Listing Brokers: Protect yourself, protect your seller...

Earning a commission from the sale of a listing does little good if the listing broker then encounters liability for copyright violations or misrepresentation.  The revised forms offer protection against both claims, but a listing broker must understand the issues to be fully protected.  Similarly, the recent forms revisions offer protections to seller to prevent an unqualified buyer from tying up the property for a long time, but those provisions are meaningless if not used by seller.  Listing brokers need to understand all of these issues to fully protect themselves, their firm and their seller.

Avoid Copyright Infringement

Simple rule, easy to follow:  if you didn’t take it, create it or write it, don’t post it.
Whoever takes a picture, owns the picture, without the need for registration or any markings on the photo.  The person who creates an image or draws a chart, owns the image or chart.  The author of any writing is the owner of the writing.  Ownership and use rights can be given away or sold. Brokers should not, however, use any photo, graph, chart, image or written material, in advertising, without the written permission of the owner of the material.

Here is an example of how copyright infringement occurs frequently in the life of a real estate broker.

Broker takes a well-priced listing, near an elementary school, recognizing that the home would make an excellent investment or owner-occupied property.  With this, broker enters the listing in the MLS and posts on a variety of social media outlets and on her own blog.  Included in this advertising blitz is information obtained by broker in the following ways:

Broker goes to the school district website and locates a picture of the elementary school as well as a graph showing test scores for students at the school.  Broker includes both in her advertising.

Broker finds the HOA website for the property and with a quick cut and paste, copies a photo showing the entrance to the subdivision and another with children playing on the subdivision play equipment.  Broker also locates a graph illustrating the uses made of HOA dues by association leadership and another graph comparing the dues collected by this HOA to surrounding HOAs. Broker utilizes the graphs.

Broker visits the local chamber of commerce website and finds a link to an interesting article on the increasing property values in this neighborhood and a stick figure drawing of people shopping in the downtown corridor.   Broker copies the article and the drawing.
Finally, the local paper just published an article discussing the rate at which rents are increasing in this neighborhood and another article examining the average selling price of similar homes over the last ten years.  Broker copies both articles.

Broker uses the pictures in her listing and uses the pictures, the drawing, the graphs and excerpts from the articles in her social media advertising and blog.  Has she created potential liability for copyright infringement?  Absolutely!  Could she necessarily avoid liability by indicating the source of the various materials?  No.

The only way for broker to utilize, in advertising, pictures, images, graphs, charts or any writing that broker did not personally create is for broker to obtain the written permission of the creator.  It is entirely possible that broker could get written permission to use many of these copyrighted materials if she asked the owner of the materials.  Permission would need to be in writing and the writing should include instructions for broker to credit the owner of the materials.  Broker’s re-publication of the materials must then include credit to the owner of the materials in the manner specified by the owner in the written permission.  If broker cannot obtain written permission, then broker cannot use the materials as part of her advertisement.  Broker cannot use the materials in her listing, in any social media or in her blog. (There may be some situations where, with proper credit, broker can use the materials. But, unless broker is fully aware of those situations and their compliance requirements, broker should be guided by the bright line rule.)

There are people who make a handsome living from surfing the web and locating copyright infringed materials used by real estate brokers.  There are real estate brokers who have paid tens of thousands of dollars for using information just like that described in the above example.  Again, the simple rule: if you didn’t take it, create it or write it, don’t post it.  The only exception to this rule includes use of the material with written permission from its owner.

As a side note, statewide Forms 1A and 1B were recently modified to include indemnification language protecting a broker for use of photographs of the listed property, supplied by the seller.  Understand that this indemnification is only for photographs of the listed property if the seller provides those photographs and the indemnification is only as good as the seller’s financial ability is strong.  When a broker is supplied photos of the listed property by the seller with instructions to use those photographs to market the property, broker should ask the seller who took the photos.  If seller took the photos, great.  If seller did not take the photos, then broker should endeavor to gain permission from the photographer.  If it is not possible to gain permission, then broker should recognize there is risk in using the photos, even if seller supplies the photos.

Describe the Property using ONLY Seller’s warranted representations.

