Signs & Advertising Handbook REALTOR Association of Greater Fort Myers and the Beach, Inc. June, 2010
Page 2 REALTOR LOGO/TRADEMARKS, SIGNS & ADVERTISING HANDBOOK TABLE OF CONTENTS Introduction Source of Information Page 3 Chapter 1 REALTOR - A Registered Trademark Page 4 Proper Use of the Term REALTOR Written Material Page 4 In Business Name Page 5 On Business Cards Page 7 On Internet Page 8 Proper Use of the REALTOR Logo Page 9-10 Proper Use of the Term REALTOR - Pronunciation Page 11 Chapter 2 Florida Real Estate Law - Office Registration & Signage Page 11 Chapter 3 Advertising & FREC Statutes Page 14 Chapter 4 Advertising and the Code of Ethics Page 15 Chapter 5 Advertising & Truth In Lending Act Regulation Z Page 20 Chapter 6 Disclosures of Transaction Fees/Administration Fees RESPA Page 22 Chapter 7 Local City/County Ordinances Page 23 References Page 24
Page 3 INTRODUCTION SOURCE OF INFORMATION This manual contains material from the National Association of REALTORS ' Membership Marks, the Code of Ethics & Arbitration Manual; the Florida Real Estate Commission (FREC) Florida Statutes Chapter 475, and the Federal Reserve System s Truth In Lending Act (Regulation Z). The information contained herein is intended for reference use only by the members of The REALTOR Association of Greater Fort Myers & the Beach. In questions of authority, reference the official documents of each of the organizations listed above.
Page 4 CHAPTER 1 REALTOR - A REGISTERED TRADEMARK PROPER USE OF THE MEMBERSHIP MARK The word REALTOR OR REALTORS is a trademarked symbol. A trademark is a unique term, symbol or combination of terms and symbols that communicate some specific message to the public. The term COKE for example, is a trademark, which identifies a specific soft drink produced by the Coca-Cola Company for the public. Preservation of trademarks requires that they be used only in their trademark sense, and that they be distinguished from words of ordinary use by the use of capital letters and the registration symbol. The marks REALTOR, REALTORS and REALTOR-ASSOCIATE are collective membership marks which serve to identify members of the National Association of REALTORS and distinguish them from non-members. To remain effective in performing their identifying function, the marks must be used consistently and correctly. If the marks are not used correctly, The Trademark Protection Coordinator of the National Association of REALTORS in Chicago would be notified and steps taken for legal action concerning Trademark Infringement (Trademark Administrator/800-874-6500 ext. 8380). APPROVED FORMS OF USE OF TERM REALTOR IN WRITTEN MATERIAL The term REALTOR is a registered collective membership mark which identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS and subscribes to its strict Code of Ethics. The approved form of use in written material would be: REALTOR REALTORS Quoting from the National Association of REALTORS Membership Marks Manual, When REALTOR or REALTORS are used in the text of brochures, pamphlets, newsletters or otherwise in the body of written material, all capital letters and the registration symbol " " should be used in connection with at least the first use in each section of the body of the written material and in connection with each subsequent appearance to the extent practical. Each use must, however, contain initial capital letters in the body of the text. As quoted from the Membership Marks Manual directly, the term REALTOR
Page 5 should never be used as an initial capital followed by lower case letters and omit the federal registration symbol. If all of the copy in the body of the written material is in capital letters, the terms REALTOR and REALTORS should be made to stand out by the use of boldface type or by some other means sufficient to distinguish them from words of ordinary use and, in such instances, the registration symbol " " should be used in connection with every appearance of each MARK. The following definition should appear at the bottom of the page of any written material on which the term REALTOR is first used: REALTOR is a federally registered collective membership mark which identifies a real estate professional who is a Member of the NATIONAL ASSOCIATION OF REALTORS and subscribes to its strict Code of Ethics. The following examples illustrate compliance with the correct use of the trademark REALTOR : EXAMPLE ONE It will be of interest to your buyers and sellers alike that as a REALTOR you are bound by the National Association's strict Code of Ethics. EXAMPLE TWO IT WILL BE OF INTEREST TO YOUR BUYERS AND SELLERS ALIKE THAT AS A REALTOR YOU ARE BOUND BY THE NATIONAL ASSOCIATION'S STRICT CODE OF ETHICS. EXAMPLE THREE IT WILL BE OF INTEREST TO YOUR BUYERS AND SELLERS ALIKE THAT AS A REALTOR YOU ARE BOUND BY THE NATIONAL ASSOCIATION'S STRICT CODE OF ETHICS. APPROVED FORMS OF USE OF TERM REALTOR IN COMPANY NAMES For purposes of the Membership Marks Manual, the term "firm name" means the local name by which the firm is distinguished from other firms by the Member Association, the state licensing authority and the public. With that in mind, the terms REALTOR and REALTORS may be used in connection with, but not as a part of, a corporate or business name -- provided
