Top Ten Reasons to Use the Buyer Broker Exclusive Employment Agreement

 

When a seller signs a listing agreement, the seller understands how much they are going to pay for the broker’s service.  In contrast, most buyers do not understand the MLS offer of compensation or the concept of procuring cause.  The Arizona REALTORS® Buyer Broker Exclusive Employment Agreement (“Buyer Broker Agreement”) can be used to address this issue and has many other benefits. 

Here are my top ten benefits of using the Arizona REALTORS® Buyer Broker Agreement.

1.       Sets forth how the buyer’s broker is to be compensated for their services.

2.      Assures that the broker will be compensated the agreed upon amount if the buyer purchases a property during the term of the Buyer Broker Agreement.  

 3.      With the understanding of how compensation works, the buyer agrees to work exclusively with the broker and be accompanied by the broker on the buyer’s first visit to any property. The buyer acknowledges that the broker may not be compensated by the builder, seller or seller’s agent if the broker does not accompany the buyer on the first visit to a model home, new home/lot, or “open house,” which would eliminate any credit against the compensation owed by the buyer to the buyer’s broker. 

 4.      Provides an opportunity to tout the services the buyer will receive.  A buyer broker’s services are so much more than just showing the buyer listings.  The buyer broker will assist and advise the buyer throughout the entire home buying process within the scope of the broker’s expertise and licensing.

 5.      Builds trust with the buyer through education and transparent up-front conversations.

 6.      Obtains the buyer’s agreement to act in good faith, provide the information necessary to acquire the property and conduct any inspections/investigations that the buyer deems material and/or important.

 7.      Protects both the broker and the buyer by avoiding misunderstandings. Managing expectations is an important risk management practice.   

 8.      Assures the buyer’s broker that the buyer is serious about buying a home and assures the buyer that the buyer’s broker is serious about finding them a home and guiding them to close of escrow.

 9.      Satisfies the legal requirement that a buyer’s broker must have a written employment agreement with a buyer to be paid a commission by the buyer. Real estate brokers may sue to recover compensation due under a real estate employment agreement only if there is a written agreement that complies with both the Statute of Frauds, A.R.S. §44-101(7), which requires a written signature of the party to be charged, and the real estate employment agreement statute, A.R.S. §32-2151.02(A), which requires that all real estate employment agreements be signed by all parties to the agreement and:

·         be written in clear and unambiguous language;

·         fully set forth all material terms, including the terms of broker compensation;

·         have a definite duration or expiration date, showing dates of inception and expiration.

1010. Is an enforceable contract that can be helpful in the event of a commission dispute or in a dispute with a buyer. 

Some buyers may be reluctant at first when asked to sign a Buyers Broker Agreement.  View this reluctance as an opportunity to educate the buyer about the value of your services and build trust. As you review the Buyer Broker Agreement, explain your duties and obligations to the buyer and reinforce that you are a professional who follows the NAR Code of Ethics and that the Buyer Broker Agreement ensures the buyer has a dedicated and knowledgeable advocate representing them in the transaction.

For additional information on Buyer Broker Agreements:

NAR Window to the Law:  Benefits of Using a Buyer Representation Agreement

How Buyer Agreements Boost Your Value, Fend Off Claims (nar.realtor)

Avoid a Bad Practice that can Deprive You of a Commission

Hey! That was “My Buyer” and “My Commission!”

Real Estate Tales from the Courtroom: The Buyers’ Broker’s Signature  

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.).  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  8/11/23

 

 

Do the Forms Really Matter? Real Estate Tales from the Courtroom

 

This lawsuit involved claims that are not uncommon in the real estate industry.  The Buyer purchased a house in Scottsdale and about a year later claimed to have discovered latent defects with the home’s roof and other moisture related issues. What makes the case interesting is what the courts had to say about the forms used in the transaction. 

The Facts

The Sellers purchased the house two years after it was built and owned it for 26 years.  The Sellers completed a Seller's Property Disclosure (“SPDS”), which the Listing Agent uploaded into the Multiple Listing Service (“MLS”). The “Public Remarks” section of the MLS listing stated: “Second owners of this home, this abode has been lovingly maintained” and “[t]his home has newer A/C units and a roof, which should provide for low maintenance in years to come.”

