Reappointed by Governor Patton
On September 28th, Betty J. Kaiser was reappointed by Governor Paul E. Patton to a second term as your Kentucky Real Estate Commissioner. Mrs. Kaiser was first appointed as a Commissioner on October 1, 1997. She was elected Chairman of the Commission in November of 1998 and served until September of 1999.
Commissioner Kaiser brings many years of skill and practice with her in serving as your Commissioner. She has held her broker's license since 1959 and is currently affiliated with the Prudential, Parks & Weisberg of Louisville. Commissioner Kaiser has taught pre-license and continuing education real estate courses for the past eighteen years and was past President of the Kentucky Real Estate Educators Association. She has always emphasized the importance of education and will continue her dedication to serving the licensees and consumers. Commissioner Kaiser had this to say to the licensees: "Real estate education pays. Take advantage of approved courses and reap the many rewards."
Mrs. Kaiser's other distinctions include: two-term past Director of the Louisville Board of Realtors®, past Director of the Kentucky Association of Realtors®, past President and Woman of the Year in 1990 for the Women's Council of Realtors®, twice past Chair of the Louisville Board of Realtors® Grievance Committee, and past Chair of the Louisville Board of Realtors® Education Committee.
As you can see, with all of her knowledge and experience, the licensee population is fortunate to have Mrs. Kaiser serving an additional four years.
Congratulations Commissioner Kaiser!
Comments from the Chair
by: Sue Teegarden, Chairman
As you know from our Special Edition newsletter put out a few months ago, there were many new statutory changes put into effect by the General Assembly. The Commission is now in the process of promulgating some 28 regulatory changes to go along with those statutory amendments.
We have already held two public hearings on the proposed regulations. The Commission staff is now in the process of documenting all of the comments from those hearings to present to the Legislative Research Commission. After that, there will be another public hearing on the proposals; however, that date has not yet been set. At the conclusion of the last public hearing, the regulations should be finalized.
The Commission anticipates that most of the regulations will be in place by early to mid-2001. This October, all active licensees will receive a law manual with the statutory changes only. Then, once the regulatory changes are in place, you will receive another law manual with all of the changes outlined. Until the new regulations are in place, we must still work under the old regulations.
The public response to the regulatory process has been outstanding. We had approximately 19 licensees and others attend the public hearing on unlicensed assistants and the elimination of the 50-mile radius rule. We had twelve people attend the public hearing covering the other 20-plus regulation proposals.
This participation from the licensee community and those who deal with licensee issues is essential to the passage of "good" regulations that serve the industry and the consumers. As practitioners, you know what changes are necessary and what may or may not work. We certainly appreciate the participation we've already had and encourage all licensees to participate in any future public hearings.
We think the changes will help Kentucky licensees advance into the new century with the additional tools and resources necessary to meet the challenges of new technology and the changes in the marketplace.
From the Director's Desk
by: Norman Brown, Executive Director
OFFICE RENOVATION
If you have visited the Commission's offices lately, you might have noticed that we have been under construction. As part of the terms of our lease renewal, the Commission has been able to make several tenant improvements to our office space. We have fresh paint, new carpet, a new reception area, a remodeled kitchen, a brand new bathroom and a few, new walls.
The Commission originally moved to the Triad East building back in 1989, and we have not had any improvements since that time. The staff and the Commissioners are all excited about our newly remodeled offices and encourage all of the licensees to come in and see our new look. Stop in for a visit, I will be happy to take you on a tour.
NEW TELEPHONE SYSTEM
Something else new at the Commission is our telephone system. Our new system has the convenience of voice mail for our callers as well as a few other features to ensure better customer service.
Many of you have told us how nice it is to get a live voice on the line when you call the Commission. We agreed, and while shopping for our new system, we kept this in mind. Although we now have voice-mail capability, your first contact with the Commission will still be a live voice. If you are placed in someone's voice mail, you will always have the option of returning to the operator.
We hope that with this new system, your calls and concerns will be handled promptly and efficiently. And as always, please let us know if you have a comment or a concern.
SCANNING RENEWALS
Another new project the Commission staff has been working on is the ability to scan escrow license renewals. In years past, Commission employees have had to hand key every single escrow license renewal into our database system. It is our hope that we will have this completed for the 2001/2002 license renewal. In the long run, this should save the Commission time and will be a more accurate and efficient manner of processing the thousands of renewals received each spring.
