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Volume I – Holding Yourself Out To The Public
What is this topic about?
Holding Yourself Out to the Public is about how you make the public aware of your services. To do that, you have to advertise. Real estate advertising is highly regulated by the Real Estate Agency. There are a number of state statutes affecting real estate advertising. These are covered in the Statutory Provisions Affecting Advertising section of this topic. The administrative rules that implement these statutes are explained in the Administrative Rules Affecting Advertising section.
Advertising by real estate professionals involves a lot more than just knowing the applicable statutes and rules. Agents have to understand the difference between misrepresentation and Puffing. There are rules and practices that apply to Inducements, Business signs and using the Internet to advertise. Using CMAs and BPOs is part of Holding Yourself Out to the Public as a real estate professional.
Everyone involved in real estate has to worry about Fair Housing laws when they deal with the public. Fair Housing is discussed in the Fair Housing section of this topic. Telephoning potential clients and customers is also part of Holding Yourself Out to Public. You can find an explanation of telephone solicitation rules in the Cold Calls section.
- Statutory Provisions Affecting Advertising
- Administrative Rules Affecting Advertising
- CMAs & BPOs
- Fair Housing
- Making Cold Calls
Advertising doesn’t just mean putting your listings in the newspaper. Advertising, according to state administrative rule, “includes all forms of representation, promotion and solicitation disseminated in any manner and by any means of communication for any purpose related to professional real estate activity.”
The administrative rule makes it pretty clear everything you do as an agent that involves a member of the public is advertising. From your business card to your office sign to your email signature, to what you say about your competitors, it’s all advertising. Hunting for prospective clients, whether buyers or sellers, involves advertising even if all you do is call someone on the telephone.
What all this means is you have to have advertising rules and regulations down pat so you can conduct your business without worrying about violating some obscure rule or regulation. That is the object of this section.
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Statutory Provisions Affecting Advertising
Oregon Revised Statute (ORS) 696.020: A license is required to conduct professional real estate activity, including advertising. License law statutes and rules apply to personal transactions by licensees.
Oregon Revised Statute (ORS) 696.020 prohibits engaging in, among other things, advertising real property without having a valid real estate license. At first blush, this provision of state law would seem to affect real estate licensees very little. The statute, however, can cause considerable trouble if you miss a license renewal or change offices. If you miss a renewal, or if there is a gap between when your license is turned in and re-issued when changing offices, you become an unlicensed person until your license is re-issued. If you have any ads running or otherwise hold yourself out as an agent during that unlicensed period, you will have violated ORS 696.020. Your own ads can become evidence of unlicensed real estate activity.
Another way ORS 696.020 affects advertising is by imposing license law duties, including those that apply to advertising, to personal transactions. With limited exceptions discussed in the administrative rule section of this topic, advertising to sell your own home is no different for rule violation purposes than advertising to sell your clients home. That means being just as cautious with your advertising, and what you say to people, when dealing on your own behalf as when dealing on behalf of others. In fact, it might be a good idea to be more cautious because of the self interest involved.
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Oregon Revised Statute (ORS) 696.200: Brokers, unless associated with another broker, must have a place of business designated by a business sign in the broker’s registered business name under which the real estate licensee conducts professional real estate activity.
Oregon Revised Statute (ORS) 696.200: The statute that requires real estate brokers and organizations to maintain a place of business, also affects advertising rules. Not only do brokers and companies have to have a place of business but they must designate that place by a sign bearing the registered business name under which the real estate licensee conducts professional real estate activity.. Business signs are mandatory under Oregon real estate law. When your place of business changes, you must notify the Real Estate Agency, which can be done online here. In addition to notifying the Agency, the broker must physically remove their office signs. Licensees cannot use a name on a business sign other than their registered business name under which the real estate licensee conducts professional real estate activity.
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Oregon Revised Statute (ORS) 696.301(1): Misrepresentations or false promises, in advertising or otherwise, are grounds for discipline.
Oregon Revised Statute (ORS) 696.301: The statutory provision under which the Real Estate Agency disciplines licensees, is by far the statute with the most effect on advertising rules. There are fifteen separate provisions of ORS 696.301. Two of those 15 have a direct bearing on advertising.
ORS 696.301(1) makes material misrepresentation and false promises license law violations.
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Oregon Revised Statute (ORS) 696.301(4): Misleading or untruthful advertising of any kind is grounds for discipline.
ORS 696.301(4) makes knowingly or recklessly published materially misleading or untruthful advertising a direct license law violation. Together, these two statutory provisions form the underlying “honesty” premise that supports the administrative rules that govern how real estate licensees advertise property and hold themselves out to the public. Administrative rules affecting advertising is the next subject in this topic.
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Administrative Rules Affecting Advertising
OAR 863-015-0125(1): Defines “advertising.”
