Section 6: Brokerage Activities and Procedures

Deceptive Ads

A deceptive ad, according to the FTC's Deception Policy Statement, is one that either contains a statement or omits information that is: Likely to mislead reasonable consumers Material (important to the consumer's decision as to whether to buy or use the product)

Unfair Ads

An unfair ad, according to the FTC's Unfairness Policy Statement, is an ad or business practice that: Causes or is likely to cause substantial, unavoidable consumer injury Is not outweighed by the benefit to consumers

Price Fixing

At its most basic level, price fixing is a conspiracy or agreement between business competitors to set their prices to buy or sell goods or services at a certain price point, and it's a violation of federal and state antitrust laws. The U.S. Department of Justice (DOJ) identifies other types of price fixing, including: Agreements to establish or adhere to uniform price discounts Agreements to eliminate discounts to all customers or certain types of customers Agreements to adopt a specific formula for the computation of selling prices Agreements on terms and conditions of sale, including uniform freight charges, quantity discounts, or other differentials that affect the actual price of the product Agreements not to advertise prices or to refuse to sell the product through any bidding process Price/Term Fixing The DOJ also notes another component to price fixing that's specific to real estate, which the National Association of REALTORS® sometimes deems price/term fixing. This is when two or more firms agree to offer exactly the same terms in their agency agreements. So, in order to avoid price fixing antitrust violations or even the appearance of violations, brokerage firms should take care to establish their fees, commission splits, and agreement terms completely independent of any other firm's policies or practices. Price Fixing by Default? Of course, just because several brokerages have the same commission rates, for example, does not mean a price fixing violation is occurring. According to the DOJ: The fact that all competitors charge the same price, or use the same terms of sale, is not, by itself, evidence of a price-fixing conspiracy because similar prices may in fact be the outcome of competition. However, where price increases are announced by all competitors at the same time, or prior to a uniform effective date, there is a substantial likelihood of collusion. Further, the fact that all prices are not identical does not indicate the absence of a conspiracy. For example, one company may have traditionally sold at a price lower than the others and, when a general increase in price occurs, the company with the lower price may adopt the same percentage or absolute increase as the others (U.S. Department of Justice, Offices of the United States Attorneys, Antitrust Resource Manual).

Brokerage Offices in Florida

Brokerage offices are required to be registered with the DBPR and to have at least one closed-off room to conduct transactions and negotiations in private. The office must have a sign on the inside or exterior prominently displayed that contains the trade or company name, the broker's name, and the words "Licensed Real Estate Broker."

Escrow Account Record Keeping Requirements in Florida

Escrow funds require special handling, and are a frequent source of lawsuits. To be in compliance with Florida statutes and regulations, a broker must keep accurate records of all escrow funds that include: Where the funds came from When the funds were received When the funds were deposited Where the funds were deposited When the funds were disbursed Who received the disbursed funds and for what purpose Brokers must reconcile the escrow accounts each month and review, date, and sign the monthly bank reconciliations. They must also retain a complete and legible copy of each disclosure of brokerage relationship, executed contract, listing or buyer agency agreement, closing statement, and other transactional documents in the broker's control. The records must be made available and kept for audit or spot check by the DBPR at any reasonable time for a minimum period of five years from the date of receipt of funds, deposits, or checks given to the broker or from the time of a written or verbal agreement that engages the services of the broker. Any records that have been used in a litigation process must be kept for at least another two years after the case is concluded, even if they were already kept for five years prior to their use.

Handling Tenant Funds in Florida

How would you feel if someone gave you a sizeable amount of money and asked you to take good care of it for them? Do you think you're up to the task? We hope so, because this is a common scenario for real estate agents. Let's look at the kinds of funds you'll be asked to take care of and what you'll need to do with them. Specifically, we'll look at security deposits and advance rentals, both of which are governed by the Florida Residential Landlord and Tenant Act (FRLTA). Security Deposits If you ever work with rental properties, you'll need to know about security deposits and advance rentals. Let's learn more about them. Money paid in advance, also called a security deposit, protects the landlord in case the tenant fails to pay rent or damages the property. Security deposits do not belong to the landlord; they belong to the tenant and are held by the landlord in trust. Landlords must disclose to tenants in writing within 30 days of receipt where and how their funds are being held. Florida requires that security deposits be accounted for. According to the RLTA, funds must be held in one of these ways: They may be held in a non-interest-bearing Florida bank account. They may be held in an interest-bearing Florida bank account, with interest retained for the benefit of the tenant. The tenant must collect at least 75% of the annual interest rate. The landlord may post a surety bond with the county's circuit court for the total amount of collected security deposits and advance rents or $50,000, whichever is less. Within 30 days of receiving this money, the landlord must notify the tenant, in writing, how this money is being held. If interest is involved, the tenant must also be notified of the interest rate and the schedule for receiving interest rate payments. The written notification should also include the address of the institution. Florida law requires that this money be refunded to a tenant within 15 days after the tenant has vacated the property, unless the landlord is keeping some or all of the deposit to pay for damages. By law, landlords must make a claim against the security deposit within 30 days after the tenant has vacated the property. Advance Rentals Some landlords require several months' worth of rent to be paid in advance. This protects the landlord in case the tenant falls behind on rent. Advance rent does not belong to the landlord; it belongs to the tenant and is held by the landlord in trust. Florida law requires that advance rent money be held and accounted for. The rules that apply to security deposits, listed above, also apply to advance rental funds. Commingling Let's say that you've just accepted an advance rental check for $5,000 from a tenant. It's Friday night, and you're going to be out of town for the weekend. You deposit the check into your personal checking account so it's not sitting around in your apartment all weekend. Besides, you might even earn a little interest! Then, come Monday, or whenever the landlord gets back, you'll just write a new check for the advance rental and put it in the right bank account. Rewind! If you do this, you're guilty of commingling—mixing the client's money with your own. Even if you later replace the money, and even if you have the best intentions, you must never mix trust funds (also called escrow funds or funds belonging to others) with your own. The best way to avoid commingling is to handle earnest money properly. Make sure it gets where it's supposed to be immediately. Oh, and never, ever use funds that don't belong to you.

