Legal Hotline Q&A: Advertising
WHAT DOES ADVERTISING MEAN?
The Virginia Real Estate Board’s definition:
"Advertising" means all forms of representation, promotion and solicitation disseminated in any manner and by any means of communication to consumers for any purpose related to licensed real estate activity."
As you can see, advertising, from VREB’s perspective, is a broad concept, covering everything from a page you pay for in a newspaper to potentially the contents of your emails. Its regulations encompass all communication media (although they require different disclosures for print and online advertising).
A guideline to go by to determine whether you are engaged in regulated advertising is: Could what I am sending out be perceived as attempting to induce business? If it could be, follow all disclosure requirements.
Also, consider that real estate advertising can be in the eye of the beholder. For example, I post on my Facebook® page that I just sold my 25th listing this month. I might just be attempting to garner praise from my friends, but I might also be attempting to tell the world what an incredible agent I am and to work with me --------advertising!
Question: What are my disclosure obligations for online and print advertising?
Answer:
Online ads for a firm must have:
- Firm name;
- City and state of main office; and
- All jurisdictions in which the firm is presently licensed
- Online ads for a licensee (not a firm) must have:
- Licensee’s and firm’s name;
- City and state of the licensee’s office (not necessarily firm’s main office); and
- Jurisdiction(s) (usually states) in which licensee holds a license, active or not.
Online ads for a licensee (not a firm) must have:
- Licensee’s and firm’s name;
- City and state of the licensee’s office (not necessarily firm’s main office); and
- Jurisdiction(s) (usually states) in which licensee holds a license, active or not.
For all other ads, the requirement is simply this: The firm’s name must be clearly and legibly displayed.
Question: What are the requirements for team advertising?
Answer:
The Board is very sensitive to team ads in which the team name is so prevalent, and the firm name so hidden, that the public could be confused as to whom they are dealing with. Firms should also be cautious about team names. We strongly encourage firms to limit team names to those that do not hold out the likelihood of confusion; teams should avoid realty, real estate, land, associates, partners, company, limited, consultants, sales, and properties. Use of the terms “team” or “group” is preferable. The key question is - does the ad leave the impression that the team is a brokerage firm acting independently? If it does, VREB will likely punish the offenders.
Question: Is it true that the agent name (or team name) cannot be in larger print than the company name?
Answer:
No, there is no such regulation. The bottom line is that all advertising – including team ads – must be clear and unambiguous as to the identity of the firm and that the team is a team, and not a brokerage.
Question: May a buyer agent who sells another agent's listing advertise that she sold the property?
Answer:
Yes. Code of Ethics, Standard of Practice 12-7 provides that:
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)
Question: May a buyer offer to rebate a portion of his commission to a client?
Answer:
A licensee may rebate to a client, as long as the lender approves (there are maximum total concessions that buyers are permitted from all sources on most loan programs).
The rebate must also be listed on the HUD1. Concessions to buyers are of interest to lenders for determining loan-to-value ratios. If someone tells you a rebate can’t go on the settlement statement, it almost certainly must.
Also, keep in mind that when you advertise a potential rebate there should be disclaimer language making clear that it is subject to lender approval.
Question: May we advertise that our firm will pay nonlicensees for real estate leads?
Answer:
Section 8 of RESPA expressly prohibits this, unless the source of the referrals is licensed. Section 8 of RESPA provides that it is illegal to pay or to receive anything of value pursuant to an agreement that settlement services will be referred. Real estate brokerage is a settlement service. (This prohibition applies only if there is an institutional mortgage loan in the deal.) RESPA contains an exemption in the case of referrals by real estate licensees to each other.
This is also a violation of Virginia law, which provides that referral is a licensed activity. See 18 VAC 135-20-280:
Actions resulting in an improper brokerage commission include:
1. Offering to pay or paying a commission or other valuable consideration to any person for acts or services performed in violation of Chapter 21 (§54.1-2100 et seq.) of Title 54.1 of the Code of Virginia, or this chapter; provided, however, that referral fees and shared commissions may be paid to any real estate entity licensed in this or another jurisdiction, or to any referral entity in the United States, the members of which are brokers licensed in this or another jurisdiction and which only disburses commissions or referral fees to its licensed member brokers;
Question: The landlord wants to pay a "finder's fee" to tenants who bring in other renters. Can the landlord directly compensate his tenants in this fashion, even though a real estate firm is managing the property?
Answer:
Section 54.1-2103A7 of the Code of Virginia gives the answer. This section deals with exemptions from the requirements of licensure, and exempts “Any existing tenant of a residential dwelling unit who refers a prospective tenant to the owner of the unit or to the owner's duly authorized agent or employee and for the referral receives, or is offered, a referral fee from the owner, agent or employee.”
Question: An agent in my office is selling his own home and has heard that he doesn’t have to use the Owner/Agent sign anymore - are Owner/Agent signs still required?
Answer:
The policy of the REB on this issue is that the public has a right to be informed if they are dealing with a real estate professional on the other side of the deal.
So let’s assume a licensee is selling his own property.
- Suppose he has listed his property with a licensed real estate brokerage firm. If so, then all firm ads will have the firm’s name displayed, and the public will know a real estate professional is on the seller’s side. In these cases, the firm signs do not need to say “Owner/Agent” or the equivalent.
- Suppose the owner is not listing the property with a firm. Now all signs will be the equivalent of FSBO signs, and unless the signs and ads give the appropriate notice, the public will not know they are dealing with a professional. Thus, the signs/ads must so state. This would also be true of the agent’s individual advertising/signs done outside the firm even if it is listed.
So, in the usual situation, if it’s listed, the firm signs do not have to say “Owner/Agent.” However if not listed, all signs/ads do have to have this disclosure.
Also please remember that in all cases, the contract must contain the disclosure.
Question: May a Virginia licensee advertise South Carolina property in Virginia publications?
Answer:
Sure. The real estate license is not property-sensitive, but activity-sensitive. In other words, it's not a function of where the property is located, but where the activity occurs.