Page 6 such terms are separated from the business name by appropriate symbols or punctuation. The objective of this limitation is to restrict the use of the term to a local firm name, since it is the local firm which has elected to be a member firm and which is therefore subject to the Code of Ethics and requests for arbitration before the Member Board to whom that firm belongs. As an example, using the phrase Blackacre Realtors, Inc. is an incorrect use of the trademarked term REALTOR. The word Realtor in and of itself should never be used in a company name without the correct placement and positioning. See examples below. The approved form of use in company names is shown below: Proper form: John Jones, REALTORS S. S. Smith -- REALTORS Separating punctuation should be used even when the term appears immediately below the firm's name. The proper form is shown below: John Jones and Company, REALTORS S. S. Smith, Inc., REALTORS Blackacre, Inc., REALTORS Smith REALTORS, Ltd. Smith, Ltd., REALTORS Sunshine Homes, REALTORS The terms REALTOR or REALTORS may not be registered by any member or member's firm as part of a business logo. Nor is it permissible for a firm to incorporate under or register an assumed business name which includes either of these terms. Possessives should be avoided whenever possible. Where necessary, possessives are formed as follows: Singular REALTOR 's Plural REALTORS ' When changing a firm name or selecting a new firm name, members are encouraged to utilize the words "Realty," "Real Estate," or similar terms that indicate the nature of the business.
Page 7 When these words are used in the firm name, the terms REALTOR and REALTORS are more clearly perceived as indicators of membership and professional commitment. See example below: Jack Jones Realty, Inc., REALTORS While the term REALTOR and REALTORS may be used in connection with a firm name, they may not be used in conjunction with a description of the firm's other line of business. See examples below: Jones, Inc., REALTOR /Builder Smith Realty, REALTORS -Insurer APPROVED USE OF TERM REALTOR ON INDIVIDUAL BUSINESS CARDS Business cards usually carry a firm name and the name of an individual. Depending on the membership status of the individual named and the standing of the firm's principals, it may be appropriate to use one of the terms REALTOR or REALTORS with either or both names. This section focuses only on use of those terms with the individual's name. If the individual is a REALTOR member, the term REALTOR may be used adjacent the member's name provided appropriate separating punctuation, all capital letters and the registration symbol " " are used. Following is a sample of a proper business card: Firm Name Street City, State John Doe, REALTOR The status of the individual within the firm may be indicated and, of course, a direct line phone number may be shown and the license status or specialty area of practice may be indicated. Following is an example of proper use: Firm Name Street City, State John Doe, REALTOR President Appraiser/Broker Phone:
Page 8 APPROVED USE OF TERM REALTOR ON THE INTERNET When surfing the Web for real estate homepages, it's quite common to come across sites belonging to REALTORS. If you are looking to add your own electronic presence on the Internet, it is easy to get caught up in designing your own web page and choosing a domain name which will capture the attention of surfers and make you easily identifiable. REALTORS often want to use the REALTOR marks as part of their domain name or address to distinguish themselves, but they must keep in mind that there are rules governing proper use of the REALTOR marks that must be adhered to at all times regardless of the media used. These rules are found in the National Association's Membership Marks Manual. Here is a brief list of the principle rules affecting use of the REALTOR marks in domain names: 1. The term REALTOR, whether used as part of a domain name or in some other fashion, must refer to a member or a member's firm. 2. The term REALTOR may not be used with descriptive words or phrases. For example, Number1realtor.com, numberone-realtor.com, chicagorealtors.org or realtorproperties.com MAY NOT BE USED. 3. For use as a domain name or e-mail address on the Internet the term REALTOR does not need to be separated from the member's name or firm name with punctuation. For example, both johndoe-realtor.com and johndoerealtor.com would be correct uses of the term as a part of domain names. jdoe*realtors@webnetservices.com OR jdoerealtors@webnetservices.com are both correct uses of the term as part of an e-mail address. 4. The REALTOR block R logo should not be used as hypertext links at a web site as such uses can suggest an endorsement or recommendation of the linked site by your Association. The only exception would be to establish a link to the National Association's web site, REALTOR.org, or its official property listing site, REALTOR.com. The public has adopted the use of all lower case letters when writing domain names, even those containing trademarks. Therefore, for purposes of domain names and internet addresses only, there is an exception to the rule on capitalization of the term REALTOR and it may appear in lower case letters.