The definition of advertising set out in OAR 863-015-0125(1): includes “all forms of representation, promotion and solicitation disseminated in any manner and by any means for any purpose related to professional real estate activity, including, without limitation, advertising by mail; telephone, cellular telephone, and telephonic advertising; the Internet, E-mail, electronic bulletin board and other similar electronic systems; and business cards, signs, lawn signs, and billboards.”The list contained in the rule is not exclusive because “advertising” includes “all forms of representation, promotion and solicitation disseminated in any manner and by any means of communication for any purpose related to professional real estate activity.” In short, if you are making information about property, or even yourself or your company, available to the public, to a member of the public, or even to other agents, you are advertising. For instance, your remarks in the MLS data are considered advertising.
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OAR 863-015-0125(2): Advertising by a licensee must, in process and substance, meet five specific criteria.
OAR 863-015-0125(2): There are five specific criteria that apply to all real estate advertising. They are: (a) identity of ad as that of a licensee; (b) truthfulness; (c) correct license status (if used); (d) correct expertise (if used); and (e) property owner”s permission. These five criteria will no doubt result in unwritten interpretations as time goes by. For that reason, it is wise to look to the underlying purpose of these rules when trying to decide what may or may not be allowed. That purpose is to prevent the public from being deceived or mislead when dealing with real estate licensees. According to Oregon courts, any statement by a licensee in any form is a violation of license law if the statement is “of such a character as reasonably to induce any person to act to his damage or injury.”
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OAR 863-015-0125(3): When a licensee includes their name in advertising, they must use either their licensed name or a common derivative of their first name and their licensed last name.
OAR 863-015-0125(3): Subsection (3) in the latest version of the advertising rule attempts to clarify the identity requirement by demanding that advertising that includes the licensee’s name use the licensed name or the licensed last name and a “common derivative” of the first name. Licensed names can be verified by doing a licensee search on the Real Estate Agency Website at: http://outside.rea.state.or.us/weblookup/ Using anything other than the name found on the Real Estate Agency website, because that is what they have as your “licensed name,” can cause you trouble. The narrow exception is that you may use a “common derivative” of your first name. For instance, “Bob” instead of “Robert” or “Rich” instead of “Richard.” Nicknames probably aren’t going to qualify as “common derivatives” of the first name, and therefore can be used only with the entire licensed name.
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OAR 863-015-0125(4): The licensed name or registered business name of the principal broker, sole practitioner or property manager must be prominently displayed, immediately noticeable and conspicuous in all advertising.
OAR 863-015-0125(4): Subsection (4), the latest version of the advertising rule, requires that the principal broker’s, sole practitioner’s or property manager’s licensed or registered business be “prominently displayed, immediately noticeable and conspicuous in all advertising.” This rule has taken the place of the never implemented rule that the licensee’s name had to be smaller than the principal broker’s. That rule- often called the “font rule” – was intended to take effect in March of 2008. It’s purpose was to prevent licensees associated with principal brokers from advertising as if they were independent brokers with their own businesses. The new rule abandons the legally questionable and impractical font rule in favor of demanding prominent, immediately noticeable and conspicuous display or the principal broker’s licensed name or registered business name. Almost all existing advertising by licensees meets this standard.
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OAR 863-015-0125(5): With limited exceptions, all advertising must be submitted to the licensee’s principal broker and approval must be obtained prior to release. Licensees must keep a record of the approval and make it available to the Real Estate Agency upon request.
OAR 863-015-0125(5): The latest version of the advertising rule requires licensees to subject all advertising, except where the licensee is selling their own unlisted property, to their principal broker for approval prior to release of the ad. The rule places a temporal requirement on advertising by demanding broker review and approval prior to release. In addition to the review and approval prior to release requirement, the rule requires licensees to keep record of the approval and make that approval available to the Real Estate Agency upon request. An approval form brokers can sign, date and give to licensees should be required, as are some record keeping changes so that advertising approval prior to release can be proved to Agency investigators upon request.
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OAR 863-015-0125 (6): With limited exceptions, a principal broker must review the advertising of associated brokers and property managers and is responsible for all advertising approved by the principal broker that bears their licensed name or registered business name.
OAR 863-015-0125(6): This provision incorporates the vicarious liability for principal brokers provision announced in the last version of the advertising rule with the review and approval requirements. Except where an agent is selling their own property and has not listed it with the principal broker, the principal broker is “responsible for all advertising approved by the principal broker.” The principal broker is required to review all advertising. This rule creates direct vicarious license law liability for content of all agent advertising. How the Real Estate Agency will use this new vicarious liability provision is not clear. It is critical to have processes and procedures in place to ensure compliance with the strict advertising review laws and rules when it comes to advertising.
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OAR 863-015-0125(7): A principal broker may, in writing, delegate supervisory authority and responsibility for advertising originating in a branch office to the principal broker managing the branch.
OAR 863-015-0125(7): A principal broker may delegate “direct supervisory authority and responsibility” for branch office advertising to the principal broker who manages the branch. The delegation must be done in writing. This provision allows the principal broker who registers the business name to delegate responsibility for the advertising done in branch offices if that responsibility is assigned to a principal broker who manages the branch. No such delegation would be possible if the branch is not managed by a principal broker.
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OAR 863-015-0125(8): A licensee associated with a principal real estate broker may advertise property owned by the licensee for sale, exchange or lease option, if they don’t list the property with the principal broker, the advertising states the owner is a licensee and they follow all other applicable real estate laws and rules.