The Buyer and Sellers entered into a purchase contract for the sale of the home for the price of $432,000.  The Buyer began his inspections and due diligence. 

The Buyer and the Buyer’s Agent attended the home inspection, along with the Sellers.  The Buyer asked about the condition of the roof and expressed concerns about the moisture in the home. The Buyer inquired about a potential leak in the garage roof, which the Seller said, “was taken care of.”  The Buyer climbed on the roof with the inspector to discuss roof issues.  The “Extended Home Inspection Report,” highlighted various roof-related issues and “recommend[ed] monitoring these areas during and after periods of heavy rainfall.”

The Buyer submitted the Buyer's Inspection Notice and Seller's Response (“BINSR”) and sought a credit or repair for roofing and other moisture related issues.  The Sellers responded to the BINSR to “provide Buyer [a] $ 1,000 credit toward [his] closing costs, escrow costs and/or lender fees, in lieu of all repairs on BINSR.” The Buyer accepted the BINSR and the parties signed an addendum to the purchase contract.  The Buyer conducted a final walkthrough and escrow closed. 

The Buyer began renovating the house within a week after escrow closed with extensive repairs and remodeling.  The Buyer claims he discovered roof problems almost a year later, after heavy rainfall caused “paint and caulking ... to peel and crack,” water leaks and mold in the walls and water pooling in front of the home. The Buyer sued all the parties associated with the transaction, except for the home inspector. 

The Seller, Listing Agent and Buyer’s Agent defendants all moved for summary judgment, which the trial court granted, dismissing the Buyer’s claims.  The Buyer appealed the trial court’s decision to the Court of Appeals.

The Court of Appeals Decision

In deciding the Buyer’s claims against the Seller, the Court discussed in detail the language in several of the forms used in the transaction, many of which the Buyer had initialed.        

·         The Purchase Contract:  The Buyer initialed the “BUYER ACKNOWLEDGEMENT” written in bold and all capital letters, where he “recognize[d], acknowledge[d], and agree[d]” that the Listing Agent and Buyer’s Agent “are not qualified, nor licensed, to conduct due diligence with respect to the premises or the surrounding area.”

 o   The provision further “instructed” Buyer to conduct due diligence, which “is beyond the scope of the Broker's expertise and licensing,” and Buyer agreed to expressly release and hold harmless the Listing Agent and Buyer’s Agent “from liability for any defects or conditions that could have been discovered by inspection or investigation.”

 

·         The Buyer Advisory:  The Buyer acknowledged receipt of the Buyer Advisory. The Advisory explained that real estate agents are “generally not qualified to discover defects or evaluate the physical condition” of the house; emphasized the limited duties of Buyer’s Agent to Buyer, which do not include “verifying the accuracy of” the SPDS or MLS listing; warned that Buyer “is responsible for” conducting due diligence prior to purchase; and cautioned that MLS listings are “similar to an advertisement” and Buyer “should verify any important information contained in the MLS.”

 

·         The SPDS:  The Buyer acknowledged receipt of the SPDS with his electronic initials on each page and an electronic signature at the end. In response to questions about roof issues, the Sellers disclosed their awareness of past roof leaks, water damage and roof repairs. The Sellers said the leaks “were identified and corrected” but otherwise, the Sellers were not aware of “any interior wall/ceiling/door/window/floor problems,” “any cracks or settling involving foundation, exterior walls or slabs,” or “any past or present mold growth.” 

 o   The SPDS advised Buyer to verify the disclosures with a professional and specifically directed him to “CONTACT A PROFESSIONAL TO VERIFY THE CONDITION OF THE ROOF.”

o  The SPDS also included an acknowledgement from Buyer “that the information contained herein is based only on the Seller's actual knowledge and is not a warranty of any kind.  Buyer acknowledges Buyer's obligation to investigate any material (important) facts in regard to the Property. Buyer is encouraged to obtain Property inspections by professional independent third parties and to consider obtaining a home warranty protection plan.”

 

·         The BINSR:  The Buyer electronically signed the BINSR, indicating he had “completed all desired [i]nspection[s]” and “verified all information deemed important [from the] MLS or listing information,” and “acknowledg[ing]” the Listing Agent and Buyer’s Agent “assume no responsibility for any deficiencies or errors made” by the inspector and “neither the Seller nor Broker(s) are experts at detecting or repairing physical defects in the Premises.”

