Real Estate Chapter 5
Junk Fax Prevention Act
does not legalize unsolicited fax advertisements or solicitations but does allow for an established business relationship exception.
Sponsoring broker
entity holding the company real estate license, whether the entity is an individual who operates as a sole proprietorship, partnership, limited liability company, corporation or registered limited liability partnership. must be licensed and self-sponsored, there may be only one per company.
written employment agreement
for each licensee. this agreement defines the employment or independent contractor relationship, including supervision, duties, compensation, and termination. must be dated and signed by both parties
independent contractor
for federal tax purposes, they must meet 3 specific criteria set out by the IRS. 1. must hold an active real estate license 2. must agree in writing not to be treated as an employee for federal tax purposes 3. at least 90% of the individual's income as a licensee must be based on sales production rather than hours worked *responsible for paying their own income and SS taxes
managing broker
has supervisory responsibilities of all licensees. the managing broker can be the same as the sponsoring broker.
managing broker
has taken additional courses and received a managing broker license. is responsible for the supervision of all real estate activities performed by affiliated licensees
personal assistants can not:
host open houses, show property, interpret information on listings, titles, financing, contracts, closings or other information relating to a transaction, explain or interpret a contract, listing, lease agreement or other real estate document with anyone outside the licensee's company, negotiate or agree to any commission, commission split, management fee or referral fee on behalf of a licensee, perform any other activity for which a license under the Act is required.
termination of sponsorship
if a broker, managing broker, leasing agent, or licensed personal assistant terminates employment with the sponsoring broker, the licensee must obtain his license from the sponsoring broker. the sponsoring broker signs and dates the license and must send IDFPR a copy of terminated license within 2 days of termination.
cooperative commission
if another real estate office "brought in" the buyer, this allows the listing broker to pay the selling broker the amount of cooperative commission advertised in the MLS listing.
unexpected loss of managing broker
if they die or unexpectedly leave a branch, a request to the IDFPR can be made within 15 days to grant an extension for continued office operation.
supervision of a managing broker includes
implementation of office policies and procedures, training of licensees or unlicensed assistants, assisting licensees as necessary in real estate transactions, supervising escrow accounts, supervising all advertising of any service, familiarizing sponsored licensees with the requirements of federal and state laws relating to the practice of real estate, compliance with rules
Real estate licensees who are paid in a lump sum and who are personally responsible for paying their own taxes are probably
independent contractors. In order to be treated as an independent contractor for federal tax purposes, a licensee must meet three specific criteria set out by the Internal Revenue Service: the individual must hold an active real estate license; the individual must agree in writing not to be treated as an employee for federal tax purposes; and at least 90% of the individual's income as a licensee must be based on sales production rather than hours worked. Independent contractors are responsible for paying their own income taxes and Social Security taxes.
E&O insurance
insurance protection from claims made by clients, customers, and consumers related to the provision of real estate activities, called professional services by the insurance industry
allocation of customers or markets
involves an agreement among real estate companies to divide their markets and refrain from competing for each other's business
most common E&O claims against real estate agents
mishandling monies, making misstatements about material facts regarding the property, misrepresenting the property dimensions or failure to measure properly, disclosure of confidential information, undisclosed dual agency, failure to identify the real or personal property correctly in the contract
An Illinois real estate licensee who is engaged as an independent contractor
must have a written contract with the sponsoring broker. The sponsoring broker must have a written employment agreement for all sponsored licensees both for independent contractors and for employees, including licensed personal assistants.
procuring cause
must have started or caused a chain of events that resulted in the sale.
advertising
must include managing brokers name
change of business address
must notify IDFPR of any business address change within 24 hours of change, for all offices and branch offices
The amount of commission paid to a sponsored licensee is determined by
mutual agreement with the sponsoring broker. The amount of compensation a licensee receives from a sale is set by mutual agreement between the affiliated licensees and their sponsoring brokers.
commission
negotiated fee (typically based on some percentage of the final sale price of annual rental cost)
group boycotting
occurs when two or more businesses conspire against another business or agree to withhold their patronage in order to reduce competition
personal assistants
often a combination of office manager, marketer, organizer, and facilitator with a fundamental understanding of the real estate industry. they do not need a licensee, but can perform more duties with one.
a ready, willing and able buyer
one who is prepared to buy on the seller's terms and ready to take positive steps toward consummation of the transaction
price fixing
practice of setting prices for products or services rather than letting competition in the open market establish those prices
Which statement is TRUE regarding the Junk Fax Prevention Act of 2005?
real estate licensees may phone or fax any visitors to an open house who provide their phone numbers on a sign-in sheet, but only where the visitor is given either an option to opt out or notice that they will be called. A real estate licensee may not legally send an unsolicited commercial fax message without express written consent or without an established business relationship with the recipient.