The Agency Law says that a real estate broker may rely, without independent verification, on representations about the property, made by the seller.  Said differently, if buyer claims that broker misrepresented the condition of the property and broker can prove that broker relied on seller’s representation, the Agency Law says that broker should have no liability even if there was a misrepresentation.  The question, then, is how does a broker insure that broker is relying only on a seller’s representations?
The boiler plate listing forms (Statewide Forms 1A and 1B) include reference to an attached listing data sheet.  Boiler plate language in the listing forms includes a warranty by seller that the information included on the listing data sheet is correct.  Every MLS across the state offers some form of listing data sheet to attach to a listing agreement before seller signs the agreement.  Broker should complete the listing data sheet, including broker remarks, before seller signs the listing agreement.  Seller should review the listing agreement and the representations set forth on the listing data sheet.  Broker should encourage seller to correct any information on the data sheet that is not correct.  Seller should then sign the listing agreement AND the attached data sheet.  Broker should advertise the property based on the information included on the seller-signed, listing agreement data sheet.  If broker wants to revise the information in the MLS printout, seller should first initial a revision to the listing data sheet.
Brokers across the state vary widely in their use of listing data sheets.  Some use the data sheet as described in this article and enjoy the maximum protection offered by the Agency Law.  Others use the data sheet but modify the MLS printout without first obtaining seller’s consent. Others fill in the data sheet after seller signs the listing agreement and may or may not get seller’s subsequent signature on the data sheets.  Still others do not use the data sheets at all.

Firms should consider implementation of an office policy requiring brokers to complete the listing data sheets before seller signs the listing agreement so that seller can sign the data sheet along with the listing agreement.  The office policy may go on to require brokers to obtain seller consent to any modifications to the listing printout.  

Proper use of the data sheets protects listing broker, firm and seller.  As much as seller’s signature on the data sheet provides broker and firm a defense to liability, seller’s purposeful review of the data sheet is likely to prevent misrepresentations caused by inadvertence or well-intended assumptions.  A lawsuit that is avoided is even better than a lawsuit that is won.

Revisions to the Financing Addendum (Form 22A) Protect Seller … But Only If Used!

Form 22A, the Financing Addendum, was recently revised to include a new paragraph 2, entitled “Loan Information”.  The “Seller’s Right to Terminate” provision is still included in the addendum, now as paragraph 3.  Both of these provisions are resources for the protection of seller’s interests in a transaction.  Listing brokers, who represent the seller and who have an Agency Law duty to take no action that is adverse or detrimental to seller’s interest in a transaction, must understand these provisions of the Financing Addendum and properly advise seller to use these provisions for seller’s protection.
The Loan Information paragraph requires the parties to designate a date on which seller may ask buyer for “Loan Information.”  The default language says ten days.  The parties can modify that number but in most cases, ten days is probably about right.  Buyer needs sufficient time to make loan application and to submit initial documentation to buyer’s lender before seller seeks buyer’s “Loan Information” by giving buyer a Form 22AL.  Upon receipt of Form 22AL, buyer has three days to respond with Form 22AP.  Form 22AP requires buyer to provide the name of buyer’s lender, the date of loan application, a checklist identifying information that buyer has already provided to buyer’s lender, a warranty that buyer has provided all information due to lender and permission for listing broker and seller to contact buyer’s lender for additional information.  With this information, seller and/or listing broker may contact buyer’s lender for information regarding the quality of buyer’s loan application.  This provision does NOT give seller the ability to terminate the agreement.  Seller has no basis for making a qualitative review of buyer’s financial information.

However, if buyer fails to timely provide Form 22AP, seller has the immediate right to give buyer “Seller’s Notice of Right to Terminate” (Form 22AR) described in paragraph 3 of Form 22A.  If buyer timely provides Form 22AP, then seller has the ability to give “Seller’s Notice of Right to Terminate” at the time identified in paragraph 3(a). 

Seller’s Notice of Right to Terminate (Form 22AR) tells buyer that buyer has three days to waive the financing contingency and if buyer fails to waive the financing contingency, then seller MAY terminate the agreement.  Seller is under no obligation to terminate the agreement and buyer has no ability to terminate the agreement based on seller’s delivery of “Seller’s Notice of Right to Terminate.”