Penalties for Deceptive or Unfair Advertising

Let's say you are found in violation of truth in advertising laws. How bad can it get? Penalties for deceptive or unfair advertising can be severe. How severe depends on the nature of the violation. The Federal Trade Commission (FTC) or courts may impose any or all of the following: A cease-and-desist order: This requires you to stop running the deceptive ad or engaging in the deceptive practice. You may also be required to have substantiation for any claims in future ads, report periodically to FTC staff with substantiation for any claims in new ads, and pay a fine of up to $41,484 per day per ad if you violate the law in the future. Civil penalties, consumer remedies, and other monetary remedies: Civil penalties can range from thousands of dollars to millions of dollars, depending on the nature of the violation. Sometimes advertisers have been ordered to give full or partial refunds to all consumers who bought the product. Corrective advertising, disclosures and other informational remedies: You may be required to take out new ads to correct the misinformation in the original ad, to notify consumers about deceptive claims in ads, to include specific disclosures in future ads, or to provide other information to consumers.

Market Allocation

Market allocation is an antitrust violation. Market allocation occurs when real estate professionals from competing firms agree to divide their market—by geography, price range, property type, etc.—and then refrain from competing for business. This used to be common practice between brokerage firms—"you take the north side of town, we'll take the south"—so the firms weren't tripping over one another in their pursuit of business. But these agreements between competing firms restrict trade, discourage competition, and restrict consumer choice, and they violate antitrust law. It's important to distinguish between making a legal independent decision about the areas and clients you and your firm wish to serve (as long as this decision isn't based on discrimination against any protected class) and an actual agreement (written or oral) with competing brokers to allocate territories or customers, which is illegal.

Escrow Procedures in Florida

Licensees may not commingle earnest money or trust funds with their personal funds. Trust funds must always be placed in a separate broker escrow account or delivered to the broker to deposit in an acceptable account held by another agreed-upon party. Funds that must be placed in an escrow account must be deposited immediately. "Immediately" has two interpretations, depending on whether you're an associate licensee or a broker. Occasionally, a seller may agree to accept escrow funds in the form of a post-dated check from the buyer. In this case, the licensee should check the brokerage's policy regarding handling procedures, but this usually involves getting the seller's approval in writing and storing the check in an office safe until it may be deposited in the escrow account. A similar procedure may be used for other checks that may be agreed to be held pending an offer acceptance, but in this case, it would require the buyer's written permission. Sales associates and broker associates must deliver escrow funds by the end of the next business day to their broker/employer, and brokers must deposit the funds in escrow by the third business day following receipt, unless otherwise agreed to by the parties in writing. A business or banking day does not include a legal holidays or the weekend. Let's take a look at what this looks like in practice Day 1 - Friday - For Sales Associates/Broker Associates: funds received by associate Day 2 - Monday - For Sales Associates/Broker Associates: funds delivered to brokery/employer by end of business day Day 3 - Tuesday - For Brokers: no action Day 4 - Wednesday - For Brokers: Funds must be deposited by end of third business day after receiving funds Escrow accounts may be opened and maintained in a bank, savings and loan association, trust company, or credit union within the state of Florida, and the broker must be a signatory on the account. The account must be identified as an escrow account, and each check, deposit slip, or bank statement must contain the words "Escrow" as part of the account name. Designating an account as an escrow account puts the bank on notice as to the nature of the funds, and it safeguards it from creditors. If the broker goes bankrupt, for instance, funds in an escrow account may not be touched. Brokers that choose not to hold escrow funds and instead deposit them with either a title company or an attorney must still provide the seller's broker with the name, address, and telephone number of the escrow holder and request a written notice verifying the deposit no later than 10 business days after the deposit is due. The broker is then given an additional 10 days to provide the seller with either a notice from the attorney or title company that the deposit was received or a notice that funds were not received. Commingling of Funds Licensees may not commingle firm funds, or funds that will ultimately belong to the licensee, with escrow funds. Escrow funds may not be deposited in non-escrow accounts where personal or firm funds are held. The only amount of non-escrow funds allowed to be kept in an escrow account is a nominal amount by the broker to cover banking fees so that the escrow funds are not compromised ($1,000 for sales escrow accounts and up to $5,000 for property management accounts). Amounts over the minimal amount for this purpose would be considered commingling of broker funds with escrow funds and would be illegal. Any funds belonging to the broker must be identified as such. A broker has 30 days from the time of the last reconciliation statement to correct any escrow errors, provided there is no shortage of funds in the escrow account. Brokers who perform property management functions often handle security deposits that, in many cases, will need to be returned to tenants. While not required, the broker should establish a separate escrow account for each property—even if one owner owns several properties. This prevents commingling and accidentally using the funds from one property to pay for expenses of another. No money may be disbursed from these accounts, except by agreement with the owner and only then if there is sufficient money in the account.