OAR 863-015-0125(8): Subsection (8) of the latest version of the advertising rule contains the limited exceptions to the principal broker review and approval rules set out in subsections (5) & (6). No review or approval is required if a licensee is advertising their own property for sale, exchange or lease option, as long as the property is not listed with their principal broker. Additionally the advertisement must state that the owner is a real estate licensee and comply with all other applicable license law provisions (e.g. be truthful and not misleading). If the property is listed with the principal broker, all advertising, even by its licensee owner, must be reviewed and approved.
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OAR 863-015-0125(9): Advertising in electronic media or by electronic means must meet three specific requirements including that the first page of such advertising contain the licensed names required under the advertising rule.
OAR 863-015-0125(9): Electronic advertising has been subject to separate rules for many years. The latest version of the advertising rule brings back some of the old electronic advertising rules. Advertising in “electronic media” and by “electronic communications” must not only conform to the other provisions of the advertising rule, but must also have on the first page: A. The licensed name as required under subsection (3); B. The licensed name or registered business name of the principal broker, sole practitioner or property manager; and C. A statement that the licensee is licensed in the State of Oregon.
Sponsored links, which are paid advertisements located on search engine result pages, do not have to meet these three requirements as long as the first page following the link complies. In plain English that means that you don”t have to have name, rank and serial number on the link to your webpage that comes up on REALTOR.com or your local MLS when consumers are searching the web, but you do have to have it on the first page that comes up when the consumer clicks the link and goes to your webpage. Emails get an exception from the “first” page requirements as long as the “initial communication” contains all the required information.
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OAR 863-015-0125(10): Advertising may not guarantee future profits from any real estate activity.
OAR 863-015-0125(10): The advertising rule contains a provision that says “no advertising may guarantee future profits from any real estate activity.” It is not clear why this provision was included or its exact reach. “Guarantee” is an inexact term with a number of meanings. As an example, something like: “You will make a million dollars on this deal,” is probably the type of expression at which the provision is aimed. Whether this provision of the advertising rule will reach more conduct than “truthful and misleading” remains to be seen.
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OAR 863-015-0125(11): In order to advertise using the term “team” or “group” a licensee must meet six additional requirements.
OAR 863-015-0125(11): The last provision of the advertising rule deals with advertising using the term “team” or “group.” The rule is permissive in that a licensee may use those terms if six conditions are met… The first attempts to enforce business license and trademark regulations by demanding that a license may not unlawfully use a trade name or be deceptively similar to a name under which someone else is lawfully doing business. It also requires that the team or group include at least one person with a license; that the licensed members are all associated with the same principal broker or property manager; that licensed members use their licensed names as required under subsection (3); that if unlicensed persons are named, their lack of license be stated and those that are licensed also be clearly stated; and that the advertising comply with all other laws and rules.
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Whether an agent’s statements about the property are of such a character as to “reasonably induce” someone to act to their detriment is the key to understanding false advertising claims. Part of that understanding is the difference between misleading facts and “puffing.” Puffing is said to be “sales talk.” That is, an expression of opinion by a sales person about the product they are selling. At common law, it was thought that no reasonable person, considering the source, would rely on a sales person’s opinion. Puffing was, therefore, not actionable as misrepresentation or false advertising.
Modern real estate practices limit the value of the “puffing” distinction. Statutory duties requiring honesty to all parties have seriously undermined “puffing” as a defense to misrepresentation claims. Agents who represent buyers are not engaged in selling at all, so “puffing” is not involved when a buyer”s agent is talking to the buyer. There are also Fair Housing laws that limit the use of puffing in advertising. Click Here for a detailed explanation of Fair Housing laws.
On the listing side of the deal, it is still important to distinguish fact from opinion, but whether something is “truthful and not misleading” is measured by its effect on potential buyers, not whether it is just factually correct. For example, consider the following ad language: “Great five acres, 20 miles from town. Modern three bedroom house in charming landscaped setting.” There are some facts in the ad (five acres, 20 miles, three bedrooms, landscaped) and some opinion (great, modern and charming). This manner of advertising is susceptible to false advertising claims because it qualifies fact with opinion.
Qualifiers do not negate the over-all impression left by the ad. It is the overall impression people rely on, not ambiguous qualifiers like “charming.” In fact, the ambiguity of the qualifiers actually hurts because if the overall impression is misleading, the qualifiers are evidence that it was deliberately so. If the property turns out to be 4.6 acres of mostly wetland 31 miles from town with a cheaply remodeled twenty-years-old house that has new bark dust in the flower beds that border the freshly mowed crabgrass yard, the qualifiers just aren’t going to help. If you want to “puff,” don’t mix opinion and fact, just offer opinion. For example: “Nice small acreage country charmer.” After all, all you want out of advertising is a call to request details.