 

·         The Final Walkthrough Form:  The Buyer acknowledged with his signature that “the property [is] as represented at the time the purchase contract was accepted by the parties, and any subsequent repairs that were agreed to ... have been completed to the satisfaction of [Buyer].”

Based upon the evidence, the Court found that the Buyer had failed to create a genuine issue of material fact that the Sellers knew about the alleged defects and had misrepresented or concealed them. Further, the Buyer understood he had imperfect information. The Court stated:  

“The undisputed facts indicate that Buyer had notice of roof-related issues from the Sellers and his home inspector, and he was repeatedly advised that he was responsible for conducting due diligence and warned to verify material information (in his counteroffer, the Buyer Advisory, the SPDS and BINSR).

He was instructed to hire a professional roofer, to verify the roof's condition and to further explore roof-related issues. He acknowledged the warnings and verified that he completed all desired inspections. Yet Buyer did not hire a roofer to take a closer look and instead opted to complete the transaction with limited knowledge.” (Emphasis added). 

The Court rejected the Buyer’s assertion that the Sellers “did not completely or truthfully represent the actual condition of the property being sold” due to three affirmative statements from the MLS listing and sales brochure: “lovingly maintained,” “beautifully remodeled,” and “newer A/C units and a roof.” The Court held the “beautifully remodeled” and “lovingly maintained” statements represented mere sales puffery, which is not actionable as fraud or misrepresentation. “These are not concrete representations of fact; they are inexact opinions of an adverb-laden sales pitch.”  Regarding the MLS description of a “newer” roof, the Court found that “newer” is a relative adjective that derives its meaning from comparing two or more items; the term has no concrete meaning standing alone.

In deciding the case against the Listing Agent and the Buyer’s Agent the Court noted that the trial court granted both summary judgment motions based on, among other things, the absence of expert testimony to establish a professional duty and breach of that duty. The Court recognized that expert testimony was indispensable - both to establish the professional standard of care for licensed real estate agents and agencies, and to demonstrate that defendants breached the standard. 

The Court stated that an “expert opinion was especially critical here, where Buyer sued seven different real estate professionals and agencies representing different parties with different interests and different relationships; Buyer has contracts with some and no contracts with others; and he signed various documents, guides and disclosures during the transaction which implicate and address the duties and responsibilities of distinct parties.”

Therefore, the Court upheld the dismissal of the Buyer’s claims against all parties. 

Case Lessons:

• The proper use of the Arizona REALTORS® forms is one of the best risk management practices.
• Always obtain the party’s signature or initials on the forms where prompted.   
• The language in the Arizona REALTORS® forms does matter.

 Seidman v. Weiler

2019 WL 2152666

NOTICE: NOT FOR OFFICIAL PUBLICATION.

UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

Court of Appeals of Arizona, Division 1.

No. 1 CA-CV 18-0261

FILED 5/16/2019AMENDED PER ORDER FILED 7/8/2019

Review Denied November 19, 2019

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.).  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  8/2/23

Good Fences Make Good Neighbors: Real Estate Tales from the Courtroom

Neighbor Segal appealed to the Arizona Court of Appeals from the trial court's grant of summary judgment in favor of his Adjoining Neighbors in a boundary-by-acquiescence and adverse-possession action concerning a strip of land between the parties' properties.

Facts

In July 2006, Neighbor Segal built a block wall fence between his lot and the adjacent vacant lot, which was owned by the Adjoining Neighbors. The wall fence did not track the property line, but sat east of the recorded boundary line, leaving 440 square feet of Neighbor Segal’s property on the Adjoining Neighbor’s side of the wall (the “Disputed Area”). The Adjoining Neighbors assert that Neighbor Segal asked that they share in the cost of constructing the wall, which Neighbor Segal denied.

The Adjoining Neighbors regularly sprayed weeds and cleared debris from their lot as well as the Disputed Area. Neighbor Segal claims he performed similar maintenance on the Disputed Area during the same time.

