Real Estate Brokerage

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RealEstateBrokerage
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The History of Brokerage
It was clear that the broker represented the
sellers interests.
The common-law doctrine of caveat emptor Let the
buyer beware was the rule buyers were pretty
much on their own
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1960s came the creation of the first Multiple
Listing Services
Multiple Listing Service
Broker B
Broker A
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Buyers

• Buyers began to view the real estate licensee as
  the expert on whom they can rely for guidance.
  Buyers began to seek not only protections but
  representation as well
• Almost all states recognize buyer agency today,
  and a large percentage of sales contracts are
  written by buyer agents.

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ARELLO
Association of Real Estate License Law Officials

• Uniform policies and standards for administering
  and enforcing state license laws.
• All 50 states, DC and all Canadian provinces
  license and regulate the activities of real
  estate brokers and salespersons

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Purpose of License Laws
To protect the public by ensuring standard of
competence and professionalism. The laws achieve
this goal by

• Establishing basic requirements for obtaining a
  real estate license and, in many cases, requiring
  continuing education to keep license
• Defining which activities require licensing
• Describing the acceptable standards of conduct
  and practice for licensees and enforcing those
  standards through a disciplinary system.

The main objective is to make sure that the
rights of purchasers, sellers, tenants and owners
are protected from unscrupulous or sloppy
practices
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Real Estate Commission

• Each state has a licensing authority for real
  estate brokers and salespersons.
• This authority has the power to issue licenses,
  make real estate information available to
  licensees and the public and enforce the
  statutory real estate law.
• Each licensing authority has also adopted a set
  of administrative rules and regulations that
  further define the statutory law. The rules and
  regulations have the same force and effect as any
  law.

Both the law and the rules are usually enforced
through fines and the denial, suspension, or
revocation of licenses. Civil and criminal court
actions can be brought against violators in some
serious cases.
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Real Estate Brokerage
Simply the business of bringing parties together.
lenders
borrowers
Investors
Corporations

• Custom brokers help importers navigate through
  complex customs procedures
• A real estate broker is defined as a person
  licensed to buy, sell, exchange, or lease real
  property for others and to charge a fee for these
  services

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Brokerage business may take many forms.

• Sole proprietorship (a single-owner company)
• A corporation
• A partnership with another broker

The office may be independent or part of a
regional or national franchise. The business may
consist of a single office or multiple branches.
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Broker-Salesperson Relationship

• A real estate salesperson is any person licensed
  to perform real estate activities on behalf of a
  licensed real estate broker.
• All of a salespersons activities must be
  performed in the name of the supervising broker.
• The broker is liable for the acts of the
  salesperson within the scope of the employment
  agreement.

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Independent contractor vs. Employee

• The salesperson may either be an independent
  contractor or employee

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Independent Contractor
VS.
Employee

• Broker can exercise certain controls over a
  salesperson
• Broker may require employee to follow rules
  governing such matters as working hours, office
  routines, attendance at sales meetings,
  assignments of sales quotas, and adherence to
  dress codes.
• An employer (broker) is required by the federal
  government to withhold Social Security tax and
  income tax wages paid to employees.
• Broker is required to pay unemployment
  compensation tax on wages paid to one or more
  employees
• Employees might receive benefits such as health
  insurance, profit-sharing plans, and workers
  compensation

• Independent contractor operates more
  independently than an employee.
• Broker may not exercise the same degree of
  control over the salespersons activities.
• Broker may control what the independent
  contractor does, the broker cannot dictate how to
  do it.
• The broker cannot require the independent
  contractor to keep specific office hours or
  attend sales meetings.
• Independent contractors are responsible for
  paying their own income and Social Security taxes
  and receive nothing from brokers that could be
  construed as an employee benefits, such as health
  insurance or paid vacation time.

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Meeting the following requirements can establish
an independent contractor status

• The individual must have a current real estate
  license.
• He or she must have a written contract with the
  broker that specifies the salesperson will not be
  treated as an employee for federal tax purposes.
• At least 90 percent of the individuals income as
  a licensee must be based on sales production and
  not on the number of hours worked.

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Real Estate Assistants
personal assistant or professional assistant

• Is combination office manager, marketer,
  organizer, and facilitator with a fundamental
  understanding of the real estate industry.
• An assistant may or may not have a real estate
  license, depending on state law.

