…and were made privy to the offerings of 2 dozen or so vendors (like HLF).

What I found encouraging is that – even in the face of one of the most difficult markets in my career life (35 years — how did that happen?) – the level of enthusiasm remained high.

Sure, we’re all working twice as hard for half the money. But that’s what separates a professional from a wanna-be.

Keeping on top of your game, keeping informed of what’s going on. That’s the key to success in this, and in every, market.

Are you thinking about using a team name? Are you already using one? Are you asking for trouble?

DRE takes the position that a team name must be registered as a fictitious name (dba) with DRE before it can be used. The problem is that only a broker can have a dba. Many of the people using a team name hold a salesperson license and therefore can not register a dba.

Can their broker register the dba? Probably, but that raises two issues. If the broker registers the dba and you want to leave, the broker still owns the dba. A broker can not register a dba which includes the name or initials of a salesperson so the broker can not register a team name which will identify the salesperson.

Broker associates come off a little better, but not much. A broker associate could have their supervising broker register the dba, but the supervising broker still owns the name. The broker associate could register their own dba. But only associates licensed to the broker associate can use the name. Salesperson associates licensed to the supervising broker can not use the team name of the broker associate because that is not the broker holding their license.

We know there are many licensees using a team name that are not in compliance with DRE requirements. DRE is not out there looking for them. But as soon as DRE becomes aware of the name, often through a consumer complaint about something totally unrelated, DRE will sent a Desist and Refrain Order prohibiting the continued use of the team name. If the licensee does not comply DRE will likely pursue enforcement action against the licensee which could result in revocation of their license.

If you are thinking about using a team name, before you spend lots of money on signs, cards and stationary, you probably ought to spend a relatively small amount of money for an informed advisor to determine if you will be operating in accordance with DRE requirements. If not, a few days after you spend all that money DRE might tell you that you can not use the name.

If you have any questions on this article or any other aspect of real estate law please contact the Hanson Law Firm at 916 447-9181 or log on to our website at www.HansonLawFirm.com.

Arbitration is arbitrary.

Originally conceived as an instrument of community empowerment, arbitration quickly degenerated into a travesty of the American judicial system.

The framers of arbitration were the progenitors of the modern legal apparatus — lawyers, judges and politicians who restructured the fundamental concepts of the judiciary and placed the power of adjudication into the hands of every citizen who desired to contract for an alternative to litigation. Thus, arbitration promises the justice provided by the American legal system but is all too often a risky and uncertain venture — a crapshoot.

Although arbitration in America originated in the colonies as the preferred form of non-legal dispute resolution, arbitration as we know it today is an effort to circumvent jury awards by the dominant organized trade groups and corporate enterprises, which began during the industrial revolution and reached near ubiquity in the late 1970s. Today, arbitration is losing favor among the rank and file of the California real estate trade union, and for good reason.

The concept of alternative dispute resolution (ADR) arose due to society’s general dissatisfaction with the complex and often costly judicial system. If parties agreed to arbitrate their disputes, they avoided court entirely by giving a “neutral” third party the authority to make a final and binding decision for them.

However, it quickly became evident that the absence of judicial accountability in an arbitrator’s decision was not worth the binding arbitration bargain they contracted for when arbitrators misinterpreted the law or gave erroneous awards — leaving disputants with an unpredictable and arbitrary decision with no chance of remedy.

Discretion outside the law.

One of the primary avenues for introducing arbitration into the mainstream real estate market was the widespread use and acceptance of ADR imposed on members of the predominant California real estate trade union. Arbitration became their favored method of ADR in real estate transaction disputes as it provided trade union members recourse for resolving disputes among themselves without the need to squander their resources on costly litigation.

More importantly, the advent of arbitration allowed trade union leaders to maintain control over their constituents by requiring all disputes be settled internally without the influence and involvement of state or federal governments, and outside the influence of the law. [The People v. National Association of Realtors (1984) 155 CA4th 578]

Thus, members of the trade union are required to settle disputes amongst each other via arbitration. Since what’s good for the goose is good for the gander, arbitration has also crept into the real estate forms published by the trade unions and now the unlicensed, ordinary citizens looking to buy or sell real estate have become subsumed into the arbitration machinery.

Editor’s note — As a matter of policy, first tuesday’s [and HANSON LAW FIRM'S] purchase agreements and addenda have never contained an arbitration provision or an attorney fee provision in an effort to reduce the risk of litigation to brokers and agents by making litigation less economically feasible for sellers and buyers along with their attorneys, and to better protect buyers and sellers from the perils of arbitration.
The real estate market has since been flooded with agents and brokers trained to reassure their buyers and sellers that initialing the arbitration provision is a “standard” practice, a custom that bears multiple benefits with no risks — that is, if any guidance is given at all. [For more information regarding erroneous real estate customs, see the November 2010 first tuesday article, Holmes v. Summer: dilatory disclosures and the damage done.]

