John Hall & Associates - Phoenix Real Estate Brokerage

While there continues to be a level of hesitancy in our real estate market, Arizona’s Department of Real Estate remains committed to protecting Arizona’s consumers and the good reputation of our industry.  I believe the most effective means of preventing harm is to educate the Public, Industry and Department staff of our rights and responsibilities during a real estate transaction.  Thank you for taking a moment to read Dialog and continuing to educate yourself.

I frequently mention the Real Estate Recovery Fund while speaking with groups and discover that there are few, if any, in the audience who are familiar with it.  Consequently, I want to highlight it and educate our readers about this resource.

The Real Estate Recovery Fund was established July 2, 1963.  It benefits consumers who are financially harmed due to the actions of a real estate licensee during a purchase, sale or lease of real estate in Arizona (including a cemetery plot) , or from a property management transaction executed by a licensee on the applicant’s Arizona property.  New sales agents and brokers deposit $10.00 and $20.00 into the Fund, respectively.  Should the fund balance drop below $600,000.00, a contribution would be expanded to renewing agents and brokers until the minimum balance is reach.  As of March 1st, 2008, the fund balance is $890,717.83.

How to File:
An “Application for Payment from the Real Estate Recovery Fund” is available at www.azre.gov or by calling the Customer Assistance Team at 602-771-7730.  It must be submitted with:

1. A court order awarding payment and recorded by an Arizona County Recorder.
2. Documentation showing the applicant exhausted all efforts to collect the money from the defendants/respondents.
3. The court order must be against a person licensed at the time of the transaction.
4. It must also find the person’s conduct violated duties under the real estate statutes (Title 32, Chapter 20) or Rules of the Commissioner (ACC R4-28-101 thru R4-28-1313).

The Fund may pay up to $30,000 per transaction with a $90,000 cap per licensee.  For example, approximately $365,000 in losses were suffered by former clients of Russell Bosworth of Arizona High Performance Realty (AHPR) as a result of his misuse of client funds. The fund can pay only up to $90,000 of potential claims.  This means that $275,000 would be ineligible for payment from the fund.

Eligible losses include:

• • Misappropriated earnest money, down payment, security deposit, rent income, or money fraudulently withheld that was intended for a mortgage or other expense on property managed by a licensee
• • Repair costs for defects or transaction losses where the licensee misrepresented the condition of a property or actively misrepresented the financial condition of the parties or the property.
• • Reasonable attorney fees and court costs awarded by the court.

Ineligible losses consist of:

• • Lost profits, speculative losses, investments in notes, mortgages, limited partnerships or other securities where the applicant did not engage the services of the licensee
• • Repair costs for defects when the purchaser was aware of, or notified about, the defect
• • Punitive damages, post-judgment interest, undocumented transactions or losses
• • Money spent on lodging, meals, travel, photocopies or phone calls, and losses exceeding out-of-pocket losses.

In 2006, 4 applications to the Recovery Fund were received and 2 obtained payment for a total of $36,652.80.  During 2007, 18 applications were received and 10 obtained payments for a total of $240,862.59.  3 applications from 2007 are still pending. I anticipate receiving more applications in 2008 as the public gains more awareness of this resource.

The Real Estate Recovery Fund can help make consumers whole when financially harmed.  It exists because the Public, Industry and Department worked together in 1963 to establish it as a consumer resource.  In 2007, all three Entities worked together again to establish the Condominium Recovery Fund.  For more information on this new fund, please visit www.AZRE.gov.  Whether you are a consumer or a licensee, the Arizona Department of Real Estate and I are always willing to help and look forward to serving your needs.

The Commissioner can be reached at commissioner@azre.gov.  ADRE does not monitor comments or questions on this blog.