New law manuals are being printed and should be available in about a week. The Commission will be mailing a new manual to every active sales associate and broker. The manual contains all of the new statutes which became effective on July 15, 2000. A law manual with the new regulations will be sent when the regulatory process is complete.
LICENSING NEWS
Broker Pre-License Education Requirements
All sales associates who wish to apply for a broker's license must have completed 21 semester credit hours (336 classroom hours) with at least 12 of those hours (192 classroom hours) in specific real estate courses. All applicants must also have 2 years of experience as a sales associate working at least 20 hours per week. The experience is verified by a notarized affidavit signed by the licensee's principal broker(s).
All education must be completed prior to sitting for the examination. In order to be sure that you are qualified to receive a broker's license prior to sitting for the exam, please ask the Commission to do an education documentation. This can be accomplished by forwarding a written request for the review, a $10 check payable to KREC, and copies of any transcripts or completion certificates for courses completed in real estate or elective courses through a college or university. If additional hours are necessary, the licensee will be advised.
Please do not rely on information you receive from the principal broker or a real estate school to determine your eligibility for the broker's exam. The Commission is the only entity from which you should be receiving guidance on what courses will fulfill the pre-license requirements.
If you take the test and have not completed all of the necessary hours, your test scores will be invalidated.
REVISED Reciprocal Agreement with Illinois
Kentucky and Illinois have recently reestablished a reciprocal agreement. Changes in the Illinois law last fall invalidated the previous agreement between the two states. For information on obtaining an Illinois license through reciprocity, call the Office of Banks and Real Estate at 217-785-9300.
Calling All Real Estate Educators
The Commission will sponsor its annual Real Estate Educators Conference on November 16 & 17, 2000 at the Holiday Inn Hurstbourne in Louisville. All real estate instructors, provider representatives, college real estate program directors, and continuing education personnel are invited to attend. The program is still being organized. Information will be mailed to instructors and providers in October. Educators: make plans to attend -- we have an exciting agendaplanned for you, and we hope to see you there!!!
Education, Research and Recovery Fund
Annual Statement of Income and Expenses
Fiscal Year Ending June 30, 2000
| Income FY 1999/2000 | Expenditures FY 1999/2000 | ||
|---|---|---|---|
| Exam Recovery Fee | $36,570 | Legal Services | $28,040 |
| Reciprocal Recovery | 6.930 | Investigative Services | 108,136 |
| Renewal Recovery | 610,560 | Carpool | 900 |
| Core Course | 4,170 | KY Real Estate Education Foundation | 66,496 |
| Fines | 4,170 | Postage/Parcel Delivery | 7,324 |
| Education Fines | 41,800 | Postage/Meter & Bulk | 39,111 |
| Investment Income | 71,818 | Printing State | 167 |
| Restitution from Complainants | 22,250 | Printing Vendor | 25,831 |
| Prior Year Grant Refund | 60,782 | Cassettes/Books | 2,777 |
| In-State Travel | 1,546 | ||
| Out-of-State Travel | 1,764 | ||
| Travel, Non-State | 1,096 | ||
| Subpoenas/Court Fees | 506 | ||
| Judgements | 4,565 | ||
| Subscriptions | 3,211 | ||
| Seminar Refreshments | 3,523 | ||
| College Grants/Scholarships | 269,712 | ||
| TOTAL INCOME | $856,380 | TOTAL EXPENDITURES | $555,714 |
ESCROWED LICENSEES
Avoid the pitfalls of unlicensed brokerage while in escrow
by: Lee Harris, Staff Attorney
The Commission receives numerous questions about licensees going into escrow or moving firms and then being paid a commission for deals which have already been written or are already in the works.
A licensee may legally receive his or her commission for a sale which occurred while he or she was licensed, even if the licensee goes into escrow prior to the closing of the transaction. The main precaution is that all the licensable activity must cease once the licensee goes into escrow. The licensee cannot then answer questions or attend the closing. Rather, the broker or another sales associate in the firm will have to handle the closing and any issues which arise after the escrow date.
The key to this issue is that licensees "may" be paid after going into escrow. The Commission is not saying that licensees "shall" be paid under such circumstances. As always, the listings belong to the broker of the firm and any and all payment options will be based upon the company's payment policy, written employment agreement, etc. The Commission cannot make a broker pay a licensee who has gone into escrow. It is always best to discuss the possible escrow with your broker and to come to a written understanding as to how those commission payments will be handled once the closings occur.
