Real Estate Chapter 8

Sales associates commission split increases depending on whether the sales associates achieves highest production goals

Graduated Commission split

NAR Affiliates

Has many affiliated institutes, societies, and councils that are available to members who wish to increases their knowledge of a specialized area of real estate practice and earn the accompanying designation

Real Estate Broker

Licensed to buy, sell, exchange, or lease real property for others and to charge a fee for those services.

National Do Not call list, RE proff can call consumer up to how many months after the consumers last purchase, delivery, or payment?

18 months

Code of Ethics

A written system of standards for ethical conduct. The code contains statements designed to advise, guide and regular behavior. To be effective a code of ethics must specific by dictating rules that either prohibit or demand certain behavior. By including sanctions for violators, a code of ethics becomes more effective.

Internet advertising policy or law?

Ads must contain true, current information and avoid misleading the potential client or customer.

Tie in agreements

Agreements to sell one product only if the buyer purchases another product as well. The sale of the first (desired) product is "tied" to the purchase of a second (less desirable) product. Can occur when a broke will agree to list sellers home for sale only if the seller agrees to be represented by the broker in the purchase of a new home.

National Association of Real Estate Brokers

Members are known as Realist. Arose out of the early days of civil rights movement as an association of racial minority real estate brokers in response to the conditions and abuses that eventually gave rise to fair housing laws.

Three examples of Antitrust Violation

Price - fixing, group boycotting, and allocation of markets.

Vicarious liability

That the broker can be held responsible for the conduct while preforming brokerage activities of every sales associate employed by broker

In real estate, a sales associate is always...

a licensee who performs real estate activities on behalf of the broker

Sales Associate

might be licensed as a real estate salesperson or be a licensed real estate broker who simply chooses to work for another broker rather than set up an independent brokerage office. A real estate salesperson is licensed to perform real estate activities on behalf of a licensed real estate brokerage office. The broker for whom the salesperson works is called the employing broker and both will be subject to the terms of an employment agreement, even when salesperson is an independent contractor for tax and other purposes.

Price Fixing

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. Price fixing occurs when competing brokers agree to set sales commission, fees or management rates. Price fixing is illegal. Real estate brokers must independently determine commission rates or fees for their own firms only.

Receiving compensation from a real estate transaction, an individual must...

- a licensed real estate broker - employed by the buyer or seller under a valid contract - procuring cause of the sale

Brokerage duties

- maintaining space and equipment - hiring licensed real estate professionals as well as unlicensed support staff -determining compensation - directing staff - Implementing producers for lincensees to follow in carrying out activities permitted by the states real estate license law and regulation

Antitrust Violations

- price fixing - the group of boycott - allocation of customers - allocation of markets - tie in agreements

Real Estate Assistant

Also known as a personal assistant or professional assistant, can be a combination office manager, marketer,organizer, and facilitator who has a fundamental understanding of the real estate industry. Can be a staff member working for more than one real estate professional but often works for a specific sales associate. May be required to have a real estate license, depending on task performed Unlicensed assistant generally may perform duties that include clerical tasks, office management, website development and maintenance and production of marketing pieces but with little direct contact with consumers. Licensed personal assistant working for a sales associate must be paid by the employing broker licensed personal assistant and sales associate are both under supervision of the broker.

Sales Associates compensation

Amount of compensation a sales associate receives is set by mutual agreement between the broker and the sales associate. Some brokers require sales associates to pay all or part of the expenses of advertising listed properties Some firms have adopted a 100% commission plan in which each sales associate pays a monthly service charge to the broker to cover cost of office space, telephone, and supervision in return for keeping 100% of the commission. Sales associates on a 100% commission plan pay all of their individual business expenses, such as the salary of a personal assistant or the costs associated with development and maintenance of the sales associates website.

Tie in agreement

An arrangement to sell one product only if the buyer purchases another product as well.

Employee vs. Independent Contractor

Broker is responsible for the acts of the sales associate employed by the brokerage (traditional employer-employee relationship) This is true regardless if the sales associate is considered an employee or an independent contractor for income tax purposes, which will affect the brokers legal obligation to pay and withhold taxes from the sales associates earnings.

Procuring Cause

Broker or the brokers sales associate must have started an uninterrupted chain of event that resulted in a sale. May include activities such as - conducting an open house - placing an advertisement in local real estate advertising magazine - making the property listing available on the internet - showing the house to the buyer

Allocation of customers or markets

Divide their markets and refrain from competing for each others business. Allocation may be made on a geographic basis, with real estate brokers agreeing to specific territories within which they will operate exclusively -reduced competition

IRS

Internal Revenue Service is established by three requirements needed to establish a non employee status for tax purposes. - individual must have a current real estate licenses - individual must have a written contract with broker specifying that the individual will not be treated as an employee for federal tax purposes - substantial portion of individuals income must be based on sales production.

Name of current policy of the National REALTOR assocition that allows all MLS members equal rights to display MLS date

Internet Data Exchange

Unbundling Services

Offering services as the consumer desires them. With discounted services, the consumer receives the full package of services but pays discounted price

Ready, willing, and able buyer

Once a seller accepts an offer from a ready, willing, and able buyer is one who is prepared to buy on the sellers terms and is ready to take positive steps toward consummation of the transaction. A court may prevent the real estate broker from receiving a commission if the real estate broker knew the buyer was unable to perform.

