Published by

South Dakota

Real Estate Commission

221 West Capitol, Suite 101

Pierre, SD 57501

(605) 773-3600

FAX (605) 773-4356

www.state.sd.us/sdrec

E-Mail: DRR-REALESTATE @state.sd.us

The South Dakota Real Estate Commission is a regulatory body charged

with administering the real estate licensing act, the timeshare act, the

condominium act, and the subdivision act. The mission of the real estate

commission is to protect the interest of the public when engaged in a real

estate transaction. It is the commission's responsibility to enforce

standards for education, licensing, and practice of real estate brokers,

salespersons, auctioneers, property managers, residential rental agents,

timeshare agents and home inspectors, and for registration of

condominium, timeshare, and subdivision projects.

Page

Introduction ..................................................................1

Real Estate Terms..........................................................2

For the Buyer.................................................................4

For the Seller .................................................................21

Complaints and Problems..............................................34

Discrimination ...............................................................35

Referral Guide ...............................................................37

1

The buying or selling of residential real estate is an important matter for

everyone involved. For many people, the purchase or sale of a home is

one of the largest financial transactions in which they will ever be

involved.

The South Dakota Real Estate Commission has developed this guide to

help you, the home buyer or seller, understand the process of purchasing

or selling residential real estate. This booklet contains answers to

common questions that may arise during the home buying or selling

process. The basic steps in a real estate transaction are discussed with

the intent that it will help you become more knowledgeable in the

purchase of your new home or the selling of your current home.

A referral guide is located at the back of this brochure to provide you

with references to contact for further information on certain topics.

2

In choosing a real estate licensee, it may be helpful to understand the

different terms and types of representation available in a real estate

transaction:

any agency relationship with a real estate licensee.

any agency relationship with a licensee.

client subject to the client’s reasonable direction and control.

job it is to bring parties together in a real estate transaction. The

responsible broker usually collects a fee (commission) from the seller of

the real estate; however, sometimes the buyer pays the commission.

same duties as a broker. However, they cannot do so under their own

authority – they must act as a representative of the responsible broker

with whom they are affiliated. The responsible broker is ultimately

responsible for the real estate activities conducted by any licensee

associated with the broker.

(buyer or seller) to a transaction.

with both the seller and the buyer in the same transaction. (Example: A

buyer who has signed a buyer agency agreement with a broker becomes

interested in purchasing a property owned by a seller who has a listing

agreement with the same broker. When this happens, the fiduciary

responsibilities of the broker change so that the buyer and seller are

treated equally with the broker not being partial to either party.)

3

provide full representation to a client, whether or not another licensee in

the same firm represents another client in the same transaction.

(Example: A licensee associated with a responsible broker has a property

listed and another licensee associated with the same broker represents a

buyer who becomes interested in that property. As appointed agents, the

licensees can act as single agents for their respective clients.)

does not represent either the seller or the buyer in a fiduciary capacity.

Therefore, the buyer and seller do not become clients of the broker but

rather customers.

real estate transaction without being an agent or advocate for the interest

of any party to the transaction. This term includes the licensees

associated with the broker.

A real estate licensee who is a member of the NATIONAL

broker, broker associate, or salesperson. In some areas of South Dakota,

for its members. The MLS compiles and distributes a list of all

properties listed by its members and provides its members with

information to better serve the consumer. When a property is sold

through MLS, the listing brokerage and the selling brokerage divide the

commission according to a negotiated agreement.

4

This section of the Real Estate Consumer Guide is related to the purchase

of real property. It is the intent of this section to provide you, the buyer,

with basic knowledge to assist you in the purchase of your new home.

When dealing with a real estate licensee in the purchase of real estate,

you are either a client or a customer of that licensee. A licensee has

certain duties and obligations to assist you throughout the home buying

process.

If you wish to be represented in a real estate purchase, you will become a

client of the licensee. The licensee chosen represents your interests. In

some transactions, the buyer and seller will receive the real estate

services from the same responsible broker or from licensees associated

with that broker. In other transactions, there can be a written agreement

in which the broker does not represent either party. In other transactions,

neither party wishes to be represented. No matter what type of

relationship exists between you and the broker, a written agreement must

be entered into. The different types of relationships a licensee can offer

you are described in detail below.

Any licensee representing you has the following duties and obligations to

you:

fidelity, including:

manner regardless of whether you are already a party to a

contract to purchase property or already a party to a contract

or a letter of intent to lease;

licensee;

5

about which the licensee knows but the specifics of which

are beyond the expertise of the licensee;

received

rules, regulations, and ordinances, including fair housing and

civil rights statutes or regulations.

When a licensee has a home listed for sale and also represents a buyer

who wants to purchase the home, the licensee becomes a limited agent of

the buyer and the seller. A licensee may act as a limited agent only with

the informed written consent of the buyer and seller and has the

following duties and obligations:

buyer and the seller;

timely manner regardless of whether the buyer or seller is

already a party to a contract to purchase property or is already a

party to a contract or a letter of intent to lease;

by the licensee;

material matters about which the licensee knows but the

specifics of which are beyond the expertise of the licensee;

received;

rules, regulations, and ordinances, including fair housing and

civil rights statutes or regulations.

When a licensee has a home listed for sale and another licensee

associated with the same responsible broker represents a buyer who

wants to purchase that home, those licensees must act as limited agents

for that transaction, unless the responsible broker offers appointed

agency.