Federal regulations on unsolicited email
require commercial emails to include a physical address, among other things, for the sender. Commercial email must be identified as an advertisement and include the sender's valid physical postal address.
employee
required by federal law to withhold social security tax and income tax from wages. employees might receive benefits such as health insurance, profit-sharing plans, or workers' compensation.
Under Illinois law, an unlicensed assistant may
sit at a property that is not open to the public. Section 1450.740 of the administrative rules specifies one of the permitted activities an unlicensed real estate assistant of a licensee may do is sit at a property for a broker tour that is not open to the public.
broker compensation
specified in the contract with the client
maintenance of license
sponsoring brokers are required to notify the IDFPR in writing of the names and license numbers of all managing brokers employed by sponsoring broker
if a licensee if changing brokers
the new sponsoring broker must immediately complete a sponsor card (45 day permit) for the licensee to carry until a new license and pocket card (with new firms name) arrives
After a particularly challenging transaction finally closes, the client gives the sponsored broker representing the client a check for $500 "for all your extra work." Which statement is TRUE?
the sponsored broker may receive compensation only from the sponsoring broker. Only a licensed managing or sponsoring broker may collect a commission in Illinois; the managing or sponsoring broker then may share it with any licensees who are directly involved in or responsible for a given transaction.
antitrust laws
these laws prohibit monopolies and any contracts, combinations, and conspiracies that unreasonable restrain trade.
only a licensed managing or sponsored broker may collect commission in IL
they may later share it with any licensees who are directly involved in or responsible for the transaction.
renewal
when the managing broker receives a renewal application form from the IDFPR they must notify the licensee of the receipt in person within 7 days or by registered mail within 10 days.
antitrust laws
-price-fixing -group boycotting -allocation of customers -allocation of markets -tie-in agreements
internet uses no nos
1. URL or names that are misleading, as well as deceptive keywords
commission is usually earned when
1. a completed sales contract has been executed by a ready, willing, and able buyer 2. the contract has been accepted and executed by the seller 3. the copies of the contract are in possession by all parties
to be entitled to a sales commission the individual must be
1. a licensed real estate broker 2. the procuring cause of the sale 3. employed by the buyer or the seller under a valid contrac
Controlling the assault of non-solicited pornography and marketing act of 2003
CAN-SPAM ACT- established requirements for sending commercial email, establishes penalties for noncompliance, and gives consumers the right to have emailers stop emailing them.
Two real estate companies agreed to boycott the services of a title company so that a new title company can take over the corresponding market share. The two real estate companies are violating the
Sherman Antitrust Act. Group boycotting is illegal. The penalties for violating antitrust laws are severe. For example, under the Sherman Antitrust Act, people who fix prices or allocate markets may be subject to a maximum $1 million fine and up to 10 years in prison.
penalties for violating antitrust laws
Sherman Antitrust Laws, could result in large fines and/or prision
The broker's commission was $8,200. If the commission rate was 6%, what was the selling price of the property?
The answer is $136,666.67. $8,200 ÷ 0.06 = $136,666.67.
A new sponsored real estate licensee wants to find new business among the firm's expired listings. Under the National Do Not Call Registry, for how long after the listing has expired may the licensee solicit business from the firm's previous listings?
The answer is 18 months. Licensees are permitted to call consumers with whom they have an established business relationship up to 18 months after the consumer's last payment, purchase, or delivery.
A broker received $2,520 as the firm's 50% share of a commission. If the property sold for $72,000, what was the commission rate?
The answer is 7%. $2,520 × 2 = $5,040 ÷ $72,000 = 0.07 or 7%.
A sponsoring broker must have a written employment agreement with
The answer is must have a written contract with the sponsoring broker. The sponsoring broker must have a written employment agreement for all sponsored licensees both for independent contractors and for employees, including licensed personal assistants.
