Real Estate: The Duty to Inform
Did you remember that you have a duty to inform the party you are assisting in a transaction that they are expected to pay certain costs of the transaction any time an offer is made? Specifically, Oklahoma statutes state that every licensee MUST “inform the party in writing when an offer is made that the party will be expected to pay certain costs, brokerage service costs and approximate amount of the costs.” Here are a few tips and methods for complying with this provision:
Calculating the Costs
The first thing you need to do is obtain the approximate amount of the costs. Where do you get this information? You have a few options that are available to you and will keep you in compliance.
- Manually calculate it using the form provided by OREC. This is certainly the most challenging method to use and requires the largest time investment. You should know how to use this form and understand the components of the form to help your clients understand the costs, but you are not required to use this form if another method for providing a cost estimate is available.
- Use an app that will calculate the information. There are at least a few great apps on the market that will help you calculate the cost estimate. Just make sure you are using an app that will give you all the necessary information to provide a full estimate of the costs.
- Use information provided by the lender, such as a loan estimate. A lender is a great source of information and will typically provide a very accurate estimate of the costs to a transaction. Can you rely on the estimate provided by the lender? You can!
Once you have the cost estimate, what next?
- Double-check the information. No matter the source, you should double-check the estimate for any mistakes. This applies whether you calculated the costs, used an app, or used information from a lender.
- Remind your client it is an approximation of the costs. You are required to provide an “approximate amount of the costs.” Make sure your client understands the bottom line could change by the time you get to closing.
- Create a paper trail showing your client received the cost estimate. The OREC forms have lines for your clients to acknowledge receipt. You can also keep an email exchange as record of you giving the estimate to your clients. At a minimum you should keep some note of when you provided the cost estimate to your client.
- Keep a copy of the estimate in your files. When OREC does an office audit, they look for this information to make sure you are complying with your required duties and responsibilities. If you are using an app or information from a lender, such as a loan estimate, you need to have a copy in your files.
I hope you find this summary of your duty to inform your client of costs helpful. A few points to recap:
- You can use information obtained from any reasonable source in providing the estimate of the costs.
- Double-check the information for accuracy.
- Tell your client it’s an approximation.
- Get confirmation or track when you give it to your clients.
- Keep a copy in your files.
GDL Legal PLLC is your source for legal services when you or your team is in need of help to maintain compliance with OREC statutes and regulations, resolve issues with state agencies, navigate contractual disputes, or if you simply need an on-call attorney to keep your team focused on serving your clients and not on resolving legal questions.
GDL Legal PLLC is The Law Office of Geoffrey D. Long. Geoffrey previously served as General Counsel for the Oklahoma Ethics Commission and Assistant Attorney General. While an Assistant Attorney General he served as the legal counsel to the Oklahoma Real Estate Commission. He also currently holds an active Oklahoma Real Estate Broker’s license. Geoffrey is ready to provide you simple and straightforward approaches to legal issues in the real estate industry.