6

A licensee who has been selected by the responsible broker to act as an

appointed agent for you owes the same duties and obligations as a

licensee representing a buyer described previously. Unlike limited

agency, a licensee acting as an appointed agent for you can fully

represent you if you become interested in a property listed with another

licensee associated with the same responsible broker.

Any licensee acting as a transaction broker to a buyer has the following

duties and obligations:

received

rules, regulations, and ordinances including fair housing and

civil rights statutes or regulations

licensee.

A transaction broker may not advise any party to a transaction to the

detriment of another party.

You may choose not to utilize the services of a real estate licensee. In

that instance, a buyer agency agreement will not be entered into. If no

written relationship exists between you and the licensee, you must be

very careful as to not release any confidential information to the licensee.

You must assume that anything said to the licensee will be

communicated to the seller who is the licensee's client.

Since there are several legal documents involved in the purchase of real

estate, you may wish to work with an attorney to draft or interpret these

documents.

7

A real estate transaction requires a variety of forms. You, as the buyer,

should be aware of the more commonly used forms in order to

understand and protect your interests. If you have any doubts or

concerns regarding any form, you should seek legal advice.

brokerage relationships available to the buyer.

At the first substantive contact with you, the licensee is required by law

to disclose, in writing, the types of agency and brokerage relationships

available. Examples of substantive contact are:

(1) your specific financial qualifications or

(2) your buying motives or objectives, in which you may divulge

any confidential personal or financial information, which if

disclosed to the seller, could harm your bargaining position.

that the licensee has discussed the types of brokerage services offered by

the responsible broker. You will also acknowledge receipt of this

consumer guide. If you decide not to be represented in the transaction,

you will be asked to sign that acknowledgement as well. The licensee

must provide a written copy of the disclosure to you.

If you and the real estate licensee consent to work together, you will need

to enter into a written agreement with the licensee. The type of

relationship agreed to determines the type of agreement used.

responsible broker whereby you become a client of the broker and the

real estate licensee you selected. This agreement employs the licensee to

seek a particular type of real estate, within a certain geographic area,

during a given time, for which service you agree on the amount and

method of compensation to be paid. Keep in mind that the brokerage fee

is negotiable when entering into a buyer agency agreement.

8

In many instances, the compensation will be deducted from the seller's

proceeds of the sale. However, if you become interested in a property

that is offered for sale by the owner of the property who does not want

the commission to come from the proceeds of the sale, you will be

responsible for compensating the responsible broker.

Once you sign the buyer agency agreement, your agent will then present

a part of the buyer agency agreement. It further explains agency

relationships in a real estate transaction and allows you to instruct your

agent to act solely as your agent or a limited agent. If your agent’s

responsible broker offers appointed agency, you may elect to choose that

option. If you agree to limited and/or appointed agency, your agent is

allowed to show properties listed with the responsible broker. If you

select strictly buyer representation, the broker and the broker's associates

cannot show any properties listed with the responsible broker to you.

If you do not want the real estate licensee to act in a fiduciary capacity,

have already reached an agreement and just want the broker to execute

the paperwork. A transaction broker cannot advocate, nor negotiate for

either party.

You will need to be aware of other forms used in a real estate

transaction. These forms will be described throughout the remainder of

this brochure.

To meet the many kinds of needs that people have, a number of different

types of housing have been developed over the years. You need to know

about them. One thing to keep in mind is that eventually all homes are

resold to new owners. The more unusual the type of construction, the

more difficult it can be to find a buyer with similar architectural tastes.

9

a very popular kind of housing. Each type of home has its advantages

and disadvantages, and tastes vary in architectural styles.

together. The middle wall separating the units is common to both. This

type of housing offers an owner the opportunity to live in one side and

rent the other side. The income from the rental portion helps the owner

pay for the entire property.

separate parties that adjoin each other and utilize a “zero lot line”. The

owner of each unit owns the designated lot the home sits on. Twinhomes

are constructed with independent party walls and roof structure

systems but may share common footing and foundation structures,

provided the same is described in the restrictions or covenants attached

to the properties. The right to establish and enforce the restrictions,

covenants and maintenance requirements is vested in owners of both lots

and homes. There are no common areas, unless so provided for in the

covenants attached to the properties. There may be common utility

services provided maintenance and replacement are addressed in the

restrictions or covenants.

exclusive use and ownership of a portion of a larger property, plus shared

use and ownership of common areas. Under the condominium

arrangement, the individual owner purchases the exclusive right to

occupy the three dimensional space where the unit is located. The owner

also receives an undivided interest in the land and common areas, such as

hallways, elevators, structure of the building, and as a rule, the recreation

facilities. A board of directors or a condominium association elected by

unit owners administers the common area.

10

condominium. The legal concept is that the owner enjoys a separate

ownership of his/her dwelling and the land immediately beneath the

dwelling, plus joint ownership of the common areas surrounding the

dwelling units. There may be restrictions upon all separately owned lots

and dwellings. The right to establish and enforce these restrictions is

usually vested in an owner’s association. Title to the common areas is

vested in the association, and it governs how the residents use the area.

Although needs differ from family to family, there are certain general

guidelines which every potential homebuyer should take into

consideration. The following represents some of the items to consider:

facilities

neighborhoods

Give some thought into the approximate price range of the house, and

how the monthly payments will be made once the house is occupied.

During the qualifying interview, the real estate licensee can provide

assistance to help determine the price range and/or payment that will be

comfortable.

11

Almost everyone who buys a house borrows money to pay for it. This is

done most often through a note and mortgage, but is sometimes done by

contract for deed.

The buyer receives the deed from the seller and becomes the legal owner.