Some licensees choose to move firms or start their own firms while some deals are still pending and before the closings have occurred. Under this situation, it is imperative to stay within the licensing laws. The listings which you may have while at Firm A belong to the broker of Firm A. It is not appropriate to try to get your sellers to re-list with your new company. Rather, it is up to your broker whether he or she wants to release those listings, and it is up to your client whether he or she wants to move to the new firm. The licensing laws make it illegal to try to obtain a brokerage agreement knowing that there is already a valid agreement granting exclusive agency to another licensee, the broker. All that you can do is to inform your clients that you are leaving the firm. If the broker chooses not to release the listings, he or she is entitled to retain them through the duration of the listing period.
In addition, there is another instance in which it is important to obtain a written agreement regarding payment of commissions. If the broker decides to retain the listings or if there are sales outstanding which have not closed, the broker may choose to pay the sales agent a commission. This commission may be legally paid by the broker who was the broker at the time the listing was obtained. Some brokers prefer to pay the commission to the agent's new broker to be passed on to the agent. Either way is legally acceptable.
Licensees: When having consumers fill out the seller's disclosure and agency disclosure forms, suggest that they initial each line on the form instead of checking the line. This will protect you from possible discrepancies down the road if there is ever a dispute over which line was marked and by whom.
UNLICENSED ASSISTANTS
by: Lee Harris, Staff Attorney
At its 2000 session, the General Assembly made some changes to the law pertaining to unlicensed assistants. Specifically, KRS 324.030(6) now allows unlicensed assistants to give out general public information to consumers or clients so long as the assistant is supervised by the principal broker. No regulation has been passed as of yet to outline and detail exactly what "general public information" means. (A regulation has been proposed and is currently being processed through the Legislative Research Commission. The expected date of finalization is early to mid-2001.)
At this time, the Commission is advising firms that "general public information" is the information provided on a "Fact Sheet" which is made available to the public at an open house or in a sign box in the yard. The Commission's advice is this: be cautious. Advise your unlicensed assistants well. Take the calls that you can. It is still your license and you are the trained real estate professional.
In addition, the new law allows unlicensed assistants to now set appointments for licensees. Again, please be cautious and explain the parameters to your unlicensed assistants so that they will know what questions they can and cannot answer, etc.
The law is still clear, though, that only licensees can hold open houses or attend showings or solicit listings. There is a proposal in the regulation package that some of these restrictions be lifted; however, at this time, the regulations have not passed and only licensees may hold houses open or show property. We have had several calls lately which indicate that some members of the licensee community have heard that unlicensed assistants may now hold open houses, etc. This is not the case. If the regulation proposals are indeed passed, we will duly and timely inform you of those changes. Until such time, though, please be advised that unlicensed assistants must be accompanied by a licensed sales associate or broker at any and all open houses and other property showings.
We have now placed an outline of the guidelines for unlicensed assistants on our website at www.krec.ky.gov. Therefore, if you would like to print out or download those guidelines, you can do so easily and quickly. As soon as any changes are made through the regulatory process, we will certainly update the guidelines to reflect those changes immediately.
"Completed" Repairs - Any reason to disclose?
by: Stewart Prather, Counsel - Frontier Insurance Company
As more and more potential buyers elect to make their purchase contingent upon a satisfactory home inspection, the following trap arises with increasing frequency. The home inspector reports both cosmetic and structural problems. The purchasers decide to pass on the property. The homeowner advises you that they have made all repairs as needed. Certainly, the cosmetic items are corrected. You re-market the house without mention of the previous home inspection report. Of course, the seller didn't really repair the structural problems and the new buyers discover the problems. Do you have any exposure for failing to disclose what you believed to be corrected defects?
Many judges or juries will say "yes." Regardless of the eventual outcome, the way to avoid the emotional distraction and economic cost that necessarily follow any suit against you is to disclose the previous inspection. But be careful that you are not vouching that the repairs have been performed. Since you are representing the seller, you should ask permission to share the previous inspection with potential buyers. If the seller refuses, you should think twice about this listing.
Ronald T. Hurst (Harrodsburg), Case No. 99-CI-0009.
Violation: The Commission entered into a settlement agreement with Respondent Ronald Hurst, whereby Hurst stipulated to a violation of KRS 324.160(1)(e) for failing to disclose his personal interest in a property he was selling to his clients.
Disposition: He agrees to give up his grandfather status and to attend the required continuing education from now on. In addition, he agreed to pay the Complainants $5,000 in restitution and to accept a formal reprimand from the Commission.