Page 9 USES OF THE TERM REALTOR TO AVOID The examples below illustrate some common, but incorrect, usages of the term REALTOR. NEVER: Hyphenate, reconstruct, expand, combine, abbreviate or divide the TERM: REAL-I-TOR REALTORrific Blue Ribbon Chain, R-E-A-L-T-O-R-S Rltr. REALTOR -Assistant NEVER: Use descriptive words or phrases to modify the TERM. This is explicitly prohibited by Article V, Section 7 of the Bylaws of the NATIONAL ASSOCIATION OF REALTORS. Adjectives often suggest an improper vocational meaning and also tend to distort the consistent understanding and image of these terms, thereby undermining their identifying function: Main Street's most qualified REALTOR Consult a professional REALTOR Doe County's leading REALTOR The concerned REALTOR Your local REALTOR ver Your International REALTOR NEVER: Use the term REALTOR as part of a firm name or without using punctuation to separate the individual or firm's name from the terms even when the terms appear on a separate line: Blackacre REALTORS, Inc. John Jones REALTOR Sally Brown and Company REALTORS Green, Inc. REALTORS Sunshine REALTORS Homes Jack Jones Realty, Inc.
Page 10 USE OF THE REALTOR LOGO The REALTOR Logo consists of an "R" set in futura type face on a sharply contrasting rectangular background to form a block "R" under which is centered the term REALTOR. The proper form is shown below: Used as shown with the block "R" to form the REALTOR Logo, the term REALTOR is called an "identifier." The REALTOR Logo should be separated from other lettering, designs or emblems by a minimum distance of one-half the width of the block "R". The minimum reproduction for the REALTOR LOGO is.375" wide. At sizes below a width of 1"; the registration mark must be increased by the difference in size between the reduction percentage and 100%. Example: If the REALTOR LOGO is reduced to.75" from 1", the must be increased 125%. The must always be legible.
Page 11 USE OF THE TERM REALTOR AND REALTORS - PRONUNCIATION Irrespective of local dialect and custom, the term REALTOR has but one pronunciation WITH TWO DISTINCT SYLLABLES: REAL'tor Members are encouraged to rehearse new employees and salespeople, particularly receptionists, on the proper pronunciation of the term REALTOR. All too often a firm's long standing reputation in the community and the business is overshadowed by the uninformed employee who greets clients and the public in person or by phone with: "Good morning! Joe Doe, REAL-A-TORS," or "Good morning! Joe Doe, real-i-tors," or "Good morning! Joe Doe, RE-LA-TERS," or "Good morning! Joe Doe, RE-AL-TORS." If you ever have any questions with regard to the proper use of the REALTOR trademarked term OR logo, please refer to the National Association of REALTORS website at www.realtor.org. The website includes specific information within the Membership Marks Manual that addresses the proper and improper use of the term REALTOR and all that it implies. CHAPTER 2 FLORIDA REAL ESTATE LAW OFFICE REGISTRATION & SIGNAGE Florida real estate law affecting office registration & signage is contained in Florida Statutes Chapter 475. Additional rules are contained in the Florida Administrative Code Rule 61J2 series. In this chapter, we have taken information from these two source documents for your handy reference. OFFICES Brokers licensees that are active are required to have an office and to register the address with the Department of Professional Regulation. Sales associates must be registered from and work out of an office maintained and registered in the name of the employer/broker. (See 61J2-10.022).