The buyer gives the lender the right to foreclose and obtain possession of

the house if he/she fails to repay the loan. This is called a mortgage.

Payments are generally made monthly, which include part of the

principal and part of the interest.

owner of the property and the buyer makes monthly payments to the

seller to buy the house. The seller remains the legal owner of the

property until the contract is paid. Contract for deed sales are usually

made when a mortgage loan cannot be obtained, and the buyer and seller

are both eager to do business.

You should take the following items into consideration when you begin

looking for financing in the purchase of your new home:

the loan and the economic conditions. Shop for the best possible

rate available when considering a purchase of real property.

the monthly payment. However, the total interest paid is more.

Most home mortgages are for 15 to 30 years. Some loans are

obtained with a “balloon” payment, which permits smaller monthly

payments for a time period, and then the unpaid balance is due.

will happen if payments are not made timely. In many cases, the

failure to meet payment requirements causes the entire debt to

become due.

12

before the end of its term. This right is necessary if refinancing is to

be possible, or if the borrower wants to sell before the mortgage is

paid. Some lenders charge a penalty for prepayment.

mortgagor is required to pay off the mortgage debt, at the lender’s

option, when the property is sold. This eliminates the possibility of

the buyer assuming the mortgage without the lender’s consent.

lender to maintain insurance on the property as a protection against

loss. The borrower may be required to pre-pay the property taxes to

the lender, either in a lump sum or on a monthly basis as a part of

the payment to the lender. The insurance premium may also be

part of the monthly payment.

downpayment is made. The amount depends upon the lender and

type of loan.

a number of expenses, including such things as the time the loan

officer spends interviewing the borrower, office overhead, the

purchase and review of credit reports, title searches, legal and

recording fees, and so on. The general practice is for lenders to

charge 1% to 2% of the amount of the loan. This is commonly

known as the origination fee.

One point = 1%. Points are charged to raise the lender’s yield. For

example, a lender may be willing to offer an interest rate that is

lower than the general market rate and in return require the

borrower to pay points. The points are payable at closing.

generally originated at one rate of interest, with the rate fluctuating

up or down during the loan term base upon economic conditions.

Generally, interest rate adjustments are limited to one each year,

and there are a maximum number of increases that may be made

over the life of the loan.

13

Real estate loans today are categorized into three general types:

is to assist veterans in financing the purchase of reasonably priced

homes, including condominium units and mobile homes, with small

or no down payments. The financing is limited to owner-occupied

residential (1 to 4 family) dwellings.

an FHA-insured mortgage must meet certain criteria. A charge will

be made to the borrower as the premium for the FHA insurance.

This protects the lender from loss. The property must be appraised

by an FHA appraiser before the loan is made.

government or guaranteed. The risk is therefore higher for the

lender, which is reflected by higher interest rates and a larger down

payment requirement. Lenders establish specific terms of the loan,

and can vary according to market conditions, consumer needs, and

state regulations.

created for the purpose of administering housing programs enabling low

and moderate income families in South Dakota to obtain decent and safe

housing. Some of these programs offer special incentives for first-time

homebuyers, so if you fall under this category, you might want to contact

this agency. For further information, please contact the South Dakota

Housing Development Authority at 605-773-3181 or www.sdha.org.

14

Once you have found the house that seems to be “just perfect”, the

tendency is to want to close the transaction right away and move in.

there are a number of things to check. The time to ask questions and

If the house falls under the disclosure requirements of property condition

and/or lead-based paint disclosure, you will be presented with either one

or both of these disclosure forms. The property condition disclosure will

have been completed and signed by the seller and is to be furnished to

property condition disclosure because they think they might be

committing themselves to a contract. By signing the property condition

disclosure, you are simply acknowledging receipt of the form. However,

the seller is verifying that the information contained in the form is true to

the best of the seller's knowledge.

The seller's property condition form can be utilized during the inspection

substitute for a professional inspection as a measure to discover and

investigate defects or shortcomings about a home.

The seller of a newly constructed home that has never been lived in does

not have to provide a property condition disclosure statement to you.

However, you may still want to have a professional home inspection

performed on the property.

You will also need to complete the "Purchaser's Acknowledgment" of the

lead-based paint disclosure if the house was built prior to 1978.

Providing this form to a buyer is a federal requirement and you need to

sign the form certifying accuracy.

If obtaining a loan, most lenders will require a survey. Whether or not a

loan is obtained, it may be wise to have a survey done prior to closing.

15

Other conditions you should inquire about, either before making an offer on the

property or addressing them as a contingency on your offer to purchase are:

by local government and designates the type of buildings and how they

may be used, such as: residential, commercial, and industrial.

use and occupancy of real property. Such things as the purpose of the

structure to be built, architectural requirements, setbacks, size of structure

and aesthetics are only some examples. You or your agent can contact the

Register of Deeds in the county where the property is located to obtain

further information.

assessments regarding roads, streets, sewers, electrical, etc. Also check

if there are any property tax reduction programs affecting the current

year’s taxes.

of another’s land for a special purpose consistent with the general use of

the land. Easements are commonly given to telephone and electric

companies to erect poles and run lines, as well as gas and water

companies. Other easements can be given to people to drive or walk

across someone else’s land. You or your agent can find what easements

exist on the property by contacting the Register of Deeds in the county

where the property is located.

could be a part of a homeowners’ association that is responsible

for collecting fees from its members to maintain common elements, such

as swimming pools located within a condominium project or private roads

within a subdivision. A homeowners’ association will also establish

policies and rules to ensure a safe environment for its members. Your

agent should be able to provide this information to you.

designed to give the property owner protection against a wide variety of

risks and will be required by your lender if you are financing the

property. In some cases, a property may not be insurable, so you might

want to make this a contingency on your offer to purchase.

