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Posted about 1 year ago

Interesting Legal Issues and Unusual Laws

This article is essentially a “did you know” of different legal issues. Below we’ll cover whose best interests a real estate broker has in mind, a legal nuance in some states that can help you avoid creditors, and some generally unusual local regulations.

Whose Agent Are You?

When people purchase or sell real estate, they often employ the services of a real estate agent. An agent is basically someone who represents the interests of someone else or who acts on your behalf. The average person is not a real estate expert, and so they’ll frequently hire someone who is to guide them through the process of buying or selling a home. Real estate brokers are a type of agent. Because they’re licensed, the public has some assurance that they’ve received a certain level of education and training.

When a piece of residential property, such as a house, is sold, it’s the seller that pays the real estate agent’s commission. However, it’s common for agents to work with other agents. Often one agent brings in the seller and another agent brings forward a buyer. When this happens, they split the commission. Most of this so far is fairly common knowledge. But what is less appreciated is what comes next.

The “listing broker” is the agent hired by the seller to put their property up for sale. This is the person doing the advertising, posting the property on the MLS, and conducting open houses.

Then there’s the “selling broker”. Despite the name, this agent is the one that takes buyers around looking at different properties. Think of this agent as the one “selling” the buyer on a particular house.

Remember though that it’s only the seller of the house, and not the buyer, that’s actually paying the commission. For this reason, technically speaking, both brokers work for the seller. Both brokers will earn their share of the commission from the seller. In fact, the selling broker is legally a subagent of the seller, another agent working on their behalf trying to get their home sold.

Think of it this way. If you’re looking to buy a house, when and how does the agent showing you around get paid? They get paid when you finally sign a contract promising to buy a house. It’s not like they earn a regular salary whether you buy or not. Also, the higher the price, the higher their share of the commission. So, while we’d like to believe that an agent working directly with a potential buyer would want to help you get the best deal, it’s actually in their own interest for you to pay a higher price.

Even in a legal sense, as a subagent, the selling broker, the agent showing properties to the buyer and walking them around town, has a fiduciary responsibility to the seller, not the buyer. This means that the real estate broker who we often assume is the “buyer’s agent” has a legal obligation to look out for the best interests of the seller.

Selling agents provide a valuable service, and buyers absolutely benefit from having a professional identify properties that they may be interested in, as well as helping them through the formalities of a sale. Still, buyers should be cautious about what information they disclose, such as the highest price they’re willing to pay.

For the record, there are true “buyer brokers” who would be required to act in the best interest of the buyer. But there is still an inherent conflict of interest, for example when it comes to negotiating a lower price for the buyer when it means a lower commission for the buyer broker. Nevertheless, it’s important when you hire an agent of any kind to understand what type of agent they are, where their legal obligations and loyalties lie, and how they’re paid.

Tenancy by the Entirety

Most people have heard of the phrases “tenants in common” or “joint tenancy”. These are different forms of concurrent ownership, meaning that two or more people share in the ownership of property. A key difference between the two is that joint tenants have a right of survivorship, meaning that upon the death of one co-owner, their share of the property automatically goes to the still living co-owner. Upon the death of a co-owner in a joint tenancy arrangement, their share would go to their heirs or other assigned party, not necessarily the person they co-owned the property with.

But there’s another form of concurrent ownership, which is unique to married couples, known as “tenancy by the entirety”. A tenancy by the entirety can only be terminated when both parties agree to do so, such as by signing a contract or getting divorced. Imagine a couple that owned a second property, separate from the home they live in. If one spouse decided to rent that second property; without the consent of the other spouse, that lease would be void. This is because, one spouse cannot act alone.

Following along these lines, tenancy by the entirety prevents a creditor of a single spouse from placing a lien or enforcing a judgment against a property so owned. As an example, if one spouse had a personal loan that they didn’t pay, the lender might try to come after their assets. But without the consent of the other spouse, the creditor wouldn’t be able to attach a lien, repossess, or force a foreclosure.

That being said, not all states allow for tenancy by the entirety. Also, in the states that do, the tenancy by the entirety can end. Most people don’t plan on getting divorced, and when it does happen, spouses often are no longer looking out for each other’s best interest.

As always, whenever legal matters arise, it’s best to seek your own counsel, as every situation is unique and exceptions may apply. The information here is only intended as entertainment in the sense that it’s “interesting”, and should not be construed as legal advice.

Weird and Unique Laws & Regulations

We’ve all come across or heard of some weird or strange laws, many of which had some rational historical reason for being originally enacted, but that no longer make sense today. The following is short a list of unusual real estate themed laws across the United States.

1. In Scranton, PA picketed (or pointed) fences are not permitted.

2. In San Francisco, CA you cannot have potted plants outdoors.

3. In New Jersey you cannot paint your house or repair your roof on a Sunday. In Hawaii, you cannot use a leaf blower on a Sunday, and in Santa Fe, NM you cannot use a lawnmower on Sundays.

4. In Walnut, CA you cannot put dirt, rocks, cement, or sand on your property.

5. In Aspen, CO it is illegal to throw snowballs onto either private or public property, including at any person on their own property. Presumably this has less to do with keeping children from having a snowball fight than with property damage and personal injury.

6. Residents of Boulder, CO are not permitted to have upholstered furniture (including couches and chairs) outside. Apparently, this has to do with local college students having developed a habit of setting such furniture on fire.

7. In Arizona, it is illegal to turn away a homeless person begging for water on a hot day. I wonder what constitutes a hot day. Can you imagine saying “sorry, it’s only 89 degrees out right now. Come back later when it hits 90.”

8. In Waldron Island, WA buildings cannot have more than two toilets. The rationale behind this law was to limit development and keep the town from getting overcrowded.

9. In Texas, any and all improvements or accessories shown to a buyer becomes their property at the time of sale. When we buy a house, we expect that fixtures like shelving and cabinets will come with the house, but this law suggests that in the Lone Star State, even family pictures on the wall or a child’s drawing could be legally transferred upon sale.

10. In Arkansas, no more than five females may live in the same property. The intention behind this law was to discourage prostitution and brothels. What about sororities and families with multiple daughters?