Page 12 BRANCH OFFICES If a broker desires to conduct business from more than one office, each additional office must be registered as a branch office and the fee must be paid for its registration, as provided in subsection 61J2-1.011(3). Sales associates, at the discretion of the broker, may be registered from the principal office or from the branch office to which they regularly report. (See Rule 61J2-10.023.) SIGNS Every broker is required to maintain a sign on or about the entrance of the principal office as well as at all branch offices. Signs must be positioned to be easily seen by any person entering the office. Signs are required to be posted on either the exterior or the interior entrance area of the office (Section 475.22). NAMES Each office entrance sign must contain the name of the broker as it is registered with the FREC, as well as the trade name, if any. For a partnership or corporation, the sign must also include the name of the partnership or corporation or trade name of such entity. If the partnership or corporation has more than one broker, the name of only one broker need appear. In addition, each sign must display the words Licensed Real Estate Broker. The word Licensed may be abbreviated to Lic. No other abbreviations are allowed. With the passage of the changes to Section 475.22, effective July 1, 2003, there is no longer a minimum size requirement for the letters in the sign. The following are examples of signs that conform to the specifications of the "required signs" as set forth in Rule 61J2-10.024. BROKER WITHOUT TRADE NAME Gary R. Cooper Licensed (or Lic.) Real Estate Broker "Sales Associates" or "Associates" J. F. Lee A. K. Rand Louise W. Trent
Page 13 BROKER WITH REGISTERED TRADE NAME Gary R. Cooper Cooper Real Estate, Inc. Licensed (or Lic.) Real Estate Broker BROKERAGE CORPORATION Cooper Real Estate, Inc. Gary R. Cooper Licensed (or Lic.) Real Estate Broker OR Cooper Real Estate, Inc. Gary R. Cooper John L. Cooper (optional) Licensed (or Lic.) Real Estate Broker BROKERAGE PARTNERSHIP WITH REGISTERED TRADE NAME Cooper and Cooper Realty Gary R. Cooper Licensed (or Lic.) Real Estate Broker OR Cooper and Cooper Realty Gary R. Cooper John L. Cooper (Optional) Licensed (or Lic.) Real Estate Broker CHANGE OF NAME, ADDRESS, AND EMPLOYER A licensee is required to maintain current-status records with the Department of Professional Regulation, Division of Real Estate. This includes the licensee's correct name and address, and name and address of the sales associate's employer/broker. Whenever the licensee's status changes, he/she must notify the Division, AS WELL AS NOTIFY THE ASSOCIATION. Status changes are made using FORM RE-10. Address changes are made using FORM 0080-1. Both forms can be found online at www.myfloridalicense.com. USE OF ASSOCIATION NAMES No licensee shall use an identification or designation of any association or organization having to do with real estate in such manner as to lead persons to believe that said licensee is a member in good standing of such association, or organization, when in fact said licensee is not a member in good standing of that organization and is therefore not otherwise entitled to use such identification or designation.