Antitrust Penalties

Penalties for violating antitrust laws are very severe. According to the Federal Trade Commission, fines can be as high as $100 million for a corporation or $1 million for an individual and may include prison terms of up to 10 years. The Sherman Act permits (in certain cases) the maximum fine to be increased to twice the gain or loss involved. In addition, collusion among competitors may constitute violations of the mail or wire fraud statute, the false statements statute, or other federal felony statutes, all of which the Antitrust Division prosecutes . In addition to receiving a criminal sentence, a corporation or individual convicted of a Sherman Act violation may be ordered to make restitution to the victims for all overcharges. Victims of price-fixing conspiracies may also be awarded up to three times the amount of damages suffered in a civil suit. And how's this for punishment? If your brokerage is found guilty of violating antitrust laws, it may be subject to court-ordered supervision for up to 10 years. What does court-ordered supervision look like? An example is that a court-appointed representative spends one day a week evaluating the activities of your brokerage. Put the coffee on; you've got a visitor for the next decade.

CAN-SPAM Act of 2003

The CAN-SPAM Act of 2003 serves to protect consumers from being bombarded with unwanted email solicitations. Under the law, commercial emails (which may include those sent through social media platforms and some forms of text message) must include all of the following: A legitimate return email and physical postal address A clear and conspicuous notice of the recipient's opportunity to opt out—that is, to decline to receive future messages An opt-out mechanism that is active for at least 30 days after the message has been sent A clear notice that the message is an advertisement or solicitation When a consumer sends an opt-out request, it must be honored within 10 business days. If a consumer chooses to receive commercial emails from the business, the business still must comply with the law's other requirements, except that the messages need not be identified as advertisements or solicitations. The law offers no private right of action for consumers, but each separate email in violation of the CAN-SPAM Act is subject to penalties similar to the fines for Do Not Call violations. As with the Do Not Call Registry, the Federal Trade Commission is responsible for enforcing the provisions of the CAN-SPAM Act. By the way, CAN-SPAM, although it sounds like a processed meat product, stands for Controlling the Assault of Non-Solicited Pornography and Marketing.

Do Not Call Implementation Act of 2003

The Do Not Call Implementation Act of 2003 was enacted in response to consumer concerns regarding unwanted telemarketing calls. Under the law, it's illegal to make a phone solicitation to any household that has listed its number in the Federal Trade Commission's Do Not Call Registry, unless you already have a business relationship with that household or have permission from the household to call. Note, though, that you can continue to call former customers for up to 18 months after being involved in a transaction with them. Additionally, you're allowed to call consumers for up to three months after an inquiry from them. As of January 1, 2005, telemarketers (including real estate licensees) are required to search the Do Not Call Registry at least once every 31 days and drop the phone number of registered consumers from their call lists. Fines for those who violate the law are steep. The maximum amounts are adjusted regularly, but are currently over $40,000 per violation (each call may be considered a separate violation) for lawsuits brought by the Federal Trade Commission.

Junk Fax Prevention Act of 2005

The Junk Fax Prevention Act of 2005 makes it unlawful to send an unsolicited commercial message via fax unless the sender has permission from the recipient or an established business relationship with the recipient. All fax messages must contain an option for recipients to opt out of future faxes. If you receive an opt-out request, you must comply with it within 30 days. Violators are subject to fines. The Federal Communications Commission enforces this act.

