Chapter 17

Property management trust accounts

(mainly rent, tenant security deposits) don't need to be placed in firms pooled account- so owner may receive accrued interest.

Inactive Licenses

-a license that has been turned over to the director for any reason. -holder is considered unlicensed - she cannot engage in activities requiring a license (still subject to disciplinary action for license law violations)

Moral Turpitude relating to real estate activites

-dishonesty, corruption relating to real estate activities (regardless if it's a crime or not)

Pooled accounts

-firm must put all deposits of 10k or less into a pooled account - interest paid on this account after deducting bank charges must be paid to state treasurer. -money is divided between Washington Housing Trust Fund (receives 75%) and Real Estate Education Account (receives 25%)

What happens when licensee changes firms and has an active listing?

-listing belongs to firm not lincesee- so she can't take it - licensee cannot sue for commission without proof that he was property licensed before he offered to perform any act that requires licensure.

Out of State licensees working in Washington State

-may handle commercial real estate in WA -BUT must have written agreement with cooperate with Washington firm.

Advertising for real estate employees

-must be truthful/not misleading - must include firms name as license.

Office Requirements for firm licensed in WA

-must obtain office records -must display licenses and affiliated licenses (if multiple locations- they should be displayed in the main office and licensees displayed where they work) - change of location- if firm location changes- designated broker must promptly submit change of address to Director, return all licenses and pay a fee. -2 businesses in same office - must keep everything separate - branch offices- every branch office must be licensed and have manager (managing broker) ((separate license is not required for branch where sales activity concerns only a particular subdivision tract and subdivision is 35 miles of licensed office

Agents duties to the principal

-owes duty of loyalty, disclosure, conflicts of interest, confidentiality, advising the principal to seek expert advice and good faith continuous effort. it is NOT a breach of listing agent's duties to list/show buyers other properties that may be in competition with the sellers property. The duties of confidentiality and accounting do not expire with the agency.

When is areal estate license not required?

1. . Persons acting for themselves- someone buying leasing property from themselves or selling property he owns/ co owns (like selling property land developer owns) 2. Attonrey in fact-acting on behalf of principal WITHOUT compensation 3. Attorney at law- attorney at law while performing duties as an attorney 4. persons acting under court order(receiver, bankruptcy trustee, executor, guardian, any other person acting under court order. 5. Person performing clerical duties- security, book keeper, accountant, other office personnel performing clerical duties. 6. Referrals- a person who provides a referral to a licensee, and doesn't get paid for it 7. Property management employees- person employed by property owner/brokerage to perform limited property management tasks.

3 types of licenses in WA

1. Firm 2. Managing Broker 3. Broker

Records must be......

1. available on demand for DOL

A Real Estate License is required for all of the following activities

1. offering to sell, list or buy 2. negotiating sales, exchanges, leases 3. business opportunity transactions (if it includes real estate) 4. Negotiating sale of a mobile home on land- 5. Advertising as a real estate agent 6. performing property management duties

License can be reinstated within 2 years after cancellation of the licensee:

1. successfully completed 60 hours of approved real estate courses within ONE YEAR before applying for reinstatement (including 30 hours of real estate law) 2. pays back all renewal fees, plus penalties 3. pays reinstatement penalty cannot reinstate license if it's been more than 2 years

Qualifications for Managing brokers license

18 yrs old high school diploma or equivalent must have at least 3 years experience within the last 5 years as a full time broker in WA or in another state with similar requirements (applicant who lacks 3 years experience may take the managing brokers exam if applicant has other educations experience director sees fit (like real estate attorney/5 years experience in property management. 90 clock hours pass exam

Firm must keep transaction folder that has....

2. firm must keep transaction folder that includes listing agreement, purchase and sale agreement, all modifications addenda, settlement statement other relevant documents

Advertising online

A licensee should fully disclose his licensed status in all internet communications. Full disclosure includes: • licensee's name and firm, • city and state of licensee's office, • city and state of firm's main office, and • the states in which the licensee and the firm are licensed.

To be entitled to sue for a commission, a licensee must be able to prove that at the time the real estate activities were performed, she: A. was licensed B. had passed the real estate exam C. had at least a verbal promise of compensation D. was under the supervision of a mentor

A. A licensee must have been validly licensed at the time she engaged in the real estate activities for which a commission is claimed.

A licensee hires another licensee, who works for the same firm, to be an assistant for negotiating and selling properties. The supervising licensee in this relationship must: A. be a managing broker B. be a member of the team C. have a controlling interest in the firm D. take a 30 clock-hour course on supervision

A. A managing broker's license authorizes the licensee to manage other licensees. This applies even in the "team" context, not just to the management of branch offices.