16

additional annual insurance premium may be required. If the property is

in an area deemed high risk, you may be required by your lender to obtain

flood hazard insurance through the National Flood Insurance Program.

allergy or indoor air quality concerns, i.e., mold, radon, carbon monoxide,

you should address these issues prior to purchase. The manufacturing of

methamphetamines can cause severe health risks to occupants of a home.

If the home you become interested in was used for the manufacturing of

this toxic drug, you must make necessary precautions for the safety of

your well-being because of the lingering existence of this toxic drug

within the property.

Some buyers do not want to occupy a house because of certain events or

some fact relevant to the property, i.e. a violent crime, suicide, presence

of ghosts. If you have concerns such as these, you should ask about

By law, sex offenders have to register their residences with local law

enforcement. The presence of a sex offender in the vicinity of the

property is not a fact that is required to be disclosed by your agent.

Contact local law enforcement to access this information.

Agencies that can assist you with some of these issues are listed in the

They are also listed in the back of this brochure.

Once you are comfortable with your decision to purchase, you will need

to make an offer to purchase with the seller. Your offer must be in

writing and signed by you to be valid. Real estate licensees use standard

contract between a buyer and seller for the purchase and sale of real

property in which the buyer agrees to purchase for a certain price and the

seller agrees to convey title. The terms of the offer will be the terms of

the sale, when accepted.

17

Some items included in the purchase agreement are:

amount paid at closing.

property is generally sold by bill of sale.

defects. It covers the whole term of possession of the property, not

just until the owner takes possession. The lending agency often

requires title insurance to be taken out to insure its interest in the

property.)

Your agent can assist you with writing the offer, including contingencies,

so that all your concerns can be addressed.

the completion of a certain act or the happening of a particular event before

that contract is binding. A contingency must be written clearly and

cannot provide legal advice. If you have any questions or doubts about the

clauses in the purchase agreement, you should seek legal counsel.

bind the buyer and show the seller that this is a sincere offer by the buyer.

The earnest money is usually held by the listing broker in a real estate trust

account, and is deposited by the next legal banking day after the offer is

accepted. If the sale closes, the earnest money is applied to the total price of

the property.

Your agent may wish to present your offer to the seller and the seller’s

agent, if the seller is represented. When your agent presents your offer, you

will be assured that the seller has actually received the offer. In addition,

your agent can further explain your offer and answer any questions about it.

18

If the offer is not accepted, or if the seller refuses to complete the

transaction, or if the sale is not completed through no fault of yours, the

earnest money will be refunded to you. If you do not follow through

with the transaction after your offer is accepted by the seller, your

earnest money may be forfeited, in addition to other possible legal

Earnest money disputes are one of the most common types of complaints

brought to the attention of the Commission. Unless it can be shown that

the broker has acted in a reckless manner by holding or disbursing the

earnest money, the Real Estate Commission will not get involved in this

type of problem. It is up to the buyer and seller to reach an agreement or

get the matter resolved in civil court. If the dispute involves $8,000 or

less, it may be handled in Small Claims Court. The broker may resort to

paying the earnest money to the court until a legal decision is made as to

who is entitled to the earnest money.

Once the purchase agreement has been prepared, the real estate licensee will

take your offer to the seller or the seller's agent as soon as possible. If the

accept another offer if one would be presented.

Sellers don't always agree to some of the terms the buyer is proposing.

When this happens, the seller can reject the offer or make a counteroffer. A

buyer. This will change or alter the offer to purchase. The counteroffer is

then presented to the buyer. If the counteroffer is not acceptable to the buyer,

the buyer can make another offer to the seller. Sometimes negotiations can

go back and forth several times before an agreement is reached. However, if

negotiations continue for a considerable amount of time, the buyer may find

a new property or the seller may accept another offer.

19

If you accept and sign a counteroffer, the offer is considered valid. An offer

Once a buyer and seller have signed the purchase agreement, they are

responsible for meeting the conditions of the agreement by the closing

deadline. If all goes smoothly, the closing will take place on time.

Closing can take place at the broker’s office, the title company, or the lending

agency. The procedures usually are not controlled by statute, although certain

aspects of the closing may be regulated by laws such as the federal Real Estate

Settlement Procedures Act (RESPA). Under the provisions of RESPA, the

lender is required to give the borrower a copy of a government booklet on

closing costs entitled "Settlement Costs and You." The lender must also

provide a good-faith estimate of closing costs likely to be incurred in financing

the property. If the booklet and estimate are not provided at the time of loan

application, they must be mailed within three business days.

Most likely, it will be necessary for you to pay the down payment and closing

costs. Buyer closing costs are the expenses of the sale that must be paid in

addition to the purchase price. You will be expected to pay for the cost of

preparing your financial papers, most recording fees, any appraisal fee, the

cost of any survey, and any attorney fees which you have incurred. You will

also be responsible for your agent’s commission plus sales tax on the

commission unless those amounts are to be paid from the proceeds of the sale.

Another cost, which is usually divided equally between the buyer and seller, is

title insurance. It is used to furnish evidence of marketable title. The lender

will notify you in advance what is required, to allow time to obtain a check or

money order.