Tina Goble-Hatfield and Robert Mark Hatfield (Morehead) Case No. 99-0084
Violation: The Commission adopted the Hearing Officer's Findings of Fact and Conclusions of Law in this matter, finding Tina Goble-Hatfield and Robert Hatfield in violation of KRS 324.160(1)(b) for making a misrepresentation to a consumer about the restrictions in a subdivision they were selling; KRS 324.160(1)(f) for receiving compensation for real estate brokerage from someone other than the principal broker of the firm; 201 KAR 11:400 for failing to provide appropriate agency disclosure forms; and 201 KAR 11:121, Section 1(4) for failing to act in accordance with a fiduciary standard towards a client. Robert Hatfield was also found in violation of KRS 324.160(3) for failing to adequately supervise his sales associate while acting as managing broker.
Disposition: The Commission ordered the licenses of each suspended for a period of thirty (30) days and ordered each to pay $50.00 in restitution to the Complainant.
Linda Combs (Jackson) Case No. 99-0136
Violation: The Commission entered into a settlement agreement with Combs, whereby she stipulated to a violation of KRS 324.360 for failing to retain a copy of a completed seller's disclosure form for a sale for which she received compensation.
Disposition: She agreed to pay restitution to the Complainants in the amount of $3,000.
James Beavers (Louisville) Case No. 99-0193
Violation: Beavers was practicing real estate without a license. The Commission revoked Beavers' license in 1999. Since then, the Commission has discovered that Beavers is continuing to practice real estate in this state without a license.
Disposition: The Commission has obtained an injunction against Beavers' unlicensed brokerage in the Jefferson Circuit Court, Case No. 2000-CI-04278. Anyone who is contacted by Beavers regarding brokerage activities or knows of any unlicensed brokerage by Beavers should report that conduct to the Commission immediately.
Julian Bohannon (Shelbyville) Case No. 99-0124
Violation: The Commission entered into a settlement agreement with Bohannon, whereby he stipulated to a violation of KRS 324.160(3) for failing to adequately supervise his sales associate.
Disposition: He agreed to attend twelve hours of continuing education in the first year, including the Kentucky Core Course, six hours of continuing education in the second year, including two hours of ethics and two hours of broker management education; and six hours for each of the three following years. Bohannon further agreed to allow the Commission's investigator to review any of the records in his firm, on a random basis, for a period of twelve months.
Norma J. Roberts (Shelbyville) Case No. 99-0124
Violation: The Commission entered a settlement agreement with Norma Roberts, whereby she stipulated to failure to violation of 201 KAR 11:040 for failing to specifically set forth the exact manner of financing in a purchase contract.
Disposition: She agreed to attend the Kentucky Core Course and a contract course, including ethics. She also agreed to "partner" with another licensed agent or broker so that licensee could review all purchase and listing contracts for six months to ensure that all necessary provisions are included. She also agreed to allow a Commission investigator to review all of her records for a period of twelve months.
Errors and Omissions Update
by: Cindy Rice Grissom, Vice President -Frontier Insurance Company
Frontier Insurance Company (Frontier) and Clarendon Insurance Company (Clarendon) have joined together to offer an improved real estate errors and omissions (E&O) program in Kentucky. Frontier's experience in the mandated E&O programs and its excellent claims service (specializing in real estate E&O) combined with Clarendon's strong financial performance and ratings provide licensees with a superior program for Kentucky.
Although Kentucky does not require an AM Best rating of "A", Frontier offered the cut-through endorsement issued by Clarendon to the Kentucky Real Estate Commission at no additional cost to its licensees. Cut-through endorsements are commonly used in the property and casualty business to permit a company with less than an "A" rating to utilize the "A" rating of the reinsuring company. The endorsement attaches to the policy and can provide comfort to the insurance buyer.
This practice is recognized in the industry and utilized in many jurisdictions. Both Frontier and Clarendon are admitted to write property and casualty insurance in Kentucky.
Kentucky's premium amount of $68.75 per year per licensee is one of the least expensive mandated group programs offered. Eleven states have mandated programs for real estate licensees. The lowest qualified bid in the two states that bid during 2000 was $467 ($233.50 per year) in Alabama and $195 ($97.5 per year) in Tennessee. The Kentucky Real Estate Commission has successfully obtained a quality program at an excellent price for its licensees. For $68.75, licensees who choose the group coverage are getting a real bargain.
