Unit 8: Real Estate Brokerage
multiple listing service (MLS)
A marketing organization composed of member real estate professionals who agree to share their listing agreements with one another in the hope of procuring ready, willing, and able buyers for their properties more quickly than they could on their own. Most multiple listing services accept exclusive right-to-sell or exclusive agency listings from their member real estate professionals.
electronic contracting
A process of integrating information electronically in a real estate transaction between clients, lender, and title and closing agents.
disclaimers
A statement indicating no legal responsibility for information; no warranties or representations have been made.
code of ethics
A written system of standards for ethical conduct.
Electronic Signatures in Global and National Commerce Act (E-Sign)
An act that makes contracts (including signatures) and records legally enforceable regardless of the medium in which they are created.
employee
For tax purposes, someone who works as a direct employee of an employer and has employee status. The employer is obligated to withhold income taxes and Social Security taxes from the compensation of employees. See also independent contractor.
antitrust laws
Laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Most violations of antitrust laws in the real estate business involve either price-fixing (real estate professionals conspiring to set fixed compensation rates) or
commission
Payment to a real estate professional for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.
ready, willing, and able buyer
Person who is prepared to buy property on the seller's terms and is ready to take positive steps to consummate the transaction.
Internet Data Exchange (IDX) policy
Policy that allows all multiple listing service (MLS) members to restrict internet access to MLS property listings.
Does it make any difference that Ivy receives no compensation for helping family and friends?
The answer is no, not charging does not prevent the real estate commission from investigating her conduct. The fact that Ivy volunteers to help others with their real estate purchases does not prevent the real estate Commission from investigating whether her conduct is a violation of the real estate law.
minimum level of services
The services that real estate professionals must provide to clients, as prescribed differently by certain states; for example, assisting clients in negotiation and answering questions from clients about offers, counteroffers, and contingencies.
boycott
When individuals or businesses withhold their patronage to a business as a protest or to reduce competition.
Which statement BEST explains this sentence: "To recover a commission for brokerage services, a broker must be employed by a client"?
The answer is the client must make an express or implied agreement to pay a commission to the broker. A broker's contract of employment by a client is the listing or buyer representation agreement signed by them both. A valid employment agreement is one of the usual requirements in a suit for a brokerage commission; it is proof of employment.
Laws cannot guarantee an ethical or moral marketplace.
The answer is true.
Uniform Electronic Transactions Act (UETA)
Sets forth rules for entering into an enforceable contract using electronic means.
National Do Not Call Registry
See Do Not Call Registry. The registry is a list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls they receive.
price-fixing
See antitrust laws. Price-fixing is a practice in which competitors agree to set prices or other terms and conditions for products or services rather than letting competition in the open market establish those prices.
independent contractor
Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. Unlike an employee, an independent contractor pays for all expenses and Social Security and income taxes and receives no employee benefits. Most real estate sales associates are independent contractors, meeting the Internal Revenue Service definition for a qualified real estate agent.
The sale of a single-family house produced a total commission of $45,825. The sales associate who was responsible for bringing the buyer to the transaction has a 60/40 commission split arrangement with the employing broker, with the sales associate receiving the 60 percent. If the total commission was split between the listing and selling firms, what is the commission that the buyer's sales associate will receive?
The answer is $13,747.50. Fifty percent of $45,825 is $22,912.50, and 60 percent of that amount is $13,747.50, which is the buyer's sales associate's compensation for the transaction.
Practical applications of the articles of the REALTORS® Code of Ethics are known as
The answer is Standards of Practice. Practical applications of the articles of the REALTORS® Code of Ethics are known as Standards of Practice.
The federal law that makes contracts originated, negotiated, and executed over a combination of computer and cell phone enforceable is
The answer is UETA. The law sets forth basic rules for entering an enforceable contract using electronic means. The primary purpose of UETA is to remove barriers in electronic commerce that would otherwise prevent enforceability of contracts.
Many states have modified the traditional terms broker and salesperson to stress that all licensees must be knowledgeable of and comply with the law. The person who performs licensed activities under the authority of a broker is frequently called
The answer is a sales associate. Some states require all real estate licensees to have a broker's license, but a managing broker is always distinguished from those employed by the brokerage as sales associates.
An arrangement to sell one product only if the buyer purchases another product as well is called
The answer is a tie-in agreement. A tie-in arrangement is an agreement to sell one product only if the buyer purchases another product. Fee-for- services refers to splitting apart the collection of services that a broker offers. A buydown provision is a financing option. Allocation of customers refers to dividing a market and refraining from competing.