20

A closing statement detailing receipts and disbursements in the transaction

will be furnished to you by the selling agent and to the seller by the listing

agent. You should review the closing statement for accuracy and

completeness. Any questions about the statement should be asked of the real

estate licensee, the title company representative, or the lending agency

To establish your title to the property, the deed must be recorded in the county

where the property is located. Make sure arrangements are made to have the

deed filed as soon as possible after the closing.

Internal Revenue Service rules require settlement agents to report details of the

closing to the IRS using Form 1099-B. Sales or exchanges of residences with

four or fewer units must be reported.

21

This section of the Real Estate Consumer Guide is related to the sale of

real property. It is the intent of this section to provide you, the seller,

with basic knowledge to assist you in the sale of your home.

Now that you have made the decision to sell your home, you will need to

decide if you will secure the services of a real estate licensee. If you

elect to handle the sale yourself you will need to proceed with caution.

Should your decision be to sell through a real estate licensee, you will be

able to leave most of the work to your agent.

When dealing with a real estate licensee in the sale of your home, you

are either a client or a customer of that licensee. A licensee has certain

duties and obligations to assist you throughout the home selling process.

If you wish to be represented in the sale of your home, you will become a

client of the licensee. The licensee chosen represents your interests. In

some transactions, the buyer and seller will receive the real estate

services from the same responsible broker or from licensees associated

with that broker. In other transactions, there can be a written agreement

in which the broker does not represent either party. In other transactions,

neither party wishes to be represented. No matter what type of

relationship exists between you and the broker, a written agreement must

be entered into. The different types of relationships a licensee can offer

you, the seller, are described in detail below.

Any licensee representing you, as the seller, has the following duties and

obligations to you:

fidelity, including:

22

manner regardless of whether you are already a party to a

contract to purchase

licensee;

about which the licensee knows but the specifics of which

are beyond the expertise of the licensee;

received on your behalf;

rules, regulations, and ordinances, including fair housing and

civil rights statutes or regulations.

When a licensee has a home listed for sale and also represents a buyer

who wants to purchase the home, the licensee becomes a limited agent of

the buyer and the seller. A licensee may act as a limited agent only with

the informed written consent of the buyer and seller and has the

following duties and obligations:

buyer and seller;

timely manner regardless of whether the buyer or seller is

already a party to a contract to purchase property or is already a

party to a contract or a letter of intent to lease;

by the licensee;

material matters about which the licensee knows but the

specifics of which are beyond the expertise of the licensee;

received;

rules, regulations, and ordinances, including fair housing and

civil rights statutes or regulations.

23

When a licensee has a home listed for sale and another licensee

associated with the same responsible broker represents a buyer who

wants to purchase that home, those licensees must act as limited agents

for that transaction, unless the responsible broker offers appointed

agency.

A licensee who has been selected by the responsible broker to act as an

appointed agent for you owes the same duties and obligations as a

licensee representing a seller described previously. Unlike limited

agency, a license acting as an appointed agent for you can fully represent

you if a buyer, who is represented by another licensee associated with the

same responsible broker as your agent, becomes interested in your

property.

Any licensee acting as a transaction broker to a seller has the following

duties and obligations:

received on your behalf;

rules, regulations, and ordinances including fair housing and

civil rights statutes or regulations;

licensee.

A transaction broker may not advise any party to a transaction to the

detriment of another party.

24

You may choose not to utilize the services of a real estate licensee. In

that instance, a listing agreement will not be entered into. If no written

relationship exists between you and the licensee, you must be very

careful as to not release any confidential information to the licensee.

You must assume that anything said to the licensee will be

communicated to the buyer who is the licensee's client.

Since there are several legal documents involved in the sale of real

estate, you may wish to work with an attorney to draft or interpret these

documents.

A real estate transaction requires a variety of forms. You, as the seller,

should be aware of the more commonly used forms in order to

understand and protect your interests. If you have any doubts or

concerns regarding any form, you should seek legal advice.

brokerage relationships available to the seller.

At the first substantive contact with you, the licensee is required by law

to disclose, in writing, the types of agency and brokerage relationships

available. An example of substantive contact would be your reasons for

selling your home in which you may divulge any confidential personal or

financial information, which if disclosed to a buyer, could harm your

bargaining position.

that the licensee has discussed the types of brokerage services offered by

the responsible broker. You will also acknowledge receipt of this

consumer guide. If you decide not to be represented in the transaction,

you will be asked to sign that acknowledgement as well. The licensee

must provide a written copy of the disclosure to you.

25

If you and the real estate licensee consent to work together, you will need

to enter into a written agreement with the licensee. The type of

relationship agreed to determines the type of agreement used. The

written agreement made between you and the real estate licensee is a

legally binding contract, so please seek legal advice if you do not

understand it thoroughly.

broker whereby you become a client of the broker and the real estate

licensee you selected. This agreement employs the licensee to sell real

estate on your terms within a given time, for which service you agree on

the amount and method of compensation to be paid. In many instances,

the compensation will be deducted from your proceeds of the sale. Keep

in mind that the brokerage fee is negotiable when you are entering into a

listing agreement.

Once you sign the listing agreement, your agent will then present an

the listing agreement. It further explains agency relationships in a real

estate transaction and allows you to instruct your agent to act solely as

your agent or a limited agent. If the responsible broker offers appointed

agency, you may elect to choose that option. If you agree to limited

and/or appointed agency, your agent is allowed to show your property to

buyers who have buyer agency agreements with the responsible broker.

If you select strictly seller representation, the broker and the broker's

associates cannot show any properties to buyers who they have agreed to

represent. Be aware that this option could limit the marketing of your

property.