• An assistant may perform duties ranging from
• Clerical and secretarial functions to office
  management,
• Telemarketing,
• Market strategy development
• And direct contact with clients and customers

A licensed assistant can set up and host open
houses and assist in all aspects of a real estate
transaction.
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Technology
A wide range of technologies is available to help
a real estate licensee do his or her job more
efficiently and effectively. The advantages in
Technology and its effects on the practice of
real estate brokerage are moving so fast that it
can be difficult to keep abreast of the most
recent changes the National Association of
REALTORS (NAR) is a good resource for updates
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• Computers and Laptops
• Computers are a necessary ingredient in any
  modern real estate brokerage.
• CE credits and other education tools can be met
  through the use of specially designed continuing
  educations software.

• The Internet and Web Sites
• The internet has brought tremendous change to the
  real estate industry.
• Consumers can find information about properties,
  relocation services and particular communities.
• Many websites have disclaimers that indicate the
  material on the site is solely for informational
  purposes and that no warranties or
  representations has been made.

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Other Technologies

• E-mail
• PDAs
• Cell Phone
• Digital Cameras

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Internet Advertising
Internet advertising laws include the following

• All electronic communication by a licensee must
  include the licensees name, office address, and
  broker affiliation
• Real estate professionals must disclose their
  status as brokers or agents on each page of a Web
  Site that contains advertisement
• The listing of only a salesperson's name without
  the sponsoring brokers name in an advertisement
  is prohibited.
• An advertisement must be a true representation
  and not be misleading.

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Electronic Contracting
Two federal Acts Govern electronic contracting

• Uniform Electronic Transaction Act
  (UETA)
• Electronic Signatures in Global and National
  Commerce Act (E-Sign)

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UETA
Sets forth basic rules for entering an
enforceable contract using electronic means and
has been enacted in most states. Primary purpose
is to remove barriers in electronic commerce that
would otherwise prevent enforceability of
contracts UETAs Four key provisions

• A contract cannot be denied its legal effect just
  because an electronic record was used.
• A record or signature cannot be denied its legal
  effect just because it is in an electronic
  format.
• If a states law requires a signature on a
  contract, an electronic signature is sufficient.
• If a states law requires a written record, an
  electronic record is sufficient.

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The purpose of the E-sign is to make contracts
and records legally enforceable regardless of the
medium in which they are created.
Ex Contracts formed using e-mail have the same
legal significance as those formed on paper
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Brokers Compensation

• Is specified in the contract with the principal.
• License laws may stipulate that a written
  agreement must establish the compensation to be
  paid
• Can be in the form of a commission or brokerage
  fee (computed as a percentage of the total sales
  price), a flat fee, or an hourly rate
• The amount of a brokers commission is negotiable
  in every case. To impose uniform commission rates
  is a clear violation of state and federal
  antitrust laws.

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Commission is usually earned when.

• A completed sales contract has been executed by a
  ready, willing and able buyer
• The contract has been accepted and executed by
  the seller and
• Copies of the contract are in the possession of
  all parties.

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Antitrust Laws

• At the federal level the Sherman Antitrust Act
  provides specific penalties for a number of
  illegal business activities.
• Each state has its own antitrust law.
• These laws prohibit monopolies and any contracts,
  combinations and conspiracies that unreasonably
  restrain trade that is , behaviors that
  interfere with the free flow of goods and
  services in a competitive market place

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To be entitled to a commission, an individual
must be..

• A licensed broker
• The procuring cause of the sale and
• Employed by the buyer or seller under a valid
  contract.

To be considered the ____________ of a sale, the
broker must have started or caused a chain of
events that resulted in the sale.
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Ready, willing and able buyer

• Is one prepared to buy on the sellers terms and
  ready to take positive steps toward consummation
  of the transaction

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If the transaction is not consummated, the broker
may still be entitled to a commission if the
seller..

• Had a change of mind and refused to sell
• Has a spouse who refused to sign the deed
• Had a title with uncorrected defects
• Committed fraud with respect to the transaction
• Was unable to deliver possession within a
  reasonable time
• Insisted on terms not in the listing or
• Had a mutual agreement with the buyer to cancel
  the transaction.

