income. However, • The property must be the homeowner's primary residence. borrowers will still be required to provide evidence of a hardship. • The amount owed on the first mortgage must be equal to or less than $729,750. (3) Banks/Servicers must communicate approval, disapproval, or • The homeowner must have trouble paying the mortgage. a counter offer within 30 calendar days after receiving either an (i) executed sales contract, (ii) Alternative Request for Approval of For example, the homeowner may have had a significant increase in their Short Sale, and (iii) a signed Hardship Affidavit. mortgage payment, reduction in their income since they got their current loan, or have suffered a hardship that has increased their expenses. (4) If an unsolicited borrower requests to participate in HAFA, the servicer has 30 calendar days to acknowledge the borrower's eligibility • The mortgage must have been obtained on or prior to January 1st, and, if eligible, send the borrower the Short Sale Agreement to begin 2009. the process. • The payment on the homeowner's first mortgage (including princi- (5) HAFA will no longer impose a 6% cap on payments for each pal, interest, taxes, insurance and homeowners association dues, if subordinate mortgage/lien holder when establishing eligibility. The applicable) is more than 31% of their current gross income. $6,000 aggregate limit is still in effect.

(6) The update also clarifies that vendors of the servicer may not MODIFICATIONS WILL RUN UNTIL DECEMBER 31st, 2012; LOANS be paid from the real estate commission fees (In other words, the CAN BE MODIFIED ONLY ONCE UNDER THE PROGRAM. commission cannot be split with a vendor of the servicer). Servicers must have implemented these changes by February 1st, 2011.

Home Affordable Foreclosure Alternatives Foreclosure Alternatives Program (FAP) (HAFA) Program This program was announced by the Obama Administration in May of 2009 and took effect in July of that year. This program outlines new incentives HAFA is the acronym for a federal government and uniform procedures for short sales. For borrowers who are unable to program named "the Home Affordable keep their home under the Making Home Affordable Loan Modification Foreclosure Alternatives Program" which Program, the servicer may consider a short sale or, if that is not successful, was created to augment another government a deed-in-lieu of foreclosure. Here is a general outline of the program. program, the "Making Home Affordable Program.” Both are under the supervision • Borrowers (Homeowners): Borrowers qualify under the FAP if of the U.S. Treasury Department as part of they meet the minimum requirements of the Home Affordable the TARP (Troubled Asset Relief Program). Modification Program, as previously listed, but did not qualify HAFA has been created to help those when loan modification is not an for a modification or were unable to sustain payments under option by providing alternatives to foreclosure. a trial period plan or modification. Before proceeding with a foreclosure, servicers must determine if a short sale is appropriate. HAFA has been designed to help those: Considerations should include property condition and value, 1. Who request a short sale or deed-in-lieu of foreclosure. average marketing time in the community, the condition of the title

36 Illinois Core B: Legal Issues including the presence of junior liens and determinations that the net sales proceeds are expected to exceed the investor's recovery through foreclosure.

• Standardized Documents: The program will include streamlined and standardized documents, including a Short Sale Agreement and an Offer Acceptance Letter. The goal is to minimize complexity and increase use of the short sale option.

• Incentive Payments: ♦ Servicers may receive incentive compensation of up to $1,000 for successful completion of a short sale or DIL. ♦ Borrowers may receive incentive compensation of up to $1,500 to assist with relocation expenses. ♦ Treasury will also share the cost of paying junior lien holders to release their claims, matching $1 for every $2 paid by the investors, up to a total contribution of $1,000 by Treasury.

• Property Valuation: The servicer will independently establish both property value and the minimum acceptable net return in accordance with investor guidance and will provide instruction to the borrower regarding the list price and any permissible price reductions. The price may be determined based on either an appraisal performed in accordance with USPAP; or one or more Broker Price Opinions either of which must be dated within 120 days of the Short Sale Agreement.

• Minimum and Maximum Duration: Under the program, servicers will allow borrowers at least 90 days to market and sell the property, with possibly more time based on local market conditions. The property must be listed with a licensed realtor experienced in selling properties in the neighborhood. Marketing of the property may run concurrently with the foreclosure process; however, no foreclosure sale can take place as long as the borrower is acting in good faith to sell the property. There is a maximum marketing period of 1 year for the property.

• Selling Commissions and Fees: The Short Sale Agreement has to specify the reasonable and customary real estate commissions and costs that may be deducted from the sales price. The servicer must agree not to negotiate a lower commission after an offer has been received.

• No Borrower Fees: Servicers may not charge fees to borrowers for participating in the FAP.

• Deed-in-Lieu of Foreclosure Option: Servicers have the option to require the borrower to agree to deed the property to the servicer in exchange for a release from the debt if the property does not sell within the time allowed in the Short Sale Agreement (plus any extensions).

Illinois Core B: Legal Issues 37 Illinois Core B: Legal Issues ~ Practice Assessment Questions ~

Select the best answer for each question and mark your answers on the Student Assessment Sheet (last page of book) or complete your assessment online at www.McKissock.com/ILRE

1. In the Sale and Rental of Housing, no one maytake any of 6. Collaborating with others and collectively refusing to the following actions based on race, color, national origin, conduct business with another real estate professional religion, sex, familial status or handicap EXCEPT: is a violation of antitrust law in that it constitutes a(n) a. make housing unavailable ______of trade. b. deny a dwelling a. enhancement c. deny housing to a person who is a direct threat to the b. robust environment health or safety of others c. equitable d. set different terms, conditions or privileges for sale or d. restraint rental of a dwelling 7. A short sale is an arrangement where the ______2. Fair Housing complaints filed with HUD are investigated offers, and the ______agrees to accept less than the by the _____ total amount owed to pay off the home. a. Office of Fair Housing and Equa Opportunity a. Bank; homeowner b. Attorney General of the state where the alleged incident b. Agent/licensee; bank occurred c. Homeowner; bank c. U.S. Court of Appeals d. Agent/licensee; homeowner d. Office ofADA Amendments 8. A bank can try to recoup its losses from a short sale 3. What is an exception to the Fair Housing Act? deficiency by: a. Any statement that indicates a limitation or preference a. Demanding that the borrowers sign an unsecured note based on national origin b. Seeking a legal remedy known as a judgment b. A person who is HIV positive may be refused a rental c. Taking a write-off loss on its bokos and issuing a 1099 to agreement if the disease is not in remission. the seller/homeowner c. Housing need not be made available to a person who d. All of the answers shown currently uses illegal drugs. d. Companion animals of any breed (by prescription) must 9. A form known as a 1099, issued to the seller/homeowner always be permitted. by a lender after a short sale, may subject the homeowner to: 4. In the Fair Housing Act of 1991 affecting four or more a. Tax consequences units, all units must have ____. b. Legal consequences a. Reinforced bathroom walls to allow later installation of c. A decline in their credit score grab bars and Kitchens and bath rooms that can be used d. An inability to purchase real estate in the future by people in wheelchairs b. Accessible light switches, electrical outlets, thermostats 10. A Realtor can represent clients in a short sale as long as: and other environmental controls a. The Realtor has a mortgage banker's license c. An accessible route into and through the unit b. The real estate market is in a decline d. All the answer shown are correct c. The buyers are ready to close quickly d. The Realtor has written authorization 5. HOPA retains the requirement that senior housing must have one person who is 55 years of age or older living in _____ of its occupied units. a. 50 percent b. at least 80 percent c. half d. 55 percent

38 Illinois Core B: Legal Issues Real Estate Safety: Protect Yourself During a Showing 3 CE Credit Hours (Approval # 564.002260)

As a real estate agent, you are placed in a position of special trust. Your clients expect you to deliver the best skill and care as a part of your fiduciary duties. You counsel your clients on strategy, help them complete mounds of paperwork, and sometimes even advise them on home staging. With all of this going on, it’s easy to forget about your clients’ personal safety or the safety of their belongings. Your clients are counting on YOU to know the common risks associated with a real estate transaction and the best practices for minimizing those risks.

Chapters: • Chapter One: Introduction • Chapter Two: Working with Seller Clients: Getting a Home Ready to Sell • Chapter Three: Working with Seller Clients: Conducting the Showings • Chapter Four: Working with Buyers with Safety in Mind

Learning Objectives: • Identify common items that are vulnerable to theft during property showings • Explain to seller clients the safeguards to implement prior to taking photos and showings • List some pros and cons of using a lock box on a listing • Conduct a showing or open house, and property close up afterward • Explain safety tips for issues that commonly come up before and during a showing • Discuss the required disclosures and items that buyers should investigate

Customer Testimonial “When I was a multi-million salesperson and manager, you covered the multitude of problems that occurred in transactions. GOOD CLASS.” ~ Waneta

Real Estate Safety: Protect Yourself During a Showing 39 Chapter One: Chapter Two: Introduction Working with Seller Clients: Getting a Home

Fiduciary Duties Ready to Sell As a real estate professional, you are placed in a position of special trust. Most of us already know that and take great care to provide fiduciary duties Many people think that a real estate agent’s most difficult task is prepar- to our clients in the transaction. We counsel our clients on strategy, help ing a listing for a Multiple Listing Service or handling paperwork. These them complete mounds of paperwork, and sometimes even advise them on certainly are highly detailed and often challenging tasks, but there is so home staging. How many of us think about our client’s personal safety and much more that goes on before a home is listed, in order to make the home the safety of their belongings during this process? more marketable and to help protect the seller and the seller’s possessions. In this chapter, we will talk about safeguarding valuables and medications Think about it; you are providing fiduciary duties of: during the showing of a home. Making sellers aware of the vulnerabilities in showing a home without the assistance of a real estate licensee is also Care: you show reasonable care for your clients in the transaction. crucial. The importance of screening buyers prior to showings will also This could very well include their safety. be covered.

Obedience: you obey your clients’ wishes. Most would wish to keep themselves and their belongings safe. Safety First: Before a Showing

Loyalty: being loyal to the client means placing their interests above Have you ever taken a look at a property listing or the property itself and your own. You are their guardian in this transaction. found yourself focusing on the contents, rather than the building? Maybe you like the artwork, the furniture, or the electronics. People generally don’t Disclosure: you disclose facts that are relevant to the transaction–and look at listings and pick out the valuables, but there are individuals in our safety for buyers and sellers may be an extremely important disclosure! society who do just that. (Think: lead paint, registered sex offenders registry) Sellers should be counseled on protecting their valuables before photo- Accounting: for funds and documents, which could include escrow graphs are taken and home showings are conducted. Some items should be funds for radon systems and lead paint disclosures. hidden from plain sight, while others may be better off shredded, moved to another location or placed in a safe deposit box at a nearby bank. Sell- Confidentiality: a licensee keeps important information confidential, ers should be told that hiding valuables in the home does not protect them. thereby keeping their clients safe from its misuse. Buyers frequently open cupboard doors and look in freezers, in closets and under beds. Some may go further and look in dressers, even though they There is no question that having a fiduciary relationship with a client means shouldn’t. that the client is counting on YOU to know the common risks and safety precautions that should be applied in a real estate transaction. Let’s delve If a seller truly values something and moving it wouldn’t be a disruption into this subject and talk about some things that don’t frequently come up in to their daily lives, valuables should be moved to the home of someone other education and training classes. trusted, or better yet, placed in a safe deposit box until the home is no longer being shown. Some homeowners invest in a fire-proof lock box. While a Note! lock box is a good way to protect valuables and documents in a fire, these boxes are often small enough to be removed from the property. A skilled Please note: safety of the real estate licensee is also of great concern! This robber can get into one with enough time, especially if the box is in his course addresses the safety of the client, but a licensee is advised to learn possession. Remember the expression: “an ounce of prevention is worth a how to keep themselves safe during showings. Please read up on licensee pound of cure.” A little forethought could prevent a major hardship! safety, contact your local Board of Realtors, and/or contact your local police department for tips on staying safe. The North Carolina Real Estate Safety Council (a joint effort from the NC Real Estate Commission, and the NC As a person held in special trust, the real estate licensee should be careful Association of Realtors) has an excellent guide for real estate licensees. when photographing a home not to include valuables in the photos.

Things that should not be left out in plain sight include: • Jewelry • Antiques • Medications • Cash and checks • Bills with account numbers • Bank statements that include images of cleared checks • Spare keys • Photos that are too personal • Personal documents such as Social Security Cards and Passports

40 Real Estate Safety: Protect Yourself During a Showing • Briefcases, purses, computer bags Cash and Checks • Small electronics, such as iPods, iPads, and laptops. Cash and Checks may seem like an obvious thing to avoid leaving out, but what about bills or bank statements? Many people leave cash laying Jewelry around and don’t think it is a big deal. As a real estate licensee, you serve your clients well by suggesting that cash, checks, bills and bank statements Imagine this: you are a seller, trying to sell your home, and you list it with a be locked in a safe, taken off sight, or shredded. Bank statements may not competent real estate licensee. The licensee does an excellent job marketing have account numbers printed on them, but copies of cancelled checks may the home and many potential buyers have viewed the home. One weekend, be included in a statement. A thief can obtain routing numbers and account your listing agent holds an open house, and it is a huge success! A large numbers from those images. Credit card bills frequently include account number of buyers come to see the home, so many that the listing agent can’t numbers, and someone adept at identity theft or account theft could easily be in every room with every buyer during the open house. You come home charge up a fortune, even without the expiration date or security code. after everyone has gone, very happy with the exposure that your home has gotten, only to find out that someone has been in your jewelry box! Almost everything has been taken! How could this have happened? Spare Keys Spare Keys need to be secured as well. They should not be hanging from According to an article in the Chicago Sun-Times, in 2012, a seller client a hook by a door or placed in a “junk drawer.” Spare keys should never be described the unthinkable: $162,000 worth of jewelry was stolen during hidden in common places, like under a doormat, under planters, just inside an open house in Highland Park, a neighborhood in Chicago. What did the a garage, or in obvious, magnetic hide-a-key places. Hidden spare keys are seller do? She sued the real estate firm that had the listing. The seller stated often a good idea, but think like a burglar and put keys in a place that is not that the listing brokerage had sole control over the home when the jewelry obvious. Perhaps a trusted neighbor can hold on to a spare key, if necessary. was stolen, thus they were responsible for the loss.

Could this have been prevented? What is the best thing to do with jew- elry? Jewelry is incredibly easy to sell or pawn. Advise the client to secure Photos jewelry in a locked safe or safe deposit box. In the event that jewelry is stolen, contact police immediately and call around to local jewelers and Photos that are too personal should be pawn shops. packed away. This is a common sug- gestion when staging a home. Homes generally sell better when buyers can Consider: Has one of your clients ever had a piece of jewelry stolen during envision themselves living in the home, a showing or open house? If yes, consider what you could have done to help which is difficult if pictures of another prevent that from happening. family are scattered around the house. There is another, perhaps more impor- tant reason to take down those family snapshots. Children and young women are statistically more vulnerable to Antiques predators. In order to reduce this sinister risk, people looking at a listing online or in person should not know what the residents of the home look Antiques may be more difficult to move off sight, like. but they should not be ignored, especially small items that can be tucked into a pocket or purse. Social Security Cards and Passports

Personal documents, such as Social Security Cards and Passports, are prime targets of identity theft. Are those documents in a file cabinet? Are they in a fire-proof lock box or in a Medications file box marked “Family Docu- ments”? These documents are often overlooked and so easy to move to a Medications can be more difficult to se- secure location, like a safe deposit cure, if they are needed on a daily basis. box. These documents are also the Every year, pharmacies report break-ins easiest way for a thief to successfully steal an identity and ruin a person’s and stolen medications. The National credit or worse! Community Pharmacist Association estimated that there were 686 prescrip- tion drug robberies in pharmacies in 2010. That is an 81% increase from 2006 Briefcases, Purses, and Computer Bags (NCPA, 2012). Don’t forget about briefcases, purses and computer bags, especially design- er brands. Many high-end bags can fetch a good price on auction websites, The prevalence of prescription drug theft from homes is not known because even if they are used. many people do not report those thefts to the police. Think about how much easier it is for a thief to steal medications from a home that is listed for sale! Pain medication is of particular concern, but every medication should be se- Small Electronics cured prior to each showing. Sellers should NOT simply place medications in a medicine cabinet or linen closet. Those are the first places many people Small electronics, such as iPods, iPads, tablets, and laptops, should be would look. Luckily, medications are generally small in size and can simply locked up. Although many of these items can be password protected and be placed in a bag and taken with the seller before a showing. have tracking software built in, that will not stop them from being stolen.

