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Chapter 8

Chapter 8. Real Estate Brokerage. 1. The Real Estate Sales Process. Listing agreement Marketing the property and qualifying buyers Presentation and negotiations Contracts and closing. 2. Real Estate Brokers and Sales Associates.

Renfred
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Chapter 8

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  1. Chapter 8 Real Estate Brokerage 1

  2. The Real Estate Sales Process Listing agreement Marketing the property and qualifying buyers Presentation and negotiations Contracts and closing 2

  3. Real Estate Brokers and Sales Associates A broker is an intermediary who brings together buyers and sellers, assists in negotiating agreements between them, executes their orders, and receives a commission (or brokerage) in compensation for services rendered. Real estate brokers are individuals licensed by state governments to arrange real estate sale or lease transactions for a commission Real estate sales associate are individuals licensed by state governments to arrange real estate sale or lease transactions under the supervision of a real estate broker 3

  4. Licensing of Sales Associates & Brokers All states have a minimum education and testing requirement Most states require continuing education to renew license 4

  5. Real Estate Brokerage Regulation All states have regulatory bodies to ensure compliance with regulations Licenses may be revoked and other penalties imposed for violations 5

  6. Legal Aspects of Broker-Client Relationship In an “agency relationship,” one party (the principal) authorizes another party (the agent) to act on his or her behalf. The agent is a fiduciary of the principal 6

  7. Agency Relationships in Real Estate • Broker may be hired to: • Help a buyer find and purchase property • Help a seller sell property • Broker may hire associates to assist in locating buyers or properties 7

  8. The Role of Real Estate Brokers • Many transactions have more than one broker involved e.g. a listing broker and a buyer’s broker • Dual agency – broker represents buyer and seller • Transactional agency is allowed in some states where broker helps the parties reach a deal 8

  9. Creating Agency Relationships - Listings Listing Agreements establish the agency relationship between sellers and brokers. Open Listing – seller hires several brokers and is only obligated to pay the broker who finds the actual buyer (See Figure 8.1 Commission Agreement) Exclusive-Brokerage Listing – seller agrees to hire only one broker to search for a buyer, but reserves the right to sell the property without the assistance of the broker and thus avoid paying a commission (See Figure 8.2 Exclusive-Brokerage Listing) 9

  10. Creating Agency Relationships – Listings (continued) • Exclusive Right to Sell Listing – seller agrees to hire only one broker and to pay that broker a commission even if the seller locates a buyer without the assistance of the broker (See Figure 8.3 Exclusive-Right-to-Sell Listing Agreement) 10

  11. Creating Agency Relationships – Listings (continued) Net listing – Seller guaranteed certain amount, broker keeps excess. Illegal in some states Limited-Service Listing – Broker places listing on the multiple listing service but provides little service (See Figure 8.4 Limited-Service Listing Agreement) 11

  12. Broker-Buyer Relationship (Buyer’s Agent) • Types of buyer representation agreements are similar to listings • Open • Exclusive right to represent (See Figure 8.5 Exclusive Buyer Brokerage Agreement) 12

  13. Compensating the Buyer’s Broker Retainer fee Fixed fee Percentage of purchase price Commission split for property listed on the multiple listing service 13

  14. Duties & Rights Under Agency Relationships Legal duties imposed by statutes and regulations Ethical duties e.g. National Association of REALTORS® Code of Ethics 14

  15. The Broker’s Duties The broker is as a fiduciary is a person who occupies a position of trust and confidence in relation to another person or his or her property. Fiduciaries must act in the best interest of their client at all times. 15

  16. Fraud & Misrepresentation • Elements of fraud • Intention to mislead • False statement material to the transaction • Client justifiably relies on the statement • Client is injured • Misrepresentation can be innocent, no intention to mislead, or negligent i.e. a mistake 16

  17. Seller’s Agent’s Duties to Seller Locate a buyer and keep the seller informed 17

  18. Seller’s Agent’s Duties to Buyers • Disclose negative factors that might adversely affect the property’s value • See Legal Highlight “The Seller’s Agent’s Obligations to the Buyer” • Keep any money deposits in a neutral location 18

  19. Buyer’s Agent’s Duties to Buyer Buyer’s agent is a fiduciary of the buyer Act diligently to locate property that matches buyer’s criteria 19

  20. Buyer’s Agent’s Duties to Seller Treat all sellers fairly, honestly, and with due care. 20

  21. Fair Housing • Prohibits discrimination based on: • Sex • Race • Color • Religion • National origin • Disabilities • Familial status 21

  22. Fair Housing (continued) Cannot engage in steering or blockbusting Civil Rights Act of 1866 prohibits public & private racial discrimination Fair Housing Act of 1988 provides penalties for violation See Legal Highlight “Fair Housing” 22

  23. Disclosure of Agency Relationships Most states have enacted laws that require brokers to disclose the nature of their agency relationships 23

  24. Termination of Agency Relationships When a transaction occurs When the agreement expires When the parties agree to terminate When one party breaches the agreement When one party becomes contractually incapacitated The listing property is destroyed The listing property is condemned 24

  25. Types of Brokerage Firms Franchises Desk fee arrangements Multiple-Listing services 25

  26. Broker & Sales Associate Compensation Usually a percentage of the transaction amount Broker and sales associate usually have an agreed “split” Cooperating brokers – listing broker, through multiple listing service shares fee with buyer’s broker 26

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