If you do not want the real estate licensee to act in a fiduciary capacity,

have already reached an agreement and just want the broker to execute

the paperwork. A transaction broker cannot advocate, nor negotiate for

either party.

You will need to be aware of other forms used in a real estate

transaction. These forms will be described throughout the remainder of

this brochure.

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You may already have a price in mind, but unless you have studied the

market, you might erroneously price your property above or below

market value. One of the most vital services your agent can render is that

of offering his or her expertise to aid you in determining a marketable

price for your property.

Whenever a listing is taken on a parcel of real property, it is appropriate

the listed price and financing arrangements assumed in the listing

agreement, this statement will show you what your estimated net

proceeds could be when the sale of your home becomes final.

Once you have selected and employed a real estate broker, the problem

of marketing your property becomes largely that of your agent. Your

agent’s skill and knowledge in this area will substantiate why you chose

a real estate professional to handle your sale.

Most likely your agent will utilize the local newspaper media, as well as

real estate publications as marketing tools. Your agent may also

home to the public during established hours.

If your broker belongs to the Multiple Listing Service, you may wish to

select that option on the listing agreement. By selecting this option, you

are enabling your broker to allow licensees representing buyers the right

to show your property to their clients. By utilizing this service, your

property is exposed to more potential buyers. If you sell your property to

one of these buyers, your broker will divide the commission with the

broker of the buyer’s agent as required by the Multiple Listing Service.

Not all communities in South Dakota have this service, so check with

your agent on its availability.

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If your home falls under the disclosure requirements of property

condition and/or lead-based paint disclosure, you will be presented with

either one or both of these disclosure forms.

property condition disclosure because they think they might be

committing themselves to a contract. By signing the property condition

disclosure, you are simply verifying that the information contained in the

form is true to the best of your knowledge.

Department of Housing and Urban Development (HUD). You must

complete this form if your home was constructed before 1978.

not, and the buyer finds a defect not disclosed by you or you have failed

to complete the lead-based paint form, the buyer and/or HUD may have

solid grounds to pursue legal action. Your agent can discuss the legal

ramifications of not complying with disclosure requirement with you in

further detail.

Once an interested buyer is found, a written offer to purchase your

property will be prepared. Your agent will explain to you the process of

receiving and reviewing offers. Do not be surprised if you are presented

with offers which differ dramatically from your listed asking price. You

agent is required by law to present all written offers to you for your

consideration.

It is not uncommon for a buyer’s agent to present the buyer’s offer to you

and your agent. When a buyer’s agent presents the offer to you and your

agent, be careful not to say anything that could harm your negotiating

position. After presentation, the buyer’s agent will leave and you will

have an opportunity to discuss the offer with your agent.

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Some items included in the offer to purchase:

of the cash down payment and details as to how the remainder

of the purchase price will be financed (It is normal procedure

buyer and show the seller that this is a sincere offer by the

buyer. The earnest money is usually held by the listing broker

in a real estate trust account, and is deposited by the next legal

banking day after the offer is accepted. If the sale closes, the

earnest money is applied to the total price of the property.

property is generally sold by bill of sale

defects. It covers the whole term of possession of the property,

not just until the owner takes possession. The lending agency

often requires title insurance to be taken out to insure its

interest in the property.)

fulfilled before the sale can take place

When you receive one or more offers to purchase your home, it is in your

own best interest to give considerable time and attention to reviewing each

offer carefully. Your agent will assist you in understanding the terms and

conditions contained in the offer and if working on your behalf as a seller’s

or appointed agent, will provide you with any advice you request. You are

under no obligation to accept any one offer over another.

Before you decide, you may wish to have your agent prepare a revised

estimate of the net cash proceeds you would receive at closing, based on

the sale price and financing arrangements stated in the offer.

Once an offer has been presented to you, you have three options: accept

an offer exactly as it stands, make a counteroffer or reject the offer.

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accept an offer, be sure you know the precise meaning of each term in

the written offer before you sign the document. Once you sign the offer

agreeing to its terms, and your acceptance has been conveyed to the

buyer, it becomes a legally binding contract.

Legally binding means both you and the buyer will be bound by the

terms of the contract and must perform your respective obligations as

stated. Your performance can be enforced in a court of law.

If you are uncertain about any of the clauses contained in the offer, you

may wish to seek legal counsel before signing the contract. However,

keep the expiration date of the offer in mind if you decide to postpone

acceptance.

terms the buyer is proposing. If you wish to change anything at all in the

offer made in response to an offer received by the buyer. This will

change or alter the offer to purchase. When the buyer receives your

counteroffer, he or she may decide to make another counteroffer back to

you. The process of counteroffers may continue until an agreement is

reached or it becomes obvious that you and the buyer are unable to come

to a meeting of the minds. If negotiations continue for a considerable

amount of time, the buyer may find a new property or you may decide to

accept another offer.

When you make a counteroffer, you are considered to have rejected the

offer made by the buyer. If you accept and sign a counteroffer, the offer

is considered valid. An offer is not accepted unless it has been signed by

A risk in making a counteroffer is if a buyer should change his or her

mind and reject the counteroffer, you do not have the option to return to

the original offer and accept it.

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to make a counteroffer. However, if you reject an offer which exactly

meets all the terms you agreed to in the listing agreement you signed

with your agent, you may be legally obligated to pay your broker’s

commission plus sales tax. In a situation such as this, the agent’s duty to

find you a willing and able buyer, as stated in the listing agreement, is

performed. Therefore, you have the duty to perform, as expressed in the

listing agreement, by paying the commission.