In 2010, the Adjoining Neighbors began construction of their home on the lot and, in 2011, they built a permanent shed and drainage structure within the Disputed Area. The Adjoining Neighbors also enclosed their backyard with a “wing wall” fence attached to Neighbor Segal's wall. According to Neighbor Segal, he informed the Adjoining Neighbors in February 2011 that their construction encroached on his land, an assertion the Adjoining Neighbors disputed.  It was undisputed that during the construction of the Adjoining Neighbors' shed, Neighbor Segal complained to the city that the shed did not comply with the city's setback requirements and a city inspector found no violations.

In 2018, Neighbor Segal obtained a survey, which revealed that 440 square feet of his land was on the Adjoining Neighbors' side of the wall fence and included part of their shed and drainage structure.  The Adjoining Neighbors also obtained a survey that revealed the same results. 

Neighbor Segal filed a quiet-title action, and the Adjoining Neighbors counterclaimed, arguing they had obtained the legal right to the Disputed Area through adverse possession and/or boundary by acquiescence through their use of the Disputed Area for more than 10 years.

Both parties moved for summary judgment, and the trial court granted the Adjoining Neighbors' motion, finding they had acquired title by adverse possession and both parties had acquiesced for more than ten years to the establishment of the property line created by the wall fence that Neighbor Segal built. 

Neighbor Segal appealed the trial court’s decision to the Court of Appeals. This appeal followed. 

The Court of Appeals Decision

First, the Court of Appeals noted that Summary judgment is only appropriate when there is no genuine dispute as to any material fact and a party is entitled to judgment as a matter of law. When considering a Summary Judgment Motion the trial court may not weigh witness credibility, or quality of evidence, or “choose among competing or conflicting inferences.”

Boundary by Acquiescence

To establish a boundary by acquiescence, a party must prove “(1) occupation or possession of property up to a clearly defined line, (2) mutual acquiescence by the adjoining landowners in that line as the dividing line between their properties, and (3) continued acquiescence for a long period of time.”  The boundary in question must be visible, definite, and clearly marked, and the required time period for the parties' acquiescence is ten years. 

There was no dispute that the boundary in question was visible, definite, marked by the wall fence Neighbor Segal built in 2006 and that the Adjoining Neighbors occupied the Disputed Area up to Neighbor Segal's wall from 2010 to 2018.  What was in dispute was whether the Adjoining Neighbors occupied the Disputed Area before 2010, whether Neighbor Segal acquiesced that the wall he built was the boundary line, and whether such acquiescence continued for at least ten years.

Adverse Possession

To establish title by adverse possession, the party claiming title must prove an (1) actual or visible, (2) open and notorious appropriation of land, (3) under a claim of right (4) hostile to the claim of another that is (5) exclusive (6) continuous and (7) for a period of ten years.  Whether the elements of adverse possession have been satisfied is a question of fact based on the circumstances of the case. 

Again, the parties disagree as to whether the elements of adverse possession coincided prior to 2010. Neighbor Segal claimed: (i) the Adjoining Neighbors' occasional entry onto the Disputed Area was insufficient to satisfy the “appropriation” element of adverse possession; (ii) the Adjoining Neighbors did not visibly occupy Neighbor Segal's property in an open and notorious manner by maintaining the Disputed Area; (iii) the Adjoining Neighbors' did not have exclusive possession of the Disputed Area due to Neighbor Segal's access to it; and (iv) the Adjoining Neighbors did not occupy the Disputed Area under a hostile claim of right.

The Court’s Decision

The Court of Appeals reversed the trial court’s summary judgment and sent the case back to the trial court for findings of fact.  Whether the case went to trial or was settled by the Neighbors is unknown to this author. 

Case Lessons:

·          Boundary by acquiescence and adverse possession claims can be difficult and costly to prove.

·         If you encounter a boundary dispute or adverse possession claim, consult a real estate lawyer as soon as possible.

·         Don’t build a fence unless you are sure of the property boundaries – good fences make good neighbors. 

 

Segal v. Carstensen

2020 WL 5629766

THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES.

No. 2 CA-CV 2019-0208

Filed September 21, 2020

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.) .  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  7/23/23

“Finders Keepers Losers Weepers?” - Real Estate Tales from the Courtroom

A buyer purchased a Paradise Valley home “as is” and while remodeling, $500,000 was found hidden in the walls. Who owns the money – the buyer, the seller, or the contractor that found the money? The Arizona Court of the Appeals was asked to answer this question.   

