Staying Legal While Advising a Consumer About Listing Their House

by | Aug 10, 2018 | Legal Tips

Under South Carolina law, a real estate licensee may not advise, counsel or advocate for a consumer without a written agency agreement. These services are strictly only available to a client and may not be provided to a customer.

In light of this law, I am constantly asked what to do when a consumer wants a real estate licensee’s advice on getting their house ready for sale but is not ready to actually list the property with an agent. Can the real estate licensee create a document that says “I am going to advise you but not list or market your property”?

The short answer is yes, but it still may not work out as your client desires. The problems lies not only in South Carolina real estate law but also in the Multiple Listing Service (MLS) rules. Here is why.

As discussed, a real estate licensee must have a written agency agreement with the consumer in order to provide advice or counsel.  In order to have a valid agency agreement, South Carolina Code §40-57-135(H) holds that a listing agreement must be in writing and must set forth all material terms of the parties’ agency relationship including, but not limited to:

  • a description of the agent’s duties or services to be performed for the client including, but not limited to, an explanation of the office policy regarding dual agency, designated agency, and transaction brokerage, if offered by the real estate brokerage firm;
  • the amount of compensation to be paid if a flat fee or the method to be used in calculating the amount of compensation to be paid;
  • an explanation of how and when compensation is earned;
  • an explanation of how compensation will be divided among participating or cooperating brokers, if applicable;
  • the amount of retainer fees, deposits, or any other money collected before the agent’s performance of a service on behalf of the client and an explanation of conditions, if any, in which such monies are refundable or payable to or on behalf of the client;
  • the duration of the agency relationship, setting forth specific dates for the beginning and ending of the relationship;
  • the signature of all parties;
  • must state that it terminates on the definite expiration date unless a written extension is signed;
  • must state, if applicable, that it is either an “exclusive agency” listing agreement or “exclusive right to represent” listing contract;
  • clearly specify an exception or variation in an amount of commission to be paid and circumstances that would apply;
  • must be given to the seller or buyer at the time of, or directly following, signing; and
  • must have a legal description of the listed property or a description sufficient to identify the listed property and state the price of the listed property.

That is a lot for a real estate licensee to try to cram into a document that really should be drafted by an attorney. Especially when the form is already available from the REALTORs Association or  MLS in the form of the Exclusive Right To Sale (ERTS). Therefore, in order to stay compliant with state law, the easiest thing to do is have the consumer sign an ERTS.

This brings us to the second issue. The MLS rules require the licensee to enter the property into the MLS within 2 days of ratifying the ERTS. Thus, while you may create a document or use the ERTS to stay compliant under state law, MLS rules may make accomplishing the client’s goal of not marketing the property impossible.

The only way to accomplish all of the consumer’s goals is to enter into a listing agreement or ERTS with the consumer. This will keep the licensee compliant with state law and allow the licensee the ability to advise and counsel. Then the client can execute the “Withhold from Market” form available at the MLS that will allow the listing to be withheld from the MLS for a set period of time. In Columbia the client may withhold their property from the MLS for a period of up to 90 days and this period may be renewed as many times as the client likes.  However, keep in mind that the licensee may not market the property at all while the “Withhold from Market” is in effect.

This procedure will keep you compliant both legally and under MLS rules. Additionally, I think it will help you keep the client after they have completed preparation of the house since you will already be under agency.

IT’S PARTY TIME!  Blair Cato’s Annual Military Appreciation Event will be held September 19 from 5:30 pm to 8:00 pm in our Parking Lot at 700 Huger St. We will have silent and live auction items, BBQ, beer and music by Tokyo Joe!  The event is free and open to all real estate agents. All proceeds go to the South Carolina Military Family Care Association.  Together we have raised almost $50,000 for the SCMFCA over the past three years!

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