The professional framework for the mediation of real estate agents within the Association of Real Estate Agents
The purpose of the summary below is to clarify the professional framework for the work of real estate agents within the Association of Real Estate Agents, i.a. towards the legal regulations that apply to the work of real estate agents, the code of conduct of members within the Association of Real Estate Agents, proper practices in real estate sales and other values that must be followed.
I.The right to mediate real estate transactions
There are 330 real estate agents within the Association of Real Estate Agents who have obtained certification to mediate real estate transactions on the basis of university education and experience that is required before the certification for the occupation is granted.
Realtors within the Association of Real Estate Agents are subject to the supervision of the supervisory committee for real estate agents, must possess liability insurance for financial losses they may cause in their line of work, and must follow the Association of Real Estate Agents's strict code of conduct. The Association of Real Estate Agents supervises that Association of Real Estate Agents members follow the association's code of conduct in their work.
It is imperative that consumers realise that when persons sell their real estate themselves and without the real estate agent’s involvement , their legal status and consumer protection are not guaranteed throughout the sales process in the same way as if they would otherwise have been if they used the intermediary of a realtor.
In their profession, real estate agents have the status of public magistrates based on the public interest behind their work.
Real estate agents must protect the interests of both buyers and sellers throughout the entire sales process.
When a property is taken up for sale and preparation for it, when pricing and presentation of it is handled professionally, the chances that the transaction will turn out to be successful for both parties increases greatly. Before a realtor can proceed to work, he must make a written agreement with the seller, i.e. a so-called sales agency and at the same time to follow the requirements of the code of conduct and make sure that the property is not for private sale
treatment with another real estate agent. Similarly, the realtor has a legal obligation to conclude a contract with a buyer who intends to make an offer for a property.
Before a real estate agent can start work, he must make a written agreement with the seller, i.e. a so-called sales agency, at the same time following the requirements of the code of conduct and assuring that the property is not for private sale treatment with another real estate agent. Similarly, the real estate agent has a legal obligation to conclude a contract with a buyer who intends to make an offer for a property.
When a property is considered for sale, a realtor prepares a detailed sales overview of the property.
The sales overview is based, among other factors, on a mandatory inspection that the real estate agent must carry out himself. He must familiarise himself with the condition, type and equipment of the property.
The law on the sale of real estate has detailed requirements for the real estate agent to obtain a variety of important information about the property which must be included in the sales overview of the property. This is an aspect that real estate agents need to be very diligent about.
The real estate agent obtains, among other things, the seller's information about the condition of the property, and in the case of a multi-family house, the realtor asks for a statement from the housing association with information about building fees, financial status, condition, current and/or planned construction. When all the information is available, the financial value of the property is estimated. In general, evaluation meetings are held at the estate agents office, where estate agents jointly weigh and evaluate each property discussed, and estimate its most likely sale value. Real estate agents make use of various data during the evaluation, in addition to sharing extensive experience and knowledge of market conditions at any given time.
The property's sales overview must be prepared and confirmed by the seller before the property is advertised for sale. The sales overview is an absolutely fundamental document in real estate transactions and the buyers should be able to trust that it is done well, detailed and that it contains all of the information that is necessary for buyers to be aware of when making a decision about a possible offer for the property. The seller bears responsibility for the correctness of the information provided in the sales overview. Furthermore, the content of the sales overview may be examined when the real estate agent's liability is assessed, whether the buyer or the seller makes a claim against the realtor in court or against an insurance company due to the professional liability insurance that all real estate agents must possess.