Most homebuyers (and misguided real estate agents) know little about arbitration beyond its guise of being less costly and more efficient than litigation. Arbitration has become one of the sacred cows of real estate transactions. The myth of arbitration’s benefits has become so ingrained that it is no longer questioned — buyers and sellers do not know enough to inquire and agents are not equipped with sufficient knowledge and awareness by their brokers to advise. Thus, the virtuous view of arbitration is passed down as tradition, while widespread ignorance of its risks persists among agents.

What follows is a rigorous review and analysis of recent case decisions and common scenarios in real estate transactions that bear out the full extent of the inherently flawed and ultimately irredeemable approach to arbitration as an appropriate method of dispute resolution.

Lost right to correct a decision gone awry

The chief flaw of arbitration lies in the loss of the disputants’ right to judicial review. Parties involved in arbitration often enter this action with hopes for all the benefits offered by the American justice system and none of the costs. Rather, these naïve disputants all too often invest as much time and money as they would have in litigation, only to be scorned by a misinterpretation of the law or a host of other fatal flaws.

The chief flaw of arbitration lies in the loss of the disputants’ right to judicial review.Consider a seller who enters into a listing agreement with a real estate broker, negotiated by the broker’s listing agent. The listing agreement contains a provision calling for disputes to be submitted to binding arbitration — no judicial oversight permitted.

A buyer is located and a purchase agreement offer is submitted by another agent employed by the same broker, called a selling agent. Both the agents and the broker are aware the buyer is financially unstable and may encounter difficulties closing the transaction.

However, confirmation of the buyer’s creditworthiness and net worth are not made the subject of a contingency provision by the selling agent who prepared his buyer’s offer. More importantly, the listing agent does not include a further approval contingency provision in a counteroffer. The clearing of such a contingency would have put the seller on notice that the buyer’s financial status needed his further approval (or cancellation of the purchase agreement), if the buyer’s creditworthiness proved unsatisfactory.

When the listing agent, acting alone, submits the buyer’s offer to the seller, the buyer’s financial status is not discussed even though the listing agent was duty-bound to the seller to disclose it. The supervising broker fails to catch or correct the oversight. The seller accepts the purchase agreement offer.

Later, the buyer fails to close the transaction due to his disabling financial condition, resulting in the seller losing money on a resale. The seller discovers that the listing agent, broker and selling agent all knew of the buyer’s financial condition and failed to advise him of this fact.

The seller makes a demand on the broker and both agents for his losses resulting from the failed transaction. The seller claims the buyer’s financial condition interfered with the buyer’s ability to perform and thus was a material fact in the transaction known by the agents and broker who failed to disclose it at the time of acceptance.

The dispute is submitted to binding arbitration. The arbitrator awards money damages to the seller based on the professional misconduct of the listing agent and employing broker for failure to disclose their knowledge of the buyer’s unstable financial status on acceptance.

Further, the arbitrator erroneously issues the seller a money award against the selling agent, ruling the selling agent and the listing agent were “partners” since they shared in the fee the broker received on the transaction. Thus, the selling agent is improperly held liable as a partner of the listing agent for the seller’s money losses resulting from the misconduct of the listing agent and the broker.

The selling agent then seeks to vacate the portion of the arbitration award holding him liable as a “partner” of the listing agent, claiming the arbitrator incorrectly applied partnership law to a real estate agency and employment relationship.

Can the award against the selling agent be corrected by a court due to the arbitrator’s erroneous application of partnership and agency law?

No! An arbitrator’s award, based on an erroneous application of law, is not subject to judicial review. The requirement for judicial review of the arbitrator’s award was not included in the wording of the arbitration provision. The arbitrator acted within his powers granted by the arbitration provision, even though he applied the wrong law and produced an erroneous result.

A court of law confronted with a binding arbitration agreement without a provision for judicial review cannot review the arbitrator’s award for errors of fact or law even if the error is obvious to the court and causes substantial injustice when the court enters judgment for collection of the award. [Hall v. Superior Court (1993) 18 CA4th 427]

Unless the arbitration provision states an arbitration award is “subject to judicial review,” as in all fairness it must, the award resulting from arbitration brought under the clause is binding and final. Without judicial review of an award in an arbitration action, the parties cannot be assured the award will be either fair or correct. Currently, the prevailing arbitration provision used in purportedly “standard” purchase agreements has not yet evolved to include language allowing for judicial review.

Copyright © 2010 by first tuesday Realty Publications, Inc. Readers are encouraged to reprint or distribute this information with credit given to the first tuesday Journal Online — P.O. Box 20069, Riverside, CA 92516.

We recently EZined about an October 2010 case where the court found liability for a listing broker for failure to disclose the transaction was a short sale.  We disagreed with the court – which found liability.

Not everyone agrees with us.

For instance, Peter D from Ventura says:

Quote:  ”You are full of shit!  Fraud is fraud!!

“Any property that is under water MUST be disclosed to buyer as a short sale!  Failure of a realtor or broker to disclose that the home is under water any may be subject to short sale is wrong!!!!!!!!!

You cannot agree to sell you home for less than it’s worth….only a lender can do that!  Realtor and broker should be sued!!!!!!!!!!!

“The court ruled correctly!!!!

