Real Estate Brokerage by niusheng11


									      Rationale for Licensing
   Does the public have a vested interest in seeing that real estate
    salespersons and brokers have the qualifications of honesty,
    truthfulness, good reputation, and real estate knowledge before
    they are allowed to negotiate real estate transactions on behalf of

   It was this concern that brought about real estate licensing laws as
    we know them today.

   Until 1917, no state required real estate agents to be licensed.
    Anyone who wanted to be an agent could simply hang up an
    agent’s sign.
   A person who, for compensation or promise of
    compensation, lists or offers to list, sells or offers to sell,
    buy or offers to buy, negotiates or offers to negotiate
    either directly or indirectly for the purpose of bringing
    about a sale, purchase or option to purchase, exchange,
    auction, lease, or rental of real estate, or any interest in
    real estate
   Is required to hold a valid real estate license.
            More on Licensees
   Some states also require real estate licenses for persons
    offering their services such as appraisers, property
    managers, mortgage bankers, apartment locators, or rent

   Exemptions: property owners dealing with their own
    property, attorneys conducting real estate transactions as
    part of their duties as an attorney for a client, other trustees
    or executors acting on behalf of an estate, etc.
                 License Types
   Real Estate Broker
       A person or legal entity licensed to act independently in
        conducting real estate brokerage business.

   Real Estate Salesperson
       A person employed by a broker to list, negotiate, sell, or
        lease real property for others.

   Real Estate Sales Associate
       Either a salesperson or broker employed by a broker. This
        is an employment arrangement but not a licensing
Qualifications for Licensing
   Examination

   Education

   Continuing Education
         Licensing Procedure
   Application with fee

   Character references (loyalty, honest, truthfulness)

   Examination date will be set by the state real estate
    commission. Frequency of exams varies by state.

   If applicant passes the exam, pays license fee and license is
    mailed to applicant. Upon receipt the applicant can begin
    operating as a salesperson or broker.
      Nonresident Licensing
   In general, a person must be licensed in the state in which he
    negotiates. A sale can be brokered in another state as long
    as the negotiations are done in the state in which the
    salesperson/broker is licensed.

   Non-resident license - a license given by some states to out-
    of-state brokers, particularly when the broker is located
    close to the state line.

   License reciprocity - one state honors another state’s license
    (full and partial).
      Nonresident Licensing
   Notice of consent - when a broker operates outside of his
    home state, he must file notice with the secretary of state.
    This permits the secretary of state to receive legal
    summonses on behalf of the nonresident broker.

   Moving to another state? Most states will give credit for the
    education and licensing time in another state when you go
    to move and start up a real estate business in a new resident
Licensing the Business Firm
   A broker can operate as a sole proprietorship under his
    name or a fictitious business name. A broker can also
    operate in partnership with other brokers or as a
    corporation. If operating as a corporation, its CEO or
    President or some other designated officer must act as the
    licensed broker responsible for managing the firm.

   A broker who expands by opening branch offices must have
    a licensed broker managing each branch location.
Minimum Service
            Minimum Service
   According to the Department of Justice, there are 21 states
    with minimum service requirements.
       States with non-waivable MSRs: Alabama, Illinois, Indiana,
        Iowa, Missouri, District of Columbia, Kansas, Texas, Utah,
        Idaho, Oregon, Washington, West Virginia
       States with waivable MSRs: Delaware, Florida, Nevada, New
        Mexico, Ohio, Pennsylvania, Tennessee, Wisconsin
                        Minimum Service
                                             AL   DC   IA   ID   IL   IN   KS   MO   OR   TX   UT   WA   WV
Accept delivery/present offers               X    X     X    X   X     X   X     X   X    X    X    X     X
Answer questions                             X          X        X     X         X        X    X
Assist communications/negotiations                      X        X     X         X             X
Provide access to listed properties                     X
Accept deposits                                         X   X              X         X
Promote best interests of client                            X              X                        X
Disclose all adverse material facts                         X              X         X              X
Use reasonable skill/care/good faith                        X              X         X              X
Provide advice to client                                    X              X         X
Continuous good faith effort to find buyer
unless otherwise agreed                                                              X
Present written contract with all terms
and condiitons                                                                                           X
            Minimum Service
   Goodwin, Johnson, Zumpano (Journal of Real Estate Finance
    and Economics, 2010) looks at the effect of discount brokerage
    in a sample of over 11,700 properties between January 1,
    2006 and July 20, 2007 in Montgomery, Alabama.
   The study found that sellers using discount brokers had a
    trade-off between a 2% higher sales price and a 20.5% longer
    time on market. Using a discount broker also lowered the
    probability of finding a match between a buyer and seller in
    a given marketing period.
   Registered trade name

   Member of NAR and not synonymous with real estate agent
       Agency Relationships
   Principal – the person who authorizes another to work for

   Agent – the person empowered to act by and on behalf of
    the principal
     Three Levels of Agency
1. Universal Agency – the principal gives the agent legal
    authority to transact matters of all types on the principal’s

2. General Agency – the agent is given the power to bind the
    principal in a particular trade business

3. Special Agency – empowers the agent to perform a particular
    act or transaction
 Broker’s Obligations to the
1. Faithful Performance

2. Loyalty to the Principal

3. Protecting the Principal’s Interest

4. Reasonable Care

5. Accounting for Funds Received

6. Commingling
    Problems of Dual Agency
   Cooperating Broker – In approximately 70% of sales made
    through the MLS, the broker who lists the property for sale
    is not the same broker who locates the buyer (the
    cooperating broker). Who is the cooperating broker an
    agent of?
       Middleman Principle – the cooperating broker is neither an
        agent to the buyer or the seller
       Dual Agency – when a single broker represents both the buyer
        and seller, dual agency is established. In 17 states, the broker
        is legally prohibited from being an agent for either party.

   Disclosure Statements!
     Multiple Listing Service
   A database of local homes for sale along with details about
    the property, selling price, and broker’s commission

   Only member brokers can access the database
              Listing Contracts
   Real estate Listing – a contract where a broker is employed to find
    a buyer or tenant

   Elements of a Listing Contract
       Parties involved in transaction (principal and agent)
       Description of property
       Price and terms of financing the transaction
       Broker’s obligations and authority
       Seller’s obligations
       Compensation for broker
       Terms for cooperation with other brokers
       Specification of the brokerage arrangement
       Conditions for termination
             Types of Listings
   Exclusive Right to Sell

   Exclusive Agency

   Open Listing

   Net Listing

   Advance Fee Listing

   Advance Cost Listing
               Buyer’s Broker
   Buyers may want to hire their own broker to assist them in
    their search and purchasing process.

   Exclusive Authority to Purchase

   Brokerage commission is typically split in half between the
    listing broker and the buyer’s broker
Completion of the Contract
   Procuring Cause – A selling broker can expect a commission
    if the actions of the broker caused the seller to find a “ready,
    willing, and able buyer”
       Ready to buy at the seller’s price and terms
       Has the financial capacity to purchase

   Terminating a contract – contracts can only be terminated
    prior to the ending date if by mutual agreement or if the
    broker is said to have abandoned the client
               Bargain Brokers
   Flat Fee Brokers – Payment is a fixed dollar amount rather
    than a percent of sales price. Usually provide a lesser menu
    of services than a traditional full service broker.

   Discount Broker – A full service broker who works for a
    lower commission rate.

   Variable Rate Broker – The listing broker may charge a
    lower rate for services but still offers a full 3% to the full
    service buyer broker.

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