Page 14 CHAPTER 3 ADVERTISING POTENTIAL FREC VIOLATIONS FREC REQUIREMENTS - RULE 61J2.10.025: Simply put, FREC requires that all advertising must clearly indicate to any reasonable person that he/she is dealing with a real estate licensee or brokerage firm. No real estate licensee's advertisement shall be fraudulent, false, deceptive, or misleading. FREC Rule 61J2.10.025 is probably the rule most violated by Florida REALTORS - and they don t even know they are violating it. This rule requires that ALL advertisements: 1) Be in such a manner that a person would know if he or she is dealing with a real estate licensee or brokerage 2) Not be fraudulent, false, deceptive or misleading 3) Include the name of the brokerage firm as listed with the Department of Business and Professional Regulations FREC has ruled that the first requirement is satisfied when one or more of the following criterion is included in the advertisement: 1) the words REALTY or REAL ESTATE form a part of the brokerage firm name 2) the advertisement includes the licensee s realtor status (SL, BK, BL) or has the word REALTORS or 3) the brokerage name is virtually synonymous with real estate. FREC has ruled that the third requirement is met with regard to internet advertising when the brokerage firm name is place adjacent to or immediately above or below the point of contact information. Point of contact information refers to any means by which to contact the brokerage firm or individual licensee including mailing address, physical street address, e-mail address, telephone number, or fax number. QUESTIONS AND ANSWERS: 1. What does FREC consider advertising? Anything beyond the required office sign is advertising. This includes but is not limited to: 1) print advertising such as business cards, letterhead, envelopes, direct mail, postcards, yard signs, flyers, information cards, billboards, yellow page ads, newspaper ads, name badges 2) broadcast ads such as radio or TV and 3) online advertising such as websites and blogs. When advertising on a site on the Internet, the brokerage firm name shall be placed adjacent to or immediately above/below the point of contact information. POINT OF CONTACT information refers to any means by
Page 15 2. which to contact the brokerage firm or individual licensee including mailing address, physical street address, email address, telephone number or fax. 3. Must an ad indicate the individual licensee status (SL, BK, BL)? All real estate advertisements must include the licensed name of the brokerage firm. While FREC requires that ads clearly indicate that a real estate licensee or brokerage is involved, it does not specifically require the individual s license status to be stated. When the licensee s personal name appears in the advertisement, at the very least, the licensee s LAST NAME must be used in the manner in which it is registered with The Division of Business and Professional Regulations. MORE IMPORTANTLY, Article 12 OF The NAR Code of Ethics DOES REQUIRE licensees to include their license or REALTOR status when they use their personal name. Example, John Smith/REALTOR or John Smith/BROKER-ASSOCIATE or John Smith/BROKER. 4. Can the brokerage firm name be abbreviated to save space? NO. FREC rules require that the brokerage firm name must appear in the advertisement as it is registered with FREC. CHAPTER 4 ADVERTISING POTENTIAL ETHICS VIOLATIONS In addition to potential FREC violations, there are certain advertising requirements contained in the Code of Ethics of the National Association of REALTORS that could be potential ethics violations. The following is either a direct quote of the Articles that deal with advertising issues: ARTICLE 2 REALTORS shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction. ARTICLE 12 REALTORS shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing and other representations. REALTORS shall ensure that their status as a real estate professional is readily apparent in their advertising, marketing and other representations, and that the recipients of all real estate communications are, or have been notified, that those communications are from a real estate professional.
Page 16 Standard of Practice 12-1 REALTORS may use the term free and similar terms in their advertising and in other representations provided that all terms governing availability of the offered product or service are clearly disclosed at the same time. Standard of Practice 12-2 REALTORS may represent their services as free or without cost even if they expect to receive compensation from a source other than their client provided that the potential for the REALTOR to obtain a benefit from a third party is clearly disclosed at the same time. Standard of Practice 12-3 The offering of premiums, prizes, merchandise discounts or other inducements to list, sell, purchase, or lease is not, in itself, unethical even if receipt of the benefit is contingent on listing, selling, purchasing, or leasing through the REALTOR making the offer. However, REALTORS must exercise care and candor in any such advertising or other public or private representations so that any party interested in receiving or otherwise benefiting from the REALTOR s offer will have clear, thorough, advance understanding of all the terms and conditions of the offer. The offering of any inducements to do business is subject to the limitations and restrictions of state law and the ethical obligations established by any applicable Standard of Practice. (Amended 1/95) Standard of Practice 12-4 REALTORS shall not offer for sale/lease or advertise property without authority. When acting as listing brokers or as subagents, REALTORS shall not quote a price different from that agreed upon with the seller/landlord. Standard of Practice 12-5 REALTORS shall not advertise nor permit any person employed by or affiliated with them to 16 advertise listed property without disclosing the name of the firm. Standard of Practice 12-6 REALTORS, when advertising unlisted real property for sale/lease in which they have an ownership interest, shall disclose their status as both owners/landlords and as REALTORS or real estate licensees. Standard of Practice 12-7 Only REALTORS who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have sold the property. Prior to closing, a cooperating broker may post a sold sign only with the consent of the listing broker. (Amended 1/96)