If a designated broker wishes to terminate an affiliated licensee, or an affiliated licensee wants to terminate employment with a brokerage, which of the following statements is true? A. Either party may act unilaterally to end the relationship B. An affiliated licensee may terminate only after the agent pays all debts incurred to the brokerage C. A designated broker may terminate an affiliated licensee only if there is good cause for termination D. Only the affiliated licensee can terminate employment

A. Either a designated broker or an affiliated licensee may act unilaterally in order to terminate the licensee's affiliation with the firm.

A real estate agent sold a home for $275,000. Prior to closing, the agent's license was revoked on grounds of moral turpitude. With respect to his eligibility for the commission, which of the following statements is true? A. He is eligible for the commission because he was duly licensed when the sale was made B. He is eligible for the commission because he is technically licensed until all appeals have been exhausted C. He is not eligible for a commission because he was not licensed at the time the commission was paid D. He is not eligible for a commission because a license revocation automatically nullifies any right to commissions that are yet unpaid

A. The commission is earned when the sale is made, not when it is paid (at closing). The license was revoked after the sale was made.

A licensee, with permission from his designated broker, sets up his own subsection S corporation, which he calls M Team. He then rents a billboard and advertises a listing on it, using only the M Team name. Is this legal? A. No, because ads must give the name of the firm B. No, because the firm must be the one that rents the billboard C. Yes, because he had the designated broker's consent D. Yes, because he used the exact corporation name that was registered with the Secretary of State

A. Under Washington's real estate license law, every advertisement placed by a licensee on behalf of others must contain the name of the real estate firm as licensed. This is true even if a licensee conducts his own operations under a separately named business entity.

Director of Real Estate Commission is advised on legal matters by the.....

Attorney General

An affiliated licensee rarely works in the firm's main office. The records for the licensee's transactions must be kept in: A. the licensee's personal files B. the firm's office C. both the licensee's personal files and the firm's office D. the licensee's personal files until closing, then at the firm's office

B. A firm must keep all records at its main office or a branch office. While it may be advantageous for a licensee who is rarely in the office to keep copies of the records for personal reference, the law makes the firm ultimately responsible for the custody and accuracy of all required records.

An affiliated licensee owns a wholly owned S corporation called "A Team." He instructs an escrow agent to issue a commission check directly to A Team. How has he violated the real estate license law? A. A third party can't give instructions to an escrow agent B. Commissions can be paid to licensees only via their firm C. The licensee didn't first inform the principals D. The licensee may charge for escrow services only if he is also a licensed escrow agent

B. A licensee may be paid a commission only by the real estate firm he is affiliated with. An affiliated licensee cannot receive compensation directly from a client or customer, or from another licensee, another real estate firm, or another business entity. ("A Team" can't be a real estate firm itself, because no designated broker has a controlling interest in the corporation. The sole owner of A Team is an affiliated licensee, not a designated broker.)

In Washington, a person licensed to act on behalf of a real estate brokerage is called a/an: A. independent licensee B. affiliated licensee C. associate licensee D. designated licensee

B. A person licensed to act on behalf of a real estate brokerage is called an affiliated licensee.

J passes the license exam on March 20. How much time does J have to apply for his license before being required to retake the license examination? A. Six months B. 12 months C. 18 months D. Two years

B. J has 12 months. If the license fee is not paid and the license placed on an active or inactive status within that time, the applicant will have to retake the exam and meet any additional licensing requirements that have been adopted in the interim.

A Washington real estate broker takes a listing for a waterfront bungalow while working for Firm A. However, before the transaction closes, she terminates her affiliation and begins working for Firm B. Which of the following statements is true? A. The listing belongs to Firm A, but Firm A will still owe a commission to the original broker B. The listing belongs to the firm, and will remain with Firm A C. The listing belongs to the licensee, and will go with her to Firm B D. The listing is canceled automatically, and the seller must re-list with the broker

B. Listing agreements are the property of a firm, not a licensee. If a licensee leaves a firm mid-transaction, the listing still will belong to the firm and will not follow the licensee to a new firm.

The Real Estate Commission does all of the following EXCEPT: A. prepare licensing exam questions B. set real estate transaction fees C. advise the Director regarding new regulations D. hold educational conferences for the benefit of the real estate industry

B. The Commission does not set transaction fees. Fees are set by agreement between the agent and principal in each transaction.