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Another place the general “truthful and not deceptive or misleading” rule applies is with “inducements.” Inducements, like free home warranties, discounts, trips, merchandise and so on, given to encourage listing property or utilizing other broker services are common in the industry. Inducements continue, however, to have a bad name. In fact, many Oregon brokers appear to believe they are illegal when in fact they are not. As long as the inducements are truthful and are not misleading – the consumer actually gets whatever is offered – and they do not run afoul of commission-sharing rules they are not illegal. Commission Sharing is covered under the main topic Working With Clients.
A form of inducement that is prevalent in the market is offering a selling bonus to the selling agent. Such bonuses do not violate commission sharing rules because the recipient is licensed. Truthfulness is usually not a problem with selling bonuses as long as there are no hidden criteria for collecting the bonus. Selling bonuses do, however, raise disclosure issues for the selling agent. Because the agent is receiving a bonus in money as a result of their representation, the agent must disclose the bonus to their client. The duty to disclose a bonus is a function of the duties of loyalty and disclosure agents owe their principal. Click Here for a detailed discussion of agency duties.
Normally, the truthfulness requirement doesn’t cause any problems with inducements. The exception is not including the full terms of the inducement in advertising. To meet the truthfulness requirement, the consumer must be able to tell from the ad what action is required to receive the inducement. Take, for instance, an ad that says: “List your house with us and we’ll send you to Hawaii.” On its face, there is nothing wrong with the ad. If, however, there are strings attached such as the property must be worth more than $500,000 or must sell in-house or for full price, truthfulness will require the ad contain the qualifying conditions or at least some warning that additional terms apply.
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As mentioned earlier, advertising rules also cover business signs. License law requires every licensee who is not associated with another broker to have at least one place of business and designate that place with a sign containing the name under which the broker is licensed. For years, signage was closely regulated by administrative rule. However, advertising rules have since deleted these provisions. Nevertheless, it is still good business practice to have signs located on or near the main entrance of the office or on a wall or window immediately adjacent to the entrance. If located in a general office building, the sign should be on the individual office door or, if there is no door, displayed on the desk or prominently within the area used by the broker.
Being forced by real estate license laws to have a business sign doesn’t give real estate licensees any right to ignore or violate local zoning or sign ordinances. This can sometimes be an issue, especially when it comes to real estate office signs for offices operating out of the broker”s home. Many zoning and sign ordinances prohibit business signs in residential zones. If that is the case, a licensee may find they are unable to have a home office because they cannot meet the signage requirements of license law without violating local zoning or sign ordinances. When determining the location of your business, it would be considered a best practice to check with your local zoning codes related to signage to ensure compliance is possible.
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Using the Internet
It is a violation of OAR 863-015-0125(2)(e): to advertise properties listed for sale by other licensees without that licensee’s written permission. Fortunately, the authorization can be contained in MLS, or other cooperative service, rules. Where MLS rules are the source of the permission to advertise, the advertising must be consistent with the MLS rules. Because of the truthfulness requirement, a licensee cannot alter any informational part of another licensee’s listing. Formatting changes, however, are allowed under state advertising rules if the information itself is still accurate and not misleading. Formatting may, however, be subject to separate MLS rules.
Modification of listing data is an issue because of Internet advertising. Remember, all of the rules concerning identification and truthfulness apply to Internet advertising. It is not necessary to identify yourself as a licensee in every electronic exchange of information when engaged in an ongoing exchange (i.e. ongoing e-mail conversation) once the identification is made as long as the initial communication included the required information.. A licensee with their own webpage can provide the required company information by having a clearly identified link to their real estate business’s homepage.
A licensee who owns or operates a site on the Internet is responsible for the accuracy of the information displayed. The licensee owner of the site must periodically review the advertising and marketing information displayed to make sure it is current and not misleading. “Current” depends on whether more current information is “reasonably available.”
Electronic display of property information raises a number of issues unique to the medium. Photographs, for instance, once in digital form, can be edited or enhanced. Editing and enhancement of digital photographs that materially changes the appearance of the property or changes or deletes significant features of the property is considered misleading. Similarly, the coding and programming used to display information on the Internet cannot, by “meta-tag” or otherwise, be used to misdirect Internet traffic from another site to your own. Virtual tours that feature the inside of the house should be used only with the written permission of the owner and the tour should be designed to protect the privacy of the owners and prevent misuse by the public. Click here for a sample permission form.
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Digital Millennium Copyright Act (DMCA)
The DMCA was passed in 1998 and criminalizes production and dissemination of technology, devices, or services intended to circumvent measures for digital rights management (DRM). Additionally, it makes it illegal to circumvent an access control, whether or not there is actual infringement of any copyright itself. The practical consequences for those that own their website is they can be held liable for infringement that occurs on your website, whether you knew of the infringement or not. As a result, it’s critical that you become educated and protect yourself as it pertains to copyright infringement. The bottom line is that no one is permitted to use someone else’s images without permission.
To get more information on the DMCA and learn about the “Safe Harbor” and best practices, visit the DMCA Toolkit here.
CMAs & BPOs
ORS 696.010(7) defines CMA. ORS 696.294 defines “Letter Opinion,” commonly known as a Broker Price Opinion (“BPO”).