A real estate licensee has a written contract with a broker specifying that the licensee will not be treated as an employee. The licensee's entire income is from sales commissions rather than an hourly wage. Based on these facts, the licensee is considered
The answer is an independent contractor. The licensee meets the IRS's three requirements to be treated as a self-employed independent contractor: the individual (1) is a real estate licensee, (2) has an agreement with the broker that the licensee will not be treated as an employee for federal tax purposes, and (3) earns the majority of income from the firm in commissions, not wages.
The services performed by a licensed real estate professional
The answer is can be customized to the needs of the client or customer. Some states require that licensees offer a minimum level of service, but most allow the client and customer to decide on the specific level of services that will be provided.
All of these are violations of federal antitrust law EXCEPT
The answer is commission splitting. Brokers may legally share and split commissions. Price fixing, allocation of customers, and group boycotting are illegal under federal antitrust law.
A broker would have the right to dictate which of the following to an independent contractor?
The answer is conduct in compliance with statutory law and regulations. Brokers may dictate behavior as it complies to laws and regulations, but they may not dictate working schedules or attendance at sales meetings.
Price-fixing, which is the practice of setting prices for products or services rather than letting competition in the open market establish those prices, is legal.
The answer is false.
States' licensing rules and regulations do NOT have the same force and effect as statutory law.
The answer is false.
The Institute of Real Estate Management (IREM) is affiliated with the National Association of Real Estate Brokers (NAREB).
The answer is false.
When information is taken from the internet, it is always accurate.
The answer is false.
An important purpose of the E-Sign Act is to
The answer is give contracts created using email the same legal standing as those on paper. The E-Sign Act diminishes legal barriers in electronic contracting, but it does not specify required security measures. Notarization is allowed. Parties are not required to use electronic contracting.
What is the compensation plan called if a sales associate's commission split increases depending on whether the sales associate achieves higher production goals?
The answer is graduated commission split. A graduated commission split is based on a sales associate's achieving specified production goals. A 100% commission plan provides for a sales associate to pay a monthly service charge to the broker so that the sales associate can keep 100% of the commissions earned.
The amount of commission paid to a sales associate is determined by
The answer is mutual agreement with the broker. All commissions must be paid through the broker, and the amount the sales associate receives is set by mutual agreement between these two parties.
A broker has established the following office policy: "All listings taken by any sales associate of this real estate brokerage must include compensation based on a 7% commission. No lower commission rate is acceptable." If the broker attempts to impose this uniform commission requirement, which statement is TRUE?
The answer is the broker may, as a matter of office policy, legally set the minimum commission rate acceptable for the firm. Brokers have the right to set commissions within their own firm. This is not an antitrust violation. Sales associates who wish to continue with that broker can be required to comply.
The broker may still be entitled to a commission in which of these situations where a pending property sale did NOT close?
The answer is the seller decided not to sell. If the sale is not completed due to the seller's default (deciding not to sell), then the broker is generally due a commission. Courts may prevent a real estate broker from receiving a commission if the broker knew that the buyer was unable to perform.
Group boycotting, allocation of customers or markets, and tie-in agreements are all prohibited acts under the Sherman Antitrust Act.
The answer is true.
Many trade organizations serve the real estate business. The largest is the National Association of REALTORS® (NAR).
The answer is true.
The purpose of the Electronic Signatures in Global and National Commerce Act (E-Sign) is to make contracts (including signatures) and records legally enforceable, regardless of the medium in which they are created.
The answer is true.
If Ivy later obtains a real estate license, will she still have a problem?
The answer is yes, her conduct prior to being licensed could still be questioned. It is doubtful that Ivy could obtain a real estate license while being investigated by the real estate Commission for a possible violation of the real estate law. But even if she could obtain a real estate license, her conduct before obtaining the license could still be questioned.
Is there any problem with Ivy acting so generously on behalf of family and friends?
The answer is yes, she may be charged with engaging in activities that require a real estate license. Ivy may face a complaint filed with the state real estate Commission, charging that she is engaging unlawfully in activities that require a real estate license.
brokerage
The bringing together of parties interested in making a real estate transaction.
procuring cause
The effort that brings about the desired result. Under an open listing, the real estate professional who is the procuring cause of the sale receives the commission.
managing broker
The real estate professional who is responsible for supervision of the real estate professionals who act on behalf of the brokerage; may also be called a supervising broker.