Who is ultimately responsible for the delivery of the earnest money? A. Purchaser B. Designated broker C. Listing licensee D. Licensee who receives funds

B. The designated broker is the licensee who is responsible for handling the deposit in compliance with the license law.

A Washington real estate licensee's license has expired because he did not pay his license fee as required. His license can be reinstated if: A. he completes an additional 30 hours of continuing education electives B. he obtains special permission from the Director of the Department of Licensing C. he pays back renewal fees, plus penalties D. he retakes the real estate examination

C. A license that hasn't been properly renewed will expire. It can be renewed within one year of the expiration, if the licensee pays a penalty and any back fees.

A property manager would like to have his son perform maintenance duties on the managed property. The manager needs to provide all of the following to the owner, EXCEPT: (weirdly) A. disclosure of the family relationship B. opportunity for the owner to decline C. proof that the son is a licensed and bonded contractor D. rates that will be charged

C. A property manager may arrange for contractor services (such as maintenance services) on the property with the owner's consent. The manager must disclose the manager's relationship to the service provider and the rates that will be charged. The service provider doesn't necessarily have to be a licensed contractor, though.

Who needs to submit continuing education credits with each license renewal? A. Active brokers only B. Active managing brokers only C. All active licensees D. All active and inactive licensees

C. Both brokers and managing brokers must take continuing education courses, so long as they are actively licensed. Inactive licensees do not need to comply with the continuing education requirement, although a 30-hour class is required in order to reactivate a license that has been inactive for more than three years.

Real estate transaction records should be kept for a minimum of: A. one year B. two years C. three years D. four years

C. Transaction records should be kept for at least three years after the transaction closes.

Center for Real Estate Research, what is it?

Created by commission to study state wide real estate concerns such as affordable housing. -provides scholarly information/may recommend changes to license law and real estate education criteria

Licensee A and Licensee B form a team, working together within the brokerage they work for. Licensee A is listed as the agent on a purchase and sale agreement, but it was Licensee B who negotiated the transaction. Which of the following is true? A. Licensee A cannot be paid because B negotiated the transaction B. Licensee B cannot be paid because A's name is the only one on the agreement C. Licensee A, as team leader, will pay Licensee B D. Licensee B must receive payment from the brokerage

D. An affiliated licensee may receive compensation only from the firm who employs him or her. If two affiliated licensees will split a commission, it must be handled by their firm or firms.

A licensee is about to change her business location. Which of the following should she do? A. Move her license to the new location until the renewal date B. Notify the Director of the Department of Licensing by phone C. Notify the Real Estate Program Manager in writing D. Surrender her license and apply for an updated license with the correct location

D. If there's a change in the location where a licensee conducts business, her license needs to be updated with the new address. The old license must be surrendered to the Director of the Department of Licensing, who will then issue a new license for the new location. (This question concerns the brokerage office where the licensee does business, not the licensee's mailing address. Issuance of an updated license is not necessary if the licensee's home address changes.)

L's broker's license was issued on October 16, 2019. L's license will expire on: A. December 31, 2019 B. December 31, 2020 C. October 16, 2020 D. October 16, 2021

D. L's license will expire two years after its issuance: October 16, 2021.

If Licensee D works out of a home office, for how long is she required to maintain records of closed transactions? A. 1 year B. 3 years C. 7 years D. Affiliated licensees are not required to maintain records of closed transactions

D. Real estate firms must maintain records of closed transactions for at least three years. The firm is responsible for the custody and accuracy of the required records, and they should be kept at a main office or branch office. the FIRM is responsible but the licensee is technically not required to keep it

Washington State's real estate agency law does not address which of the following? A. Definition of dual agency B. Creation and termination of agency relationships C. Vicarious liability of principal and licensee D. Penalties for not disclosing agency status

D. Washington's real estate agency law is the Real Estate Brokerage Relationships Act (RCW chapter 18.86). There is no reference in the law to penalties for not disclosing agency status. Penalties are found in the license law (RCW chapter 18.85).

Real Estate License Law is administered (managed) by

Department of Licensing (DOL)

Real Estate Commission consists of who and who are they appointed by?

Director and 6 members who are appointed by the Governor. -commissioners offer suggestions to the Director regarding real estate industry and profession

Can commissions to affiliated licensees be paid directly out of trust fund account?

NO!!! commissions are handled like any other business expenses, funds must be transferred to firms general business account first and then affiliated licensees are paid out of that account

Does the firms name have to appear in an ad that a licensee is adverttising for their own property?