For many years, “competitive market analysis” (CMA) and “letter of opinion” or “broker price opinion” (BPO) were terms of art used to describe the analysis and opinion used by real estate brokers when establishing a listing price. Competitive market analysis was intended to convey the idea that what was being analyzed was the housing market to determine a competitive listing price. Broker price opinion was used to distinguish the work of brokers from that of appraisers.
Eventually, “competitive market analysis” and “letter opinion” (BPO) came to be defined in statute. According to ORS 696.010(7), “Competitive market analysis” means a method or process used by a real estate licensee in pursuing a listing agreement or in formulating an offer to acquire real estate in a transaction for the sale, lease, lease-option or exchange of real estate. The objective of a competitive market analysis is a recommended listing, selling or purchase price or a lease or rental consideration. Competitive market analysis may include but is not limited to an analysis of market conditions, public records, past transactions and current listings of real estate.” A “letter opinion,” as defined in ORS 696.294, is “a document that expresses a real estate licensee’s conclusion regarding a recommended listing, selling or purchase price or a rental or lease consideration of certain real estate and that results from the licensee’s competitive market analysis.”
Administrative rules have been used to flesh out these statutory definitions. All is thought necessary to distinguish a broker’s opinion on “price” from an appraiser’s opinion of “value.” As the real estate lending market heated up in the 1990’s, banks were able to successfully lobby Congress to loosen appraisal rules for residential lending. The federal rule change caused something of a legal dust-up between lenders and appraisers that untimely lead to an exception being carved out of the (brokers do price opinions and appraisers do value opinion) paradigm. This compromise and the traditional rules that distinguish BPO’s from appraisals are now found in a single administrative rule.
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OAR 863-015-0190 contains the express legal authorization for a real estate licensee to provide competitive market analysis and letter opinions in the normal course of their business.
OAR 863-015-0190 contains the express legal authorization for a real estate licensee to provide competitive market analysis and letter opinions in the normal course of their business. The authority, however, is expressly limited to the “pursuit of a listing, to assist a potential buyer in formulating an offer or to provide a broker’s price opinion, whether or not done for a fee”
The rule specifically declares that the term “value” when used in a CMA or letter opinion is not intended to mean or imply “value” as used in appraisals. To make certain there is no confusion, the rule requires that a CMA or BPO be in writing and contain the following: “(a) A statement of purpose and intent; (b) A brief description of the property; (c) The basis of reasoning used to reach the conclusion of value including the applicable market data and/or capitalization computation; (d) Any limiting conditions; (e) A disclosure of any existing or contemplated interest of the licensee in the subject property; (f) The licensees signature and the date it was prepared; (g) A disclaimer that, unless the licensee is also licensed by the Appraiser Certification and Licensure Board, the report is not intended to meet the requirements set out in the Uniform Standards of Appraisal Practice; and (h) A disclaimer that the competitive market analysis or letter opinion is not intended as an appraisal and that if an appraisal is desired, the services of a competent professional licensed appraiser should be obtained.”
CMAs and BPOs have become an ordinary part of professional real estate activity. If the directives of OAR 863-015-0190 are followed, there are few problems. When the requirements of the rule are not followed, however, the result can be violations of real estate license law. It is, for instance, a violation of ORS 696.301(8) to accept employment or compensation “for the preparation of a competitive market analysis or letter opinion that is contingent upon reporting a predetermined value or for real estate in which the licensee had an undisclosed interest.” But, far and away the most common violations result from agents doing CMAs and BPOs for purposes other than in “pursuit of a listing, to assist a potential purchaser in formulating an offer or to provide a broker’s price opinion in pursuit of a listing, to assist a potential purchaser in formulating an offer or to provide a broker’s price opinion.”
A common way in which the limitation placed on the authority to do CMAs and BPOs is to do them for a home owner challenging a property tax assessment or a lawyer in a divorce case or other real property action. It is not that CMAs and BPOs cannot be used in such context; rather it is that often the agents hired forget they cannot offer opinions of value and must use their CMA and letter opinion authority only in pursuit of a listing or to aid a buyer in making an offer. A seller who received a letter opinion in contemplation of selling the property might later use the letter to contest a property tax assessment, but the agent could not provide the letter for the purpose of contesting the property tax assessment. It is for this reason, that every letter of opinion should be accompanied by a cover letter that explains its purpose.
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Lending and Default Collateral Analysis
Recently, narrow exceptions have been carved out of the rule that CMAs and Letters Opinion can only be done for the purpose of pursuing a listing or to aid a buyer. The exceptions, found in subsection (4) of OAR 863-015-0190, deal with what are called “lending collateral analysis;” or “default collateral analysis.” “Lending collateral analysis” means a real property market analysis where the purpose of the analysis is for use by a lending institution in support of a loan application. “Default collateral analysis” means a real property market analysis where the purpose of the analysis is for use by a lending institution in considering its actions with respect to a loan in default.
Lending collateral analysis and default collateral analysis are creatures of Federal law. They were originally exceptions to the appraisal requirements for Federally-backed real estate mortgages. Such analyses are not appraisals and under state or Federal law can be used only for the internal purposes of a financial institution when the loan is less than $250,000. OAR 863-015-0190(4) allows Oregon real estate licensees to do a lending collateral analysis or a default collateral analysis provided the analysis is for the internal purposes of a financial institution when the loan is less than $250,000.