Real Estate Safety: Protect Yourself During a Showing 41 Passwords can be reset and tracking software can be disabled by a skilled As you walk through the home, you admire the beautiful photography. The thief. These electronic devices are actually designed that way. If a consumer lovely family who currently own the home has 2 beautiful young children. owns one of these devices and forgets the password, usually a skilled in- formation technology specialist can reset the password in a matter of min- If the home looks well-staged, do you make any suggestions? How would utes. As far as tracking software, that can be disabled and registration can you broach the subject of home safety? be reset. These small electronics are highly marketable and often contain very personal information, such as passwords, social security numbers, and credit card information. Comments: Handing the sellers a checklist is a good start. If it is pre- printed, then it gives the feeling that securing valuables and taking down Breakables personal photos is a normal matter of course. Discussing the checklist will drive home the point. In some areas, having a professional home-stager can Finally, breakables should be safeguarded. They may be worthless to a add to the credibility of how important it is to secure valuables and take thief, but valuable to a family. Think about the vase that your daughter made down personal photos. A home-staging consultation may be surprisingly in 3rd grade art class. What if a clumsy buyer knocked it over? Many buyers affordable and may be a nice service that the listing agent can provide. have children who come on showings and children are more prone to ac- cidents. When securing a home, keep an eye out for those precious artifacts, even if they are worthless on the market. Importance of Screening Buyers before a Suggestion Showing In 2006, a Maine man was convicted in New Hampshire on 5 felony counts of sexual assault, plus criminal threatening, kidnapping, and several misde- Provide sellers with a pre-listing checklist. Ad- meanors. The man was named “The Real Estate Rapist” in local newspapers vise them to move valuables they do not need because he approached residents of homes that were listed by real estate on a daily basis to a secured location, like a brokerages, instead of contacting a listing agent or licensee. One of his vic- trusted family member’s house, or better yet, a tims was a 19-year-old woman. The Real Estate Rapist knocked on doors safe deposit box at a bank. Things that should that had For Sale signs in the yard and asked the residents to view the home. be moved include: Once he gained entry into the home, he proceeded to sexually assault, kid- nap, and otherwise threaten the residents, generally young women.

Listing agents can hang “Do Not Inquire Within” riders on the For Sale • Jewelry signs. They can also recommend that sellers do NOT show their home to • Antiques buyers who have not been pre-screened, which protects the clients from the unthinkable (as seen in New Hampshire), and it saves the sellers time and • Medications hassle. Oftentimes, buyers who are not working with a real estate licensee • Cash and checks are not serious about purchasing property. Others do not have a realistic idea of how much home they can afford. The recent case of the “Real Es- • Bills with account numbers tate Rapist” in New Hampshire is reason enough to want all potential buy- • Bank statements that include images of cleared checks ers screened before a showing! Sellers should be cautioned about showing • Spare keys property themselves. The simple act of making an appointment with a real estate licensee is a significant deterrent to those who may want to steal from • Photos that are too personal or harm home sellers. • Personal documents, such as Social Security cards and passports • Briefcases, purses, computer bags While the actual percentages change from time to time and among market areas, studies show 80–90% of sellers who attempt to sell their homes them- • Small electronics, like iPods, iPads, tablets, and laptops selves end up listing with an real estate agent (US News and World Report, • Breakables 2008; National Association of Realtors, 2012). Common reasons sellers end up listing with a real estate licensee are market exposure, knowing how to price correctly, and seller frustration with buyers who are not pre-screened, Consider: Are there any items that we missed? What else should be a part pre-qualified or pre-approved for financing, and generally not serious about of this checklist that we did not go over? buying. Most buyers who are truly ready to buy a home will approach a real estate licensee. Example You have been asked to list a beautiful home in a prestigious neighborhood Before screening potential buyers, you should ask your principal or man- in your market area. The home is decorated impeccably, and you know it aging broker if there is a safety/screening protocol for your office. Part of will generate a great deal of interest. your job as a real estate licensee is to take as much time and stress out of the selling experience as possible. If a buyer approaches you, you should do the following: When you first view the home, you notice the lovely office, with a well- marked filing cabinet (one drawer says, “Family Documents”). On the desk 1. Ask if they working with another agent. are a variety of electronics--a tablet, a laptop--and a few small collectables. Further down the hall, you come to the master suite with an amazing walk- 2. Ask if they have been pre-approved for financing and with whom. in closet. The closet has an organization system with a jewelry rack that is laden with gold and diamond jewelry. There are hooks that hold an array of 3. Know the person you are taking into your client’s home. If high-end handbags as well. It shows nicely. possible, meet them in your office first and have them fill out an Moving on to the master bath, you find wonderful storage. There are many identification form. Photocopy their driver’s license and note the cabinets and drawers, some containing medications, while others have fine make, model, and license plate number of their car. linens and makeup. 4. Get a full name and phone number. Call the number to verify it is 42 Real Estate Safety: Protect Yourself During a Showing not false. Put the name in an internet search, and if possible, try pened if one of the agents ignored their inner voice and conducted a show- to verify that it is real. ing for this individual. We all want to provide the best service for the seller clients. Sometimes this includes refusing to show a property to a buyer who 5. Let someone in your office know when you are going to the doesn’t seem legitimate. Let your managing or principal broker know about listing and when you will be back. If a person is planning to rob situations such as this and trust your instincts. the home, they may compromise your safety too.

6. Attend a showing with another agent. Perhaps one of you can stay in the car with cell phone in hand. Summary 7. Trust your instincts! If something doesn’t feel right, you should In this chapter, we covered some of the more common household items that protect your client and simply decline a showing. should be protected prior to listing a property (before photographs are taken and before any showings). Such items include jewelry, antiques, medica- If a buyer has a difficult time with any of the things listed above, perhaps tions, cash and checks, bills with account numbers, bank statements that they are not serious about buying a home. Going through these steps will include images of cleared checks, spare keys, photos that are too personal, likely screen out predators and thieves, as well as the “tire-kickers” and personal documents, such as Social Security cards and passports, brief- nosey neighbors. It simply protects your client, who is your principal. You cases, purses, computer bags, and small electronics, like iPods, iPads, and must do what you can to keep your principal and their home safe, even if laptops. We also talked about the importance of screening buyers prior to it means turning away someone who may or may not be serious about pur- showings. Real estate licensees should design their own checklists to be chasing the property. A serious buyer should not have a problem with any used consistently. of the aforementioned steps. Think about how many times you show your driver’s license--when you cash a check, buy alcoholic beverages or ciga- rettes, or use a credit card. Driver’s licenses are copied to test drive a car or adopt a pet from a shelter, and people usually have to provide a name and phone number when having a pizza delivered! A home is a MUCH bigger purchase than most cars, pets, and certainly pizzas.

If the buyer is working with another licensee, tell the buyer to contact the li- censee. If a licensee contacts you, ask for the buyer’s name. Also, ask if the buyer is a buyer client (under an agency agreement), or a buyer customer (without an agency agreement). Has the other agent verified their identity? This is yet another layer of protection; plus, having another agent involved increases the safety for you, your client, and their belongings.

Example A buyer calls you and asks to see one of your listings as soon as possible. You go through your list of questions:

• Is he working with another agent? (No)

• Where have they been pre-approved for financing? (Nowhere – he says he has plenty of money)

• Will he meet you in your office first so you can get a copy of his driver’s license? (No, he wants to meet you at the house. He doesn’t have time to meet you before a showing).

• Will the buyer fill out an identity form? (No, that is ridiculous; he has NEVER had to do anything like that in previous transactions).

This buyer becomes increasingly agitated and insistent on seeing the house without bothering with any of these formalities. You have a very uneasy feeling about this situation.

Consider: What should you do? We will go over a suggested response on the next page, but take some time and consider how you would/should re- spond in this situation.

Example - Resolution This exact situation happened to a number of licensees within a brokerage. All the agents who talked to this buyer felt uneasy about his aggressive- ness. The managing broker was alerted to the situation, called the police and emailed all licensees, warning them not to take a call from that number, and if they did, to politely decline a showing. Most of the agents (including the author of this course!) had been contacted by this buyer regarding many of the listings held by the brokerage. No one knows what would have hap-

Real Estate Safety: Protect Yourself During a Showing 43 Chapter Three: Vacant Homes What about vacant homes? There is virtually nothing to worry about in that Working with Seller type of listing, right? Clients: Conducting With vacant homes, especially empty ones, it is true that the items discussed in chapter 1 may not be an issue. There is no need to advise sellers to secure belongings that are not in the home. However, that does not mean that the the Showings home is invulnerable to theft and other pitfalls. Every year, vacant homes are subjected to theft, fraud, and squatters. With the popularity of online classified ads, there is a new phenomenon of fraud. Much of this can be ac- complished easily if a home is not closely monitored. In this chapter, we will talk about showing the property. Should the show- ings be assisted (with the listing agent present) or is a lock box a better idea? What are some pros and cons of using a lock box for unassisted showings What can a seller of a vacant home do to protect their home from bur- and some benefits of accompanying buyers? Next there will be tips for pro- glary and vandals? tecting vacant homes from theft, vandalism, fraud and squatters. We will address ideas of what to do with pets, and how to close up after a showing, • Call the home owner’s insurance company and ask about vacant specifically, making sure doors and windows are locked, and heat and lights home policies (and perhaps purchase the extended coverage– are turned down. Finally, we will share safety tips on hosting an open house. most homeowners policies will cover only 30 days after the home is vacated).

• If possible, take pictures of the home before furniture is moved out. Pictures of an empty home in the MLS can attract mischief. To Lock Box or Not to Lock Box? Lock boxes are a wonderful convenience. Different regions of the country • Ask a neighbor to park their car in the driveway. have different customs when listing homes. In some areas, it is customary to have listing agents conduct showings most of the time, while in other • Ask neighbors to keep an eye on the home. areas it is rare for a listing agent to be present during a showing. Lock boxes may be the norm in some places–either Supra Boxes or combination boxes- • Have the Post Office hold or forward mail. Check the mailbox -while other brokerages may prefer to hold a key in the office for buyers’ and front steps regularly for mail and flyers. agents to pick up. • Put a lamp on a timer, so it will turn on and off like someone is still living in the home. What is the best way to keep a listed home secure? In an ideal situation, a sales team would be present to show the property. Buyers would be thor- • Install motion detector lights and/or a security system. oughly screened prior to a showing and not allowed to be alone in any room. The ideal situation, however, is not always possible, so let’s discuss the pros • Make sure snow, leaves, or other debris is cleared away regularly. and cons of different types of lock boxes. • Check in on the home regularly. Technologies like the Supra Systems have many wonderful features. The showing agent must subscribe to the service to get a special key. Their infor- Consider: What do you think? What method(s) work best? Which methods mation is made available to the listing agent, and the system records when do you like to do most? What others did we miss? and who enters the property. The advantages are obvious, and that is why such systems are so popular. The downside is that many real estate licensees do not subscribe to these services, so they need to find another way to enter the property. Records can become inconsistent and the listing agents often What Can Happen if a Vacant Home is Not consider a simple combination lock box instead. Closely Monitored?

A combination lock box does solve the issue of licensees who do not sub- If an unethical person is able to obtain a key to a vacant home that is for scribe to a key system, but once the combination is out, it is not possible sale, they can easily show the home to would-be renters. It may be easy to determine who viewed a property or when they viewed it. Some buyers’ to collect deposits and take off with the money. A home that is not closely agents may be careless and write the combination on a listing sheet, which monitored is much more susceptible to rental fraud. they may in turn give to a buyer or discard for anyone to pick up. Craig’s List advises potential renters about this type of scam on their web- Having either type of lock box visible from the street can make a home site: http://www.craigslist.org/about/scams. These scams occur when a more vulnerable to vandalism. In Pennsylvania, several homes were broken property is posted for rent, when in fact, it is not. The person posting the into when thieves cut lock boxes off of front doors. The lock boxes where rental may have nothing to do with the property but collects security de- smashed and the criminals entered the homes with the keys. They then pro- posits, first and last month’s rent, application fees, and more. While a court ceeded to take copper pipes from the empty houses. may not find the seller liable for damages in this case, it would be prudent to advise sellers about this possibility and suggest that they make the home look inhabited (at least when photos are taken), so it is less inviting to this Some brokerages may have a person on duty who distributes keys to agents type of scam. Avoiding the use of a combination lock box in vacant homes working with buyers. Having this person sign out a key may help keep track may also be good advice. of who views the property, but keys can be lost, returned in an untimely fashion and perhaps even copied. There is no doubt that assisted showings help to keep homes, possessions, and keys safer, but having a key in a lock In 2012 in Sarasota, Florida, there was a rash of rental scams in vacant box or available through an office makes scheduling the showings much homes. Renters paid cash deposits, only to find they could not access the easier. What are the priorities of your seller? home on moving day. The people posing as the could not be found.

44 Real Estate Safety: Protect Yourself During a Showing Vacant homes that are empty are also more exposed to theft. Police blot- Having two people at a showing helps, if multiple buyers want to go in ters across the country are riddled with reports of items stolen from vacant multiple directions. The listing agents can follow them to answer questions homes, such as copper pipes, furnaces, gas fireplace inserts, and appliances. and make sure they don’t steal or damage anything. There is vacant that can be purchased, and it may be a very good idea for sellers to invest in that protection. Keep your phone with you and have a secret code that others know in case you suspect something suspicious. For example: “I’m at the Main St. house and … the flowers are blooming… the new floor looks great… the neigh- Conducting a Showing bors came by…,” some phrase that your colleague will understand means Even after the buyer(s) have been carefully screened, there is work licens- you need assistance quickly. Using a code means you won’t add any ad- ees can do to help keep seller clients and their possessions safe. ditional risk to the situation.

Whenever possible licensees should show property in-person and in teams. This is especially important when going to a home without close neighbors Damage to a Property and/or with an unfamiliar buyer. While female agents may be statistically more vulnerable to assault crimes, male agents have fallen victim, too. Theft is highlighted in this course, but how many buyers will damage a property to get a better look at something? They may want to know if there is hardwood under the carpeting or if there is rot behind a piece of trim. When showing property it is helpful to be at the property before the buyer, Something may look loose, and a buyer may want to jiggle it a little. Buyers so you can adjust the heat or AC. Turn on lights and make sure the home is have been known to move appliances, scratching floors and damaging gas presentable. A few extra minutes could make a big difference if the home or water lines. Even licensees who represent the buyer should not let this has dirty dishes in the sink, clothes on the floor, or a dead mouse in the din- sort of behavior occur. It is much better to ASK the seller if there is hard- ing room! Oftentimes, the property owner prefers to reduce energy bills by wood under the carpet then to rip up a corner! keeping heat or air conditioning turned down. Comfortable room tempera- tures can make buyers feel better about a home, and the listing agent won’t be distracted, thinking about rushing around to do things like this when they should be focused on the buyers. Being early to a showing allows a licensee Lock the Door Behind You to make the home more comfortable to show and causes fewer distractions In some neighborhoods, you may want during the showing, which allows the licensee to better protect the seller’s to lock the door behind you once you are possessions. They can also protect the seller’s money by being sure to turn inside to prevent others from entering down/off everything that was turned up/on! the home after you. A For Sale sign in the front yard can invite crime into a There are ways to show properties that can minimize this risk to the seller’s home. Seeing a strange car in the drive- home and to the licensee. To start, always let the buyer walk into a room way may let a would-be thief or attacker first and never let them get between you and the door. When going into a gain easy access into a home. The per- basement or attic, wait on the stairs or decline to enter the space altogether. son gaining access to the home may A cell phone in hand may help, as can pepper spray (check to make sure it wish to cause physical harm to the oc- is legal in your area). Pepper spray comes in many containers that do not cupants, to steal, or to squat. Such per- raise alarm, such as a pen. sons may quietly sneak in, unlock a window and sneak out, with the inten- tion of coming back later. Locking the door behind you can help prevent Much like the recommendations with open houses, it is a good idea to meet this from happening. the neighbors and ask that they keep an eye out for anything out of the ordinary. Doors and Windows What to Do with Pets On that note, many buyers will want to open doors and windows. This is perfectly acceptable if What is the best thing to do with pets? Many prop- they wish to see how something erty owners enjoy the company of their pets–dogs, operates or to check if a door or cats, birds-- but where should these pets be during a window sticks or is easy to lock. showing? What if they get out or are frightened or As a real estate licensee, it is your excited and cause damage? If possible, it is a good job to make a final check after a idea for the owner of the property to take the pets showing to ensure all the doors with them during a showing. Sometimes that is not and windows are locked or left in possible, so there are some options to consider. The a state preferred by the seller. pet owners know the pets best, and should make the ultimate determination. Should the pet wander freely? This may be alright for pets, such as cats, if they are allowed outside or will not try to escape. Dogs can be placed in a Example dog run outside or a kennel inside. Some pets may themselves be vulnerable During a home inspection in a multi-family home, the home inspector in- to theft, so keeping the furry family members safe is a top concern, too. advertently locked all the doors and windows, including a deadbolt lock on an apartment door. The listing agent knew that the tenants did not have a key to the deadbolt, only to the door knob. She didn’t bother to check the doors because she knew the tenants would return to the home soon after the Accompanying the Buyer inspection. Accompanying the buyer during a showing may be one of the most impor- tant things a listing agent can do to ensure the safety of the seller and their When the tenants returned, they could not open their door, so they broke belongings! Thieves and assailants are far less likely to commit crimes if a storm window in the living room. Unfortunately, they could not get the their faces are known. If possible, bring a sales team member to showings. living room window open, so they proceeded to the basement, where they

Real Estate Safety: Protect Yourself During a Showing 45 kicked a window in, causing a few hundred dollars’ worth of damage. Luck- • Ask a neighbor to park their car in the driveway. ily, the seller did not mind paying for the repair, but the listing agent could have easily prevented the damage. • Ask neighbors to keep an eye on the home.