III.Marketing and property showing
Valuation of real estate is taught in university for certification in real estate sales, and there are a variety of factors needing consideration in that regard, as housing varies greatly and the price per square metre can vary greatly for different properties within the same neighbourhood, and even within the same street. Simplification by use of certain computer systems which automatically calculate the value of real estate ought to be avoided. It is imperative that assets are valued in the most realistic way achievable as well as the matter requires to be viewed in a broad context. The situation in the real estate market must be observed at any given time, as there are often large fluctuations in supply and demand. The real estate market is also sensitive to external influences such as market outlook, economic situation, interest rate environment, etc. It is crucial to be able to rely on the advice of a real estate agent for valuation, however the seller makes the final decision on the intended price. When all the data regarding the property is available, the realtor can display the property for sale. It is important for real estate agents to inform sellers that according to by law and custom is considered collateral to real estate, but realtors are obligated to inform the sellers what, according to law and custom, is considered to be property’s collateral, however the Association of Real Estate Agents has prepared a specialised list on the subject to promote uniform working practices of its members and to increase the security and reliability of contracts. Exclusively real estate agents are permitted to advertise real estate on the real estate website fasteignir.is (visir.is). Such arrangement ensures consumer protection for both buyers and sellers, where the law on the sale of real estate applies when a realtors attends the sales process. All who look at real estate ads on fasteignir.is should be able to be certain that the sales process is handled professionally, that the necessary professional liability insurance is in place, that the activities are monitored and that the laws on money laundering are not being circumvented. Usually, the real estate agent arranges for a professional photographer to be hired to take pictures of the property. Real estate agents act as intermediaries between the buyers and sellers, answer questions and send sales documents to interested parties, keep sellers informed about the status of matters, show properties at booked times and/or hold open houses in the absence of the seller if the seller so chooses. With such an arrangement, the realtor can have a significant conversation with potential buyers, where various issues regarding the property in question can be discussed and the buyer's intentions for possible transactions.
b. Offer process and offer preparation
Following the advertisement of a property and its showing, an important period begins where it becomes clear how much interest there is in the property. Real estate agents may contact those who viewed the property. Realtors may compile a list of those who view the property, and that list is protected by privacy rules prepared by the Association of Real Estate Agents.
Market conditions can vary greatly, from many people being interested in buying the same property to no offer being received. The importance of good marketing can make a large difference, and it is therefore important that sellers rely on the knowledge of real estate agents in that regard.
Members of the Association of Real Estate Agentsare are obliged to comply in all respects with the association's laws and codes of conduct which apply to the execution of offers for real estate. The code of conduct, among others, is stipulated on the duty of confidentiality of real estate agents during the offering process, which, among other things, means that he is not allowed to inform anyone except the seller about the content of the purchase offer, incl. purchase offer amount.
The realtor's duty of advice becomes immediately legally effective towards the seller and those who make an offer for real estate, as there are many things to consider. A real estate agent has a duty to be independent in his work and to protect the interests of both buyers and sellers in all respects.
When people intend to make an offer on a property, it is important that they can benefit from the advice of a realtor and that there is a detailed statutory sales overview which ensures that clear information is provided before a purchase offer is made.
Real estate agents are under considerable pressure when making an offer, as they are obliged to negotiate in such a way that the interests of both parties are protected, as well as that the legal position of both parties is clear, and that no illegal, unfair or unreasonable advantages are present in the contract.
Realtors need to be aware that during their advocacy towards the buyer and seller, various issues may arise that may be resolved by inserting a clauses in the purchase offer, for the defence of the seller, for the defence of the buyer and, depending on the circumstances, for the defence of the real estate agent himself. Such clauses can be of various types, often tailored to each transaction individually, in which case it is not sufficient to resort to standard wording on disclaimers when making an offer.
Other traditional clauses must be kept in mind and, as the case may be, included in the purchase offer in the form of clauses that can be resolved by the buyer or seller. An example of a buyer's clause is a disclaimer about financing, a disclaimer about the sale of another property, a disclaimer about a condition inspection, etc. Then reservations must be timed. Another factor that is extremely important is that what concerns the housing association should be addressed during the offer process, whether there are ongoing or planned constructions on its behalf, and if so, it is necessary to negotiate the obligations and decide how the settlement between the parties should be handled.
A payment plan must be available at the time of the offer, specifying what the buyer's equity is, whether the buyer intends to take out a new loan or mortgage another property. The seller must also provide information on what he intends to do with the loan in question, whether to pay it off or transfer the mortgage to another property. It is important to concur on when payments should be made. The matter can be further complicated when dealing with property chain sales. The payment flow is then often intertwined with the acquisition of the property, which further complicates the matter and requires close and professional communication between involved realtors.