Page 17 Probably the most violated article with regard to advertising is ARTICLE 12 and members inadvertently misleading the public and other REALTOR members as to whether or not an ad presents a true picture. The best advice that the Association can provide on this is DON T ADVERTISE IT WITHOUT AUTHORITY. If you didn t have a role in the transaction, don t make it appear that you did. Here are two great QUESTIONS & ANSWERS on this very subject, as provided by Bruce Aydt from NAR S REALTOR Magazine: QUESTION: I recently acted as the listing agent for a neighbor who was selling her home. The buyer was represented by a salesperson from a different company. After the transaction closed, a third real estate practitioner who had no part in the deal mailed a Just Sold flyer to households in the neighborhood. The flyer contained information about the house and the public synopsis from the MLS, along with that real estate practitioner s contact information and an advertisement for his business. A letter accompanying the flyer also made it appear that he was the broker responsible for the sale, although he didn t say that explicitly. Is this a Code of Ethics violation? ANSWER: The key concept is whether or not the advertising presents a true picture. Article 12 of the Code says REALTORS shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. Standard of Practice 12-7 amplifies the true picture test. Only REALTORS who participated in the transaction as the listing broker or cooperating broker (selling broker) may claim to have sold the property. If the flyer and letter would lead a reasonable consumer to believe the REALTOR who sent the flyer actually sold the property, then likely IT IS a violation of the Code. Although sold properties and (usually) their sale price are public record, that doesn t allow REALTORS to claim to have sold the property if they weren t the listing or cooperating broker. This standard also applies to newsletters. Case Interpretations 12-12 and 12-13 allow REALTORS to publish a list of sold properties in a neighborhood newsletter as long as that publication is consistent with local MLS rules and it s clear to reasonable readers that REALTORS aren t claiming to have sold any property where they weren t either the listing or selling broker. Remember, the essence of Article 12 is truth in advertising!
Page 18 QUESTION: Would it be ethical for me to advertise a property that appears in the multiple listing service even if I m not the listing agent? I d like to include information about a particular property in a newspaper ad. But I m wondering if I need to first contact the listing broker for permission? ANSWER: Yes, you do. There are a couple of issues to consider here. When it comes to advertising, the key concept in the Code of Ethics is the true picture test. Article 12 of the Code says, REALTORS shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing, and other representations. Standard of Practice 12-4 goes one step further and requires authority to advertise a listing: REALTORS shall not offer for sale/lease or advertise property without authority. Where does authority to advertise a listing come from? It starts with sellers giving the listing broker permission to advertise and market their property. That authority is generally established in the listing agreement. The listing broker may have been given authority in the listing agreement to allow other brokers to advertise as well. But just because the property appears in the MLS doesn t mean that other brokers have any right or authority to advertise the listing in a newspaper or in other media, absent permission from the listing broker. It should be noted that Internet Data Exchange (IDX) rules of REALTOR association owned and operated MLSs (like ours) enable listing brokers to give other participants blanket authority to advertise the listing broker s listings on their Web sites. This is ONLY applicable to websites and does not apply to ebay, Craig s List, You Tube or other media such as newspapers (these forms of advertising are NOT IDX compliant and would require permission for each ad).
Page 19 ADVERTISING DISCLAIMER USE OF MLS INFORMATION IN ADVERTISING Use of MLS information to compile current listing information, sold reports or comparable reports for public mass-media advertising is allowed by the members of THE REALTOR Association of Greater Fort Myers & the Beach, Inc. and is permitted by the MLS Rules and Regulations of The REALTOR Association of Greater Fort Myers and the Beach, Inc. However, any print or non-print forms of advertising or other forms of public representations based in whole or in part on information supplied by the REALTOR Association of Greater Fort Myers & the Beach, Inc. or its Multiple Listing Service, must include the following disclaimer to assure that the public is fully aware the data being published is not attributed to any one single party presenting the advertisement and clearly demonstrates the period of time over which such claims are based: The statistical data provided is based on information compiled from the FLORIDA GULF COAST MLS, INC. for the period through. In addition, when publishing information about specific properties that have been sold from The REALTOR Association of Greater Fort Myers and the Beach s statistical reports or from any sold or comparable report of the Association or the MLS, the following disclaimer or substantially similar notice must be clearly legible and included if all the properties included were not listed and/or sold by the participating advertising office. Based on information from The REALTOR Association of Greater Fort Myers & the Beach, Inc. for the period through. These properties were sold by various MLS participating offices.