No- does not need to disclose firm name BUT it has to disclose that seller has a real estate license

Interim License

The completed application form for a broker's license, which serves as a temporary license until the permanent license is issued. may begin working on the date she signed, dated, and completed application form and license fee is submitted to the Department (serves as license for 45 days) no interim license for managing brokers

Vicarious Liability

Under WA real estate agency law- principal is not liable for harm caused by agent or subagents negligence.

What act lists several kinds of unprofessional conduct for a liccensee

Washington Unifrom Regularion of Business and Professions Act

Does a broker/managing broker need to be affiliated with a firm for his license to be active?

Yes. broker/managing broker is NOT allowed to engage in real estate activities except under the supervision of an representative of a firm. firms designated broker has custody of the licenses of her affiliated licensees.

Does the director have the right to investigagte a licensee regardless of their status?

Yes. he can investigate a licensee even if they are with another firm or if their license is inactive.

Affiliated licensee

a broker or managing broker who is licensed under a particular firm may only be affiliated with one firm at a time

Obtaining license

after passing exam apply for license itself exam results are valid for 1 year (have to take exam again if you don't apply within the year) interim license (can work during this time)

Renewal of Inactive License

although inactive license must be renewed on its renewal date- holder is usually not required to comply with continuing education requirements. failure to renew inactive license results in cancellation (same an inactive license) licensee may not renew inactive license if there are disciplinary proceedings pending against him or her

Blind ad

an ad without the firms name- it is against the law!

When is a license required?

anyone who performs real estate brokerage services must have real estate license to be compensated-person must be licenses at the time he engaged in real estate activities

A licensee writes a successful transaction while working for Designated Broker X. Before the transaction closes, though, the licensee starts working for Designated Broker B. How is the licensee's commission handled? A. Designated Broker X will pay the licensee, even though she is working for another designated broker B. Designated Broker X will keep the commission C. Designated Broker X will pay the commission to Designated Broker B, who will pay the licensee D. Designated Broker X must forfeit the commission

because she wrote a successful transaction- the SALE has been made- even though it hasn't closed- she's still entitled to that commission because she made the sale. C. A licensee can only accept compensation from the designated broker for whom she currently works. So, if a licensee moves from one firm to another with a transaction pending, the licensee's new designated broker would accept the compensation from the old designated broker and then pay the licensee.

Summary statement

brief report showing the property's financial status for a period of time, such as a month or a quarter includes the starting and ending account balances, total rent receipts, itemized expenditures, and owners' contributions.

Paying affiliated licensees

brokers and managing brokers may receive compensation ONLY from their firm. -they cannot collect commission directly from a client/from other firm. -licensees cannot pay each other directly either it must ALL be handled by the firm

Broker

brokers license can be issued only to an individual license authorizes agent to work with/represent his firm but NOT to manage a branch office or be a designated broker broker with less than 2 years experience is subject to heightened level of scrutiny by managing broker which includes review of all transaction documents within 5 days of clients signature

When can a relationship between a firm and affiliated licensee be terminated and when?

can be terminated at any time by either party if there is termination- the licensees license becomes inactive and remains inactive until they join another firm

When is commission actually earned?

commission is actually earned when the sale is made.... NOT at closing -licensee is still entitled to comissions

What happens when a broker/managing broker has been terminated because of conduct that would be grounds for disciplinary action?

designated broker MUST send the Director a written statement of the facts surrounding the termination

Handling Transactions

directors regulations include several rules governing how licensees serve their clients/customers 1. copies of all documents (licensee is responsible for providing clients/customers with copies of all documents they sign

Deceptive Advertising

false/deceptive etc. (includes blind ads (w/o firm name)

Firms Expenses

firm MAY NOT pay its business expenses directly out of trust account if client owes firm money- funds first must be transferred to trust account

Property management agreements

firm MUST have written property management agreement with owners of each property it manages. - license low requires the agreement to state the managers compensation, type of preoty, number of units/square footage, whether manager may hold/disburse funds and how often manager must provide summary statements. so evveryythinngggg except, condition of property is NOT described in the agreement. copy MUST keep copy of management agreement and all summary statements. management agreement may be only modified in writing

Assumed names

firm can operate under multiple names with Directors permission but it CANNOT be misleading i

Firm

firm license may be issued to a business entity like a corporation or partnership frim must name managing broker who has control over firms opertation/financial decidion making as its designated broker Designated broker has ultimate authority over the firm firm is authorized to employ brokers and managing brokers known as affiliated licensees

Paying liencees from another firm....

firm may NOT pay compensation directly to managing broker or broker licenses with other firm. the FIRM pays the other firm- which then pays its licnesee.