Lending collateral analysis and default collateral analysis are often confused with CMAs and BPOs. They are, however, not the same thing. Basically, the Real Estate Agency has simply incorporated state and Federal appraisal law exceptions into real estate license law and grafted them onto the existing CMA/BPO rules. The appraisal exceptions, however, apply to anyone employed by a financial instruction to do such analysis for internal use.
Having a real estate license is irrelevant to the appraisal exceptions that allow financial institutions to use lending collateral analysis and default collateral analysis instead of appraisals. This explains why, unlike CMAs and BPOs, there are no real estate license law provisions that dictate the contents of such analysis when done by a real estate licensee. The administrative rule simply allows licensees to do what anyone employed by a financial institution can do. It is for that reason that banks often deal individually with agents and do not involve the agent’s broker or company. Agents involved in providing such analysis should be aware, however, that they must disclose their involvement if they later list or represent a buyer in the purchase of the property.
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Federal Statutes Affecting Fair Housing
Title VIII of the Civil Rights Act of 1968 prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status, and handicap (disability).
The Fair Housing Act covers most housing. The Federal Act (not the state) exempts owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members. For all other housing, no one, including an agent, may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap:
- Refuse to rent or sell housing
- Refuse to negotiate for housing
- Make housing unavailable
- Deny a dwelling
- Set different terms, conditions or privileges for sale or rental of a dwelling
- 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) or
- 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.
The Fair Housing Act also places restrictions on residential 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 mortgage loan
- 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 or
- Set different terms or conditions for purchasing a loan.
In addition to these specific restrictions, it is illegal under the Act to threaten, coerce, intimidate or interfere with anyone exercising a Fair Housing right or assisting others who exercise that right. It is also illegal to advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act and plays a large role in real estate advertising.
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State Statutes Affecting Fair Housing
- ORS 659A.421 “Purchaser” defined for ORS 659A.421.
- ORS 659A.421 Discrimination in selling, renting or leasing real property prohibited.
Oregon’s housing discrimination statutes mirror Federal statutes. The mirroring is deliberate so that Oregon can benefit from Federal discrimination enforcement dollars. Oregon laws can be more restrictive or grant more rights than Federal laws, but not less. So, for instance, there is no exception under Oregon laws for owners of single family residences or small landlords (< 5 units) as there are under Federal discrimination statutes. Oregon adds marital status, source of income and sexual orientation to the Federal list of protected classes. Cities and counties occasionally add classes locally, so always ask about local discrimination statutes if you are unfamiliar with an area.
In addition to Fair Housing provisions like those found in Federal law, Oregon law contains a unique disclosure prohibition that applies to AIDS. Under Oregon law, “[i]n the sale, lease or rental of real property, a person may not disclose to any person that an occupant or owner of the real property has or died from human immunodeficiency virus or acquired immune deficiency syndrome” This prohibition applies to brokers as well as homeowners and buyers.
Oregon law is also unique in the way it handles exceptions based on familial status and gender. Under Oregon law, those sections of ORS 659A.421 (2)(a) to (d) and (f) that prohibit actions based upon familial status, sexual orientation or sex do not apply to the renting of space within a single-family residence if the owner actually maintains and occupies the residence as the owner’s primary residence and all occupants share some common space within the residence. This exception is the only one found in Oregon law and is much narrower than the exceptions applicable under Federal law.
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Complying with Fair Housing Laws
The key to complying with the Fair Housing Act is having good company policies, communicating those policies and following them. Real estate companies and their agents cannot engage in discriminatory practices or allow their clients to do so and need to be able to show that is the case. Proving you do not engage in discriminatory conduct or allow your clients to do so is not easy.
The following questions will allow you to assess your company’s exposure and suggest areas for improvement. If you answer “no” to any of the questions below, evaluate and adjust your office practices accordingly:
- Do you have a written Fair Housing policy?
- Do you publicize your commitment to Fair Housing in your office, in your advertising, and to sellers and buyers?
- Is Fair Housing training required in your company?
- Have you developed procedures to provide equal professional service?
- Do you review your offices’ compliance with your procedures on a regular basis?
- Do you have a corrective action policy?
- Do you regularly review and modify your procedures to respond to changes in the law or new Fair Housing issues and to correct deficiencies in your office?
- Do you have a mechanism for feedback from customers and prospects?
Help with developing written policies, implementing procedures, conducting training, and even handy forms are available from the National Association of REALTORS® (NAR) by visiting their website at https://www.nar.realtor. NAR’s REALTOR® Magazine recommends the following Fair Housing policy statement: “This company conducts business in accordance with all Federal, state, and local Fair Housing laws. It is our policy to provide housing opportunities to all persons regardless of race, color, religion, sex, familial status, handicap, national origin or sexual orientation. The company’s Fair Housing procedures are not recommendations. They must be followed by everyone associated with the company.”