While checking that doors and windows are shut and locked (or left as the • Have the Post Office hold or forward mail. Check the mailbox and front steps regularly for mail and flyers. property owner desires), it is a good idea to check the heat, air conditioning and lights. Buyers and home inspectors may turn these things on exces- • Put a lamp on a timer, so it will turn on and off like someone is sively to see how they work. How would you like to return home to find it still living in the home. 90 degrees in the dead of winter? Or even 90 degrees in the middle of the summer?! Buyers may turn on heating and cooling systems to see if forced • Install motion detector lights and/ or a security system. hot air systems irritate their allergies. There are many reasons why these systems may be activated. It is your job as a licensee to set them back to the • Make sure snow, leaves, or other debris are cleared away regularly. levels the property owners prefer. • Check in on the home regularly.

How to Host an Open House • Keep a phone with you and have a secret code word that alerts other agents if you feel endangered. During an open house, the listing agent may not have the opportunity to screen every potential buyer who comes in the door. Many of the people who view an open house may not even be potential buyers. Nosey neigh- Hosting an Open House: bors, curious drivers and possible criminals may also stop by the home. What can a listing agent do to minimize the risk to the seller and their be- • Introduce yourself to neighbors and let them know you will be longings? There are many things we can do. hosting an open house.

• Warn sellers that they are liable if a person gets injured while First, introduce yourself to neighbors and let them know you will be hosting viewing their home. an open house. They will likely pay attention to people coming and going. This may not only help identify a thief, but it may actually deter theft if it is • When people arrive, jot down the make, model, color, and license obvious that there are neighbors looking on. It may help market the house, plate number of each car, and a basic description of the individuals too. Having caring neighbors can be a wonderful thing! viewing the home.

Warn sellers that they are liable if a person gets injured while viewing their • Place yourself in a spot that is right by the front door and ask home. Ask if the sellers have liability coverage in their home owners insur- viewers to sign in. ance policy. They should also pay attention to hazards, such as loose carpet- ing, wobbly stairs, areas that have low ceiling height and poor lighting, or • Whenever possible, get help from other licensees in your office sidewalks that may be icy. and position agents on each floor.

When people arrive, jot down the make, model, color, and license plate number of the cars, as well as a basic description of the individuals. Place yourself in a spot that is right by the front door and ask viewers to sign in. This information could prove important if a crime does occur. It could also be useful information to your sellers. They may want to know if a scheduled showing resulted from the open house.

Whenever possible, get help from other licensees in your office. Position agents on each floor to help answer questions more easily AND to protect the seller’s belongings. Thieves often work in teams–one distracts, while the other takes the valuables. It is more difficult to pull off that kind of theft when more than one agent is on duty.

Summary This chapter covered showing the property, including some pros and cons of using a lock box for unassisted showings and some benefits of accompa- nying buyers. There were also tips for protecting vacant homes from theft, vandalism, fraud and squatters, followed by ideas of what to do with pets and how to close up after a showing. Finally, safety tips on hosting an Open House were shared. To recap:

• Call the home owner’s insurance company and ask about vacant home policies and perhaps purchase the extended coverage--most homeowners’ policies will cover only 30 days after the home is vacated.

• If possible, take pictures of the home before furniture is moved out. Pictures of an empty home in the MLS can attract mischief.

46 Real Estate Safety: Protect Yourself During a Showing Loyalty: you are loyal to the client, which means placing their interests Chapter Four: above your own. You are their guardian in this transaction.

Working with Buyers with Disclosure: you disclose facts that are relevant to the transaction, and safety for buyers and sellers may be an extremely important disclosure! (think: Safety in Mind lead paint, registered sex offender registry, etc...).

Accounting: you deal with funds and documents, which could include es- crow funds for radon systems, or lead paint disclosures. Disclaimer A licensee’s duty to a buyer as a buyer agent is slightly different in every Confidentiality: you keep important information confidential, thereby state. Licensees should keep up on the laws and rules in their states. This keeping your clients safe. document is meant to highlight examples of some of those duties, it is not intended to be an all-inclusive list. Terms of a brokerage agreement and Chapters 1 and 2 covered how these duties apply to a seller client. Do you company policy must also be taken into consideration. In this chapter, we see how they are just as applicable to the buyer-client? Both sides of a trans- move to the other side of the transaction and talk about keeping buyers action face risks. It is our job as licensees to disclose, advise and protect our and their assets safe, starting with meeting the buyer and disclosing the clients from common risks in accordance with the law and our fiduciary difference between agency and non-agency relationships. We will examine duties. overlooked issues, such as leaving the buyer’s car in a safe place and safely showing a property. Next, we will do a brief overview of disclosures and safeguards, such as inspections. Buyers should be alerted to future safety in the property and should conduct their due diligence with respect to the Before the Showing - Agency and sex offender registry and crime statistics for the neighborhood. They should Non-Agency also consider obtaining title insurance, homeowners insurance, and flood insurance. Finally, buyers should change the exterior door locks immedi- ately after taking possession of a property. Before the showing, get to know your buyer. Does your state have a broker- age relationship disclosure? It is vital that the buyer know the difference between agency and non-agency relationships when working with a real One theme that runs through this chapter is disclose and refer. As a real estate licensee. An agency relationship helps to protect the buyer. When an estate licensee, you must disclose material defects to all buyers, be they agency relationship exists, the licensee keeps the buyer’s willingness to pay, clients (with an agency agreement), or customers (without an agency agree- motivations, buying strategies, and personal information confidential. This ment). For clients, you must disclose material facts as well, for example if type of relationship also means the interests of the buyer are placed above you know a concrete manufacturing plant is being built across the street. As the interests of the licensee. In short, having an agency relationship with a a real estate licensee, you are a professional in the real estate transaction. buyer adds a significant level of safety and protection for the buyer. Make That does not mean you are an industrial hygienist, law enforcement officer, sure the buyer knows that the seller’s agent acts in the best interest of the or real estate lawyer. For technical questions, always refer your buyer to an seller, and that they should avoid sharing personal information with that expert in the field who can give the buyer the best answer and protect you licensee. Only an agency relationship will require that personal information from liability. be kept confidential.

While you might want to save your buyers money, remember their health and safety are priceless. Before the Showing - Financing Pre-Approval Learning Objectives It is also wise to have the buyer pre-approved for financing, if it required for Upon completion of this chapter, you will be able to: the purchase of the property. How does this keep the buyer safe, you ask? It keeps them safe from falling in love with a property that is out of their price • Explain safety tips for issues that commonly come up before and range or from losing a home they want because another buyer presented an during a showing. offer that included a commitment letter from a lender, thus making that of- fer stronger. Pre-approved financing could also save the buyer from losing • Discuss the required disclosures and items that buyers should an earnest money deposit, if they cannot get financing before a contractual investigate. financing deadline.

Fiduciary Duties Before the Showing - The Buyer’s Car, Buyers are exposed to significant risks when shopping for a home. Many of these risks must be disclosed because of federal regulations (such as lead the Licensees Car paint disclosures), or state regulations (such as asbestos or radon). Recall When going out on showings, it is common that the buyer leaves his car and from Chapter 1 the Fiduciary Duties that all real estate licensees are re- ride in the real estate licensee’s car. However, you must consider the safety quired to provide to their clients: of the buyer’s car when it is left. It is in a safe neighborhood? If you leave or return to the car in the dark, is the parking area well lit? Is there a place to Care: you show reasonable care for your clients in the transaction, which park the car where it is less likely to be hit by another car door or shopping could very well include their safety. cart? Making these sorts of parking suggestions will show the buyer-client that you are trying to keep them safe through the entire transaction. Obedience: you obey your clients’ wishes--most would wish to keep them- selves and their belongings safe. If a licensee drives buyers in their car, it is wise to protect the buyers by hav- ing good insurance coverage. Do you have liability coverage or just Real Estate Safety: Protect Yourself During a Showing 47 collision? Collision may protect your car, but what about the passengers? Hazards of Special Interest: Radon Make sure your coverage insures passengers in the event of an accident. Radon is another deadly hazard that is prevalent in much of the country (to see if radon is common in your area, see the QR code). Radon is a natural At the Showing gas that results from the breakdown of radioactive materials commonly found in soil and rocks. It is invisible and odorless, and tends to accumulate Next, when viewing a home, it is vital that the buyer knows the listing agent in basements and lower levels over time. Radon can also be present in represents the seller. They should never divulge personal information that water. It is estimated that radon is second only to cigarette smoking as a may affect their bargaining position in a sale. Most consumers are unaware contributor to lung cancer in the United States. of confidentiality rules. The Environmental Protection Agency recommends taking action if Radon Locking Doors exceeds 4 pCi/L in the air. The EPA has proposed guidelines for areas with radon in the water that ranges from 300 pCi/L to 4,000 pCi/L, depending on When viewing a home, take note of the neighborhood. Should the doors be the source of water. locked once everyone is inside the home? With foreclosures, short sales and vacant homes, many of them could be “winterized,” with electricity and heat turned off to save money and prevent pipes from bursting. If a property It is important to warn your buyers of the dangers of radon, recommend is winterized, set up a showing during daylight hours. It is difficult to see the that they test for it, and let them know that radon can be mitigated in most details of the property when viewing it with a flashlight. situations.

Disclosures Home Inspections A variety of hazards are common in different parts of the country. Each state has its own list of mandatory property disclosures. These disclosures Most licensees know the importance of may include: home inspections and readily provide buyer clients with a list of reputable in- • Water Supply System (type, location, any malfunctions, date of water test, problems) spectors. Oftentimes, however, the buyer may under-inspect or decline the inspec- • Insulation tions all together. • Heating System (type, age, company that serviced, date of service, annual fuel consumption, malfunctions) When potential issues become apparent, • Waste Water Disposal System (type, size, location, malfunctions, getting a professional opinion is gener- date of instillation, date of service, name of servicer, more info ally a good idea. The next few pages will contain some common examples needed for systems within shoreland zones) of transactions that would have benefited from a home inspection. • Hazardous Materials • Asbestos • Lead-based Paint Home Inspections: New Construction • Radon Your buyers are thrilled to find a newly-constructed home that suits their needs. Why should they have a home inspection when the home is brand • Underground Oil Storage Tanks new? It is in perfect condition, right? • Other Material Defects Consider: What do you think? Should the house be inspected? If so, for Consider: What other hazards are there? Are there any on this list that are what reasons? unique to your area?

New Construction Suggestion Hazards of Special Interest: Lead It is true that the property probably had the municipal building inspector out According to Colorado State University (Fact Sheet number 9.538), more to sign off on the home during the various stages of construction, but the than 75% of homes built before 1978 contain lead paint. According to UL, building inspector may be looking for particular safety and code require- that figure jumps to 87% for homes built before 1940. Lead paint can con- ments. There are many things that a municipal building inspector is not tribute to nervous system and kidney damage, learning disabilities, dimin- responsible for inspecting, such as water quality from a well or radon levels ished bone and muscle growth, behavioral issues and even death. It is espe- in the basement. Building inspectors are human and may simply miss mate- cially dangerous for children 6 years and younger. rial defects, especially if the builder is actively trying to hide them!

Lead paint is the only federally mandated property disclosure. Sellers, land- A basic home inspection should be recommended even if the home is new lords and real estate licensees must ensure that buyers and renters receive a construction. lead paint disclosure AND the lead paint pamphlet from EPA/HUD, if the property is for sale or rent as housing and was built before 1978. Home Inspections: The Additional Items It is vitally important to inform your buyers of the hazards of lead paint. Your buyers may have requested a basic home inspection but now wonder Email the above PDF file and ask for confirmation of receipt and/or obtain about the add-on items, which can be expensive. Should they get the home paper copies from EPA, HUD, or your local Board of REALTORS®. inspected for lead paint? Should they do additional water tests for radon or heavy metals? Should the septic system be inspected? If the home is on a public sewer, should the line be inspected?

48 Real Estate Safety: Protect Yourself During a Showing Consider: What do you think? Should they add on the other items to be Buyers frequently make poor decisions because they hear misleading in- inspected? Which ones are more vital? What factors play into the decision? formation about market conditions. They may hear that it is a “buyer’s market.” which makes them think that making purchase offers significantly The Additional Items Suggestion lower than the list price is an ideal strategy. While that strategy may work in some cases, it may also lead to insulted sellers who will then refuse to The first question to consider is how common is the issue in the area or negotiate or will not counter-offer with their lowest acceptable price, both with that type of construction? For example, if the home was built in 1850, of which could ultimately harm your buyer’s chances of purchasing a prop- lead paint is a common occurrence, but not so for a home built in 1985. In erty at the best possible price. On the other hand, if buyers hear they are in any event, it is a good idea to refer the buyer to an expert. The 1985 home a “seller’s market,” they may feel unnecessary pressure to offer more than may have salvaged doors, windows, or fireplace mantles that contain lead market value for a property. paint. Real estate licensees are not industrial hygienists. Refer the buyer to a licensed or certified inspector. As a real estate licensee, you have the best tools to assist your buyer-clients (remember, you should not give price recommendations to customers, just Home Inspections: The Additional Items #2 clients). Let’s say you are showing a home that was built in 1905 and is on public What are the best tools to assist your buyer-clients, you may ask? sewer. The listing agent insists that any sewage issues are the responsibility of the town and there is no need to have an inspection. Facts! • Show your buyer-client examples of recent sales that are comparable Consider: Is the listing agent correct? Is there really no need for an inspec- to their ideal property. tion? What do you think? • Calculate the ratio of sale price to list price of recent sales in their target market: Is it 90%? 95%? 102%? The Additional Items #2 Suggestion • When looking at these facts, also note the Days on Market, Original While it is true that the sewer line is maintained by the town, what about List Price, and any special circumstances, such as a short-sale or the line that goes from the home to the street? Most likely that is the re- foreclosure, of the recent sales. sponsibility of the home owner. You may want to call and ask an expert if inspection is warranted. If a sewage line is old, it may have deteriorated and replacing it could be expensive! Arm your buyer-client with facts so they know what the current market conditions are and what they can expect in their search for the best property. Keep your buyer safe from overpaying and safe from losing a property they really want to buy. Crime Rates Example Safety is a concern for most people, though not all buyers will research You are working for a newly-married, young couple as their buyer agent. the safety of an area they are consid- They are looking for their first home. Of course, they want their dream ering buying in. Some buyers will home, but after many, many (many!) showings, you hope they get a sense ask if a neighborhood is safe or do of the market and find a home that suits their needs. research online, while others won’t think about the issue until it is too The buyers eventually find a home that they fall in love with and wish to late. Real estate agents are not law make an offer. While investigating the home, you see that it has been on enforcement officers. It is not a good and off the market every year for the last 5 years without selling. You also idea to take on the liability of making safety statements. Refer buyers to key notice that 3 homes on the road have gone through foreclosure and sold for websites and the local police department. 50-75% less than the list price of the home in question. When you run a CMA on the property, your estimate indicates that it is overpriced by 20%. One list in particular may be of interest to buyers--the Sex Offender Reg- istry. Each state maintains their own registry. Let the buyer look up the Consider: What should you do? information for them to ensure they know where to locate the information if they want to check it later. Example - Resolution

