Minnesota Real Estate Regulations: Terms & Definitions

The Basic Terminologies

Petra recently moved from Hungary to Minnesota, and she is in the process of looking for a home to purchase. The challenge that Petra is facing is that some of the terms used in Minnesota are not the same that she is accustomed to when she learned English. Before she can start her real estate journey, Petra decides to become familiar with some basic real estate terms:

• Real estate: refers to any property that is affixed to land as well as manufactured homes. A manufactured home may be mobile, such as a trailer, but can be designed to have the necessary connection to act as a dwelling.
• Brokerage: a business entity that holds a real estate broker's license and is legally capable of conducting real estate business.
• Buyer's broker: refers to a licensee who is authorized to represent a buyer through a signed buyer's broker agreement and owes the fiduciary duties to the buyer.
• Licensee: refers to any individual who is licensed to conduct real estate business throughout the state.

Petra is now aware that she must hire a buyer's broker who is licensed to conduct real estate business throughout the state and is working under a brokerage to represent her when she looks to purchase her home.

The Not-So Basic Terms

Petra spends the weekend with Evan. Evan is a licensee that Petra has hired to represent her as a buyer's broker. Evan has been in the real estate business for nearly ten years, and he has built a successful book of business working under Min-City Brokerage. After viewing a handful of options, Petra is excited to make an offer on a property; however, she begins to get confused when Evan mentions that he needs to clarify that there may be a dual agency conflict prior to him sharing his BPO with Petra.

• Dual agency: refers to any situation when a licensee owes a duty to more than one party. Dual agency generally occurs when a licensee represents both the buyer and the seller but also if two or more licensees working at the same brokerage represent a party within the transaction.
• Broker price opinion (BPO): refers to an estimate that details the probable selling price of a particular property and takes into account the property's condition, market, neighborhood, as well as comparable sales.

Evan explains to Petra that there is a dual agency conflict as a fellow licensee, Niko, is the listing agent of the property and he also works at Min-City Brokerage. Evan is legally required to disclose this information to Petra, and she must agree to this dual agency relationship before they can make an offer on the property. Once the proper documents are signed by Petra, Evan lets her know that his BPO on the property is around $550,000.

Closing the Transaction

Petra is delighted to hear that her offer on the property was accepted and the deal will close at the end of the month. Evan instructs Petra that she will need to meet with her closing agent to finalize some documents as well as to provide a down payment that will be held in a trust account. Unfamiliar with what these terms are referring to, Petra asks Evan to provide some clarity of what is needed.