Document preparation in connection with mortgage transfers is significantly complicated and not at all within the reach of everyone. When a loan is mortgaged, the equivalent value of the debt plus 10% must be paid by transfer at the same time, and in the case of property chain sales and even mortgage transfers made between several properties, which creates further considerable complexity in the matter. Moreover, in cases where mortgage transfer and mortgage release cannot be obtained in the same document the issue gains further intricacy. During such a disposition, it may be necessary for money transfers to be taken as collateral or deposited into the trust accounts of real estate agents who are responsible for the deposition. Also, the working rules of credit institutions can be very varying, which tests the experience and skills of the realtors who handle the documentation.
When the real estate sales process is part of a property chain sale, the translation may lack progress for a significant amount of time. It may take a long time to resolve clauses, reservations may be cancelled, which can lead to falling through of transactions that involve five to seven properties. It is clear that uncertainty is often present within property chain sales, where a final property sale may not come to fruition due to various factors going awry. When it is possible to resolve complex situations, for example when handoff dates or payment flows need to be coordinated between several contracts at the same time as a mortgage transfer, the issues will only be resolved with good communication between all parties and extremely well-thought-out documentation. It only takes one weak link for the chain to break. The human element is unavoidable in these situations, because people need to be able to compromise in order for agreements to come to fruition.
The code of conduct for the members of the Association of Real Estate Agents emphasises the importance of good cooperation among members and the absolute necessity of this being practised in circumstances as such.
IV. Purchase contract
Generally 4-6 weeks pass between when a purchase offer is accepted until the purchase contract is made. By that time all reservations must have been resolved and the final version of the purchase agreement must be at hand, with minor changes from the original purchase offer if needed.
All changes made to the terms of the contract between the purchase offer and the purchase contract must be approved by both the buyer and the seller, and it is crucial that the real estate agent keeps the contracting parties well informed in this regard.
When signing the purchase agreement, all loan documents and mortgage permits must be ready for signing and/or depending on the circumstances, a loan promise must be available if payments from loans are to be received later. It is imperative to know how the related loans will be handled and assure that parallel payments associated with mortgage transfer are sufficient to cover it.
When signing a purchase agreement for a property which is part of a chain sale, all the properties must be eligible for it. It is an arduous task to resolve if the agreements of the remaining properties to be entered into a purchase agreement are altered, and it may affect agreements that have already been completed, as well as those which have already arrived for registration. When done properly everything should have stable foundations.
The law requires that a real estate agent always sign a purchase agreement with the buyer and the seller, and it is part of his responsibilities to ensure that all contracts are drawn up properly and that the interests of both parties are sufficiently protected.
At the purchase agreement meeting, the realtor examines the contract terms in detail and aims to answer anything that may be unclear before the seller and buyer sign the purchase agreement.
Occasionally it may be convenient, although not mandatory, as for example in the case of complex mortgage transfers, of transfers being made by the contracting parties or credit institutions to the real estate agent's trust account. It will continue to be used during settlements, both for deposits and for repayment of related loans, etc. Real estate agents' trust accounts are subject to strict laws and such accounts are regularly monitored.
The real estate agent must submit the purchase agreement together with the accompanying documents for endorsement by a credit bureau and subsequently for registration without unnecessary delay. Following the registration, the realtor must collect the documents and bring them to the relevant credit institution so that loan disbursements can be implemented.
V. Handing over of real estate
The hanging over of real estate is an important moment and it is crucial that the real estate agent goes over the legal implications of the hanging over in detail with buyers and sellers. In general, realtors emphasise that people meet formally when handing over real estate in the property. Experience has shown that if there are issues during the handover, they are usually resolved on the spot.
If the buyer considers the purchased real estate to be defective, he must immediately direct a clear and defined claim in writing to the seller and send a copy of his claim letter to the real estate agency.
VI. Waiver and settlement between buyer and seller
When the buyer has fulfilled his obligations, he has the right to a waiver from the seller, and with that he becomes the sole owner of the property and acquires all the rights as an owner of the property.
The real estate agent invites the buyers and sellers to a sale meeting when he has completed work on the financial settlements between the parties.
It is worth noting that the Association of Real Estate Agents has prepared a standardised settlement that members use when settling real estate transactions. It deals with settlement of real estate taxes, water and sewerage fees, association fees, fire insurance, land rent, settlement of legal mortgages, as well as other issues that may be necessary to settle between the parties.
