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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Real Estate Brokerage
Marketing the property and qualifying buyers
Presentation and negotiations
Contracts and closing
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
All states have a minimum education and testing requirement
Most states require continuing education to renew license
All states have regulatory bodies to ensure compliance with regulations
Licenses may be revoked and other penalties imposed for violations
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
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)
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)
Percentage of purchase price
Commission split for property listed on the multiple listing service
Legal duties imposed by statutes and regulations
Ethical duties e.g. National Association of REALTORS® Code of Ethics
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.
Locate a buyer and keep the seller informed
Buyer’s agent is a fiduciary of the buyer
Act diligently to locate property that matches buyer’s criteria
Treat all sellers fairly, honestly, and with due care.
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”
Most states have enacted laws that require brokers to disclose the nature of their 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
Desk fee arrangements
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