Understanding the Law

While agents and brokers cannot offer legal advice, they must have an understanding of the laws that govern their business. They must also know how those laws and regulations fit into the big picture, and how the real estate attorneys they work with can be expected to operate.

“You cannot practice law in a vacuum,” says Joe Fortunato, an attorney with Momkus McCluskey Roberts and a member and past president of the Illinois Real Estate Lawyers Association. “You have to be aware of the particular market you are in.” For an agent, the “particular market” will determine a number of things. For example, agents have to follow the letter of the law regarding the Fair Housing Act. The federal law was put into place in 1968 and later modified in 1988 to prevent home sellers from discriminating against potential buyers based on race, religion, color, nationality, gender, familial status or the presence of a physical or mental disability that substantially limits one or more of the person’s life activities, such as walking, breathing, learning or living independently.

But some states have expanded protections further than the seven protected classes mandated by federal law. In Illinois, sellers (and landlords) are prohibited from refusing to sell or rent based on a person’s ancestry, if age 40 and up, marital status, military service, sexual orientation, order of protection status and whether the person had a less-than-honorable discharge from the armed forces.

Actions that violate the law include local statutes or groups that act to block property owners from selling or renting to a person belonging to a protected class, property owners outright refusing to sell or rent to protected individuals solely based on their status as a member of one of the protected classes, charging a higher rent or sale price than would otherwise have been collected and agents steering buyers away from particular neighborhoods or properties.

For agents who manage a team or an office, decisions such as hiring, representing clientele and even advertising come with legal lines to toe, as in any other commercial enterprise. Agents must make the effort to avoid discrimination in their hiring practices and in how they treat consumers and clients. Otherwise, they may face fines or even the loss of their license.

Other rules and regulations agents must follow include: workers’ compensation laws; posters that must be visible to employees in workspaces; and the accessiblity requirements of the Americans with Disabilities Act. Even real estate websites — and other commercial sites — may eventually be required to provide means of access for people with visual, hearing and other disabilities. The U.S. Department of Justice is expected to rule on the matter in 2018. Suits have been threatened against real estate professionals in the Chicago area, prompting NAR to appeal to the U.S. Department of Justice for guidance back in April. Businesses in other fields — notably the National Basketball Association, The Home Depot and J.C. Penney — have had ADA suits filed against them for alleged non-compliance with accessibility requirements.

Representation

Advertising is another area where agents must watch their step.

Illinois law dictates that advertisements must be truthful in nature and must not be misleading or deceptive in theory or in practice. The NAR Code of Ethics also requires that agents follow “Truth in Advertising” standards, in that they should be honest and truthful in how they present properties for sale in their advertising, marketing and promotional efforts.

So concerning photography, a narrow reading of those rules implies that altering or enhancing a photo of a property is at least disingenuous, if not in violation of the law or a breach of ethics. The assumption is that a buyer is going to visit the property and inspect it, and can therefore observe any enhancements that have been made. It’s fine to present a home in the best light possible or from favorable angles in advertising. However, actions such as omitting substantial landmarks and deleting major flaws (such as cracks in the walls or the foundation) would count as misrepresentation.

“Issues often come up with the physical condition of the property,” Goodman says. “People might find out there’s a problem with the foundation and the attorneys and Realtors have to work together to obtain information and determine what is going to happen. It becomes a collaborative process when dealing with the physical condition of the property.”

When such a thing occurs, the agent should bring the attorney in to help work out the details of what repairs are needed and who will cover the costs. Attorneys do not negotiate the sales price, but they can put agents in touch with contractors, inspectors and other experts who can help the agent take inspection problems back into negotiation. So a solid network of professional connections is one perk a well-connected real estate attorney can bring to the table.

Both the Code of Ethics and state law stipulate that agents may offer prizes, premiums and other incentives for people to buy or sell, but that the conditions for receiving such incentives are made clear. It must be clear that they are real estate professionals and not acting as private sellers. Real estate professionals are forbidden from advertising properties without permission and from doing so without listing the name of their firm in all ads, whether in print, broadcast or online.

Various methods of contacting consumers are also regulated. Cold calling clients after their listing has expired is legal, but agents can be put on the Federal Trade Commission’s Do Not Call Registry. Just like any other commercial enterprise, real estate professionals are legally obligated to search the registry every 31 days and drop any consumers from their contact lists who have registered, according to the National Association of Realtors’ Field Guide to Do Not Call and Do Not Fax Laws.