UNIT 5: BROKER-AGENT RELATIONSHIP

Due to the potential for broker responsibility for a licensee's actions, what do many brokers require their licensees to carry?

Automobile liability insurance in high amounts, naming the broker as an insured on the policy Errors and omissions insurance, covering the broker and salespersons for negligent acts

Because brokers could be held responsible for any wrongful acts performed by a salesperson they employ, many brokers require that licensees carry

Automobile liability insurance in high amounts, naming the broker as an insured on the policy Errors and omissions insurance, covering the broker and salespersons for negligent acts (but not intentional acts)

What are the three common-law categories that determine the level of control an employer has?

Behavioral Financial Type of relationship

What five topics must be included in every written agreement with an employee or independent contractor?

Supervision Duties Compensation Duration Termination

Basically a licensee should keep two types of records

Tax records and expense records Transaction records

What is the main difference between an employee and an independent contractor?

The main difference between the two is an issue of control, as established by income tax laws.

What are the conditions of the IRS safe harbor test?

The person must be a properly licensed real estate agent. Gross income from all output must be based on production and not on hours worked. A written agreement must exist between the independent contractor and the broker stating that the contractor will not be treated as an employee for income tax purposes

The three conditions of the safe harbor test are:

The person must be a properly licensed real estate agent. Gross income, including that which results from sales and all other output (including the performance of services), must be based on production and not on hours worked. A written agreement must exist between the independent contractor and the broker which outlines the services to be performed by the contractor and states that the contractor will not be treated as an employee for income tax purposes

Why should an independent contractor keep expense records?

These records are particularly important as documentation for the licensee's tax return. Also, depending on the written agreement the licensee has with the broker, he or she may need specific expense records and receipts for reimbursement of some of those expenses

What are three important questions to ask when negotiating an agency contract?

What are the start-up costs? Who pays the expenses? What is the commission schedule?

If a licensee working for a broker is a property manager having access to the money of others, the broker may get a ______________ to protect himself or herself from any embezzlement by such a licensee

fidelity bond

According to the license law of many states, all listings, transactions, management agreements, and other contracts relating to providing brokerage services are the property of the

real estate firm

Federal tax laws allow real estate agents to be classified as independent contractors. In order to qualify, the IRS requires what's called the _____________ test to establish that a person is indeed an independent contractor

safe harbor