Page 20 CHAPTER 5 ADVERTISING & TRUTH IN LENDING REGULATION Z The Federal Trade Commission is empowered by the Federal Government to enforce the TRUTH IN LENDING ACT, commonly known as Regulation Z. Enacted by Congress in 1968, the Truth in Lending Act was originally part of the Consumer Protection Act and was meant to protect borrowers from falling prey to dishonest lenders. The purpose of this Act is to assure the meaningful disclosure of consumer credit and lease terms. The disclosure, if required, must be made clearly and conspicuously. The importance of this Act becomes apparent to a real estate licensee because not just creditors or lessors must comply, but also advertisers. If the advertisement promotes credit, then the real estate licensee must comply. The application of the Act applies if certain "triggering terms" are used. If these "triggering terms" are used in the advertisement, then certain disclosures must be included. ADVERTISEMENTS INVOLVING NEW FINANCING Almost anyone who advertises financing information must comply with Regulation Z. Regulation Z defines advertisement as "any commercial message that promotes consumer credit". Regulation Z applies: To ads for residential properties that are to be owner occupied. To any real property that requires four (4) or more payments. To ads that mention the following triggering terms: 1. The amount or percentage of any down payment, or 2. The number of payments or period of repayment, or 3. The amount of any payment, or 4. The amount of any finance charge NOTE: Mention of only a down payment in an ad doesn't trigger the need for further disclosures unless the seller of the property is financing the transaction and meets the definition of a creditor. A creditor is defined as one who regularly extends credit. In practice, that means someone who has financed at least five (5) transactions secured by mortgages in the prior year. Ads describing seller financing are exempt from Regulation Z unless the seller meets the definition of a creditor. The terms Subject to financing, such as wraparound mortgages or all- inclusive deeds of trust, are also exempt.
Page 21 Seller financing is covered by Regulation Z when the seller is a creditor. You might encounter this when you are advertising property repossessed by a lender. If financing is offered by this lender/seller and lender/seller meets the definition of a creditor then the ad must comply. In this example down payment also becomes a triggering term that requires further disclosure. FIXED RATE LOANS If you include in your ad the monthly payment, term or amount of any finance charges or downpayment if seller is a creditor, all of the following must be included in your ad. The amount or percentage of the down payment, and The terms of repayment, and The annual Percentage Rate with that term spelled out or abbreviated, APR, and, if the rate may be increased after the sale, that fact. You may quote the simple interest rate in an ad, but only if you also use the APR. The APR can appear by itself without triggering Regulation Z. Keep in mind that the simple interest rate cannot be shown more conspicuously than the APR. ADVERTISEMENTS OF ASSUMPTION Advertisements of assumptions generally involve the use of the one credit term that does not trigger the full disclosure required in Regulation Z -- the rate of finance charge. In order to comply, the advertiser may state the rate and nothing else, but it must be expressed as an "Annual Percentage Rate", using that term: PROPER "Assume 7-1/2% Annual Percentage Rate Loan" IMPROPER "Assume 7-1/2% Mortgage" The term "Annual Percentage Rate" should be spelled out rather than abbreviated. Further, since Regulation Z provides that whenever the term "Annual Percentage Rate" is required to be disclosed, it must be printed as conspicuously as other terminology. USE OF GENERAL TERMS None of the above rules apply when generalities (no figures other than price) are used. You can advertise without restraint such phrases as "liberal terms", "low down", "FHA-VA terms", "low monthly payments", and etc. Other general rules regarding Regulation Z, detail the disclosures which normally must be made. (Note: It is stated that when making loans (not advertising) the disclosure must be made within three days of receiving a written loan application.