GO F yourself and get me off this &^%$# mailing list right now!!!!!!!!!=”       End Quote

In a recent EZine, we wrote that it was our opinion that BPOs (Broker Price Opinions) should be disclosed.

What do you think?

This one is for the birds… (we can’t make this stuff up!). According to an article in the Beaufort (SC) Gazette, two Hilton Head siblings were recently awarded $4.25M in a pet turkey lawsuit:

What began as a dispute between neighbors about pet turkeys ended Friday when a Beaufort County jury awarded two Hilton Head Island siblings $4.25 million in damages.

In 2004, defendant Ralph Dupps accused Robert and Jennifer Klippel of taking his turkeys from his Sea Pines home and setting them free. The charges were dismissed, and the Klippels sued Dupps. They claim he accused them falsely and that their wrongful arrest caused public humiliation and emotional distress that drove Robert Klippel to alcohol and Jennifer Klippel to the use of sleep aids and depression medication.

Much of the plaintiffs’ claims revolved around arguments that the turkeys shouldn’t have been on Dupps property in the first place.

The issue dates back to the fall of 2004 when, according to the Klippels, the birds began roaming their yard, defecating, creating traffic issues and scaring Robert Klippel’s son.

After reporting the turkeys to Sea Pines Security, an officer allegedly told the Klippels that Dupps had set them free. The officer offered to help catch the birds and later suggested shooting them, according to the Klippels’ complaint.

The Klippels admitted they took the turkeys to a wildlife preserve, saying it was out of concern for the birds’ safety.

When Dupps arrived home to find his birds missing, he contacted authorities….

Three law enforcement officials told Dupps no crime had occurred, Kippel attorney Richard Rosen said. Yet, Dupps proceeded to get arrest warrants for the Klippels from a Hilton Head Island judge and sought out his brother-in-law, a special prosecutor in the 14th Circuit Solicitor’s office at the time, to prosecute the case, Rosen said.

Rosen suggested to jurors that Dupps should pay $10 million in damages for “seeking revenge on the Klippels” and subsequently causing them great distress.

Our opinion: $4.25 million ought to clean up a LOT of turkey poop!

Real estate agents and talking on the phone while driving go together like milk and cookies. Just be sure California doesn’t turn it into sour milk!

Look at these fines and think again about the cost of that hands-free cell phone headset:

• Drive using wireless phone not hands free, first offense: $148
• Drive using wireless phone not hands free, for each subsequent offense: $256
• Drive using wireless device to send, read or write text: $148

According to the CHP, “The base fine for the FIRST offense is $20 and $50 for subsequent convictions. However, with the addition of penalty assessments, the total amount can be more than triple the base fine.”

And with California scrambling for any and every opportunity to add revenue to our starved coffers, you can be sure those penalty assessments will be added!

A mortgage broker who took out astronomical loans on behalf of “straw buyers” has been sentenced to a five-year term in federal prison (“the big house”) for the mortgage fraud scheme.

Viktor Kobzar, a Federal Way mortgage broker, and six other associates charged in the scheme had falsified income documents to obtain loans and then siphoned money prior to attempting to resell the homes.

According to news reports, Kobzar obtained a $1.2 million loan for a house cleaner earning less than $20,000 a year. A janitor earning $16,600 annually had his income falsified to reflect an annual income of $385,000.

Former U.S. Attorney for Seattle Jeffrey Sullivan noted that the banks extending the loans — primarily Washington Mutual and ING Bank — could have prevented the fraud by conducting “a little more due diligence.” (A janitor earning $385K a year? Ya think?)

All six defendants have been tried and sentenced; all but one is serving time in prison (an accountant who falsified income statements got probation and 200 hours of community service).

And what of Washington Mutual and ING? WaMu got eaten by Chase and ING just got gobbled up by Julius Baer Group, Ltd., a private Swiss bank.

And the American taxpayer? Still choking on the leftovers.

A “hot” market just means deferred litigation. For many.

We’re not the only ones that think so. Calls from brokers, buyers and sellers tell us: time in court is coming a broker’s (and agent’s) way.

The rising real estate market covered a multitude of sins, sins which are now becoming clear. In addition, 85% ( ! ) of recent licensees hold “conditional” licenses – meaning that they only completed 1 of the 3 “required” courses to get their license in the first place. (But they promised to complete the other 2 in 18 months…)

With so little experience and training, mistakes got made. Many were overlooked because of the profits that were made in the rising market. Now, it’s another story.

Nobody likes to “need” lawyers; but when you do, you want them to be the best.

In the event a claim is made, you need to designate specific legal representation in your E&O Policy. (Generally at the time of application or renewal.)

It’s a simple document – that can strike fear in the heart of the most experienced owner, buyer, or broker.

A Lis Pendens (Latin for: Notice of Pending Action) is recorded to advise a potential purchaser or lender of another’s claim to ownership of the real property that is adverse to the owner of record. It kills deals.

What many don’t know is that you must follow very strict rules in recording that lis pendens, or it is invalid. And if the owner brings a motion to expunge it, and wins, the owner “shall” be awarded attorney fees. In some cases, the owner can get attorney fees, even if the lis pendens is voluntarily withdrawn before the hearing on an expungement motion.