 The Facts:

The seller’s father lived in the home until he passed away and his daughter (the “seller”) was the personal representative of his estate. The seller knew from experience that her father had hidden gold, cash, and other valuables in unusual places in other homes. Over the course of seven years, the seller found stocks and bonds, as well as hundreds of military-style green ammunition cans hidden throughout the house, some of which contained gold or cash.

Seven years after her father’s death, the seller sold the home “as is” to the buyers. The buyers hired a contractor to remodel the home. Shortly after construction began, an employee of the contractor discovered two ammunition cans full of cash in the kitchen wall behind a wall mounted toaster oven, and two more cash-filled ammo cans inside the framing of an upstairs bathroom. The contractor did not disclose the found money to the buyers right away and hid the money. Eventually, the contractor told the buyers about the discovery and the police ultimately took control of the $500,000.   

The buyers sued the contractor for the money, the contractor filed a counterclaim for the money, and the seller filed a petition in probate court on behalf of the estate to recover the money. The two cases were consolidated.   The trial court ruled that the money belonged to the seller and the buyer appealed, arguing that the money was abandoned when the home was sold “as is.”  

 The Court’s Decision

The Court of Appeals stated that although school children like to say “finders keepers” a finder’s rights depend on how a court classifies the found property. Found property can be classified as: 

 

·         Mislaid: the owner intentionally places it in a certain place and later forgets about it.

·         Lost: the owner unintentionally parts with it through either carelessness or neglect.

·         Abandoned: it is thrown away or voluntarily and intentionally forsaken by its owner.   

·         Treasure trove: it is verifiably antiquated and concealed for so long that the owner is probably dead or unknown. 

Generally, a finder of lost, abandoned, or treasure trove property acquires a right to possess the property against the entire world, except the rightful owner.  A finder of mislaid property must turn the property over to the owner of the premises where the property was found and has a duty to safeguard the property for the true owner.

The Court quoted an American Law Reports article “Title to Unknown Valuables Secreted in Articles Sold”:

 

Where both buyer and seller were ignorant of the existence or presence of the concealed valuable, and the contract was not broad enough to indicate an intent to convey all the contents, known or unknown, the courts have generally held that as between the owner and purchaser, title to the hidden article did not pass by the sale.

 

Further, the Court noted that money is rarely, if ever, abandoned.  As a result, the Court of Appeals agreed with the trial court, found that the money was mislaid, and therefore, the money belonged to the seller. 

Case Lessons:

• “Finders” are not always “keepers” – even in an “as is” contract. 
• “Losers” are not always “weepers” – regardless of what the kids say.
• If you hide money in your home – make sure your Personal Representative knows where to find it. 

 

Spann v. Jennings, 229 Ariz. 584, 278 P.3d 1287 (App. 2012)

 

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.) .  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  7/5/23

The Problems with an Unrecorded Deed

 

A deed is a legal document used to transfer real property ownership from one person or entity (the grantor) to another (the grantee). In most cases, the transfer occurs at the close of escrow of the sale of the property with the seller being the grantor and the buyer being the grantee.  The escrow/title company will then generally record the deed at the county recorder’s office. 

Recording the deed gives the public notice that the grantee/buyer now legally owns the property.

Arizona statute requires: 

Any document evidencing the sale, or other transfer of real estate or any legal or equitable interest therein, excluding leases, shall be recorded by the transferor in the county in which the property is located and within sixty days of the transfer. In lieu thereof, the transferor shall indemnify the transferee in any action in which the transferee's interest in such property is at issue, including costs, attorney's fees and punitive damages.  A.R.S. §33-411.01

But there are times when deeds are signed and delivered, but not recorded.  This may be done in the mistaken belief that the unrecorded deed will avoid probate in estate planning, to avoid taxes, or a variety of other reasons – some done out of ignorance of the law and others in violation of the law.  Many of the cases filed in court involving unrecorded deeds (or unrecorded deeds of trust) are complicated with complex arguments on both sides. 

Arizona follows a notice recording statute, which means that, while unrecorded transfers are valid between the parties to the deed (grantor and grantee), the grantor who, in violation of A.R.S. §33-411.01, fails to record the transaction, opens the grantee up to claims from future bona fide buyers for value.  See, A.R.S. §33-411 (No instrument affecting real property gives notice of its contents to subsequent purchasers or encumbrance holders for valuable consideration without notice, unless recorded as provided by law in the office of the county recorder of the county in which the property is located.).