The Commission and the KAR legal hotline receive numerous calls regarding multiple offers. There seems to be confusion among licensees as to how to handle multiple offer situations. Here are a few basic guidelines:
1. Always, always present all offers as soon as possible after receipt. Do not under any circumstances wait until the seller has accepted or countered one offer before presenting a second offer. Imagine your seller's horror if he or she were to accept an offer for $100,000 only to find out that an offer for $120,000 was waiting in the wings!
2. It is important to be especially careful when there are multiple offers and one of them is your buyer and one is another agent's buyer. If you do not present the offer as timely as possible, suspicion will be raised as to whether the other agent's contract was held back because of the possibility of a dual commission payment. 3. Let the seller decide which offer to choose. While you are there to offer advice as a professional, it is important to allow the seller to choose the offer he or she ultimately desires, especially in a multiple offer situation.
4. If you cannot get to the sellers' home or office immediately, call or fax them to let them know that another offer has come in and that they need to consider it before making a decision on prior offers.
5. Make sure that the seller only acts upon one offer in a definitive way. For instance, a seller should not counter two of the offers, as both buyers may accept the counteroffer. The seller will need to counter or accept one offer and either reject or hold off on all other offers.
If your birthday falls in the months of April, May and June, you are required to complete the Kentucky Core Course by December 31, 2000. The Kentucky Core Course is the mandatory six-hour continuing education course required of all active licensees once every four years and of those licensees who are reactivating from escrow. Remember that when you take the Core Course, it fulfills your continuing education requirement for that year. All other active licensees who are subject to the continuing education requirements are required to complete six hours with at least two of those hours in an approved legal topic. (The two hour law requirement will increase to three hours effective January 1, 2001.)
A list of continuing education providers and Core Course classes is available on the KREC website (www.krec.ky.gov) or through Fax-on-Demand at 888-KREC-FAX. Don't forget that the deadline for completion of continuing education is December 31, 2000.
PREVENTING NEW SOFTWARE FROM CAUSING LICENSE LAW DIFFICULTIES
by: Jeff Blair, General Counsel
Bill Gates has stated that the internet is a "tidal wave" which will revolutionize modern communication and industry. Other experts state that the internet is a "revolution not an evolution". It has been predicted that 40 million households will have internet access by 2002. Many real estate professionals believe the internet is revolutionizing the real estate industry. However, regardless of this technology, real estate professionals must still be aware of certain issues such as fiduciary duties to clients and proper supervision of sales associates. This article will briefly address some of those issues and list preventive steps to avoid license law difficulty.
The wide utilization of personal computers and the internet have brought great advances to the real estate industry. Greater efficiency is occurring throughout real estate transactions due to the "computer age". The "computer age" has also sparked an explosion in software designed to help you sell real estate better. I recently attended a real estate conference where numerous software programs were demonstrated. One program was designed to provide consumers and buyers' agents detailed information about listed property. One question asked by the software program was: "Are there any other pending offers and how much are these offers for?" Once the licensee answered this question, this information was to be provided to consumers and licensees representing consumers via the internet.
In an attempt to better market real estate, the computer program "set up" the listing agent. If the listing agent provided the answer to the question, the listing agent would likely violate fiduciary duties to the seller. Further, the licensee may violate ethical codes if he or she is a member of an industry trade group.
The message here is to have your company attorney review software prior to purchase. The attorney may locate legal issues which should be considered. Certainly no one wants to spend money on a software program and later find out it "sets up" the company associates to violate the law. Issues involving a principal broker's duty to adequately supervise associates are also relevant when new software is purchased.
This article is not intended to deter use of new computer software. Rather, it is intended to help your company avoid the unnecessary expense (and possibly a license law complaint) that could arise if software is purchased without a full review of its applications.
By taking the simple precaution of a legal review prior to software purchase, you can prevent the "tidal wave" from getting your real estate license "all wet."
The Commission will be closed on the following days
| November 7, 2000 | Election Day |
| November 10, 2000 | Veterans Day |
| November 23 & 24, 2000 | Thanksgiving |
| December 25 & 26, 2000 | Christmas |
| January 1 & 2, 2001 | New Years |
The Seller's Disclosure & Agency Disclosure forms are being revised by the new regulations. Please keep this in mind when you are printing new forms for your company. You should not print more than a six to nine month supply. We anticipate the new forms being completed around June of 2001. The new forms will be available on our website and through our fax-on-demand system. You will be notified when the new forms become mandatory.