Hopefully, you have already talked to your buyer-clients about the market Protecting the Buyer’s Earnest Money Deposit conditions. This property may be at risk of appraising low. Warn your buy- ers that they may lose their deposit if the appraisal comes in low and the Purchasing property, especially a home, can be a very emotional experi- financing contingency deadline has passed. ence. Negotiations can be emotionally taxing, so it is the job of the licensee to be the voice of reason, the buffer, and sometimes the peacemaker. Many It may be tempting to let the buyers proceed with the transaction without transactions are completed with a minimum of negotiations, but some are warning them. It may feel like they will never find an acceptable property. fraught with haggling over price, repairs, timelines, and other details. Pre- Nevertheless, be aware of your duty to care for your clients and keep their pare your buyer for the possible scenarios so they do not come as a surprise. earnest money deposit safe. Equip your buyers with the facts and advise Make sure they know when their earnest money deposit will be returned them as best as you can. Once you show the facts and give your advice, and when they risk losing it due to certain transactional issues. the ultimate decision is up to your buyers--”agents advise, clients decide.” If your advice encourages your buyers to keep looking, that may work out best for you in the long run! Clients appreciate agents who actively work Current Market Conditions to keep them safe. They will be more likely to recommend you to others in the future. This section refers to buyer-clients only. Licensees should not give advice on market values after the initial solicitation of agency services, if the li- censee acts as a transaction broker, facilitator, or non-agent (i.e., no agency It is a good idea to show your buyer a copy of the Binder or Purchase and agreement). Sales Agreement used by your brokerage. Perhaps it is a standardized form

Real Estate Safety: Protect Yourself During a Showing 49 available from your state’s Association of REALTORS®. It could also be There is a database of claims that insurance companies can access to see if a form specially designed for the brokerage or one drawn up by attorneys a property has a history of claims. This was of particular concern in Texas for the transaction in question. In any event, it is important to go over the when a series of water-related and mold claims prompted insurance compa- terms of a typical Purchase and Sales Agreement ahead of time, so the buyer nies to deny coverage on certain properties. In other cases, a property may is aware of the terms and conditions, timelines, and contingencies. The li- be uninsurable because it has older electric wiring (knob and tube, or 60 censee should refer the buyer to an attorney if there are any questions or if amp fuses). Buyers would do well to make sure the property is insurable the buyer wants advice on certain contingencies in a contract. well before closing.

The licensee is also responsible for keeping the buyer on track. How many Real estate licensees frequently get questions about Title Insurance. Most days should the buyer have for inspections? (Note: it is a federal law that lenders require that the buyer make a one-time payment for title insurance 10 days must be allowed for lead paint inspections). Should there be a buf- to cover the lender. It is up to the buyer to decide if it is worth it to cover fer for more experts to come in or for contractors to give estimates? When them. Many buyers will ask their real estate agent if title insurance is worth- should all documentation for financing be in? When should the buyer en- while. Remember two things: 1) The safety of your client is priceless, and sure the property is insurable? When will the appraisal, title search, and 2) Real estate licensees are not title insurance experts. Let the buyers know other applicable work be done? The licensee must keep track of all these that it is usually a good idea to purchase title insurance, and that they should things for their buyer-clients. In addition, they should remind the buyer to talk to a title company for the best advice. Protection after Closing - have utilities switched over on or soon after the closing date. Many utility Change the Locks! companies will charge more if utilities are turned off, then turned on, rather than a simple name change. How many sets of keys exist for the property the buyers just purchased? What if everything is going smoothly, until a significant undisclosed mate- rial defect is uncovered in the home inspection? Depending on the purchase Why guess? There could be many sets of keys and sales agreement, the buyer may have three choices, but MUST execute in the hands of many people. Here are a few their choice BEFORE the last day specified for that particular inspection, or common examples of individuals who may they waive their right for a remedy. A buyer may wish to consult with a real have keys to a newly-purchased home: estate attorney to design or better understand a legal contract. • The previous owners (or the owners before them) Here are the three common choices in a typical Purchase and Sales Agree- ment: • People who rented the home a few years ago

1. Buyer can declare the purchase contract to be null and void and • A few neighbors who have keys in case of emergency or because receive his or her earnest money deposit back. they walked a dog that used to live there

2. Buyer can ask the seller to remedy the defect, by repairing it, • Contractors who worked on the house reducing the purchase price, or receiving cash back at closing. • Family and friends of the previous owners 3. Buyer can accept the property “as-is” and execute the contract as planned. • The listing agent

The licensee should stay aware of the terms and any Purchase and Sales • Another buyer-agent who forgot to return the key Agreement. In some states, it is common to allow the seller to declare the contract null and void if the buyer requests a remedy to a defect. It is im- It may be surprisingly inexpensive to have locks re-keyed. Another option portant to be cognizant of the terms of the agreement when making recom- that may add a little style (and safety) to the newly-purchased home is to mendations to buyer-clients. purchase new door knobs and/or deadbolt lock sets from a local hardware store.

Protection after Closing - Insurance Most lenders require buyers to obtain homeowners insurance when pur- Summary chasing property with the help of mortgage funds. Buyers are well advised In this chapter, we covered safety concerns for buyers and their assets. to talk to an insurance agent to assess their particular insurance needs. There From the first meeting, the buyer must be made aware of the difference are basic, broad, and multi-peril policies, among others. Every property is between agency and non-agency relationships. We also went over some of- different and every property owner is different. It is best to refer the buyer ten overlooked issues, such as leaving the buyer’s car in a safe place and to an insurance professional rather than advise them yourself. safely showing a property. Next, we did a brief overview of disclosures and safeguards, such as checking crime rates, having inspections done, obtain- However, you should alert the buyer to the need for homeowners insurance ing certain kinds of insurance (title insurance, homeowners insurance, and and the potential need for other insurance, like flood insurance. A flood flood insurance), and changing exterior door locks immediately after taking certification may be required by the lender. If the buyer is a cash buyer, you possession of a property. may want to advise him to look into flood certification for his own protec- tion. One theme that runs through this chapter is disclose and refer. While you might want to save your buyer money, remember their health and safety are An often overlooked insurance issue is the existence of past claims on a priceless! property. Scan this code for an article that details the risk buyers may face in this scenario.

50 Real Estate Safety: Protect Yourself During a Showing Real Estate Safety: Protect Yourself During a Showing ~ Practice Assessment Questions ~

Select the best answer for each question and mark your answers on the Student Assessment Sheet (last page of book) or complete your assessment online at www.McKissock.com/ILRE

1. Real Estate Licensees are experts in: 6. How does pre-approved financing protect a buyer? a. Home inspection a. Prevents the buyer from falling in love with a b. Real estate law property out of his price range c. Title insurance b. Provides protection from losing a home to another d. None of the answers shown buyer with the same offer who has a commitment letter from a lender c. Reduces the risk of losing earnest money if financing 2. What is the most important reason that breakables cannot be completed before the contract deadline should be secured prior to a showing? d. All of the answers shown a. They are valuable for reselling purposes b. They may have tremendous sentimental value c. They distract the buyer from envisioning himself in 7. To prepare for closing, what recommendations should the home a buyer-agent provide to the buyer? d. They are vulnerable to being broken by a clumsy a. Investigate title insurance buyer b. Change the locks immediately after the close c. Register the deed at the county courthouse immediately after the close 3. In what way(s) does a Supra lock box provide home d. To investigate title insurance AND change the locks security for listings? after the close a. Can be unlocked from a brokerage office b. Collects data on who enters a home and when c. Releases a warning sound when someone attempts to 8. Why is it a bad idea to display family photos during a physically remove the lock box without authorization showing? d. All of the answers shown a. Photos with children or young women provide a target for predators b. Buyers don’t want to see who lives there 4. Most lenders require what type of insurance that is c. Photos give the home a cluttered look paid in a one-time payment? d. Photos are often stolen from homes a. Homeowners’ insurance b. Renters’ insurance c. Title insurance 9. Is it okay for spare keys to be left on a hook or in a d. Mortgage insurance “junk drawer” when showing a home? a. No. They clutter the home’s appearance. b. No. They can easily be stolen. 5. Vacant and empty homes frequently run the following c. Yes. They provide a “homey” appeal. type(s) of risk(s) to the sellers: d. Yes. If they are clearly labeled. a. There are no significant risks to sellers when the homes are empty b. Copper pipes may be stolen 10. The EPA suggests taking action if the Radon levels in c. Appliances may be stolen a home exceed: d. Both copper pipes AND appliances may be stolen a. 4 pCi/L b. 40 pCi/L c. 100 pCi/L d. 400 pCi/L

Real Estate Safety: Protect Yourself During a Showing 51 Niche Marketing: Narrow Your Focus 3 CE Credit Hours (Approval #564.002258)

Many real estate agents operate in a certain specialty or “niche,” and perhaps with a little thought, many more would take the time to discover the benefits of carving out a niche for themselves. When agents market themselves as experts in a certain aspects of the industry, it not only helps the agent, but the client/customer as well. Customers need to know who the most knowledgeable, experienced professional in the area is. If there is an agent who specializes in the topic the customer needs assistance with, it is good for the industry if that customer is made aware of that agent. This feature is designed to help agents identify a niche that they may want to specialize in and to be able to market themselves as an expert so that all customers are receiving the best care possible by an experienced expert in the industry.

Chapters: • Chapter One: What is Niche Marketing • Chapter Two: What is YOUR Niche Market • Chapter Three: Implementing Your Niche Marketing Plan

Learning Objectives: • Compare and contrast the mass marketing and niche marketing approaches • Discuss the process of thinking strategically about developing a niche • Discuss different niches that are available and how they apply to their abilities and interests • Discuss the opportunities available in combining niches to target an even more narrow group • Explain how being a referral resource could prove to be a valuable niche • Explain how social media can help build lasting relationships with clients • List some time management tools and the benefits of each

Customer Testimonial “Really good information on time management and on analysis of operating the business.” ~ Carole

52 Niche Marketing: Narrow Your Focus 1908: Harvard Business School opens Chapter One: 1922: Radio advertising commences 1940s: Electronic computers developed What is Niche Marketing? 1941: First recorded use of television advertising 1950s: Systematization of telemarketing 1970s: E-commerce invented How did we go from the Mom and Pop corner store to conglomerate Wal- 1980s: Development of database marketing as precursor to CRM Mart, Target and other national chains on every corner? 1980s: Emergence of relationship marketing Much of traditional marketing practice prior to the twentieth century was 1980s: Emergence of computer-oriented spam based on rules-of-thumb and lack of information. Since then, information 1984: Introduction of guerrilla marketing technology has become the marketing frontier, providing new channels of communication as well as enhanced means of collecting and analyzing mar- 1985: Desktop publishing democratizes the production of print-advertising keting data. As a result, marketing specializations have emerged, especially 1991: IMC gains academic status sales versus marketing and advertising versus retailing. And of course, our purpose together here, Niche Marketing. 1990s: CRM and IMC (in various guises and names) gain dominance in promotions and marketing planning Starting in the 1990s, a new stage of marketing emerged called relationship 1995-2001: The dot-com bubble temporarily re-defines the future of mar- marketing. The focus of relationship marketing is on a long-term relation- keting ship that benefits both the company and the customer; a relationship based 1996: Identification of viral marketing on trust and commitment. One of the most prominent reasons relationship marketing developed was the discovery, referred to as Kotler’s idea, that it 2000s: Integrated marketing gains acceptance and the first academic re- costs the average business about five times more to obtain a new customer search center for integrated marketing opens than to maintain the relationship with an existing customer. So, how has niche marketing evolved and where will it take us? The seg- While relationship marketing is largely held as the impactful stage of mar- mentation of products and markets has been quietly evolving in business keting, we’ve entered into a new social/mobile marketing era, where busi- over the past 30 years. The catalyst for change to a more segmented in- nesses are connected to customers 24/7. dustry structure has been competition, expense control and the demand for specialization of business in general. The result is the development of niche market products and strategies.

Marketing Timeline Consider: What do you think has been the single most significant contribu- tion to the way business owners communicate to their customers (either on Let’s take a stroll through history and appreciate a timeline of marketing this list or not)? innovation:

What is Niche Marketing? If you’re anything like most real estate professionals, then you love the fast- paced environment and diversity this career offers you. That being true, then creating a niche market might sound limiting to you at first. However, having a niche doesn’t mean you’re not diversified or that you can’t expand into other niche markets later--it’s primarily about focus.

Real estate niche marketing is not difficult; it just takes some thought. The old school real estate mindset is that it’s a numbers game. And although it seems as though you would be more successful marketing to the largest number of people, the truth is that you will only attract clients who are in- terested in what you have to offer–your product, your niche. By creating a niche and targeting your efforts, you can be even more successful than you

would be marketing to everyone. 1450: Gutenberg’s metal movable type (printing press), leading eventually to mass-production of flyers and brochures To do that, you have to create a beginning point. This will be an important step in getting off on the right foot. Too often business owners create a 1730s: Emergence of magazines (a future vector of niche marketing) laundry list of services they provide, hoping to broaden their market and 1836: First paid advertising in a newspaper (in France) expose their potential. Resist that urge. More isn’t always better. At this point in your business, it’s not what you can do, it’s how well you do it 1839: Posters on private property banned in London and how focused you are. Even though you could, would you list all of 1864: Earliest recorded use of the telegraph for mass unsolicited spam the following on your business card: real estate agent, office manager, list- ing specialist, buyer/seller representative, foreclosure mentor, short-sales 1867: Earliest recorded billboard rentals coach, area specialist, marketing expert, transaction coordinator, home 1880s: Early examples of trademarks as branding stager, photographer, referral system vendor, administrator, brochure writer, 1905: The University of Pennsylvania offered a course in “The Marketing market educator, resource center, website owner, and so on? With all of that of Products” buzzing around, it’s hard to start your day, much less determine your focus.

Niche Marketing: Narrow Your Focus 53 Establish Yourself as the Expert Example - Wal-Mart When people want something done, they want an expert, not someone who You might remember when a visit to Wal-Mart offered lots of options; just appears to be decent at a lot of things. It doesn’t matter if you are actu- shelves were lined with a variety of brand choices in every department. ally really good at all of them. Having a niche allows you to be the “go to” Nearly every brand imagined was displayed. However, in the last decade or person in a particular area of your field. For the purposes of creating your so, Wal-Mart has developed its own product, “My Essentials”, and slowly, Niche Marketing plan, focus is the key. Remember, you can always expand but surely has begun to reduce the number of competitor products offered and diversify later. Having a focused beginning point, a niche, will make to a very select, SKU-worthy few. Why is that? you more money in the the long term.

