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Legally speaking: Avoid missteps when marketing a REO property

By Peg Ritenour, OAR Vice President of Legal Services/Administration

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. The following addresses marketing a REO property…  

Q: I am listing a bank owned property for the first time. The lender that owns the property insists on using its own listing contract. Also, the lender acquired the property at a sheriff’s sale, but I’m not sure if the deed has transferred to the lender yet. Can I go ahead and begin marketing the property if the deed isn’t in the bank’s name yet? Can I use the lender’s listing form?

A: You raise two very important points about listing REO property that could easily put you on the wrong side of the Ohio Division of Real Estate and Professional Licensing if not handled correctly.

First, Ohio Revised Code Section 4735.18(A)(20) prohibits a licensee from offering property for sale without the knowledge and consent of the owner or the owner’s authorized agent. So it is imperative to determine if in fact the lender is the “owner” of this property. Many years ago the Division interpreted “owner” to be the person or entity whose name was on the deed. Thus, licensees couldn’t take a listing from a lender on an REO property until the sheriff’s deed was issued in the lender’s name. Because there was so much pressure to list properties prior to issuance of the sheriff’s deed, the Division relaxed its position in 2008 to allow a licensee to begin marketing the property on behalf of the lender once the sheriff’s sale has been confirmed by the court. So when listing an REO property, find out if title to the property is in the lender’s name, and if it isn’t ask if the sale has been confirmed by the court. If the lender tells you the sale has been confirmed, I would strongly recommend you get a copy of the court order confirming the sale for your file. At a minimum, have the lender representative who is signing the listing put in writing that the sale has been confirmed. If the property isn’t in the lender’s name yet or the sale hasn’t been confirmed, you can’t start marketing the property until that order is issued by the court.

Secondly, it’s OK to use the lender’s listing contract but, as an agent, I would recommend that your broker review that agreement. The most important requirement is that the listing contract contain the fair housing and blockbusting statement that is mandated under Ohio license law. If that exact language is not in the lender’s listing agreement, it needs to be added in order to avoid a license law violation. This can be done by an addendum to the listing agreement. Click here for the required language that must be included in any agency agreement to which a licensee is a party.

 

Legal articles provided in the OAR Daily Buzz are intended to provide broad, general information about the law and is not intended to be legal advice. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney. 

Tags: legal, Legally Speaking