Brokerage Business Entities in Florida

There are a variety of legal structures that a brokerage may be registered under. Each has its advantages and disadvantages. These include: High Risk: Sole Proprietorship This is the simplest business type. It doesn't afford personal protection to the owner. The owner operates under their own name or acquires a DBA (doing business as) to operate under a trade name and bears sole responsibility for the risks and rewards of doing business. Moderate Risk: Partnership The partnership form of business is designed for two or more partners who wish to engage in business for profit. There are two types of partners: general and limited. Both types of partners still take responsibility for the risks and rewards of the business. General Partnership All general partners share full personal liability for debts and obligations in proportion to the percentage of ownership as outlined in the partnership documents. Limited PartnershipA limited partner has a stake—but usually not a role beyond financial participation—and the partner's liability is limited to the amount of money that a partner has invested. Limited Liability Partnership (LLP)Similar to a limited partnership, each partner is not responsible for the actions of the other partners or their employees. It affords a small amount of protection similar to that provided to a corporation. The individual is still liable for the risks and rewards. Low Risk: Limited Liability Company (LLC) Combines the tax advantages of a partnership with the legal shield offered to corporations. An LLC is actually a non-corporate entity. As with partnerships, owners of an LLC participate in the brokerage's profits and losses without taxation to the company. LLCs do not need a board of directors and their owners can participate directly in the management of the company. Lowest Risk: Corporation This structure is legally considered a separate entity governed by its own articles of incorporation. There is a system of centralized management and the liability incurred by the corporation is an obligation of the corporation, not that of an individual owner or set of owners, offering a sort of "legal shield" to protect the owners. Domestic corporations are those that are registered within the state and foreign corporations are registered outside of the state. Ownership is conveyed through shares or stocks in the company to shareholders. There are two primary types of corporations: General Corporation Elected officers govern the affairs of the company, while the designated licensed broker is directly responsible for the real estate transactions. Corporations have perpetual existence. Legally, corporations cannot die until they are dissolved or the state revokes the corporate charter for non-compliance. Ownership in a general corporation is easily transferable through the stock. Close Corporation A close corporation is one in which the stockholders, directors, and officers of the company are typically the same people. Officers of a close (also called closely held) corporation typically want to remain a small, tight-knit group. Owners in a close corporation run the company directly, without the oversight of a board of directors. Transfer of stock is more complicated, given the closely held ownership nature. There is also a non-profit corporation, which can be organized similarly to for-profit corporations, with distinct tax advantages.

Federal Laws Relating to Prospecting

Three federal laws are in place to protect consumers from unwanted solicitations: Do Not Call Implementation Act of 2003 Junk Fax Prevention Act of 2005 CAN-SPAM Act of 2003

Truth in Advertising

To protect consumers from misleading or fraudulent advertising techniques, the Federal Trade Commission (FTC) has enacted rules to encourage truthful, non-deceptive, and fair advertising. It requires advertisers to have evidence to back up any claims made.

Interest-Bearing Accounts and Disbursement of Escrow Funds in Florida

Interest-Bearing Accounts and Disbursement of Escrow Funds in Florida The principal broker is responsible for the escrow account of the firm. He or she decides how the account will be established (within the prescribed guidelines), and is ultimately responsible for how the money is handled. Interest-Bearing Accounts The escrow funds may be held in an interest-bearing or non-interest-bearing account. If an interest-bearing account is used, the broker must obtain written permission from all parties that clearly states how interest will be distributed, or whether the broker will retain the interest earned. Failure to obtain written permission from all parties may lead to disciplinary action. Disbursement of Escrow Funds Brokers are responsible for maintaining records of their escrow accounts for the prior five years, and must be a signatory on the account. The balance in the account must at all times be sufficient to account for the funds being held on behalf of those entrusting the funds to the firm. Brokers may add a nominal amount of non-escrow money to an escrow account ONLY to ensure that the account is kept open and that maintenance fees get paid. Brokers are only allowed to disburse escrow funds: At the conclusion of the transaction, to settle the agreement between the parties On agreement, in writing from all principals to the transaction On court order After deliberating over who is the rightful owner of the funds, according to the terms of the contract (and only after giving written notice to the principal not to receive the funds). Such notice must be either hand-delivered or by certified mail with return receipt requested, and addressed to the notice address designated in the contract or to the last known address of the recipient. This notice must include the words "Payment will be made unless a written protest is received within 30 days of delivery of the notice." Obviously, payment cannot be disbursed unless these 30 days have passed or unless written permission is received by the party not to receive the funds. For payments made within 90 days of the date of a contract that is not consummated, notice may be sent by receiptable email or fax, if this information is provided in the contract.

Guidelines for Internet Advertising in Florida

Internet advertising may seem like a wild unfettered frontier. Fortunately, there is plenty of guidance for Florida licensees on advertising. Places to look include: • Florida Real Estate Commission (FREC) and related Florida Administrative Code §61J2-10.025 • The policy manual of your brokerage • The NAR Code of Ethics (for members, and as a resource for non-members, as well, given that the courts often refer to the Code of Ethics when determining expected standards for licensees) Disclosure requirements when advertising online as a licensee are the same as those for print and other media. You must disclose your brokerage's firm name as it's registered, but when advertising online it's required that the brokerage name be placed adjacent to the contact information provided. In addition, there are rules and restrictions that are part of the state and federal Do-Not-Call laws, the federal CAN-SPAM law, and the MLS IDX (Internet Data Exchange) rules and policies. You may not inundate the public with offers to purchase with such frequency as to amount to harassment, whether this is done by phone, mail, or other means, even if it's done on behalf of a buyer. Online advertising can take many forms. Here are several forms and their disclosure requirements. Online Advertising Medium / Requirements Webpage, whether firm or licensee / Disclosure of brokerage firm name next to contact information Email, newsgroups, discussion lists, bulletin boards / Disclosure of brokerage firm name next to contact information, usually at beginning or end of message Instant messaging / Disclosure is not required, provided the licensee has given the disclosure in another format previously Chat / Disclosure is required before providing real estate services or offering to provide them Voice Over Net (VON) / Disclosure required prior to advertising, or the disclosure wording must be clearly visible on the same web page Banner ads / If not included on the ad, a link to required disclosure is required

