Agency Under the New Statute

by | Oct 28, 2016 | Legal Tips

Over the next few weeks we will examine “agency” as it is used under the new S.C. Code 40-57-5 et seq. (Law effective January 1, 2017).

Section 40-57-370 (A) addresses the licensee’s requirement of brokerage disclosure. The statute says the licensee shall provide at the first practical opportunity to all potential buyers and sellers of real estate with whom the licensee has substantive contact a meaningful explanation of brokerage relationships that are offered by that real estate brokerage.  Additionally, the licensee must provide an explanation of customer and client services.

The revised statute no longer requires an “agency” explanation. Rather the agent is required to discuss the “brokerage relationships” offered. This is a result of transaction brokerage now being an option in South Carolina.  As noted in our July 22, 2016 post, transaction brokerage is not agency. Instead of representing a party in the transaction, the agent represents the transaction. Both the buyer and seller are treated as customers. Because you are now discussing brokerage options you are required to explain customer (non-agency) and client (agency) services.  This is where your agency explanation is required. Your past explanation of agency would have included an explanation of customer and client services if it was properly done.

The key phrases in the statute remain unchanged from the current law. The key phrases are “first practical opportunity,” “meaningful explanation” and “substantive contact.”

“First practical opportunity” means as soon as the agent can give the explanation. This does not mean you show the consumer houses or listing sheets first.  The agent may have a moment of light banter with the consumer before jumping into a brokerage explanation. However, before discussing the consumer’s needs or wants the agent should transition by saying something akin to, “Before we discuss your real estate needs I am required by law to discuss your brokerage options.” If you are trying to determine when you should give the explanation think: is there a time that an investigator looking backwards could say you had the opportunity to provide the explanation but failed to?

A “meaningful explanation” is an explanation that can be easily understood. Too many real estate agents simply “wing-it” while discussing brokerage/agency.  Often the explanation is disjointed or confusing.  An agent should take the time to carefully compose a meaningful explanation of brokerage/agency and then memorize it.  Practice the explanation with a friend not in the business and see if they understood your explanation. Every time the agent gives the explanation they should use the same one. This simple task will ensure that you cover all of the salient points necessary to give a meaningful explanation.

“Substantive contact” is defined by Section 40-57-30(29) as when the conversation moves from causal talk to meaningful conversation regarding the consumer’s motives or objectives, financial qualifications or other confidential information. In real estate, this usually occurs within the first few minutes of the meeting. Rarely can you have a conversation with a consumer about real estate in which one of these three matters are not discussed. It is always better to err on the side of being too early with your explanation than too late.

Also, new to the statute is the requirement that an “Acknowledgement of Receipt of the Disclosure of Brokerage Relationship” form must be included not only in the agency agreement but also in the sales contract. Your local Realtor Board will be revising the contracts to add this provision.

Historical Fact: The Curtiss-Wright Hangar was the first building built at Owens Field. The building was constructed in 1929 by the Curtiss-Wright Company who built and operated numerous airports across the country. Owens Field, named for Mayor Lawrence B. Owens, was opened in 1930. Over 15,000 attended the airshow that dedicated the the airport and hangar. Owens Field has been used for scheduled flights, civilian training, military observation flights and military training over the years. In 1962 the city transferred the airport to Richland County which has operated it since. The hangar was listed on the National Register of Historic Places in 1998.



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