Ultimately the decision to accept, counter or reject an offer is yours.

If the offer is not accepted, or if you refuse to complete the transaction,

or if the sale is not completed through no fault of the buyer, the earnest

money will be refunded to the buyer. If the buyer does not follow

through with the transaction after the offer is accepted by you, the

earnest money may be forfeited, in addition to other possible legal

Earnest money disputes are one of the most common types of complaints

brought to the attention of the Commission. Unless it can be shown that

the broker has acted in a reckless manner by holding or disbursing the

earnest money, the Real Estate Commission will not get involved in this

type of problem. It is up to the buyer and seller to reach an agreement or

get the matter resolved in civil court. If the dispute involves $8,000 or

less, it may be handled in Small Claims Court. The broker may resort to

paying the earnest money to the court until a legal decision is made as to

who is entitled to the earnest money.

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The offer presented to you may contain one or more contingency clauses.

requires the completion of a certain act or the happening of a particular

event before that contract is binding. A contingency must be written

clearly and precisely. If you have any questions or doubts about the

contingency clauses in the purchase agreement, you should seek legal

counsel.

One of the most common contingencies you might encounter on the

purchase agreement is one in which the buyer makes the sale conditional

upon finding the exact amount and type of financing which will enable

the buyer to purchase your home. Another typical contingency is one

based on the sale of the buyer’s home.

the contingency clause cannot be met after every reasonable effort has

been made to do so, the contract ends and there is no legal obligation to

complete the sale.

As a seller, you may wish to accept an offer containing a contingency

clause yet still leave yourself free to consider other offers, in the event

the buyer is unable to remove the contingency. You can do this by

having the buyer agree to insert a time clause in the contract. A time

clause will permit you to require the buyer to remove all contingencies

within a short specified time period. If the buyer does not remove the

contingencies within that time, the contract comes to an end and you are

free to accept the second offer.

An offer to purchase will reveal how the buyer intends to finance the

purchase of your property. If you currently have a mortgage loan on

your home, you may be faced with one of two situations:

situation will require you to pay off your existing mortgage and

there will probably be an interest penalty for doing this. Having

to pay an interest penalty will reduce the price you will receive

for your home.

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buyer to assume your mortgage loan, you should ensure that your

mortgage lender will release you from any future obligation to

repay the monies owing if the buyer defaults on the loan.

If you have no existing mortgage, an offer by the buyer to pay all cash is

ideal and, of course, would be your preference. However, the buyer’s offer

might state that part of the purchase price is to be paid in cash and part is to

be paid in payments over a specified period of time at a specified interest

rate. In effect, the buyer would be asking you to become the lender.

When you are considering an offer containing a request to finance, think about

whether or not you want the responsibility of collecting payment over an

extended period of time. If you do feel comfortable with such an arrangement,

be sure that you verify the buyer’s source of income and credit history before

making a decision. Ask your agent or a financial counselor to fully explain the

financial significance and the possible consequences of the terms offered.

It is strongly recommended that you secure competent advice from a real

estate agent or legal counsel before finalizing any real estate contract.

This recommendation is much more urgent when a seller is exposed to

unusual financing arrangements and techniques proposed by the buyer

that could jeopardize you financially.

Be wary of offers which require any of the following:

included, but which are not written in the offer

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Once a buyer and seller have signed the purchase agreement, they are

responsible for meeting the conditions of the agreement by the closing

deadline. If all goes smoothly, the closing will take place on time.

Closing can take place at the broker’s office, the title company, or the

lending agency. The procedures usually are not controlled by statute,

although certain aspects of the closing may be regulated by laws such as

the federal Real Estate Settlement Procedures Act (RESPA). Under the

provisions of RESPA, you will receive a copy of your settlement

statement detailing your receipts and disbursements involved in the sale.

You are probably wondering what costs you can expect in the sale of

your home. In many cases, if an item is not covered in the terms of the

contract, the law will prevail. The offer to purchase can spell out

responsibility regarding payment of expenses at settlement. Unless the

terms of the contract specify otherwise, you are expected to pay the cost

of the transfer taxes, the real estate commission, sales tax on the

commission, any attorney fees incurred by you, and a prorated share of

the real estate taxes, insurance and utility bills up to the day of the

settlement. Another cost, which is usually divided equally between the

buyer and seller, is title insurance. It is used to furnish evidence of

marketable title.

Internal Revenue Service rules require settlement agents to report details

of the closing to the IRS using Form 1099-B. Sales or exchanges of

residences with four or fewer units must be reported.

Any questions about the settlement statement should be asked of the real

estate licensee, the title company representative, or the lending agency

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The South Dakota Real Estate Commission is charged with the

responsibility of investigating complaints, which are brought to its

attention involving real estate licensees, whereby misconduct is alleged.

Commission may not force a licensee or a buyer to specifically perform

under the terms of a contract, nor may it award damages. These

problems would have to be settled by a court of law in a civil action

brought by you. If the dispute involves $8,000 or less, the matter may be

settled in Small Claims Court.

The South Dakota Real Estate Commission furnishes the complaint

forms to the person registering the complaint. All complaints must be in

writing in order for the Commission to investigate. The complaint must

have a clear and concise statement of the facts, with supporting

documentation. It is very important to include copies of all the

documents in your transaction file. What may seem unimportant to the

complainant may actually be a relevant piece of information for the

Commission.