A.R.S. §33-412, states in part: 

A. All bargains, sales and other conveyances whatever of lands, . . . and deeds of trust and mortgages of whatever kind, shall be void as to creditors and subsequent purchasers for valuable consideration without notice, unless they are acknowledged and recorded in the office of the county recorder as required by law.

B. Unrecorded instruments, as between the parties and their heirs, and as to all subsequent purchasers with notice thereof, or without valuable consideration, shall be valid and binding.

An unrecorded deed can cause numerous problems for the grantee, such as:

• The grantee will likely be unable to obtain a loan using the property as security, insure the property, or sell it.
• The grantor may be able to sell the property to another buyer since the grantor is still listed as the owner at the county recorder’s office.
• Any liens recorded against the grantor may also be recorded against the property, since the grantor is still listed as the owner at the county recorder’s office.

Ensure all deeds are recorded and title insurance is obtained in every transaction.  All deeds transferring real property should be recorded to protect the grantee.  Further, title insurance should always be obtained to protect the grantee from covered title defects.  See, ABA Title Insurance:  Why It's Important and What to Look For.

 

 K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.) .  Watch for the Fourth Edition, which should be available soon. 

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  6/28/23

 

Tools to Combat Seller Impersonation and Deed Fraud

 

Deed fraud.  You have heard about it and read about it.   You may have been a victim or know someone who was.  Last August the Attorney General's Office warned Arizona homeowners about deed fraud with an informative video on the crime by a Special Investigator. 

The Crime

The United States Secret Service Cybercrimes Investigations Field offices have reported a sharp increase in deed fraud crimes associated with unencumbered (lien-free), non-owner-occupied properties, such as vacation homes, rental properties, investment properties, and vacant properties.  Criminals posing as “out of town” property owners are listing these targeted properties, falsifying documents, impersonating the notary, and absconding with the proceeds at close of escrow.

Now there are some tools to help combat this crime. 

ALTA Seller Impersonation and Deed Fraud “Red Flags” and Precautions Information

Real estate industry partners must work together to educate ourselves and others about these fraudulent schemes to help prevent them.  The American Land Title Association (ALTA) has published this flyer Deed Fraud Flyer listing the deed fraud “red flags” to watch for and the precautions to take to protect property owners and the industry for this increasingly common crime.  Please share this ALTA flyer with your broker, office, escrow/title company, and local association.

County Recorder Alert Systems

The Pinal and Yavapai County Recorders have a system that allows property owners to sign up to receive an alert whenever a document is recorded that mentions their name.  The Maricopa County Recorder’s Office is launching a similar opt-in alert system to combat deed fraud.  See, Amid a rise in title theft, Maricopa County launches new alert system (azcentral.com).

All of Arizona’s counties are required by a new law (SB 1110) to offer similar alert systems by 2025.  The system will be voluntary, and the notice may be provided by email, text, or other similar means.  A.R.S. §11-467.

These notification systems will alert owners if their property has been subject to deed fraud.  This early warning will assist owners and law enforcement in the investigation and prosecution of deed fraud criminals. 

Common Deed Fraud “Red Flags”

Below are some deed fraud red flags to be aware of and report to your broker and at https://www.azag.gov/consumer if fraud is evident.

·         The property is:

o   non-owner-occupied or vacant

o   owned free and clear

·         The Seller

o   is out-of-state and will not meet in person

o   communicates only via email or text 

o   has a different address than the property address or tax mailing address

o   wants a quick, below market price cash sale

o   insists on using their own remote notary

o   wants sale proceeds wired 

For More Information

·         Title Talk – Entity Hijacking/More Deed Fraud:  https://www.aaronline.com/title-talk/

·         Arizona Attorney General Deed Fraud:  https://www.youtube.com/watch?v=cqmyE7qDsJo

·         American Bar Association – How to Avoid Title Fraud on Your Property:    https://www.americanbar.org/groups/senior_lawyers/publications/voice_of_experience/2022/october-2022/how-to-avoid-title-fraud/

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the book - Arizona Real Estate: A Professional's Guide to Law and Practice (3rd Ed.) . 

For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  6/1/23