In General, a broker is due a commission if a
sale is not consummated because of the principals
default
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In Most States

• It is illegal for a broker to pay a commission to
  anyone other than the salesperson licensed with
  the broker or to another broker.
• Fees, commissions or other compensations cannot
  be paid to unlicensed persons for services that
  require a real estate license.
• Brokers fees can be paid between brokers for
  leads.
• Referral fees are legal as long as both
  individuals are licensed.

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Salespersons Compensation

• The amount of compensation a salesperson receives
  is set by mutual agreement between the broker and
  the salesperson.
• Some firms have adopted a 100 commission plan in
  which salespersons pay a monthly service charge
  to their brokers to cover the costs of office
  space, telephones, and supervision in return fro
  keeping 100 of the commissions from the sales
  they negotiate. The 100 salesperson pays all of
  his or her own expenses.
• Other companies have graduated commission splits
  based on a salespersons achieving specified
  production goals.
• However the salespersons compensation is
  structured, only the employing broker can pay it.
  The commission must first be received by the
  employing broker and then paid to the
  salesperson, unless otherwise permitted by
  license laws and agreed to by the employing
  broker.

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Antitrust Violations

• Price Fixing
• Group Boycotting
• Allocation of Customers or Markets

Is the practice of setting prices for products or
services rather than letting competition in the
open market establish those prices.
Occurs when two or more businesses conspire
against another business or agree to withhold
their patronage to reduce competition. Group
boycotting is illegal under the antitrust law.
Involves agreement between brokers to divide
their markets and refrain from competing for each
others business.

• Tie-in Agreements

Also know a tying agreements are agreements to
sell one product only if the buyer purchases
another product as well. The sale of the first
product is tied to the second product
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Penalties

• The penalties for violating antitrust laws are
  severe.

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Fee for Services

• The average consumer is now more knowledgeable
  about real estate matters because of the
  internet.
• It is important for the licensee to think of
  himself or herself as a consultant. While
  consumers are more independent, real estate
  expertise is almost always needed.
• Agents need to see their occupation as a bundle
  of services that can be unbundled.
• Fee-for-services is the arrangement where the
  consumer decides which services he or she needs
  and then works with and pays the licensee solely
  for those services.

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Unbundling Services
Means offering services in a piecemeal
fashion. For example, a consultant may want to
offer a seller the following services

• Helping the seller prepare the property for sale.
• Performing a competitive market analysis (CMA)
  and pricing the property.
• Assisting with marketing the property using the
  MLS and any Web sites.
• Locating and screening a buyer
• Drafting a purchase sales agreement and helping
  with negotiations
• Assisting with the closing transaction

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Other services includes those for a buyer. For
example, a consultant may offer a buyer the
following services

• Consulting on renting versus owning
• Helping a buyer with a mortgage pre-approval
• Consulting on a buyers desired location
• Visiting properties with a buyer and checking
  property information
• Drafting a purchase sales agreement and helping
  with negotiations
• Assisting with the closing transaction

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Discounted Real Estate Services

• Is the arrangement where a consumer receives all
  of the real estate services, but at a discounted
  price.

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Minimum level of services

• Accept delivery of and present offers and
  counteroffers to the client
• Assist the client in developing, negotiating, and
  presenting offers and counteroffers
• Answer the clients questions about offers,
  counteroffers, and contingencies.

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National Do Not Call Registry

• In 2003, Federal Do-Not-Call legislation was
  signed into law.
• Real estate professionals must comply with the
  provisions of the NDNCR.
• Registry is manages by the Federal Trade
  Commission.
• Registry is a list of telephone number from
  consumers who have indicated their preference to
  limit the telemarketing calls they receive.
• Registry applies to any plan, program, or
  campaign to sell goods or services through
  interstate phone calls.
• Registry does not limit calls by political
  organizations, charities, or telephone surveyors.

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• Real estate professional may call a consumer with
  whom it has an established business relationship
  for up to 18 months after the consumers last
  purchase, delivery, or payment, even if the
  consumer is listed on the NDNCR
• A real estate professional may call a consumer
  for up to three months after the consumer makes
  an inquiry or submits an application.
• If the consumer asks a company not to call even
  if there is an established business relationship,
  than the company must abide by the consumers
  wishes.

To access the National Do Not Call Resistry,
visit www.telemarketing.donotcall.gov