When a complaint is filed against a licensee, a copy of the complaint is

forwarded to the licensee. The licensee must file an answer on forms

furnished by the Commission within 20 days from receipt of the

complaint. This answer must be in written affidavit form, be properly

certified, and contain the licensee’s factual response.

The licensee’s response is filed with the Commission. A copy of the

licensee’s answer is forwarded to the person registering the complaint,

and the Commission’s staff investigates the matter. Priority of

investigation is normally based on the date of receipt of the complaint.

The complaint, answer, and investigative report are submitted to the Real

Estate Commission for its review. There are three options the

Commission may take:

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without merit, is frivolous, or charges conduct not constituting

grounds for disciplinary action, it will dismiss the complaint and

notify the parties in writing.

complaint to be of a serious nature constituting grounds for

disciplinary action, it may, at its discretion, consult with the

party or parties affected in an effort to resolve the matter in an

informal consultation.

informal consultation, decide to conduct a formal hearing. The

parties involved are mailed a notice of hearing. The hearing is

similar to a court proceeding; however, rather than a judge, an

administrative hearing examiner presides. Parties have right to

legal counsel; witnesses may be subpoenaed; testimony is sworn;

documents are offered in evidence; and witnesses may be crossexamined.

A court reporter is also present in order to provide a

transcript of the hearing.

Once the hearing examiner has reviewed all testimony and evidence, the

hearing examiner will make a recommendation to the Real Estate

Commission. After considering and discussing the hearing examiner’s

recommendation, the Commission will render a decision at its next

meeting. If the licensee is found guilty of misconduct, paperwork is

prepared setting forth the violations found and disciplinary action to be

taken. Disciplinary action may take the form of a letter of reprimand,

suspension or revocation of license, monetary penalty, or a combination

thereof.

The South Dakota Human Relations Act, Federal Fair Housing Act, and

Fair Housing Act Amendments prohibit discrimination in housing.

State and federal law prohibits discrimination based upon race, sex,

religion, color, creed, ancestry, disability, familial status or national

origin. The unfair or discriminatory housing practices are defined in the

South Dakota Codified Laws (SDCL) Chapter 20-13-20 through 20-13-

21.2.

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(1) Refusing to sell, rent, or negotiate with any person, or otherwise

making a dwelling unavailable to any person.

(2) Changing terms, conditions, or services for different individuals

as a means of discrimination.

(3) Advertising or making statements which would discourage

applicants or buyers from applying or offering for real estate. Also

inducing someone to sell because of potentially mixed

neighborhoods.

(4) Representing to any person, as a means of discrimination, that a

dwelling is not available for sale or rent.

(5) Refusing to allow alterations to accommodate the disabled when

an escrow account has been set up for restoration.

(6) Altering the terms or conditions for a home loan to any person

who wishes to purchase or repair a dwelling, or otherwise

denying such a loan as a means of discrimination.

(7) Denying persons membership or limiting their participation in

any multiple listing service, real estate brokers’ organization, or

other facility related to the sale or rental of a dwelling as a

means of discrimination.

State law exempts dwellings with no more than two families if the owner lives

in one of the units. Federal law applies to dwellings with four or more units.

Familial status exempts housing units where state and federal programs are

specifically for the elderly; 100% of occupants are over 62; or if facilities

and services are designed and advertised for the elderly and 80% of the units

have at least one person over 55.

After 1991, all new apartment units must be constructed to allow ground

floor access and access to common use areas by the disabled, unless terrain

is prohibitive. If a person feels they have been discriminated against because

of membership in a protected category, they should contact the South

Dakota Division of Human Rights.

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Attorney General's Office

500 E. Capital

Pierre, SD 57501-5070

Consumer hotline number (toll free): 800-300-1986

Fax: 773-7163

Website: www.state.sd.us/attorney/index.htm

E-Mail: consumerhelp@state.sd.us

Environmental Protection Agency

Telephone (Toll Free): 800-227-8917

Website: www.epa.gov

Federal Emergency Management Agency

500 C Street, SW

Washington, D.C. 20472

Telephone: (202) 566-1600

Website: www.fema.gov

Legislative Research Council (SD Codified Laws and Administrative Rules)

500 S. Capital

Pierre, SD 57501-5070

Telephone: 605-773-3251

Fax: 605-773-4576

Website: http://legis.state.sd.us/index.cfm

Scorecard (Environmental information services by the Environmental

Defense Fund)

Website: www.scorecard.org

South Dakota Department of Environment and Natural Resources

523 E. Capitol

Pierre, SD 57501

Telephone: 605-773-3151

Fax: 605-773-6035

Website: www.state.sd.us/denr

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South Dakota Division of Human Rights

700 Governors Drive

Pierre, SD 57501

Telephone: 605-773-4493

Fax: 605-773-6893

South Dakota Housing Development Authority

221 South Central Ave. - P.O. Box 1237

Pierre, SD 57501-1237

Telephone: (605) 773-3181

Fax: (605) 773-5154

Website: www.sdhda.org

South Dakota Methamphetamine Awareness and Prevention Program

(SD MAPP)

Website: www.sdmapp.org

U.S. Department of Housing and Urban Development

451 7th Street S.W.

Washington, DC 20410

Telephone: (202) 708-1112

Website: www.hud.gov

The material presented in this brochure is intended to assist buyers and

sellers in making wise decisions regarding a residential real estate

transaction in South Dakota. The South Dakota Real Estate Commission

can be contacted at the address or phone number on the front of this

booklet, or visit us at our website also listed on the front of this booklet.