Independent Contractor

Operates with more independence than an employee, and the employer may not exercise the same degree of control over and independent contractors activities. Responsible for paying their own income and social security taxes and receive nothing from the employer that could be constructed as an employee benefit, such as health insurance or paid vacation time.

Graduated Commission Splits

Other firms have this, which is based on sales associates achieving specified production goals. - a broker might agree to split commission 50/50 up to a $25,000 sales associate share, 60/40 for shares from $25,000 to $30,000 and so on...Commission splits could go up to 80/20 or 90/10 particularly for higher producers. No matter how commission is structured, as a rule only the employing real estate broker representing that party who pays the commission and the agreed upon share of commission is paid to the cooperating broker . Each broker then pays any employed sales associate who took party in the transaction. Broker is always liable for acts of the sales associated performed in the course of business.

Penalties

Penalty for fix prices or allocating markets is a maximum $1 million fine and 10 years in prison. For corporations, penalty may be high as $100 million. An individual who has suffered a loss because of an antitrust violation may sue for treble damage - three times the actual damages sustained. In addition the injured party may recover cost of the suit which includes reasonable attorney fees.

Purpose of license laws

Real estate license laws protect the public by ensuring a standard of competence and professionalism in the real estate industry. Laws achieve this goal by -establishing basic requirements for obtaining a real estate license and in most cases requiring continuing education to keep a license Purpose of these laws is not merely to regulate the real estate industry. Their main objective is to make sure that the rights of purchasers sellers tenants and owners are protected from unscrupulous or negligent practices. By establishing minimum levels of education and standards of behavior these laws provide a base line for behavior and competency upon which an ethical marketplace can be nurtured and built Each state has licensing authority - commission department, division, board and/or agency - for real estate professional. This authority has the power to issue licenses , make real estate info available to licensee and the public, and enforce the statutory real estate law.

Employee

Requires to follow rules governing working hours, office routine, attendance, at sales meetings, assignment of sale quotas, and adherence to dress code. They are required by federal government to withhold Social Security taxes and incomes taxes from wages paid to employees. Required to pay unemployment compensation taxes on wages paid to one or more employees, as defined by state and federal laws. In addition they might receive benefits such as health insurance, profit sharing plans, and workers compensation

Antitrust laws

Sherman Antitrust act provides specific penalties for a number of illegal business activities. Laws prohibit monopolies and any contracts, combinations, and conspiracies among competitors that unreasonably restrain trade - behaviors that interfere with free flow of goods and services in a competitive marketplace.

Brokerage

Simply the business of bringing parties together. A real estate broker is licensed to buy, sell, exchange, or lease real property for others and to charge a fee for those services. A broker may be an agent for a client or broker and client may decide on a different form of representation if allowed by state law. it may be a - sole proprietorship - corporation - a limited liability company or partnership with another real estate broker Can be independent or national/with a franchise organization. Single office/multiple branches For licensing purposes the brokerage must have a physical address, but its most important marketing presence may be a website A real estate broker faces the same challenges as an entrepreneur in any other industry . In addition to mastering the complexities of real estate transactions .

Employee vs. Independent Contractor continued

Special rules apply when a real estate broker employs other real estate professionals to act on the brokers behalf. Broker is responsible for supervising the business activities of the sales associate and is liable for the actions of the sales associate, thus is treated as an employee of the broker, even though the employment agreement between sales associate and broker treats the sales associate as an independent contractor for tax purposes. Confusion over the nature of the independent contractor status of real estate associate has prompted the Internal Revenue Service (IRS) to issue specific rules to clarify the employer-employee relationship. Sales associates must have a written contract with the broker that specifies that the sales associate will not be treated as an employee for federal tax purposes.

All these are ways for a broker to charge for services EXCEPT -Standard community rate - flat fee - hourly rate - commission based on a percentage of the selling price

Standard community rate. Cant charge the same rate to customers.

Group Boycott

when two or more businesses conspire against another business or agree to withhold their patronage to reduce competitors - illegal.

Professional ethics

Merely complying with the letter of the law may not be enough. However, real estate professionals may perform legally yet not ethically. Ethics - refers to a system of moral principals, rules, and standards of conduct , these moral principal do two things... - establish standards for integrity and competence in dealing with consumers of an industry service - define a code of conduct for relations within the industry among its professionals.

Brokers Compensation

Specified in the contract with the client. The real estate license law or statute of frauds. usually will require that there be a written agreement to establish compensation to be paid. Compensation can be in the form of a commission or brokers fee (computed as a percentage of the total sales price) , a flat fee or an hourly rate. The amount of a brokers commission is negotiable in every case. Brokers compensation will also be affected by the participation in the transaction of a broker from another firm, who may be representing one of the parties. The marketing of a property is enhanced when the largest possible number of real estate professionals are aware of the availability in a MLS (multiple listing service) provides that marketing opportunity and the rules of MLS set out the terms under which brokers agree too cooperative in a transaction including sharing of the compensation earned. Commission is considered earned when the work for which the real estate broker was hired has been accomplished Different from the time at which the commission is paid; most sales commission are payable when the sale is consummated by delivery and acceptance of the sellers deed. This provision is generally included in the agreement between seller and broker.

Managing Broker

Who may also be called the supervising broker is responsible for supervision of the real estate professional who act on behalf of the brokerage To qualify for the role of managing broker and maintain that status, the real estate professional may have to meet specific education requirements. Note that not all states use the same terminology to refer to managing brokers, brokers, and sales associates.

Important purpose of the E Sign Act

is to give contracts created using email the same legal standing as those on paper.