An example is helpful to understand seller’s use of these provisions.

Closing is set for 60 days after mutual acceptance.  Buyer makes timely loan application and learns, 20 days later, that either buyer or property will not satisfy loan requirements and the loan is not available.  Buyer obtains a letter from buyer’s lender making buyer eligible for recovery of the earnest money.  Nothing in Form 22A requires buyer to notify seller that buyer’s loan application failed and buyer’s financing contingency survives to protect buyer all the way through closing and beyond.  Since buyer has another 40 days prior to closing, buyer attempts to find alternative financing and keeps seller’s property off the market for a full 60 days while buyer attempts to locate funds to purchase.  Listing broker advises competing buyers that seller’s home is off the market. Buyer is unsuccessful, the sale fails, buyer recovers the earnest money and seller, 60 days later, starts the marketing process all over again.

Had seller properly used Form 22A, the example would go like this:  Closing is set for 60 days after mutual acceptance.  Buyer makes timely loan application.  On day 10, seller gives buyer Form 22AL.  Three days later, buyer gives seller Form 22AP.  Seller uses the information on Form 22AP and instructs listing broker to contact buyer’s lender for an update.  Listing broker does so and learns, on day 20, that buyer’s loan application was declined.  Listing broker and buyer’s broker talk about the situation and buyer’s broker describes the efforts buyer is undertaking to find alternate financing.  On day 30, seller gives buyer “Seller’s Notice of Right to Terminate” (Form 22AR).  Uncertain with buyer’s ability to obtain financing, buyer chooses not to waive the financing contingency and allows three days to pass.  Listing broker advises interested, competing buyers that seller will entertain backup offers.  A competing offer is made that seller wants to accept.  Seller immediately terminates the agreement with first buyer, returns buyer’s earnest money and accepts the competing offer.

There are many different ways that Seller’s use of Forms 22AL and 22AR will play out, but it is absolutely critical that listing brokers understand the enormous value given to seller by these provisions in the Financing Addendum.  The Financing Addendum gives buyer the only contingency in the entire statewide forms system that never expires by its own terms.  If buyer complies with the financing contingency but is unable to obtain financing, buyer will recover the earnest money, even if buyer does not notify seller of the sale fail until the day of closing.  While this is wonderful protection for buyer, what does it do to seller?  It costs seller valuable marketing time and may cost seller much more than that if seller vacates the property and/or accommodates other special requests of this buyer. 

Said differently, the financing contingency places the entire burden of whether buyer will obtain financing on seller’s shoulders.  Paragraphs 2 and 3 of Form 22A allow seller to shift that burden from seller to buyer, which is appropriate.  The only objection voiced by brokers to use of paragraphs 2 and 3 for seller’s protection, is that use of the provisions creates a bad feeling in the transaction.  This “bad feeling” is based only on industry customs.  It has no grounding in the actual language of the contract.  Representation of sellers based on “feelings” is poor representation.

With the revisions to Form 22A, listing brokers across the state need to employ a new protocol for protection of seller’s interests.  Listing brokers must assist seller to understand the value in delivering Form 22AL, following up with buyer’s lender and making quality decisions, in seller’s interests, based on information learned from lender. Listing brokers must also assist seller to understand the value in delivering a Form 22AR and the benefits to seller whether buyer waives the financing contingency or not.  For their part, buyer brokers must educate buyers to expect delivery of Forms 22AL and 22AR and counsel buyers to be prepared for receipt by working diligently to obtain loan approval so that buyer will be prepared to respond to both notices.  Failure to change this industry “feeling” is failure, by listing brokers, to protect seller’s interests.  Listing brokers, who represent the seller, cannot afford to fail in the protection of seller’s interests.

Listing brokers have a duty to protect their sellers, their firm and themselves.  Adherence to the practices described in this article is essential to fulfillment of those duties.

Hotline Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week.  If you’d like to submit questions to the Legal Hotline, e-mail them to or call (800) 562-6027. Please have your NRDS number ready when you call or e-mail the Hotline with your question.  The Legal Hotline lawyer does not represent Washington Association of REALTORS® members or their clients and customers.

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