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Fair Housing Advertising Practices
All forms of promotion done by the brokerage company and by individual agents, including marketing brochures, newspaper advertising, Internet advertising and radio ads, must comply with the nondiscriminatory goals of the Fair Housing Act. To comply, it is important to avoid using language that indicates a bias against a protected class. The key is to describe the attributes of the property, not of the prospects you think would like it.
For example, say “a beautiful, fully fenced backyard,” not “a great backyard for children.”
Watching your language isn’t as easy as it sounds. As with any message, context matters. What is prohibited is discrimination, not specific words or phrases. It is possible to use language to express a preference without saying “no wheelchairs.” At the same time, an accurate neutral description of the property is not itself discriminatory. For instance, “fourth-floor walk-up” or “master bedroom” is not normally evidence of discriminatory intent.
Advertisers, like newspapers and even multiple listing services, have their own fair housing advertising obligations. This obligation causes them to have their own advertising guidelines. These guidelines are not required by Federal law and tend to be more restrictive than the law itself. Nevertheless, guidelines used by newspapers are an excellent resource for real estate professionals.
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Fair Housing and Disabilities
Fair Housing rules afford the an individual with a disability additional protection in rental housing. These protections apply to anyone with a physical or mental disability (including hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS-Related Complex and mental retardation) that substantially limits one or more major life activities. Under the rules, a landlord may not refuse to let an individual with a disability make reasonable modifications to a dwelling or common use areas, at the expense of the individual with a disability if modification is necessary for the individual to use the housing.
Probably the single biggest right an individual with a disability has under Fair Housing rules is that a landlord cannot refuse to make reasonable accommodations in rules, policies, practices or services if necessary for the individual with a disability person to use the housing. For instance, a building with a “no pets” policy must allow a visually impaired tenant to keep a guide dog. In recent years, tenants have used claims of mental disability (typically depression or anxiety) in order to keep pets in rental units with “no pet” policies.
Accommodation of disabilities is a matter of reasonableness and, therefore, can be very hard to assess. For example, an apartment complex that offers tenants ample, unassigned parking must honor a request from a mobility-impaired tenant for a reserved space near their apartment if necessary to assure that they can have access to their apartment. When parking is scarce or already assigned or assignment only to an individual with a disability is convenient, problems arise. That is why a real estate agent should never give clients advice on Fair Housing issues. Always refer your client, whether landlord or tenant, to an attorney if they want to know if something is “legal” or “illegal” under the Fair Housing statutes.
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Fair Housing and Familial Status
The other Fair Housing category that can cause real estate licensees serious problems is “familial status.”
Familial status is defined in ORS 659A.001, which closely follows the Federal definition, as “the relationship between one or more individuals who have not attained 18 years of age and who are domiciled with (A) A parent or another person having legal custody of the individual; or (B) The designee of the parent or other person having such custody, with the written permission of the parent or other person.“ Unless a building or community qualifies as housing for older persons, it may not discriminate against families with one or more children under 18. Familial status protection also applies to pregnant women and anyone with, or in the process of securing, legal custody of a child under 18.
As mentioned above, housing for older persons is exempt from the Fair Housing prohibition against familial status discrimination. There are, however, strings attached to the exemption. Housing is exempt from the familial status discrimination provision if (1) the HUD Secretary has determined that it is specifically designed for and occupied by elderly persons under a Federal or State program; or (2) It is intended for and occupied solely by persons who are 62 or older; or (3) It houses at least one person who is 55 or older in at least 80 percent of the occupied units, publishes and adheres to a policy that demonstrates an intent to house persons who are 55 or older and the facility/community must comply with rules issued by the Secretary for verification of occupancy through reliable surveys and affidavits and include examples of the types of policies and procedures relevant to a determination of compliance with the requirement of clause (ii) of the Federal law. Furthermore, such surveys and affidavits shall be admissible in administrative and judicial proceedings for the purposes of such verification.
It is, of course, the 55 or older exemption that causes the most problems. For many years after the familial status category was added to the Fair Housing laws in 1988, the law required 55 and older housing to have “significant services and facilities specifically designed for its elderly residents.” That provision proved unworkable and has been eliminated by Congress.
There are now three requirements to qualify for the 55 and older exemption. First, at least 80 percent of the occupied units must be occupied by at least one person 55 years of age or older per unit. Second, the owner or management of the housing facility or community must publish and adhere to policies and procedures that demonstrate an intent to provide housing for persons 55 years or older. Finally, the facility/community must comply with rules issued by the Secretary for verification of occupancy through reliable surveys and affidavits and include examples of the types of policies and procedures relevant to a determination of compliance with the requirement of clause (ii) of the Federal law. Furthermore, such surveys and affidavits shall be admissible in administrative and judicial proceedings for the purposes of such verification.
Examples of policies and procedure that show intent to provide housing for persons 55 years of age or older include written rules, regulations, lease provisions, deed or other restrictions. They also include the actual practices of the owner, including the kind of advertising used to attract prospective residents. Operators of exempt facilities must have age verification procedures. Birth certificates, driver’s licenses, passports, immigration cards and the like are considered to be reliable for age verification. Self-certification in a lease, application affidavit, or other document signed by an adult member of the household will also satisfy the requirement.