Page 22 CHAPTER 6 ADVERTISING & DISCLOSURES FOR TRANSACTION/ADMINISTRATION FEES Many real estate firms employ personnel to facilitate transaction closings and charge additional fees, call transaction fees, closing fees or administration fees (or something similar) in addition to real estate commissions paid by customers. Because many consumers make decisions on brokerage relationships partly based on the amount of fees charged, disclosure of such fees should be made public before a seller signs a listing agreement or before showing property to a buyer. Disclosure of such fees to the buyer just before the buyer signs the sales contract is too late. Most recently, a member of the public (BUSBY), recently filed a class action lawsuit in the U.S. 11 th District Court in Alabama claiming a local real estate firm violated Section 8 (b) of RESPA. Because the U.S. 11 th District Court also covers Florida, this case affects everyone conducting real estate here. The court found in BUSBY s favor that the real estate firm charged an unearned fee of $149.00 for an Administrative Fee. The court determined that no commensurable services were provided to justify the charge for the $149.00 Administrative Fee. The real estate firm, in the opinion of the court, performed no actual or distinct services that benefited the consumer, over and above the services performed that fell under the fees for the commission paid. The $149.00 Administrative Fee was in fact, found to be duplicative and in violation of Section 8 (b) of RESPA. While the BUSBY decision is being appealed, it is something that you need to be cautions of until it is finalized. Under no circumstances, should there ever be a separate fee on lines 703 or 704 of the HUD for anything. At all costs, you should avoid calling additional fees you wish to charge: Administration/Administrative Fees, Transaction Fees, Compliance Fees, Technology Fees, etc. In order to comply with the current BUSBY decision, it has been recommended from FAR that you include any type of fees (Administration/Administrative, Transaction, Compliance, Technology, etc) into the commission. You should seek the assistance of a qualified attorney to help you, as a violation of Section 8 (b) of RESPA could result in you receiving treble damages and prison time. HUD has published a Statement of Policy that sets guidelines that must be followed with regard to transaction or other similar fees. Brokers that charge such fees should be very cautious. There are now significant limitations on the
Page 23 amounts of such fees, as well as a defined test that must be satisfied, in order to avoid a violation of RESPA. The National Association of REALTORS RESPA Attorney Philip Schulma has also recommended that any member of NAR that charges a transaction fee should adhere to the following policies: 1. Fees may not be excessive and must bear a direct relationship to the additional services or functions performed by the real estate broker. 2. The real estate broker MAY NOT charge or collect a transaction fee that is simply an add-on to the transaction with the consumer and has no direct relationship to work performed. In accordance with HUD s Statement of Policy, the charging and collection of administrative fees where no work or services are provided, or where such work or services are nominal in nature or duplicative, ARE VIOLATIONS OF RESPA. 3. The charging and collection of any fees must be fully disclosed to the consumer. Most recent FREC (Florida Real Estate Commission) Case filing report: In a case involving nondisclosure of a transaction processing fee, FREC imposed a fine of $1,000 and a reprimand against a brokerage firm for failing to disclose the fee to the seller when it was taking the listing. The fee was included in the seller s net statement, but FREC said that disclosure came too late. (as reported 2/25/10) CHAPTER 7 CITY/COUNTY ORDINANCES Codes governing the number, size, location and character of signs are outlined in each individual City s Zoning Code or in the general Lee County Zoning Code. Here is a link to some of the cities in our area for you to use as a reference tool: CAPE CORAL www.capecoral.net FORT MYERS - www.cityftmyers.com LEE COUNTY (LEHIGH ACRES) www.lee-county.com LABELLE - www.citylabelle.com BONITA SPRINGS - www.cityofbonitasprings.org SANIBEL ISLAND - www.mysanibel.com
Page 24 REFERENCES For additional information on any of the topics discussed, feel free to visit the websites mentioned below: National Association of REALTORS www.realtor.org Click* on NAR Governance and then Governing Documents Log on for: A. Membership Marks Manual B. Code of Ethics *The first time you log on to www.realtor.org, you will need to establish a password with them. It is self-explanatory at the website. Florida Real Estate Commission (FREC) www.myflorida.com/ddpr Click on the Florida Real Estate Commission Chapter 475 Florida Statutes and Chapter 61J2 Florida Administrative Code Regulation Z -- Truth In Lending www.federalreserve.gov Type Regulation Z in the search box General Questions Association Member Website www.swflrealtors.com