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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.

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Presentation Transcript
chapter 8

Chapter 8

Real Estate Brokerage

1

the real estate sales process
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
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

licensing of sales associates brokers
Licensing of Sales Associates & Brokers

All states have a minimum education and testing requirement

Most states require continuing education to renew license

4

real estate brokerage regulation
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

legal aspects of broker client relationship
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

agency relationships in real estate
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

the role of real estate brokers
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

creating agency relationships listings
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

creating agency relationships listings continued
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

creating agency relationships listings continued11
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

broker buyer relationship buyer s agent
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

compensating the buyer s broker
Compensating the Buyer’s Broker

Retainer fee

Fixed fee

Percentage of purchase price

Commission split for property listed on the multiple listing service

13

duties rights under agency relationships
Duties & Rights Under Agency Relationships

Legal duties imposed by statutes and regulations

Ethical duties e.g. National Association of REALTORS® Code of Ethics

14

the broker s duties
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

fraud misrepresentation
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

seller s agent s duties to seller
Seller’s Agent’s Duties to Seller

Locate a buyer and keep the seller informed

17

seller s agent s duties to buyers
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

buyer s agent s duties to buyer
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

buyer s agent s duties to seller
Buyer’s Agent’s Duties to Seller

Treat all sellers fairly, honestly, and with due care.

20

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

21

fair housing continued
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

disclosure of agency relationships
Disclosure of Agency Relationships

Most states have enacted laws that require brokers to disclose the nature of their agency relationships

23

termination of agency relationships
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

types of brokerage firms
Types of Brokerage Firms

Franchises

Desk fee arrangements

Multiple-Listing services

25

broker sales associate compensation
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