Concurrent Licensure in Florida

Is it possible to have your cake and eat it, too? Can you be a licensed broker running your own firm and a broker associate for another? In Florida, the answer is yes! Brokers are allowed to hold multiple licenses. This means they are affiliated with more than one brokerage firm. To obtain a concurrent license, a broker must: Have a current broker's license. Submit an application for multiple licensure to the DBPR, along with a fee of $77 and the name of the brokerage where you wish to work as an associate. You must also have a qualifying broker sign off on your application. Similar to changing brokerages, the DBPR will review the application to ensure the request is necessary to conduct business, but you may still operate as a real estate licensee under your own firm until the request is approved.

The Real Estate Settlement Procedures Act (RESPA)

Provides consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks. RESPA was signed into law in December 1974, and became effective on June 20, 1975. The law has gone through a number of changes and amendments since then, all with the intent of informing consumers of their settlement costs and prohibiting kickbacks that can increase the cost of obtaining a mortgage. RESPA covers loans secured with a mortgage placed on one-to-four family residential properties. Originally enforced by the U.S. Department of Housing & Urban Development (HUD), RESPA enforcement responsibilities were assumed by the Consumer Financial Protection Bureau (CFPB) when it was created in 2011.

RESPA - Prohibits Kickbacks

RESPA - Prohibits Kickbacks The Real Estate Settlement and Procedures Act (RESPA) is a federal law administered and enforced by the Consumer Financial Protection Bureau (CFPB) to prevent the payment of kickbacks and other fees, which drive up costs to consumers. Section 8(a) of this law prohibits real estate professionals from receiving any item of value in return for referring business to a real estate settlement service provider (SSP) in a residential transaction. SSPs include mortgage lenders, title insurance companies, and home inspectors. A kickback is anything of value, regardless of the amount, that an individual or company provides to a real estate professional in exchange for referring business. Kickbacks include: Cash or gift cards Movie or sporting event tickets Administrative fees or commissions for selling a home warranty Rebates to firm and/or agent Example A mortgage company passed out "play of the week" cards to real estate agents who referred homebuyers. The agents could use the cards to play games online with the chance to win prizes, such as money, cars, cameras, and TVs. Is this a violation of RESPA guidelines? Yes. Any prize, or the opportunity to win a prize, is considered a "thing of value" and violates RESPA. Example A title insurance company sent movie tickets to a real estate professional in a thank you card. Is this a violation of RESPA guidelines? Yes. RESPA prohibits a real estate professional from receiving any item of value from a service provider, including items with low dollar values, such as movie tickets. What You Can Accept While RESPA prohibits most compensation from SSPs to real estate professionals, there are some instances in which an SSP may provide real estate professionals with normal promotional or educational materials: The materials cannot be in exchange for a referral. The materials cannot defray expenses real estate professionals would normally have to pay themselves. Real estate professionals can receive compensation (items of value) from an SSP for performing actual services. In such a case: The compensation should be called a "fee." It must be a flat dollar amount and not based on a percentage. It cannot be based on the success of a transaction. It cannot exceed the market value of the services or goods provided. It must be disclosed to the client. Example An inspection company provided a food tray for a broker's open house. It posted a sign indicating that the refreshments were sponsored by the inspection company and distributed promotional brochures about the company's services. It was made clear to any potential buyers visiting the open house who paid for the refreshments. If the signs and promotional materials weren't posted or distributed, this situation would have then been considered a violation of RESPA. Compensation from an Affiliated Business Common affiliated businesses are home warranty companies, mortgage companies, and insurance providers that are associated with a brokerage firm. For a business to be considered "affiliated," there must be an established relationship. Additional guidelines include: The business must be owned (in full or in part) by the real estate professional. The compensation must be related to the return earned from owning the business. The real estate professional must disclose the affiliation between the professional and the business to clients. The real estate professional cannot require that clients or customers use the affiliated business. An example would be a real estate broker who owns interest in an insurance company. The broker won't violate RESPA if the broker referred buyers to the insurance company, as long as certain conditions were met: The broker cannot require buyers to use the insurance company. The broker must disclose the interest in the insurance company to buyers. The brokerage firm cannot receive any payment from the insurance company related to the referral. Administrative Fees Under RESPA, you may also be able to charge administrative fees. Section 8(b) of RESPA prohibits the acceptance of "any portion, split or percentage of any charge made or received for the rendering of a real estate settlement service" other than for services actually performed. This appears to prohibit only the splitting or sharing of charges and not the mere receipt of unearned fees. It seems to require that at least two parties share fees. However, HUD regulations go further by providing that a charge for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates Section 8(b). The issue, then, is whether an administrative fee charged by a real estate broker violates RESPA. If it's not split with the others, it would seem to be in compliance with the act. However, if HUD determined that the fee were unearned, it would likely be considered a violation. And violations may lead to an injunction, fines, or even imprisonment. In addition, consumers can sue real estate brokers for three times the amount of the settlement service charge.