Niche Marketing defined: Concentrating all marketing efforts on a small, but specific and well-defined segment of business. Niches do not “exist” Example - Organic Food but are “created” by identifying needs, wants, and requirements that are currently not being addressed or are being poorly addressed, and then devel- Also in the last decade, more and more specialty stores have sprouted, and oping and delivering goods or services to satisfy those needs/wants. Sim- with great success. For example, Fresh Market, Trader Joe’s and World ply put, niche marketing, also referred to as micromarketing, is a business Market specifically target two niche markets: a very specific demographic strategy aimed at being a big fish in a small pond, instead of being a small and hard to find products. Think vegan, gluten free, all natural, local pro- fish in a big pond. duce and craftsmen. Moreover, even though these companies are national chains, they advertise to target and even present in appearance the idea that we are “neighbors serving neighbors.” This marketing concept attracts the “shop local” consumer, younger generations, community-minded folks, and those seeking healthier options. Niche Marketing versus Mass Marketing Big companies usually equal big and deep pockets, especially when it comes to their marketing budget. Small businesses typically can’t compete but still offer equally valuable services. So, whereas big companies might Example - Amazon have their sights set on the “mass market,” also referred to as macromarket- ing, the rest of us small entrepreneurs realize the key to success is in satisfy- Amazon.com is another noteworthy example of a successful niche mar- ing the individual and his or her very specific needs. ket. I was surprised to read recently that more than half of Amazon’s book sales derive from non-bestsellers--these are the obscure titles and small, We’ve already defined niche marketing, but how about mass marketing? In unknown authors that show up on its sales rankings at 100,000 or below. Of short, it is a difference in strategy. Whereas niche marketing is segmented course, Amazon.com also sells its fair share of New York Times bestsellers focus, mass marketing is the “shot gun” approach, intended to create market and other blockbusters, but more than half come from readers who prefer coverage by appealing to the whole market with one offer or one strategy. non-mainstream titles and who refuse to have their tastes limited by what’s For example, most real estate firms focus on all real estate matters, and most popular. even more recently, many are making efforts to be the one-stop shop for all things real estate; mortgage, closing agents, insurance. Mass marketing Amazon has aggregated many niches, and through that effort has created focuses on a wide variety of products to a wide audience with the broadest a huge and very successful mass business, simply by understanding and message intended to reach the largest number of people possible. By reach- satisfying the individual needs and tastes of a niche market. And with the ing the largest audience possible, exposure to the product is maximized. In expansion of digital media, Amazon has taken its niche market to an en- theory, this would directly correlate to a larger number of sales or buy-in tirely new level. Remember back to the beginning of this course when I to the product. mentioned that you could diversify later? Amazon is an example of how focusing on a small niche market initially can offer an even greater oppor- Mass Marketing defined: An attempt to appeal to an entire market with one tunity for growth later. basic marketing strategy utilizing mass distribution and mass media. These efforts typically derive from the study of marketing activities, institutions, and processes from the national (societal) perspective. What do These Examples Mean for You? Mass marketing is the opposite of niche marketing, as it focuses on high So, we’re real estate professionals, not a huge company like Amazon. That’s sales and low prices. Mass marketing aims to provide products and ser- fair, but the concept and message is the same -- don’t be afraid of niches. vices that will appeal to the whole market. Niche marketing targets a very Embrace them. Even more importantly, the Amazon example compels us specific segment of the market. There will be some examples on the next to redefine the very definition of a niche. Be consumer sensitive--find the few pages. “obscure titles” in real estate and the demographic that demands them.

Carving out your niche is clearly a different path to marketing than the “big bang” or mass marketing approach used by national real estate firms. But Example - Proctor & Gamble it makes a ton of sense, given the reality of today’s rapidly diversifying cli- Multinational manufacturer, Procter & Gamble (P&G), in recent years di- ents and their needs. As such, building your business around a collection of vested itself of smaller brands, such as Comet and Duncan Hines, so they well-positioned “little bangs” can lead to creating your very own “weapons could focus their efforts on higher-yield, more stable brands with more of mass distraction” from the mainstream. global appeal. Meanwhile, the big box retailers, such as Wal-Mart, as well as regional big name supermarkets, are reducing the number of brands they stock. In other words, these companies took the stance that if you’re not a top three brand, then you’re not SKU-worthy (SKU stands for stock-keep- The Essential Foundation ing unit). Sometimes, in order to move forward, we need to step back to the basics and create a new starting point. As the manager of your business, you’ll need a plan, a road map if you will, that will help you go from where you

54 Niche Marketing: Narrow Your Focus are to where you want to be. I strongly suggest that every business owner houses your clients wish to buy and/or sell will be there with or without create a thorough and strategic business plan. For the purpose of this course, you, but whether or not their needs are met and in a satisfactory and timely we’ll assume you’ve already completed my Strategic Business Planning manner, are solely dependent upon your abilities. You should be at the cen- course; however, we’ll still need a mini plan to determine and define your ter of your niche marketing plan, because you--your strengths, experiences, niche market. education, reputation, and track record--are the product. Therefore, when attempting to create your very own niche market, I strongly suggest that you first review your career history, personality, strengths, and weaknesses. Give consideration to what you have you learned during the course of your professional career, where you are currently in your career, and how you arrived there.

Every good plan benefits from past experiences. The key is incorporating those experiences with the successes of your existing business model, along with the skills that make you unique. Combine and use this information to define your future niche marketing plan. Be empowered with your progres- sion and use that progression to define your niche.

Whatever you do, don’t create this plan and then file it away and forget about it. Mapping out your niche market plan also serves the purpose of allowing you to “make mistakes on paper” before making them in wasted To create a niche marketing plan, you’ll need to give thought to various dollars and time. Mapping out your plan on paper allows you to thoroughly topics, from exploring your personality to conducting market research, work through it, by considering the elements, building a strategy, complet- researching available opportunities, reviewing your current business pro- ing research, acquiring resources, and adjusting where necessary. As time cesses and creating your prospect pool. You’ll also need to ask and answer goes on, review the plan and its projections regularly to determine not only plenty of questions. So let’s get started. your progress, but also the success of the plan and whether it is necessary to make adjustments. Your niche marketing plan should be a working docu- Here are a few questions you’ll want to ask yourself: ment, just like a strategic business plan. 1. What part of your business do you most enjoy? Success Tip: Once you’ve fully developed your plan, share it with a trusted 2. What parts do you do really well? advisor or consider hiring a business coach. A fresh set of eyes may offer 3. Where do most of your clients come from and who are they? you invaluable feedback, and at the very least, will affirm that you’ve been thorough in your thought process. 4. What sort of real estate product do you find yourself selling most?

Considering your answers to the four questions above, identify 5 niche mar- kets that could be strong possibilities for you. Strategic Thinking Process

Now take a hard look at your competition. Who else in your area is focused Throughout this chapter, I’ve referred to the niche marketing plan process on these niches? What do they do well and not so well, and what would you as strategic planning. What I haven’t shared is that there is a difference do differently to set yourself apart from your competition? between planning and strategic planning. While planning is still a very thorough and detailed process, strategic planning segments the process to a more methodical platform. The main difference is how information is What sort of challenges can you anticipate having in each of these niche formulated, processed, and then implemented, typically with more focus markets and how would you overcome them? on business resources. For our industry, compare strategic planning to the of business planning and implementation.

An important element to understanding the nature of strategic planning is to Establishing a Vision recognize the difference between strategy formulation and implementation. Establishing a clear vision and understanding of your new niche marketing business plan, as well as its strengths and weaknesses, can be the difference Strategy formulation includes the planning and decision-making that goes between success and failure. Be sure to develop and define a clear mission, into developing a company’s strategic goals and plans. For example: goals, and objectives. Defining your niche marketing plan will most likely • Assessing the environments involve more work, especially more creative thought, than you ever expect- ed. However, don’t get discouraged. Think of your niche marketing plan • Analyzing core competencies in two ways. First, imagine that your plan is a creative writing exercise, in • Creating goals and action plans which you can map out the business of your dreams on paper. This perspec- tive will really allow your imagination to guide you and help you visualize what you want. Secondly, try comparing your plan to a master plan of a Strategy implementation refers to the means associated with executing the metropolitan area. Your plan, like a city’s master plan, is the roadmap of strategic plan. These include: future development and defines the look and feel of your community (your • Creating teams business). Instead of , think marketing styles! • Adapting new technologies • Focusing on processes rather than functions Reviewing History to Establish the Product • Facilitating communications • Offering incentives When it comes to real estate, the most successful component of your busi- ness is you. That is truly what you’re selling--your personality, your ability • Making structural changes to communicate, and shape your clients perspective, you, you, you. The Niche Marketing: Narrow Your Focus 55 To be a successful business owner and an effective market leader, it is also SBA Criteria - Driving Forces: Motivation and Focus critical to develop strategic thinking skills. The good news is that through- out this chapter we have already been building your niche marketing plan Ask yourself, “What are the driving forces that will make my business a using these strategic processes. These processes will help bring your busi- success?” Then answer that question as it specifically relates to: ness vision, mission, goals and objectives to fruition through team work, resources and problem-solving. They are also useful in helping any busi- • Your company’s vision and mission. ness confront change, plan for and make transitions, and be in a position to • What you want people to focus on in your business. accept new opportunities. • How you will motivate others to perform. • Individual and organizational incentives.

• Empowerment and alignment. SBA Criteria - Organization • Qualitative factors, such as results and experience. The Small Business Association (SBA) offers five criteria to help you de- • Commitment, coherent action, effectiveness, productivity and fine your ideal outcome through strategic thinking. Each of these will be value. discussed on the following pages.

Organization SBA Criteria - Ideal Position The organization of your business involves your employees, the organiza- tional structure of your business, and the resources necessary to make it all Working through these first four phases of the strategic thinking process work. What will your organization look like? What type of structure will should help you define your ideal position within your business. Be sure to support your vision? How will you combine people, resources, and struc- critically answer the following: ture together to achieve your ideal outcome? • What conditions are necessary to be most productive? • What is the best niche market for you? • What opportunities may exist either currently or in the future for SBA Criteria - Observation: From a Holistic your business? Viewpoint • What are the core competencies or skills required in your When you are looking down at the world from an airplane, you can see business/niche? much more than when you are on the ground. Strategic thinking is much • What strategies and tactics will you use to pull it together? the same in that it allows you to see things from “higher up.” By increasing your powers of observation, you will start to become more aware of what Working through these five areas will help you clearly define and visualize motivates people, how to solve problems more effectively, and how to dis- exactly how your niche marketing goals can be accomplished. Just like tinguish between alternatives. defining your niche, if you focus, your concept will be stronger and more credible.

Consider: What core competencies or skills are essential to being a suc- cessful real estate agent? After you share, consider which of those skills you can improve upon the most.

Example - Toyota Success Tip: Seek out and learn from other successful niche seekers. Let’s look at Toyota as our example:

Toyota, a huge company with a global focus on the auto business, is an ex- cellent niche marketer. They were one of the first companies to realize there was a group of car buyers who would be very interested in environmentally SBA Criteria - Views: A Different Mindset friendly cars. Toyota answered this need with the development of the leg- endary Prius, the first mass produced hybrid car. Where other car manu- When solving a problem or preparing for change, a view is simply a differ- facturers saw Toyota taking a huge risk, Toyota saw it as an opportunity to ent angle to consider. identify a new niche and establish its brand in that niche. In marketing, it is often the first brand to market, if executed successfully, that can own the There are four viewpoints to consider when forming your business strategy: niche market with their brand. • Environmental view • Marketplace view Once Toyota took the plunge, it pursued an effective niche marketing plan. It didn’t promote the Prius in just any media. It focused on media outlets • Project view that were watched, read or listened to by people concerned about the envi- • Measurement view ronment. For example, it heavily promoted the car through environmental groups and their publications. As the only game in town at that time, Toyota These viewpoints can be used as tools to help you think about outcomes, not only dominated the niche, it was the niche. Today, with increased com- identify critical elements, and adjust your actions to achieve your ideal po- petition in this niche market, the Toyota Prius is still highly regarded as the sition. niche’s leading brand.

56 Niche Marketing: Narrow Your Focus Simply identifying holes in the market and filling them is often times not Marketing Plan is the roadmap to the future growth and success for your enough. It takes extensive research, careful planning and execution, and business. extreme aversion to risks to successfully develop, introduce, execute and dominate a niche market with a specific product or service. As discussed earlier, a great way to discover possible niches is to write out your interests, your skills, strengths, connections – your sources; family, Consider: What are some niches out there in the real estate market? Which friends, classmates, referrals, expiree’s, FSBO’s, asset managers, etc. Since ones are most in need of qualified professionals to jump in and fill the void? our goal is to grow your business, first identify the primary source of your Which ones are saturated with competition? current business, be specific and break it down. For example, if the major- ity of your business comes from listings, but those listings were referred, then referrals would be your source. Then, make a list of all the things you really enjoy about real estate, and all your strengths in this business. Again, What Now? be specific. Before we move onto the quiz, let’s look at a summary of what was dis- cussed in this chapter and how you can apply it. Ok, so now what? Well, now try different ways of combining these con- nections, your strengths, into a problem you would enjoy helping your cli- Establishing yourself as an expert in a niche can be huge for you and the ents solve. Then compare that with your market research and competition. potential customer. Remember the example of a business card with a ton There’s your niche! of “specialties” on it. Think about the customer’s perspective. The person with the wordy business card may be saying, “Yeah, I’ve done a short sale You’ll find that discovering your niche and building your business around once or twice. I’m experienced. That’s going on my card!” But, if you’re that core product, to include yourself as a product; will be a very freeing ap- an expert in the short sale realm and that’s your niche, you need to make proach. It really gives you permission to focus on the parts of your business people aware of that. You need to get them thinking, “Hmm, this guy over that you enjoy most, and channels your strengths, but most importantly it here listed short sales as something he’s good at. But, this guy specializes in focuses your daily efforts. short sales. It’s his bread and butter. We’re going with him.” It just makes sense! Ultimately, you’re doing the customer a HUGE service by making Let’s get specific. The next 18 pages will consist of examples of Niche real them aware of your expertise. estate marketing opportunities.

Once you figure out your niche (or maybe you already have one), you will need to get a feel for the need of that niche in your market. There will most certainly be a need for you niche, but you must find out how that niche is Properties already being served by others. What are they doing well? How can you top Don’t discount the for sale by owner property as not worth your time. These them? Remember, you’re the expert! No one knows that niche better than sellers will, in many cases, find that they really don’t have the ability to you. So, no one should have better insight on how to serve those customers successfully market their home and will decide to list with a real estate pro- than you do. fessional. After all, our profession was established and continues to thrive because there is a need – so get out there and show them! Structure a mar- Lastly, sometimes less can be more. Mass marketing can be, and often is, keting plan around helping these sellers to learn what they need to know to effective, but niche marketing has potential for you to tap into a specific market their property and they will frequently see the complexity of the task area of the market and clean up! Hypothetically, with a mass marketing ap- and make a decision to list with a real estate professional. If you’ve been proach, you may be hoping to get 1% of short sales, 1% of listings, 1% of their adviser, you’ll likely get the business; you, the FSBO Niche Market- buyers, etc... But with a niche, you’re aiming to get the majority of a certain ing expert. type of customer by becoming the go-to agent in that niche. You can still be involved in other aspects of the industry, but you own that area.

Consider: What did you read in this chapter that you can apply to your busi- ness? Anything you will start doing? Anything you will stop doing?

Chapter Two: What is YOUR Niche Market

Defining Your Niche Market Defining and properly marketing your niche is the key to developing a prof- itable business, especially in today’s market. If your business is to survive and prosper, taking the time to identify your purpose, plan, develop your Niche Market and to define what differentiates your business from your competitors will be a key component to your success. Remember, a Niche

Niche Marketing: Narrow Your Focus 57 Resort and Vacation Homes Buyers Nationally, there has been a huge growth in the number of in the last decade. In some cases, the owners are investors who wish to rent it. This provides another area in which you can be the expert helping them to select the most rentable properties. It can also lead to referrals to manage- ment firms or to your own business.

Property Management An agent can make a very nice living managing short and long term rentals for their clients. Within some offices, cooperative marketing has been done, for example with a vacation home buyer agent and a management agent working together. A vacation home buyer may want to use the property If you’re lucky enough to live in an area that appeals to vacationers and only part time and rent it out for income when they aren’t there. Or perhaps those looking for getaway properties, this can be a very successful niche consider partnering with agents, even of multiple firms, who have vacant market for you. Even in a down economy people see the value in vaca- listings with more than 200 days on market, and guaranteeing them the tion homes as income opportunities. Families and friends are combining professional courtesy of returning their client when they are ready to re-list. resources to buy these properties, plan their vacations and then turn the re- maining weeks for profit. With most of the prospects coming from outside the area, a good internet marketing strategy can position you as the area expert and cut down significantly on the competition. Providing usable information to out-of-area buyers will get your business, and at some point The Internet Buyer they’ll likely be your sellers also. This is a strategy that has been very successful, especially in markets with a high percentage of technology savvy buyers or those relocating from out- side the area. With more than 70% of internet buyers indicating that they ended up working with the first web agent that contacted them, you can see Single Home Buyers the potential. Moreover, consider being creative in how you present these properties to your prospects to save them time and effort by previewing the With almost 90 million unmarried and single Americans, this is a group you property and providing a video of the home and area. just cannot ignore. 55 Million households are headed by unmarried indi- viduals. Women make up about 54% of this group according to the Census Bureau. Real estate professionals that can embrace the differing needs of these heads of households will surely find a wealth of opportunity.