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Making Cold Calls
The Telephone Consumer Protection Act (TCPA)
In 1991, Congress enacted the Telephone Consumer Protection Act (TCPA) in an effort to address a growing number of consumer complaints about telephone marketing calls. The TCPA restricts the making of telemarketing calls and the use of automatic telephone dialing systems and artificial or prerecorded voice messages. The rules apply to common carriers and telemarketers.
In 1992, the Federal Communication Commission (FCC) adopted rules to implement the TCPA. Under FCC rules, entities making telephone solicitations were required to have procedures for maintaining company-specific do-not-call lists. On July 3, 2003, the FCC revised its TCPA rules to establish, in coordination with the Federal Trade Commission (FTC), a National Do-Not-Call Registry.
The National registry covers all telemarketers (with the exception of certain nonprofit organizations) and applies to both interstate (between) and intrastate (within) calls. The registry went into effect on October 1, 2003, and is administered by the FTC. Starting January 1, 2005, telemarketers and sellers are required to search the registry at least once every 31 days and drop from their call lists the phone numbers of consumers who have registered.
The National Do Not Call Registry covers intrastate telemarketing calls, like those commonly made by real estate agents, under the FCC’s rules. You can find information on the FCC regulations at www.fcc.gov/cgb/donotcall/. All sellers covered by the FCC rules must subscribe to the list before they call, or cause a telemarketer to call, any consumer within that area code, even those consumers whose telephone numbers are not on the registry. The only exceptions are for sellers who call only consumers with which they have an existing business relationship or written agreement to call, and do not access the National registry for any other purpose.
These provisions make any cold calling without access to the Do Not Call Registry an extremely risky undertaking. It’s against the law to call (or cause a telemarketer to call) any number on the Registry (unless the seller has an established business relationship with the consumer whose number is being called, or the consumer has given written agreement to be called). It is also against the law for a seller to call (or cause a telemarketer to call) any person whose number is within a given area code unless the seller first has subscribed to and accessed the portion of the Registry that includes numbers within that area code, and paid the annual fee, if required.
Signing up for the Do Not Call Registry list entitles the subscriber to data for up to five area codes for free. If you want more than five area codes, the annual fee is $62 per area code of data, with a maximum annual fee of $17,021 for the entire U.S. database. Fees are paid annually.
Companies that have subscribed, and paid the appropriate fee (if any), are allowed to check a small number of telephone numbers (10 or less) at a time via interactive Internet pages. This makes it easy for small volume callers like most real estate agents to comply with the do not call requirements without having to download a large list of all registered telephone numbers within a particular area.
Fortunately, there are “safe harbor” provisions that cover inadvertent mistakes. If a seller or telemarketer can show that, as part of its routine business practice, it meets all the requirements of the safe harbor, it will not be subject to civil penalties or sanctions for mistakenly calling a consumer who has asked for no more calls, or for calling a person on the Registry. To meet the safe harbor requirements
- the seller or telemarketer has established and implemented written procedures to honor consumers’ requests that they not be called
- the seller or telemarketer has trained its personnel, and any entity assisting in its compliance, in these procedures
- the seller, telemarketer, or someone else acting on behalf of the seller or charitable organization has maintained and recorded an entity-specific Do Not Call list
- the seller or telemarketer uses, and maintains records documenting, a process to prevent calls to any telephone number on an entity-specific Do Not Call list or the National Do Not Call Registry, provided that the process involves using a version of the National Registry downloaded no more than 31 days before the date any call is made
- the seller, telemarketer, or someone else acting on behalf of the seller or charitable organization monitors and enforces compliance with the entity’s written Do Not Call procedures
- the call is a result of error.
Data for up to five area codes is free. The annual fee is $62 per area code of data (after five), with a maximum annual fee of $17,021 for the entire U.S. database.
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Existing Business Relationship Exception
A telemarketer or seller may call a consumer with whom it has an established business relationship for up to 18 months after the consumer’s last purchase, delivery, or payment – even if the consumer’s number is on the National Do Not Call Registry. In addition, a company may call a consumer for up to three months after the consumer makes an inquiry or submits an application to the company. These rules ease the burden of Do Not Call on the practice of real estate by allowing agents to call buyers and seller who have done business with the agent’s company. They do not, however, help when calling buyers or sellers who have not done business with your company.
There is a tradition in real estate of cold calling sellers with expired listings and FSBOs. These practices were immediately called into question when the Do Not Call Registry was implemented in January of 2005. As a result, the National Association of REALTORS® petitioned the FCC for clarification regarding expired listings and FSBOs.
On February 18, 2005, the Federal Communications Commission (FCC) issued an Order addressing issues raised by NAR. According to the FCC, a real estate professional representing a potential buyer may call a FSBO so long as the purpose of the call is to discuss the potential sale of the property to the buyer. An agent may not cold call a FSBO on the Do Not Call Registry List for the purpose of soliciting a listing. The FCC also declined to exempt from the Do Not Call Registry rules any calls to expired listings. These rules are simple applications of the established business relationship exception.
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