How does the firm hold an earnest money deposit?

firm may hold earnest money check without depositing it fir specific length time (typically until seller accepts/rejects offer) firm that first receives the deposit is responsible for the handling of funds. it is AGAINST THE LAW for a firm to accept a promissory note as a deposit

Provision of services

firm may provide other services as long as it states fee - has disclosure of relationship- (firm can hire another company to do this)

Commission sharing

firm may share a commission with any firm licensed in US and canada, including transaction with its own affiliated licensees

Trust account

firm must maintain one or more trust accounts for funds held on behalf of clients -accounts must be recognized as a financial institution -must be kept separate from firms general business and personal accounts, so that trust accounts will not be mingled with firms own money (called commingling)

Trust account records

firm should keep clients ledger for trust funds, summarizing all receipts and disbursement for each transaction or property account. firm must all keep all records at location where firm is licensed

Brokers first renewal

first time broker renews his license- he must submit proof of completion of: -30 clock hour course in advanced real estate practices -30 hours of real estate law -30 hours of continuing education elective

Unlicensed Assistants

frim/licensee may employ unlicensed assistants but assistants must carefully avoid performing activities that require a license. unlicensed assistants may not be compensated by whether or not a deal closes.

Requirements for commissioners

generally required to have at least 5 years experience in real estate. -at least 2 of the members from west of cascades and 2 members from east. responsible for preparing and conducting real estate examinations

Director of the DOL is appointed by the

governor

Tranferring Trust Accounts

if a firm purchases another brokerage, other brokerage trust accounts will pass to new firm. -requires consent form signed by designated brokers

Cancelation of license

if license isn't renewed within 1 year after it expires- license is cancelled.

License Expiration and Renewal

license expires after 2 years to the day after issuance -licensee must pay and pay renewal fee -if licensee is late- then she must pay penalty (no fee is licensee changes for license to account for change in mailing name/address) \ firms licenses must also be renewed after 2 years

Where do license fees go?

license fees are placed in the Real Estate Commission Account for state treasury

Education requirement for reactivating license that has been inactive for more than 3 years....

licensee must complete 30 clock hour real estate course - ^^ may be used to both activate and inactivate license and satisfy the first renewal requirements to active license.

conversion

licensee uses others' funds for his own purpose BIG NO NO!

Fee Broker

licensee who allows another person to operate a brokerage using his firms name and license (usually for a fee)

Team names

licensees may advertise their own practice using a name/brand without obtaining as assumed name license. -can use their "team name" as long as it includes firms name

Managing broker

managing brokers license can be issued only to an individual licensee is authorized to work with/represent her firm, to manage other licensees/branch office/or be firms designated broker

Commission to firm

may be paid directly to trust account

Commingling

mixing trust funds with personal funds.

For larger deposits into trust fund accounts.....

more than 10k, celient or customer may choose to have money deposited into a pooled account or separate account

Designated Brokers Supervisory Responsibilities

must supervise all affiliated licensees (whether independent contractors or employees) 1. liability for licensees violations (managing broker may be liable/held responsible for their actions) 2. Investigations- designated broker must cooperate with an investigation of affiliated licenses conduct when providing access to records and responding with written requests 3. Fee Broker- designated broker may NOT act as a fee broker

can a licensee charge a fee to buyer and seller is she represents both?

no.

Nominal earnest money deposit

nominal earnest money deposits are $10,000 or less

Trust Account Procedures

only trust funds may be kept in trust accounts -(ONLY a little bit of firms own money may be deposited just to keep/maintain minimum balance)

Imputed knowledge

principal is not held to have notice of any facts known by agent but unknown by principal. no penalty for failure to disclose agency status (principal)

The chief officer of the Department of Licensing is

the Director -director has power to adopt, amend, or repeal regulations necessary to enforce license law.

Designated broker:

there is no separate designated brokers license it is an endorsement on managing brokers license has full liability for the firm's activities; • must have a managing broker's license; and • must have control over the firm's operational and/or financial decision making.

How long do firms need to keep adequate records of all transactions after closing?

three years after closing -designated broker may delegate record keeping activities but designated broker is responsible for custody and accuracy

Continuing Education Requirements

to renew license- all brokers/managing brokers must submit proof that they have successfully completed a total of 30 hours of approved continuing education courses PLUS 3 hours of core curriculum.

Interest Bearing Accounts

trust accounts must be interest bearing accounts and allow disgnated broker to make withdrawals with out delay

Trust fund handling

trust funds must be deposited no later than the first business day following receipt of funds Saturday is NOT considered a business day firm may hold a buyers earnest money check instead of depositing it, pending the sellers acceptance of the offer