Real Estate Advertising Guidelines

Real estate ads shouldn't mislead or contain factual errors. They should also avoid making unsubstantiated claims. For instance, there's no way to substantiate the claim, "This home is located in a neighborhood that will appreciate at twice the rate of surrounding neighborhoods." Deceptive advertising in real estate can be as simple (and as common) as using the REALTOR® designation when you are not actually a REALTOR® (a member of the National Association of REALTORS®). Some additional common real estate advertising errors include: Listing total square footage as living area Using a team or group name in advertising when there are no team members Advertising a "new air conditioner" when the compressor was replaced and not the coils, or vice versa Advertising property as waterfront when there is a small man-made pond in the front yard Note: Out-of-date information is false information. Keep online listing information (and online sources of that information) current. The public should be able to assume that the information provided in the online listing is accurate. This principle applies to all forms of advertising or marketing media.

Affiliating with a Florida Broker

Broker affiliation simply means that you select a principal or supervising broker who will maintain your license in the broker's office, and who agrees to supervise and train you and be responsible for your actions while you are a sales associate or an associate broker. Of course, you may eventually choose to get your own broker's license and "go indie," or, like many licensees, you may opt to continue to affiliate with a broker for the many benefits it provides. Benefits of affiliation include: Reduced/shared liability Office space and professional surroundings Administrative support Training Networking, social, and vacation coverage opportunities Brand awareness and recognition Floor time Shared advertising costs During the period of your affiliation, all listing and buyer representation agreements you sign, and all real estate services and marketing activities you perform, are done in your affiliated broker's name. Sales associates must be affiliated with a broker for at least 24 months during the five-year period before applying for a broker license. Associate brokers may choose to remain affiliated for as long as they wish.

Advertising Guidelines for Rental Listing Services in Florida

Brokers or individuals licensed to provide rental listing services for a fee are subject to advertising and disclosure requirements, just like all other real estate service providers. It's a violation for a licensee to do any of the following: Refer a prospective tenant to listing information that is any of the following: Isn't current Doesn't exist Isn't available Has been described in a false or misleading manner In addition to this requirement, prospective tenants must be given a receipt with the following disclosure in 10 point or larger, bold font: NOTICE PURSUANT TO FLORIDA LAW: If the rental information provided under this contract is not current or accurate in any material aspect, you may demand within 30 days of this contract date a return of your full fee paid. If you do not obtain a rental you are entitled to receive a return of 75% of the fee paid, if you make demand within 30 days of this contract date. As the disclosure states, prospective clients have up to 30 days to claim a refund if they fail to obtain a rental or if the information is not current or inaccurate. Advertising rental list information that isn't current or is inaccurate is a first-degree misdemeanor in Florida and is punishable by a $1,000 fine or up to a year in prison, and may also result in license suspension or revocation.

Broker Commission

Commissions are paid out according to the commission agreement instructions. Usually there's a commission check cut to each broker/brokerage. The buyer's agent receives their commission check from her brokerage. The seller's agent receives their portion of the commission check from his brokerage. Sales associates may not directly receive compensation for real estate-related activities. All such compensation must come through their broker. Sales associates may obtain written authorization from their broker for each transaction to receive their split of the commission directly. Brokers must disclose their right to lien prior to the beginning of any brokerage relationship, or they will have to file a claim in court before they may place a lien on property or profits. The Commercial Real Estate Sales Commission Lien Act and the Commercial Real Estate Leasing Commission Act give brokers the right to lien profits and leasehold property interest in order to collect unpaid commission.

How to Select a Broker

For those licensees who are looking for brokers who are willing to work with new licensees, don't sign up with the first person you meet, and don't select your brokerage based on proximity to your home. You'll be working outside the office a lot. Select several brokerages near the area where you would like to work. The firm will have increased visibility there, which never hurts as long as its reputation is good. Do your homework to make sure it's a good fit. Ask questions, such as: How many licensees does the broker supervise? What is the training program like? What is the retention rate of existing affiliated licensees? What is the compensation package?This doesn't mean salary. As s a licensee, you will be an independent contractor. You will be responsible for finding your own business, and you won't get a paycheck unless you make a sale. And then your broker will take half of it (or 40%, etc., depending on your agreement). Find out what your split will be, whether there is an annual cap, and what that cap is. Some firms, for instance, charge a desk fee of $20,000, and until that is paid off, the broker takes 40% of any commissions; once it's paid off, the licensee keeps 100% of commissions (less any transaction fees the brokerage may apply). What is the annual commission or sales volume per affiliated licensee? This will vary widely, but it will give you an idea for comparison purposes. How available is the broker if you have questions? Is there other management or a mentor on site in case the broker is unavailable? Does the broker practice real estate? Some do, some don't. Practicing brokers are often less available than those who are simply managing. It also puts the broker in direct competition with licensees. What is floor time like, and does it work? How are leads funneled inside the firm? If a random caller needs help, how is that call routed? What is the web presence like? Check to see how the firm ranks against other firms and ask around about the firm's reputation. Your independent contractor agreement should spell out the terms of your affiliation with the broker. Ask for a review copy to consider. You should also ask to see a copy of the office policies and procedures.