Baby Boomers and Seniors Different income considerations, as well as sometimes special housing re- quirements, make this group a great niche market. Determine their needs and develop marketing and services that are tailored to them. Look into the SRES® Designation (Seniors Real Estate Specialist) to position yourself as a specially trained professional serving the needs of this age group. Combining Niches to Find Your Perfect Marketing Strategy Luxury Homes Take any two or more of the above specializations and combine them, if it works for you. You could be an Internet Buyer Agent specializing in Farms The luxury home niche looks quite inviting, with the high home prices usu- and Ranches. Or perhaps you’d like to serve only sellers of high-rise condos ally generating correspondingly high commissions to the agents. They do in the city. It’s your business and your success. result in a higher per-transaction commission, but don’t think that there isn’t some trade-offs. Luxury homes require special marketing venues that generally require a larger investment on the part of the listing brokerage. A few other Niche Markets to consider: Overall, the percentage of net profit after marketing can be similar to lower • Investors seeking income producing and/or small multi-unit priced homes. It’s a great niche for some though. properties. • Handicap accessible properties. • Golf communities or other hobby related properties. First-Time Buyers • Farmland and acreage. Country living. Off the Grid living. First-time buyers are new to the entire process, with anxieties about financ- • Waterfront properties and or properties with boating access. ing, inspections and just about every facet of the transaction. They want and • Parents of college students looking to buy verses pay for on or need our help. It’s a great feeling helping them into their first home, and this off-campus housing. niche market is a large one. Develop marketing and transaction information materials that will help them to understand the process and view you as the • Commercial real estate, in itself is a Niche Market, but can even expert they need to carry them through it. They’ll be a huge source of future be broken down into several more segments. repeat business and referrals. • Short-sales, foreclosure and other distressed properties. 58 Niche Marketing: Narrow Your Focus • Divorce and Estates. tax professional, but I believe this would provide an attractive business tax deduction. • Executive temporary furnished housing.

Success Tip: Receptionists are the gatekeeper’s, make nice and they’ll help you get your foot in the door. Referral Resources as a Niche Market Ok, so we’ve defined several different real estate tracks above that could be viable Niche Market for you, but how about we consider referrals as a Combining Niches Niche Markets themselves. Let’s go one step further. How about we get even more specific and com- bine two of the above Niche Markets? For example, perhaps your Niche Although 84% of clients are comfortable referring friends and family to will be selling condos to parents of college students who were referred to their adviser, only 29% actually do, according to survey results from Julia you by the campus admissions office. Littlechild in Anatomy of a Referral.

So how can you ensure that your clients find the opportunity to bring you up Although we’ve yet to discuss how to Market your Niche, take a minute to in conversation? Yep, you got it, Niche Marketing! consider marketing strategies for this Niche example.

President of The Client Driven Practice coaching firm, Stephen Wershing • What is the best way to get your foot in the door with the Campus says: Admissions office?

• How do you target the parent, your client, but cater to the student? “A niche is not a demographic, a niche is a need.” By forming a niche, Wershing says clients will be able to recommend you when they hear • If you must be neutral between the College, the parent and the friends, family or colleagues, with a specific problem. More importantly, student, what is your brand? a problem you’ve created a solution for being becoming the expert in that Niche. So rather than a broad “he’s really nice” comment, the • How will you build a database of these college friendly, safe, yet referral can say “he specializes in helping clients in divorce situations affordable properties? and can best guide you in this process.” • What qualities and experience must you possess to seamlessly John Anderson, head of practice management at SEI Adviser Network execute these relationships and goals? in the US, says “the more you remind clients of the value-add and specific solutions you provide, the better they’ll be able to describe These sort of questions will need to be asked and answered at every step what you can do for other people.” of development, from planning to implementation. Doing so will help you determine if a particular Niche is a good fit for you. Speaking of “good fit”, let’s talk research. Options for Referral Resources Accountant’s: These local number crunchers have clients that very often need to invest in tax-friendly solutions, such as real estate, or even those Developing Your Niche Market who need to liquidate their real estate assets for one reason or another. So how can your small business dominate your own niche market? Con- centrate on these four basic concepts for niche marketing success: Attorneys: Family law attorney’s make great referral sources as they often 1. Unique product or service. manage divorce situations where their clients need to sell their current home and perhaps buy two separate homes. Or perhaps an Estate attorney dealing 2. Marketable product or service. with estates that need to sell their real estate assets to finalize probate. 3. Choose a niche market that’s available. • Niche markets by virtue tend to be smaller, leaving very little Medical Professional’s: Admittedly this is a very difficult group to infil- room for competition. trate; however, doctors are great referral sources. Consider building a re- lationship with your local hospital physician relocation and/or public rela- 4. Market, market, market. tions department to get your foot in the door. Market yourself as the expert • Marketing is the most important component for niche market, for busy executive professionals. and needs to target exactly the right kind of customer/client.

Corporate Recruiter’s/Human Resource Manager’s: Perhaps your local You can try to be an expert in many phases of real estate, or you can special- market is home to large corporations, plants or other organizations that have ize in a niche market and become the authority in that market. There are a direct line to employee’s moving in and out of the area. Find and build many highly successful real estate agents and brokers that have narrowed a relationship with the folks at the head of these departments and sell your their real estate marketing niche to focus on a specific geographical area, a executive relocation services. type of property or a category of consumer. Recognizing the opportunities that are out there and selecting a niche that appeals to you can be a lucrative Non-Profit’s: This one is my personal favorite. Not only is it a Niche strategy. Market, but it’s an opportunity to give back to your local community. Visit some of your local non-profit organizations and introduce yourself as their While location is the most obvious divider for real estate, perhaps your community advocate. Offer to sponsor their organization for the year, and niche involves other factors. You can target specific property types, such as as such you’ll donate a portion of your net real estate commission for every income properties, condos, waterfront homes, luxury homes, or new devel- closed transaction to their organization, and you’ll do so in the name of your opments. Perhaps you specialize in different demographics such as Spanish client. Offer to do some cross marketing efforts, host their social events at speaking clients, senior citizens, empty- nesters or first time buyer’s. one of your listings – a Community Open House. Check with your

Niche Marketing: Narrow Your Focus 59 Figure out not only who has a need for your product or service, but also who so hard to hang on to customers you don’t know intimately, you will forever is most likely to buy it. Think about the following factors: be chasing new ones.” • Age Remember, the goal here is to capitalize on your passions and interests so • Location that you can make money doing something you enjoy, while providing a • Gender service that solves a problem for your clients. Don’t short change yourself by short cutting the process. Although research is boring and typically not • Income level a strength for those with a sales mindset, it is a necessary evil to this success • Education level strategy. Not to worry, in this chapter I will provide you with some very powerful research resources and tips. • Marital or family status

• Occupation Defining your Niche Market is only part of the equation. Now we must • Ethnic background gather and correlating the research with your strategy will also help you target your efforts and build your brand. Think of it as building an argument Also consider the Psychographics of your target Niche Market. Psycho- for why the Niche you’ve chosen won’t fail. graphics are more personal characteristics of a person, including: • Personality Here are some research suggestions and a few questions to ask and answer: • Attitudes • Is there sufficient demand for your niche? Why? • Values • What makes your business different from the competition? • Interests/hobbies Create your own Unique Selling Position (USP). Study your competition to find out what they emphasize about their product. • Lifestyles Then decide on something that will make your business unique • Behavior from the others.

Once you’ve decided on a target market, be sure to consider these questions • Perform a keyword search for your niche on the internet. Make designed to best help you evaluate your decision: sure you break down your niche concept into other keywords and search again. Review and evaluate your findings and the impact • Are there enough people that fit my criteria? on your business. • Will my target really benefit from my product/service? Will they see a need for it? • Consider using a wordtracker tool to see how many people are searching each month on keywords related to your niche. • Do I understand what drives my target to make decisions? Here’s an example: according to overture (at the time of writing • Can they afford my product/service? this course), the keyword phrase “camping equipment” was • Can I reach them with my message? Are they easily accessible? searched 76,164 times in one month. If you do a search on Google.com for camping equipment you will find 1,610,000 web While we want your Niche Marketing Plan to be specific and focused, don’t sites show up. That’s a lot of competitive. break your target down too far. Determine how your product or service will fit into your target’s lifestyle. How and when will they use the prod- • Consider giving a survey to the public about your niche. Ask uct? What features are most appealing to them? What media do they turn questions specific to your product/service. Keep it short, but to for information? Do they read the newspaper, search online, or attend allow them an area to write in their thoughts. Make sure you survey the proper target group for your niche. Consider offering particular events? a survey incentive like winning a gift card.

A well-defined Niche should consist of people with the same specialized needs that you offer. You should be able to provide a compelling reason for individuals in this group to do business with you instead of your competi- How to Find Out What People Want tion. Also make sure that the target group is large enough to sustain the Now for the research; where do you go to figure out what people want? volume of business needed to meet your financial goals. Fortunately, there are a number of websites and resource centers that make answering these questions very simple. Hit the internet and search trends; Success Tip: Remember, a narrow sales focus is one of the most powerful you’ll find a number of resources that publish weekly, monthly, and annual marketing tools. trends; interest comparisons, top lists and market research reports. And in great detail; you can even find various online services that publish the number of times keywords and phrases are searched over any given period of time. Niche Market Research Once you have a list of possible niche topics, you need to see which ones Here are a few market research sites and services suggested by Rosalind are selling online. The goal is to eliminate risks by narrowing successful Gardner, a blogger, speaker and Internet Marketing consultant, best known Niche strategies. By analyzing markets correctly, you’ll discover where for her “Super Affiliate Handbook”: money is already being made, and you’ll substantially increase your po- tential for success by weeding out the dud markets, and ensure that you’re • Google Trends lets you compare the world’s interest in your cho- spending time on profitable niche markets. There’s nothing worse than sen niche markets. For example, I entered ‘coffee’ and ‘tea’ and spending a lot of time, energy, and money on a market that has no potential discovered some significant spikes in the interest in coffee (shown for sustainable, long-term profits. in the graphic below). This site allows you to enter up to five top- ics and see how often they’ve been searched for on Google over Another reason to do the research; “If you don’t know your customer, then time. It also displays how frequently your topics have appeared in you don’t know your business.” says Robb Mandelbaum, author of How to Google News stories, and which geographic regions have searched Conduct Market Research, Inc.com. He continues to say that “because it’s for them most often. 60 Niche Marketing: Narrow Your Focus • Google’s Insights for Search lets you compare search volume pat- terns across specific regions, categories, time frames and proper- Tools to Strategically Analyze Research Data ties. Check out the examples of how you can use Google Insights The process so far has presented a lot of questions, required a ton of re- for Search accessible from the homepage – you can go DEEP with search, so now what? Now, you’ll need a strategic formula to process the this one! data and make strategic decisions.

• Magazines.com lists their 10 Top Titles on their homepage. At the Situational Analysis is an understanding of your business’ external and in- time of writing, these included Sports Illustrated For Kids, Time, ternal situation. It is a common-sense approach to organize, provide and People, InStyle, Woman’s Day, Money, Newsweek, Sports Illus- consider relevant information. The purpose is to offer a formula that will trated, Women’s Health and Disney Adventures. So what topics help you process information so that you can make decisions and take ac- do we see there? Sports, general news, women’s issues, fashion, tion accordingly. kids and finances.

• EBay Pulse is a daily snapshot of current trends, hot picks, and cool stuff on eBay, listing popular searches, largest stores and most Situational Analysis: Overview of What it Is watched items. Although eBay Pulse page shows an overview of the entire eBay marketplace, you can use the drop-down menu to refine and filter the lists to show content for specific categories on eBay.

• Yahoo’s Buzz Index focuses on the entertainment industry, provid- ing their most popular searches on a daily basis for actors, movies, music, sports, TV and video games.

• comScore Networks provides insight into consumer behavior and attitudes by compiling reports based on a global cross-section of more than 2 million consumers who have given comScore explicit permission to capture their browsing and transaction behavior, in- cluding online and offline purchasing.

• JupiterResearch provides research, analysis and advice to help guide technology vendors and service providers on market oppor- tunity. Guest access is available, however, to quickly gain access to salient sections of recent Jupiter Research reports, try Googling “jupiter research ____” (_____) being the name of the topic you • Analysis of Customer’s needs, resources, other relevant wish to study. information • Mapping of all products in the marketplace. • Amazon best sites for doing market research. Search any of their • Plotting of Competitor’s positioning. departments, i.e. books or baby or and you’ll see either a link for Bestsellers or Top Sellers as well as: • Charting of competitor’s potential future actions. • Hot New Releases • Determination of strategic Collaborators. • Most Gifted • Most Wished For The Five C’s to Analysis • Movers & Shakers One commonly used formula is called the 5 C Analysis; company, collabo- • Google Adwords Keyword Tool is also a free tool that reports on rators, customers, competitors and climate. This formula focuses on these search performance and seasonal trends on keywords and keyword five key areas which are critical to any business’s situation. phrases that you enter into the search box. Statistics show the rela- tive amount of users searching for that keyword on Google. • Customers: market size and growth, market segments, customer benefits (tangible and intangible), motivation, decision maker, retail channels, consumer information sources, buying process, • WordTracker shows you exactly what people are looking for on- buying frequency, quantity, and trends. line by showing you exactly which keywords and phrases they’re searching for. Wordtracker’s suggestions are based on over 330 • Climate: (macro-environmental): political & regulatory, million keywords and phrases that people have used over the pre- economic, social/cultural, and technological environment. vious 90 days. Although WordTracker offers a free trial, I recom- mend that the week-long pass for $27.59 is really worthwhile if • Competitors: actual or potential, direct or indirect, products, you want to do justice to your market research! positioning, market shares, strengths and weaknesses of competitors. Regardless of the Niche you select for your business, use the sites recom- • Collaborators: distributors, supplies, and alliances. mended above to find out how much of a potential market exists BEFORE you make the leap to implementing a marketing plan. A Niche Marketing plan that hasn’t been properly and thoroughly research is like listing a home • Company: produce line, imagine in the market, technology, experience, culture and goals. with performing a CMA, or worse, based on Tax Assessment alone.

Niche Marketing: Narrow Your Focus 61 A six key area was added later: you actually like what you’re doing. If you’re the square peg, don’t try to fit yourself into the round hole! • Competitive advantage: competitive advantage, determination of your core competencies, analysis of which core competencies can become competitive advantages, and calculation of how a We went over several potential niches in this chapter, but don’t limit your- sustainable competitive advantage can be constructed. self to the ones listed in this course! You would be selling yourself short. Also, don’t be discouraged if you’re having trouble finding peers in your desired niche. While it may be encouraging to search Google for people who have had success doing what you want to do, finding no success stories SWOT Analysis may just mean that no one has done it quite right and you have no competi- tion!

Here’s an exercise you could do on your own:

Take a sheet of paper and start writing down every aspect of your job that you enjoy. Why did you start in real estate? What is keeping you in the profession? What type of listings or activities do you get excited about? Just start an all-out brainstorm. Then, take a look at your list and find out if something on your list fills a need in your market. If you got a large chunk of the business associated with one of those items (which is ultimately the goal!), will there be enough there to make the endeavor worth your while? You might have to cross off items like “making money,” because it’s hard to say how one could possibly make money by making money.

In the next chapter we will discuss how to implement a niche marketing plan. So, circle those items and have them in mind when you start the next chapter.

Chapter Three: Another commonly used formula is the SWOT analysis. Same purpose at the 5 C’s, however, it evaluates the Strengths, Weaknesses, Opportunities, Implementing Your Niche and Threats involved in a particular project or business venture. It involves specifying the objective of the project or business and identifying the inter- nal and external factors that are favorable and unfavorable. See diagram Marketing Plan on the right.

• Strengths: attributes of the business that are helpful to achieving the objective(s). How to Market a Niche Effectively • Weaknesses: attributes of the business that are harmful to Now that we have an understanding of what niche marketing is, the benefits achieving the objective(s). of incorporating it into your business, your areas of strengths, and possible niche markets for you to explore, let’s discuss implementation. • Opportunities: external conditions that are helpful to achieving the objective(s). How do I market a niche? Real estate niche marketing begins with your • Threats: external conditions which could do damage to the website. This is where you should brand yourself as the local expert in your objective(s). niche and blog about topics of interest to your target market. But it doesn’t end there. Post links to your niche-focused web pages on all of your com- Formulating and mapping out information in this format will simplify the munication channels, including Facebook, LinkedIn, Twitter, WordPress, decision making process by determining not only whether the objective is YouTube, Craigslist, email drip campaigns via Constant Contact, and snail attainable, but if it’s in the best interests of your business. If it wasn’t, then mail to your sphere of influence. you’d select a different scenario or objective and repeat the process. Creating a niche-specific website is very effective. When assembling your website, be sure to use your niche-specific key words. Specific key words will help direct your next potential client to you when they utilize a search What Now? engine to locate services or businesses within your niche. In short, stick to The quiz is coming up next, but first here is a quick summary of this section words relevant to what it is that you are marketing. However, the larger and some points to ponder. the niche, the more difficult and expensive it becomes to manage when you consider the cost of online advertisements. Do not forget to make sure your website is mobile-friendly and viewable. Choosing your niche shouldn’t be stressful. Actually, it should be fun! After all, you should just be taking something that you are passionate about and using it to take care of others. When choosing your niche, first consider Also, remain aware of your online resources in regards to the potential what those things that you are passionate about are. Then figure out how growth of other marketers within your niche. It is very possible that your that passion fills a need in the market. It’s important to start with something niche has become the same niche of countless others, creating an over- you enjoy, because the expertise will come much more naturally if growth of competition and challenged revenue.