"To recover a commission for brokerage services, a sponsoring broker must be employed as the agent of the seller." Which of these statements BEST explains this sentence?
The answer is the seller must have made an express or implied agreement to pay a commission to the sponsoring broker for selling the property. Only a licensed managing or sponsoring broker may collect a commission in Illinois; the managing or sponsoring broker then may share it with any licensees who are directly involved in or responsible for a given transaction. To collect a commission on a real estate transaction, the agent must have been "hired" by way of an agreement in which the principal (seller or buyer) agreed to pay a specified commission for services.
A broker listed the seller's home for $300,000. Before the listing contract expired, the broker brought the seller a full-price offer on the seller's terms, containing no contingencies. The seller then decided not to sell. Which of these statements is TRUE?
The answer is the seller probably is liable for the commission. If the transaction is not consummated, the real estate broker may still be entitled to a commission if the seller had a change of mind and refused to sell.
According to the Illinois license law, a sponsored real estate licensee may NOT
accept a commission from another broker unless previously earned. Only a licensed managing or sponsoring broker may collect a commission in Illinois; the managing or sponsoring broker then may share it with any licensees who are directly involved in or responsible for a given transaction.
tie in agreements
agreements to sell one product only if the buyer purchases another product as well
A licensee entered into a contract with her sponsoring broker, specifying that she is not an employee. In the past year, just less than half of the licensee's income from real estate activities came from sales commissions. The remainder was based on an hourly wage paid by the sponsoring broker for office administrative duties. The IRS would MOST likely classify the licensee as
an employee. Every sponsoring broker who hires licensees or has an independent contractor relationship with a licensee must have a written employment agreement with each licensee. The agreement defines the employment or independent contractor relationship, including supervision, duties, compensation, and termination. To be considered an independent contractor, at least 90% of the individual's income as a licensee must be based on sales production rather than hours worked.
A sponsored licensee wants to receive a lump-sum payment at the end of each transaction. The sponsored licensee must meet all these requirements EXCEPT
be free from supervision by the sponsoring broker and/or office manager. In order to be treated as an independent contractor for federal tax purposes, a licensee must meet three specific criteria set out by the Internal Revenue Service: the individual must hold an active real estate license; the individual must agree in writing not to be treated as an employee for federal tax purposes; and at least 90% of the individual's income as a licensee must be based on sales production rather than hours worked.
Answer telephone calls on behalf of broker
can be performed by an unlicensed personal assistant under Illinois law
Assemble documents for a closing
can be performed by an unlicensed personal assistant under Illinois law.
Schedule appointment for broker
can be performed by an unlicensed personal assistant under Illinois law.
Host open houses
can not be performed by an unlicensed personal assistant under Illinois law
Negotiate a commission
can not be performed by an unlicensed personal assistant under Illinois law
Show property to potential buyers
can not be performed by an unlicensed personal assistant under Illinois law
In Illinois, the usual "proof" that the listing broker has earned commission is the
closing of the sale. In Illinois, the closing of the sale is the usual proof in a court of law that the broker has produced a buyer and earned a commission.
broken compensation
compensation can be in form of a commission, a flat fee, or an hourly rate. it is negotiable in every case, a sponsoring broker may set the minimum commission rate acceptable for his own company. the rate is agreed on before agency relationship is established.
Which of these may a sponsoring broker dictate to an independent contractor?
compensation the person would receive. The employment agreement defines the employment or independent contractor relationship, including supervision, duties, compensation, and termination.
regulators say that brokerage companies must have a do not call policy
could result in violation and subject to fines
One general rule of the National Do Not Call Registry is
it is illegal to make an unsolicited phone call to a number listed on the national registry. The National Do Not Call Registry is a list of phone numbers of consumers who do not want to be contacted by commercial telemarketers. It is managed by the Federal Trade Commission (FTC) and is enforced by the FTC, the Federal Communications Commission (FCC), and state officials. The registry applies to any plan, program, or campaign to sell goods or services through interstate phone calls.
fiduciary standard
legal standard that holds a licensee to the highest ethical standards that the law provides, have duties of advice and counsel, must be fair, honest, and accurate in dealing with consumers and customers they do not represent.
National Do not Call Registry`
list of phone numbers of consumers who do not want to be contacted by commercial telemarketers