Antitrust and Real Estate

In the real estate industry, the most common types of per se (pur-SAY) antitrust concerns are price fixing and group boycotts, but there are also market allocation agreements and tie-in arrangements. As we take a closer look at each of these, notice the key similarity: All involve an agreement, which may take the form of a written document, verbal exchange, or even be inferred from conduct (such as a meeting between competitors followed by joint conduct). Without an agreement, there is no violation. What's "Per Se," You Say? Per se means that guilt is established on the face of the circumstances—no need to prove intent. If you do certain things, just ... BAM! You're guilty. It means that no defense, justification, or excuse will be permitted. Absent per se circumstances, the court looks at the entire situation to determine guilt or lack thereof. Per se guilt is determined when there is agreement between competing entities to do or not do an activity that has the effect of always or nearly always restricting competition.

Brokerage Registration Requirements in Florida

Regardless of the type of legal structure a brokerage chooses to operate under, there are certain requirements that must be met by each. These include: Each organization must register the name (personal name, DBA trade name, partnership name, or corporation name) in which they plan to do business with the DBPR. At least one partner, officer, or director of the organization must be a licensed active broker to act as the principal or qualifying broker of the brokerage. If the only active broker of record dies, resigns, or is removed from a partnership or corporation, no new business may be conducted until a new broker is found to fill the position within 14 days of the vacancy. Failure to do so, or upon the death of a sole proprietor, shall dissolve or cancel the registration of the business entity. Any member who deals with the public and performs real estate services must also have an active broker's license. Non-limited partners, officers, and directors who are non-brokers must register their names and addresses with the DBPR, and in the case of a corporation, their position held and percentage of ownership. Sales associates and broker associates may not go into business on their own and may only take limited roles within partnerships or be shareholders in a corporation. Citations and fines may be assessed to sales associates or broker associates who are serving as general partners, officers, or brokers in a corporation.

Florida Advertisements

Required Information Brokerage firm nameFirm name must appear exactly as it is registered with the DBPR Your last name at a minimum, if you're including your name at all Allowable Information Picture of yourself Personal logo Your full nameIf you choose to include it on advertising, it must contain your last name as recorded on your license. Nickname or slogan If you choose to include a nickname, then you should also include your full name as it appears on your license with the DBPR. Personal contact info License status Broker's logo Team name If you choose to include a team name, all team members must be supervised by the same broker and one person must be designated as responsible for appropriate advertising. Names that suggest the team is a separate real estate brokerage or company are not allowed.

Health/Safety and Evaluation Issues

The ads that the FTC is most concerned with are those that are focused on health and safety and those that consumers would have trouble evaluating for themselves. Examples of each follow: Health/safety: "XYZ automobiles protect you in case of an accident." Difficult for the consumer to evaluate: "Acme air conditioners cut your energy costs in half." Contrast these types of ads with ads that make subjective claims or claims that consumers could easily evaluate for themselves: "Chocko Energy Bar tastes better than a candy bar." The FTC is less interested in ads such as these.

Changing Brokerage Two-Step in Florida

To change brokers, your current broker must first terminate your relationship with your existing firm. The broker may use Florida's online process for an immediate change, or they may use Change of Status for Sales Associates and Broker Sales Associates Form RE 11. Use of the print-based form will result in a 21-day wait period for the change to take place. Your new broker must then use the online process or complete a Form RE 11 to affiliate you with the new firm. The DBPR will review the application and send your license with the new broker affiliation information to your new broker. You'll get a new pocket card, too. During the time the DBPR reviews your application, your current license is considered inactive and you may not perform real estate activities until your license is properly registered with your new employing broker and your new license has been issued. This process is the same when moving brokerage offices; however, your broker will take care of notifying the DBPR of the change for its licensees.