It is important that the settlement is clear and understandable for both the buyer and the seller, and that the real estate agent explains everything that the parties need to be informed about.
Following the handing over, the realtor officially registers the matter.
VII. Code of Conduct
The code of conduct for the members of the Association of Real Estate Agents is based on creating public trust in the work of the members as well as that each member is prepared to have professional and ethical ideals as a guide for their work.
The code of conduct contains multiple provisions that deal with ethical considerations regarding the relations between association’s members, buyers and sellers and, in addition, between other real estate agents.
The Association of Real Estate Agents supervises that the code of conduct is followed.
VIII. Customer knowledge according to law on money laundering
Real estate agents have extensive obligations according to money laundering laws, as they must maintain strict safeguards so that their services are not misused for money laundering.
At the beginning of transactions, the real estate agent must conduct due diligence on both sellers and buyers.
Real estate agents are obliged to report to the police if slightest suspicion arises suggesting that there is a risk of money laundering, either on the side of buyers or sellers.
To ensure that real estate agents fulfil their legal obligations, the Association of Real Estate Agents on has taken consecutive steps:
● Prepared a coordinated risk assessment of money laundering, where the main risk factors in real estate transactions are specified and ways drawn up for the Association of Real Estate Agents members so that they understand where the main dangers in relation to money laundering lie.
● Prepared a money laundering policy detailing the effort to prevent money laundering.
● Prepared an electronic form for due diligence that must be done for all buyers and sellers of real estate.
● Conduct mandatory annual training sessions for its members covering money laundering, in order to comply with the obligations of the Money Laundering Act.
IX. Conciliation meetings
Following the handing over of the property, various issues may arise that the buyer brings to attention. The content of the purchase agreement states that the buyer must immediately direct a clear and defined claim to the seller as well as send a copy to the real estate agency. At this stage it is crucial to depend on real estate agents' advice for all of the parties, as realtors have extensive knowledge of acumens which to implement in such cases.
In the event of a dispute between the buyer and the seller, the real estate agent invites both parties for a conciliation meeting at the real estate office. Experience has shown that the vast majority of cases end in settlements between the parties, as it is beneficial for both the parties to resolve disputes. If a case was to be resolved with assistance of lawyers and, depending on the circumstances, in the courts, it entails a substantial additional cost to both of the parties.
The Association of Real Estate Agents maintains thorough continuation of education of its members in order to increase their skill level and strengthen their ability to assist in reconciliation between the parties, i.a. with an annual review of all major decisions and a mediation course.
X. Insurance of real estate agents
All real estate agents are obligated to have mandatory professional liability insurance, which buyers or sellers can claim if they believe that real estate agents have caused them financial loss.
The insurance companies subsequently take such cases into consideration and assess whether the realtor's liability is to be recognized.
XI. Complaints Committee for Purchase of Goods and Services
If buyers or sellers believe that a real estate agent has caused them financial loss due to their actions, they appeal to the Complaints Committee for Purchase of Goods and Services in order to seek their opinion whether this is the case.
XII. Real estate agent supervision
All real estate agents are subject to oversight by the real estate agent supervision committee, and each real estate agent pays a special fee to the state to enforce this surveillance. All real estate agents are visited by the supervisory committee at least once every 3 years, and they are required to submit an annual confirmation that the escrow accounts they keep are in accordance with the law, as well must submit confirmation that mandatory professional liability insurance is in place.
If the buyer or seller believes that a real estate agent has not fulfilled the legal requirements in their profession, they may appeal to the supervision committee. The real estate agent supervision committee has the authority to reprimand the realtor or deprive them of their rights due to violations of their duties.
XIII. Consumer assistance of the Association of Real Estate Agents
The Association of Real Estate Agents provides consumer assistance to buyers and sellers in the same way as all other associations of real estate agents in the Nordic countries. Clients of members of the Association of Real Estate Agents may appeal to it if they have comments or if they find something unclear that needs clarification or further advice.
XIV. Reeducation for the Association of Real Estate Agents
The Association of Real Estate Agents maintains extensive customised reeducation for its members. The code of conduct for the members of the The Association of Real Estate Agents contains provisions on continuing education where members are encouraged to regularly attend further education in order to maintain and strengthen their professional knowledge.