62 Niche Marketing: Narrow Your Focus Another great resource for marketing your niche is to seek out major real Social Media as a Niche Marketing Tool estate websites, such as Zillow.com and REALTOR.com, and establish your free agent profile. Did you catch that word “free”? You’d be surprised how many free or very affordable resources are available that you might not be tapping into. I would also suggest that you go one step further and consider paying for an enhanced agent profile on any of the major syndicated sites for increased visibility. Make sure your bullet points highlight your niche services and link back to your niche website, social media outlets, and blog.

Further in this chapter, we’ll discuss how to partner with your vendors as an extension of your team. However, for the purposes of implementing your niche marketing plan, let’s start with asking your vendors to highlight you- -your niche website, your blog and your brokerage--in their blogs and web- The shifting market has forced an uncomfortable reality on real estate sites. This creates a win-win for you both by providing fresh content and agents: innovate or fold up shop. Marketing real estate used to be a ground highlighting successful relationships and exposure for your niche. Consider game. Just stick up your sign and wait for the phone calls to pour in, right? doing a guest feature with video. Well, that is not the “sign” of the times currently, and frankly, I for one, hope it never is again. Our industry needed a good flushing, and these “hard times” have required those who weren’t taking real estate as a serious Despite their popularity, some of these media outlets might be new to you profession, especially those less than ethical folks, to pack up and ship out. and perhaps a little intimidating. Don’t let them be. These free and inex- Some might say that business is harder to come by, but I disagree. I find that pensive outlets are exactly what you need to market to your niche audience. we just need to get creative...so let’s get going! If you really struggle and the thought of social media and marketing make you that nervous, then farm out the work. There are virtual assistants, social media consultants and even local college students who would welcome the We’ve touched on social media throughout this course, but let’s dive in opportunity to lend you their web skills. a little deeper. One real estate marketing tool that many thriving agents swear by is social media. Facebook, Twitter, LinkedIn, YouTube, Pinterest and other social media sites are now crucial ingredients in marketing. Real Whatever you do, don’t miss an opportunity to share. Be sure to that every- estate is no exception. one you contact knows your area of expertise. Get out there and network. You are now a walking billboard, more than ever, and your niche sets you apart. Once people know that your site offers an effective way to stay up- Let’s discuss how real estate agents are using social media to sell properties, to-date on the type of property listings they want to see, they will come using the most inventive and effective ways. First, though, let’s consider back over and over again until you sell them the perfect home. Real estate why social media is an effective tool. niche marketing can be what sets you apart from the big guys in web traffic and sales. Friends of Friends of Friends As real estate expert Scott Allen writes in ”Success Guide for Real Estate Social media is an excellent real estate marketing tool for not only targeting Sales,” real estate agents often become so wrapped up in the daily tasks of your reach, but also expanding it. Social media sites make it easy for people servicing clients that they forget to focus on developing future business. to share information with their friends. For example, if you post a custom- Allen points out that for these individuals, “Their success is limited by the ized video listing to your 300 Facebook friends, and a couple of them post number of hours in the day and/or the number of leads they get lucky to it to their 300 friends, you’ve just tripled your reach. come across.” On the other hand, agents with a marketing plan will gener- ally see more robust sales and personal satisfaction over the long term. However, the real power of social media as a marketing tool is that it is both far-reaching (you can post a public message to your board) and targeted And finally, don’t forget to be specific. As an example, let’s consider the (you can send a message to just those people who might be interested). As byline you might use on your website. “Arranging Richmond, Virginia in many industries, marketing real estate is about getting your message in Real Estate Opportunities” will have a much harder time sticking out than front of the type of people who are most likely to be interested. Why go “Expert in Downtown Shockoe Bottom Metro Homes.” The former ad line door-to-door with your message/product, when you can have the people cannot hope to compete with much larger, more established real estate firms specifically looking for your product knocking on your door?!?! who have big firm dollars and countless marketing tools at their disposal. However, the second focus has a clear message for potential buyers--this person specializes in downtown Richmond metro homes in Shockoe Bot- Recently, for example, I sold a home to a buyer (let’s call him Mark) that tom. As buyers generally zoom in on the neighborhood they’d like to live was a friend of a friend (who we’ll call John) via Facebook. I had never met in, the second marketing approach will attract more leads. So, don’t be or spoken to Mark, and my friend John had only chatted with him online afraid to be specific, very specific. After all, it’s your niche and you are the because they had several football friends in common. But because I had area expert. posted a listing via Postlets on my Facebook page, it appeared on John’s page, which Mark saw and BAM! a connection was made. Mark reached out to me and asked me to help him with his search. The best part about this story, aside from earning a lifelong client and commission, is that I didn’t have to spend a single dollar, not one, to find this client. Facebook is free. Postlets.com is free.

Social media allows users to share stories with everyone they know or just a few specific people they think might be interested. And now with Face- book’s promote and target market shares, we’re taking things to a whole new level of direct marketing. Make sure your reach is expanded, and think 6 degrees of separation.

Niche Marketing: Narrow Your Focus 63 Page vs. Timeline to post all over the web, from Craigslist to Facebook, LinkedIn to Twitter. You’ll find that your social media followers are more likely to share such The first step in using any social media site as a real estate marketing tool is rich, interactive content, than simple plain text. To successfully market real setting up a company profile/page. LinkedIn recently joined with the mar- estate with social media, keep searching for online tools that allow you to ket leader Facebook, allowing users to create a company profile. create engaging, sharable content and that help set you apart! Before we move on, here are three quick helpful tips from Susan Freidman, Once you’ve built your company profile/page, it’s time to participate. Rath- author of “Riches in Niches: How to Make It BIG in a Small Market”: er than seeing social media as a one-way conversation, like most advertis- ing, it’s important for you to see it as a two-way street. Be sure to provide • “People pay more for services from perceived ‘experts’ than helpful information, encourage users to ask questions, leave comments, and generalists.” make suggestions. Schedule at least 30 minutes on your calendar every day to interact and respond. However, don’t make your page all about business- • “Credibility occurs when you’re visible in your ‘niche’ industry, -be personable, share your thoughts and your hobbies, be real. Allowing community or geographic region.” followers to connect with you beyond what you do for a living can make them feel vested in your success. • “Marketing is less complicated and expensive when you target niche markets or client profiles.” In addition to posting your listings, provide expert information for your pro- spective clients. For instance, if one of your clients recently asked a ques- Consider: Do you use any of the four tools listed? How do you feel about tion about closing costs, you could post a quick video response or provide them? What other tools are out there? them with a blanket net sheet. This user-centric approach will keep visitors returning to your page for ongoing advice. Become the resource center for all things in your niche market. Benefits of Niche Marketing for You and Your Clients Syndicating Your Niche Marketing Online Now that we’re nearing the end of this course, I want to focus on how There are many free or affordable resources online that can help improve implementing the previously-discussed concepts into your business will your online image and your information and listings. Let’s exam- better serve you and your clients. I also want to introduce a few additional ine four of these resources: management concepts that will help you effectively manage the new busi- ness you’ll bring in. • Postlets.com: Postlets is a free tool that makes advertising properties across a variety of sites quick and easy. Effortlessly Whether you are just getting started as a sole proprietor or owner of a well- send a listing to several online real estate sites, upload classified established brokerage firm, it is important to plan for and examine how you sites with generated HTML codes, and take advantage of social build and run your business. For new businesses, build a foundation that media marketing all at one time on one site. You can choose from a variety of professional looking flyer templates and brand them allows you to think and grow big; lay the groundwork for growth now. For with your photo and logo. more established businesses, this shift in our industry might already have you considering big changes in company objectives and focus. This chapter • Virtual Tours: This is a great way to present and market your is composed of thought-provoking tools that will hopefully have you asking listings with a “wow factor” for sellers. My personal favorite and answering these questions. virtual tour product is TourFactory.com, but there are a variety of products out there, some even free, that you can use. Some of The foundation of being a self-employed real estate agent is essentially the my favorite virtual marketing features are the presentation, agent same as any other business--managing an office, creating internal office sys- branding options, free agent website and syndication to dozens tems, dealing with human resources, overseeing sales and transaction sys- of top real estate marketing websites, including REALTOR.com. tems, managing staff and vendors, marketing, accounting, etc... So whether The seller statistics, which is a great tool to show the progress your career path is simply managing your own book of business, managing of your marketing, is also fabulous for developing and adjusting someone else’s business, or opening your own firm, the management con- your pricing strategy. cepts in this chapter will provide you with a framework for success. • REALTOR.com: Even if you’re not an enhanced member of this site, there are still a lot of great and free resources available to you here. However, since nearly 90% of all buyers search online before even contacting a real estate agent, you might want The Pareto Principle - 80/20 Rule to consider this marketing engine a valuable investment tool for your business. Throughout this course, we’ve touched on finding and focusing on your strengths. This strategy derives from the 80-20 rule, also known as the Pa- • Pay Per Click (PPC) ads: Anytime you’re in a business with a reto Principle, Pareto’s Law or the Law of the Vital Few, which states that, specific customer niche, pay per click advertising is a must for for many events, roughly 80% of the effects come from 20% of the causes. success. With Facebook PPC ads or Google Adwords, you can tailor your ads so only very specific demographics, your niche, To help you better understand and implement this concept into your busi- see them. Each click represents an interested candidate for your ness, allow me to introduce Steven D. Strauss, a lawyer, author and speaker tools. If you don’t work within a niche market, PPC can get very who specializes in small business and entrepreneurship. You might recog- expensive, whereas the opposite is true if you’re trying to attract nize him for his latest book, The Small Business Bible. a tailored list of people to your ads.

Steve explains that the 80-20 rule in business says 80% of your profit comes These are just four examples of helpful tools for marketing your real estate from 20% of your customers. But the idea is a bit more complicated than niche. Using such websites to create and distribute content ensures listing that. information is consistent across the internet and you’re branding yourself as the niche expert. Furthermore, online listings and tour videos are easy

64 Niche Marketing: Narrow Your Focus The truth is peaks and valleys occur because when we’re busy doing the work (managing the pipeline), we’re not busy creating the work (filling the pipeline). Therefore, when you take time from prospecting and redirect your focus to managing the transaction, your business shifts from a peak to a valley. Suddenly, you find yourself in this vicious cycle of work, work, work and manage, manage, manage.

Well, it’s time to break that cycle by implementing a niche marketing plan, as well as the other strategic concepts discussed in this course. Before we wrap up, we will look at a few key management tools.

Key Management Tools for Success Some background: The rule of 80-20 was first stated in 1906 by Italian All this new business you’ll be attracting is great, but what good is bring- economist Vilfredo Pareto, as Pareto observed that 20% of the Italian popu- ing in new business if the systems and processes are not there to effectively lation owned 80% of the wealth. Since then, the 80-20 principle has been and efficiently manage them? Not to fret. There’s good news ahead. When applied to other scenarios, such as: implementing a strategic niche marketing plan, there are key steps you can • 0% of your time creates 80% of your results take to help minimize the peak and valley cycle and maximize your success. The following pages will introduce these critical steps. • 20% of your inventory takes 80% of your space • 20% of your suppliers account for 80% of your stock Management Tools - Systems The essential idea is that only a few things are responsible for the vast amount of your productivity and results. Think what an amazing insight One sure fire way to jam up the pipeline, and to keep your business from this can be for your business. running smoothly, is not having the proper systems in place. There are hundreds of systems out there, some free and some costly, that can help you If you have five things to do today, the 80-20 rules states that only one of stay in front of and manage your relationships and transactions from the those will be vitally important; the other four will be much less so. Figuring initial introduction to beyond closing. out which one is most important can not only go a long way to making you far more effective, but it can also yield amazing results. Invest in your business foundation and take the time to get your systems in place and organized. Otherwise, your business growth will constantly be To create truly spectacular results, consider applying Pareto’s Principle, ju- limited and you’ll find your pipeline constantly jammed. Moreover, when diciously, across the board. Steve provides us with the following examples: you are ready to add staff members, you’ll need systems in place that allow • If 20% of your employees produce 80% of your results, figure out your team to work efficiently and effectively without depending on your who those employees are and reward them appropriately. constant input.

• If 20% of your products produce 80% of your sales, know what I advise every client and every agent to build their business as if it will those products are and display and price them accordingly (a.k.a. become a huge corporation with multiple departments, all intended to run your niche). without you. So often my clients hit a glass ceiling because they’ve built • If 80% of your profit comes from 20% of your customers, figure everything with them at the controller, thus limiting growth and making a out who those customers are and reward them. simple vacation nearly impossible.

• If 80% of your visitors see only 20% of your web pages, discover which web pages they visit and why, and figure out how to monetize those pages. Management Tools - Database

You get the idea. The important thing is to begin to notice in your business Being able to access your contacts quickly is important to the success of which 20% of activities, people, and/or products are responsible for 80% of your business. I regularly consult with agents to assist them in marketing your success. Spending more time on the things that have the best chance of and growing their business. One of the very first things I ask to see is their making the biggest difference can go a long way to making you more suc- database. If they cannot quickly show it to me on a mobile device, which cessful with less effort. Work smarter not harder. preferably syncs to their other back office systems, then I know they are limited in their ability to grow.

Surprise Result of Implementing a Niche Organize your contacts. Marketing Plan • Google: Talk about FREE. Google has a ton of resources available to help you manage your database and to sync it with Once I began implementing the 80-20 rule, niche marketing, and other strat- multiple other systems. Visit Google App Marketplace, and if egies into my real estate business, I found a surprising result. When prop- you don’t already have your business email hosted by Google, do erly applied, these business strategies, along with a niche marketing plan, it now. Sorry Apple user’s, it’s just not the same. help me manage the peaks and valleys of my business. • Top Producer: It’s true they’ve been around a long time and, At some point or another in your real estate career, you’ve probably felt the yes, it has taken them a while to catch up with the times, but strain of chugging up and down that mountain, but you might not have fig- Top Producer is nearly there. They have created a Real Estate ured out what was happening or why. In fact, most agents don’t even realize Transaction Management Center that is highlight worthy. The that these ups and downs are happening or how they are a direct result of entire system is now Cloud-based and social media-integrated in their actions, or rather inaction. some very cool ways. Top Producer also manages the transaction