Guidelines for Real Estate Advertising in Florida

The basic rules for advertising in real estate, both federally and specifically laid out in Florida statute, revolve around being truthful, clear, and generally not harming the public. No false or misleading advertising - brokers can't use terms that describe a credential or membership the agent does not have, such as REALTOR or broker. In addition, ads that state that property is "in the vicinity of" an area or subdivision must include in the ad the name of the area or subdivision in which the property is actually located. No engaging in panic selling advertising - trying to encourage panic selling, also known as blockbusting, is when a licensee tries to induce sales by predicting a decline in market value. This is illegal, and any systemic solicitation of listings may be considered to be conclusive evidence of an attempt to encourage panic selling. No "blind ads" - ads that do not contain information by which the viewer can clearly identify them as a licensee's ads are not permitted. A reasonable person will need to know that they'd be dealing with a real estate license or brokerage, and ads may not imply for sale by owner if it is listed by a licensee or brokerage. Brokerage Name Required In part to avoid blind ads, Florida requires that all real estate ads must include the licensed name of the brokerage firm. For internet ads, the brokerage firm name needs to be displayed directly next to (or above or below) the contact information for the brokerage, whatever that might include (phone number, email, address, etc.). A licensee isn't strictly required to use their own name in an advertisement, as long as the brokerage name is there. However, if an ad contains the licensee's personal name, they'll need to use at least their registered last name. Nicknames are permitted, but licensees should include their first name or first initial as well, for clarity. Team Advertising As a part of the transparency of naming oneself and one's affiliations, licensees in Florida are permitted to advertise themselves as part of a team. If licensees advertise themselves as part of a team, all the licensees in that team or group must be supervised by the same broker or brokerage, and the team will need to designate one licensee responsible for ensuring advertising compliance. The team or group name can contain the words "team" or "group", but can't contain any wording that might suggest that the team is a separate real estate brokerage or company, like "realty", etc. The brokerage name will still need to take precedence in the ad, so the team name can't be in a larger font than the brokerage name.

Prohibited Business Arrangements in Florida

The following prohibited arrangements may buy and sell their own property but may not register as brokerages in Florida: Corporation sole: This is an ecclesiastical or church organization. Joint venture: Temporary arrangement between two parties for a single business transaction. Usually no written agreements are required for a joint venture. Ostensible partnership: A non-intentional arrangement that is created by the partners' acts and gives the appearance of a partnership. Creates legal liabilities and penalties for those involved. Prohibited among licensees and may result in license suspension. Business trust: Group of individual investors that buys and sells real estate. Any employee who buys or sells real estate for the trust and is compensated on a transaction basis must still be licensed. Cooperative association: Can conduct business and buy/sell its own property only. Unincorporated associations: Usually a group organized for a common purpose. Members are not partners and the associations are not incorporated. May buy or sell their own property, usually through a trust.

Permissible Activities of an Unlicensed Assistant

Unlicensed assistant is defined as support staff for a real estate corporation or other licensed individuals. Answer the phone and forward calls. Fill out and submit listings and changes to any multiple listing service. Follow up on loan commitments after a contract has been negotiated and generally secure the status reports on the loan progress. Assemble documents for closing. Secure documents (public information) from courthouse, utility district, etc. Have keys made for company listings and order surveys, termite inspections, home inspections and home warranties with the licensed employer's approval. Write ads for approval of the licensee and the supervising broker, and place advertising (newspaper ads, update websites, etc); prepare flyers and promotional information for approval by licensee and the supervising broker. Receive, record, and deposit earnest money, security deposits and advance rents. Only type the contract forms for approval by licensee and supervising broker. Monitor licenses and personnel files. Compute commission checks. Place signs on property. Order items of repair as directed by the licensee. Prepare flyers and promotional information for approval by licensee and supervising broker. Act as a courier service to deliver documents and pick up keys. Place routine telephone calls on late rent payments. Schedule appointments for the licensee to show a listed property. Be at an open house: For security purposes To hand out materials (brochures) Answer questions concerning a listing from which the answer must be obtained from the licensed employer-approved printed information and is objective in nature (not subjective comments). Gather information for a comparative market analysis. Gather information for an appraisal. Hand out objective, written information on a listing or rental.

Good Faith Doubt and Settlement Procedures

When a licensee receives conflicting demands regarding the disbursement of funds or has any good-faith doubt as to which party should receive escrowed funds, the licensee should notify their broker immediately, and the broker should: Notify FREC in writing within 15 days Request settlement procedures within 30 days of the conflict or doubt to determine who should receive the funds A good-faith doubt would include one or more of the parties expressing intentions not to close, or not receiving identical escrow instructions from both parties before or after the transaction close date. Often, one party may stop responding to the broker and leave a doubt as to the status of the transaction. If the broker has tried all avenues of communication, including a certified notice of the disbursement of funds, then the broker may have the authority to release the funds to the demanding party or submit the matter to a settlement procedure Brokers are not required to decide the disposition of funds. If the funds are in dispute, the broker may let the courts settle the matter. Settlement Procedures The broker has four available options when it comes to settlement procedures. They may use: Escrow Disbursement Order (EDO): Request an EDO from FREC to determine who is entitled to the funds. If FREC denies the request, then the broker must notify FREC within 10 days of the settlement procedure that will be used to resolve the dispute. Mediation: Obtain written consent from all parties to send the matter to a non-binding negotiation process with a third party mediator. If neither of these methods are successful within 90 days or are denied, then the broker may use either of the following: Arbitration: Obtain written consent from all parties to agree to a neutral third party's binding judgment through the arbitration process Litigation: Submit the matter to the courts for adjudication by interpleader or a declaratory judgment. Litigation may be initiated by any party who disputes the disbursement of funds by filing a lawsuit or court action. An interpleader is used when the broker wants to remove their brokerage from the proceedings, has no financial claim to the funds, and the funds will be left in the care of the court registry pending judgment. A declaratory judgment would be needed if the broker had some claim to the funds, and the judge would declare who the deserving party is.