Niche Marketing: Narrow Your Focus 65 from conception to close, automates much of the client touches, • Value: ask your vendors to bring value to your clients and syncs with Google and incorporates the latest technology. One of collaborate in marketing. They can provide content for your blog many things I love about this system is how clients and vendors (before-and-after pictures are a big hit), sponsor an ad on your can log into their “Transactions” through a private portal to get website, or “like” your Facebook page. Perhaps they can help updates on the transaction, make notes or upload files. Talk about sponsor an Annual Client Appreciation event or even participate a wow feature and streamlined processes! While Top Producer in a client mailer/email to your “sphere of influence,” providing a does fall short in some areas, I am pleased that they continue to special discount just to your clients. In return, write them a stellar work to improve the system and have incredible tech support. testimonial on their LinkedIn company profile. You can also compile a trusted vendor list on your website and link to theirs. • Solve360/Norada: I’ve research many project management systems, especially those that sync with Google and Constant • Future Business: Remind your vendors that you’ve enjoyed Contact, and I like Solve360/Norada the best. While they do have working with them and value the relationship. Let them know a self-assertive tone in their marketing, they’ve earned it. When that you’re building a referral-based business and that you want used properly, this is a great tool to streamline your database, your vendor partnerships to be mutually beneficial, especially by projects, pipeline, email and teams, all in one system. regularly sending them referrals, as well as asking for them. Give them a verbal commitment of how many clients you intend to send to them each year and ask them to match that, at least by When working with clients, make sure you keep detailed notes about how half. And that brings us full circle to accountability, not just for and when you met. Also keep notes on your conversations and interactions, you, but for them as well. as well as their personal information, such as spouse and kids’ names, birth- days and anniversaries. Keep records of the times they’ve referred you or the marketing you’ve sent them. This may sound a bit much, perhaps even borderline stalking, but when this information is applied in the right way, Management Tools - Time Management your clients will feel that you’re vested in them and your relationship. Time management is a struggle the majority of us face, and as real estate For instance, say you learned via Facebook that a client’s child, Henry, agents, we juggle multiple tasks, phone calls, emails and other to-do’s on broke his arm at school. If you make note of that and schedule a follow-up, a daily basis. Making the most of your time and avoiding time-wasting such as sending a get well card for Henry, these sort of high touches and activities is critical to your success. level of care that will set you apart from your competition. Think about it–when was the last time you got a get well card from a vendor, and if you Recent studies have shown that the average person wastes anywhere from did, would you feel more inclined to give them your repeat business? 2-4 hours per day checking email, chatting with co-workers, surfing the web and commenting on their favorite social media sites. With stats like that, it’s Oh and P.S. not just your clients, Vendor’s too. For one, they buy and sell a wonder we accomplish anything at all! houses and know other people who buy and sell houses. But also for when your client looks to you to refer a contractor, you’ll want to show them how Imagine how productive we might be if our time and our tasks were better, organized you are by how quickly you can provide them with three names and more strategically, organized. and telephone numbers for your Class-A Contractors. The challenge is implementing systems and tools that simplify your life without adding an additional layer to the process. Here are a few helpful tips on easy ways to get organized and better manage your day! Management Tools - Vendor Relationships When it comes to vendors, I could write an entire class on interesting ways Time Block to use and collaborate with them to grow your business, but here are just a If only you could see my Google Calendar; it is a beautiful color-coded few highlights to get you started. personal assistant that syncs with my smartphone, my desktop, my laptop, and my team’s calendars. Sure, I store my appointments like most people, We all have vendors that we need and use in some capacity. If you are any- but I also incorporate other strategies that will help me focus on the 20%, as thing like the agents I know, you suggest or refer business to your vendors well as create some balance. regularly. But are you paying close attention to what they are doing for you and your business? Is this relationship a two-way street? At first this exercise might be a bit challenging, but I promise that if you stick with it, you’ll be a well-oiled machine in no time. At first, try using a Here’s a collaborative concept. Reach out to your vendors and let them stopwatch on your phone, or even a simple egg timer, to help you stay on know that you’re redeveloping your business model, and part of that transi- track. tion is how your trusted vendors will play a very active and key role in your business. Explain to them how important they are to you, your business and Here’s the exercise: time block every part of your day that is significant to your clients, and how excited you are about how your new business model your success. Not just business, but personal, too. While we tend to think will position them as a direct extension of your team. of these two aspects of our lives as separate, it’s nearly impossible, espe- cially when you are self-employed. So stop trying already and let’s merge Here are a few suggestions on how to take these vendor relationships from the two. a one-way street to two:

• Mutual Accountability: ask your vendors to be accountability Which parts of time management are most important to success? Here are partners with you; share your business growth goals and your ten critical components that I incorporate into my time-blocking regimen. niche concept, and explain how they can help you achieve these As for how much time is necessary, that is entirely up to you, but be sure goals. Communicate to them how you expect your clients to be to measure your results so you can adjust as needed. And for those of you managed and that in the spirit of being a team, you want to be who are visual, like me, think of these time-blocking components as fuel kept in the loop, not just now, but in any future business with your for your success, with all components co-existing in order to produce maxi- clients as well. Promise to do the same when you’re prospecting. mum results.

66 Niche Marketing: Narrow Your Focus Personal Time: Management Tools - To-Do Lists • Social: quality time spent with family and friends, perhaps even volunteering and/or a book club. A to-do list is a must to keep you focused and on top of those important tasks. It’s essential that you start your day with a fresh perspective and a • Fitness/Health: gym, yoga, walking, sports, and mental health clean sheet of paper. Whether it’s a yellow legal pad, your smart phone or exercises, such as crossword puzzles and meditation. an old-fashioned organizer; get the to-do list out of your head and into a system that works for you. • Spiritual: whatever your belief system, be sure you’re creating the time, and if you’re not, consider perhaps keeping a journal or Subscribing to the theory that “it doesn’t exist if it isn’t written down” gives reading. you power over your to-do list. Creating a list is a mental exercise that eliminates the stress associated with feeling as if you’ve forgotten some- • Financial: planning and managing short and long-term financial thing. It also forces your brain to release that task. We can only retain so goals and frequent health check-ups. much information at any given time. Having a consistent place to capture important information will increase your productivity and make it far less • Hobbies: doing the things you love to do that feed your energy in likely that you’ll miss an important meeting or phone call. a positive way--being in nature, riding a bike, photography, etc...

Business Time: • Networking: if you’re not already associated with a networking group, join one! Consider a BNI, Toast Masters, Real Estate In- vestor Groups, Women’s Council of REALTORS, or check out MeetUp.com for other business groups that might even tie into your niche. Here’s a tip: more is not better. Join one or two groups, commit to 12 months and work it.

• Prospecting: prospecting can be many things, but I’m going to ask you to do several. Here’s a good weekly starter plan: • 25 phone calls; past clients, old contacts, FSBO’s, etc... • 15 business cards handed out to new contacts, not including Despite being a technology guru and incorporating technology into every those given out at events. aspect of my business, I still love sticky notes. One of the first things I do every morning is transcribe my to-do’s onto mini-sticky notes and place • 7 Facebook & LinkedIn posts (your blog can count as one) them onto my Action Board on my desk, which has three columns: top • 5 written note cards priority tasks, important tasks and low priority tasks. Each to-do task goes • 1 blog post on one sticky and I post them on my action board according to importance. This helps me manage my day and my tasks by priority. Is there technology • 1 business or social event out there that would do the same? Sure, but I’m a visual person and I like • All current clients contacted to report market conditions, being able to move tasks around. And the best part is balling them up and give stats, get a pulse, offer assistance, and ask for referrals. throwing them away once they’re done. Try it!

• Management: block time each day to manage current clients and their transactions. This is a working “in your business” task. Management Tools - Embrace Technology • Planning: set aside time to review your current business structure and activities. Design and plan for growth. This is a working “on Change is scary, and shifting your business from what you’re doing now to your business” task. Go back through these course materials and these strategic concepts, can be very stressful. So let’s make it as easy as your Strategic Business Plan. Review and adjust. possible and use technology to our advantage, even embrace it!

• Education: continuously seek a higher education by taking classes, earning designations, or even reading up on the latest research and trends. This will help set you apart from your competition and better serve your clients and niche market.

Find balance in your life. If your personal life is suffering, then so will your business and vice versa. Time-blocking will help you achieve balance in both aspects, and you’ll find, as I did, the happier you are, the more suc- cessful you’ll be. But in order for you to gain the best results, you must time-block these 10 components on your weekly calendar.

Success Tip: Be consistent. Move the block of time around as necessary. Dedicate as much or as little time as you feel you can to each component. Commit to trying these techniques for 90 days and review the results.

There are many time management tools and other useful technologies out there, and when used effectively and consistently, they have the ability to not only significantly improve your productivity, but to create that “wow factor” your future clients are looking for.

Niche Marketing: Narrow Your Focus 67 Most REALTOR Associations regularly offer classes on technology and how to incorporate these tools into your business. Additionally, the Na- tional Association of REALTORS dedicates an entire section on their web- site for technology tools for REALTORS. Tap into your resources, ask your colleagues, and do a Google search so you can take every advantage possible to work smarter, not harder.

What Now? Social media is a HUGE lever that, when pulled effectively, can help get the word out about your expertise like no other form of marketing. Re- member the example of the post on Facebook that was originally seen by 300 people, but later 900+ were exposed to it? This type of example is not at all far-fetched. It happens every day. You probably have a couple of close friends that you could approach and say, “I’m trying to get the word out about my niche. Could you share my post on your wall?” Just a simple request to a close friend could put your message in front of several hundred people that you may never have been able to reach.

We briefly touched on Pinterest earlier in the course. It’s a relatively new social media site that real estate agents are using more and more. We in- cluded a QR code to a short video that we put together that outlines how you, as an agent, can utilize Pinterest to boost your effectiveness.

We also discussed the Pareto Principle. This is the idea that 80% of effects come from 20% of the causes. If this principle holds true (which it often does), think about what that means for your business. Possibly 80% of your time contributes to just 20% of your production, and the remaining 20% of your time accounts for 80% of your production. Imagine if you identified which tasks, clients, and activities constituted that 20%, then flipped the numbers and focused on those things for 80% of your day.

Here’s an activity you can do on your own: Earlier, we discussed to-do lists. To-do lists and the Pareto Principle are a match made in Heaven! Make up a to-do list for the day. Be specific enough that the list accurately portrays your work day, but not so specific that you’re including something like “showering” or “eating breakfast” (those are things that should always make the list). Then take a step back and start asking questions about each item. How many of those steps are about taking care of your client? Because that’s what it’s really about, right? If you are on top of everything and your client feels like you have her back, she may give you a referral and you get more business. It’s a win- win! If you find several things on your list that are not adding value to your clients, it may be time to reevaluate your work day a bit.

How much time are you putting into each task vs. how much are you get- ting out of it? You may find that you’ve been toiling over some short sale listings and making very little impact, but have had a large amount of success assisting first-time home buyers (or vice versa). Maybe it’s time to shift your focus.

Another good question to ask yourself is, “What happens if I don’t do this task?” It may very well turn out that you are doing things that contribute no real value to you or your clients, but you do them because “that’s the way it’s always been done.” Wouldn’t it be better if you stopped doing those things (or at least spent less time on them), and focused your energy more on things your clients need?

Consider the Pareto Principle as well. Are you spending 20% of your time on 80% of your clients? Is 80% of your clientele coming from 20% of your marketing?

68 Niche Marketing: Narrow Your Focus Niche Marketing: Narrow your Focus ~ Practice Assessment Questions ~

Select the best answer for each question and mark your answers on the Student Assessment Sheet (last page of book) or complete your assessment online at www.McKissock.com/ILRE

1. What does the 80-20 rule in business suggest? 6. Which of the following social media tools can a real a. 80% of your revenue will come from 20% of your estate company use to promote its business? clients a. Contests on Facebook b. 20% of your cost items will contribute to 80% of b. Creating listings via Postlets.com your expenses c. YouTube videos c. 20% of your sales staff will contribute 80% d. All of the above of the sales d. All of the answers shown 7. Which of the following statements on social media is FALSE? 2. What is the significance of niche marketing for a real a. It is a great tool for expanding your reach estate business? b. It can act as a highly targeted real estate marketing a. It helps identify the promotional channels tool to be used to reach the target segment c. It enables mass reach from the comfort of your b. It helps in hiring the right talent office c. It can help the business be identified d. Social media campaigns are easy to execute as an industry leader d. All of the answers shown 8. Which of the following statements on marketing a real estate niche is TRUE? 3. Which of the following factors must be evaluated by a. Pay per click marketing is an inexpensive marketing a business owner for determining a niche segment? tool that may be used by any real estate business a. Area of interest b. With Google Adwords, campaigns can be tailored to b. Academic/professional qualifications match certain demographics c. Position of competitive strength c. Postlets.com is a paid marketing website d. All of the answers shown d. All of the answers shown

4. Which of the following is the number one marketing 9. Which of the following factors can be classified as tool available to a real estate firm that wants to part of the demographics for identifying a niche in market itself? real estate? a. Business website a. Lifestyles b. Business cards b. Income level c. Personal networking c. Interests/hobbies d. Social media d. None of the answers shown

5. Which of the following tools do NOT offer project 10. Which of the following is a good example of management capabilities? a lifestyle-based niche marketing strategy? a. Norada a. Country living b. Top Producer (Real Estate Transaction Management b. Commercial real estate Center) c. Handling estates of divorce cases c. Facebook d. Investment real estate d. Solve360

Niche Marketing: Narrow Your Focus 69 Illinois Proctor Exam Instructions and Options

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70 Proctored Exam Instructions Book and Individual Course Evaluation Form Book & Individual Course Evaluation Form Congratulations on completing your course(s)! Please take a moment to complete the survey below and send your responses with your registration form, and answer sheet.

Name: ______Phone: ______

1. How likely is it that you will recommend McKissock to others? (Circle one.) (0 - Not At All Likely; 10 - Extremely Likely) 0 1 2 3 4 5 6 7 8 9 10 2. The course material in the book was presented in a clear, concise and well-organized format. (Circle one.) 0 1 2 3 4 5 6 7 8 9 10 (If less than a 5, please explain.) ______

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Individual Course Evaluations Course Rating Course Material Met Course was Individual Course Name (1-5) Course Objective Affordable 1=Worst; 5=Best (Yes or No) (Yes or No) Illinois Core A - Fair Housing, Agency, License Law and Escrow Illinois Core B - Legal Issues

Real Estate Safety: Protect Yourself During a Showing

Niche Marketing: Narrow Your Focus

Please list any recommendations that you may have in regards to the course(s) you completed.

______

______

Please list any course subjects you would like to see in the future.

______

______

Email: [email protected] www.McKissock.com Fax: 1-814-723-0281

Proctored Exam Instructions Book and Individual Course Evaluation Form 71 Illinois Real Estate CE Registration Form

First Name: Company Name:

MI: Company Address:

Last Name: Suite/Apt#:

Suffix: City, State, Zip:

License Number: Work Phone:

License Exp Date: Cell Phone:

License Level: Email Address:

Course Name Hours Price Total BEST VALUE! 12-Hour Package 12 $75.95 Illinois Core A - Fair Housing, Agency, License Law and Escrow 3 $25.95

Illinois Core B - Legal Issues 3 $25.95

Real Estate Safety: Protect Yourself During a Showing 3 $25.95

Niche Marketing: Narrow Your Focus 3 $25.95

Total Price

Payment Method Check Enclosed Credit Card: MasterCard Visa Discover American Express

Credit Card#: Exp. Date:

Print Name: ______Signature: ______1. Complete and pass your assessments online at www.McKissock.com/ILRE. Once this step is complete, simply choose your preferred method to complete the proctored exam portion of each course and we’ll issue your certificates of completion. or

2. Email [email protected] or Fax in the Registration Form, Assessment Answer Sheet, and Course Evaluation Forms in with your payment to: 1-814-723-0281

Questions? Call 1-800-328-2008 and one of our knowledgeable Education Specialists will assist you.

72 Illinois Real Estate CE Registration Form Illinois Real Estate CE Assessment Sheet Illinois Real Estate CE Assessment Answer Sheet Fax or Scan and Email in this completed Student Assessment Sheet along with your Registration Form, and Course Evaluation Form. OR Complete your assessments online at www.McKissock.com/ILRE. Once this step is complete, simply choose your preferred method to complete the proctored exam portion of each course and we’ll issue your certificates of completion.

For LIVE Proctor exams you must bring this completed assessment page to be eligible to sit for the proctor exam.

Name: ______Phone: ______

Illinois Core A - Fair Housing, Agency, License Law and Escrow Pg 23 1. aО bО cО dО 5. aО bО cО dО 9. aО bО cО dО 2. aО bО cО dО 6. aО bО cО dО 10. aО bО cО dО 3. aО bО cО dО 7. aО bО cО dО 4. aО bО cО dО 8. aО bО cО dО

Illinois Core B - Legal Issues Pg 38 1. aО bО cО dО 5. aО bО cО dО 9. aО bО cО dО 2. aО bО cО dО 6. aО bО cО dО 10. aО bО cО dО 3. aО bО cО dО 7. aО bО cО dО 4. aО bО cО dО 8. aО bО cО dО

Real Estate Safety: Protect Yourself During a Showing Pg 51 1. aО bО cО dО 5. aО bО cО dО 9. aО bО cО dО 2. aО bО cО dО 6. aО bО cО dО 10. aО bО cО dО 3. aО bО cО dО 7. aО bО cО dО 4. aО bО cО dО 8. aО bО cО dО

Niche Marketing: Narrow Your Focus Pg 69 1. aО bО cО dО 5. aО bО cО dО 9. aО bО cО dО 2. aО bО cО dО 6. aО bО cО dО 10. aО bО cО dО 3. aО bО cО dО 7. aО bО cО dО 4. aО bО cО dО 8. aО bО cО dО

Email: [email protected] www.McKissock.com Fax: 1-814-723-0281

Illinois Real Estate CE Registration Form Illinois Real Estate CE Assessment Sheet 73