Section 1: Delaware Real Estate Orientation

Bridget has just passed her licensing exam and is working with a broker. What should she expect to pay in start-up costs?

$2,000 to $4,000 Considering the cost of starting in most businesses, this is a fairly reasonable outlay. As you start your own business, you'll make choices about how much to spend and what's necessary or not. A lot depends on what the business benefit will be.

Bridget has been working as a licensee for 18 months. If she's a typical real estate professional, how much does she spend each month on her business?

$200 to $1,000

Kendall's client, Lawrence, is looking for a house on the beach. Lawrence tells Kendall he'll pay him a $2,500 finder's fee if he finds him exactly what he's looking for before the property hits the market. Kendall meets Margot at a neighborhood BBQ and learns that she's thinking of putting her house on the market. He realizes it ideally suits Lawrence's needs. "I can save you a lot of hassle," he tells Margot. "You won't even have to list it. I have a buyer at the ready." What circumstances are required for Kendall to receive the finder's fee? Drag each item to the correct location to indicate whether the circumstance is required in order for Kendall to receive the finder's fee.

-Both parties would have to agree to dual representation. (Not required) -Lawrence must pay the finder's fee to Kendall's broker. (Required) -Margot must be represented by another licensee. (Not Required) -Margot must list her house on the open market, and then if no other buyers are willing to pay more, she can sell to Lawrence at the price Kendall suggests. (Not Required)

Real estate agent

-Broker's agent -Buyer's agent -Dual agent -Landlord's agent -Seller's agent -Single agent -Sub-agent -Tenant's agent -Property manager

Special Agent

-Broker's agent -Buyer's agent -Dual agent -Seller's agent -Single agent

Ongoing costs

-Business cards -MLS fee

Which two items below identify the primary reasons why workers are categorized by federal law?

-Determines whether the worker is exempt or non-exempt for FLSA purposes. -Impacts how the worker is treated for employment tax law purposes.

Not a real estate agent

-Double agent -Secret agent -Transactional broker

Brokers understand the risk they take on when sponsoring other licensees. Good sponsoring brokers will take actions to ensure they appropriately manage their risk. Which of the following are some actions a sponsoring broker may take?

-Establish a standardized set of policies and procedures -Ensure policies and procedures are written and available to all team members -Conduct training on the procedures

Where are the top two places you should spend your marketing dollars?

-Farm area -Sphere of influence

Shawna must provide the CIS form to Darryl at the earliest of which of the following? Select all that apply.

-First scheduled appointment -First showing

Which of the following are considered residential properties?

-House -Condo -Duplex

Stephanie, a real estate licensee, received a referral from Gloria, another licensee who's in her office and will be out of town at the time that her buyer wants to go house hunting. Under what two circumstances may Stephanie pay Gloria a referral fee?

-If she disclosed it to all parties -If it were paid through Stephanie's and Gloria's broker

He's been in the business long enough to know that there will always be risks associated with supervising other licensees, and that if they do something wrong, Sam's license could be on the line, too. Review these situations and determine if each one creates vicarious liability for Sam. Select "yes" if it does and "no" if it doesn't.

-Leon, one of Sam's licensees, has failed to disclose a known material fact. (yes) -Dinah, another of Sam's licensees, shows her buyer client homes only in neighborhoods that seem to align with the client's Hispanic background, hoping to make that client happy. (yes) -Sam is a selling broker, and one day he gives a client advice that's outside his area of expertise. (no)

Ongoing expenses

-Lockbox fee -Continuing education -License renewal -Automobile insurance -Errors and omissions insurance

Independent contractor

-Paid for results, not time worked -Broker doesn't withhold income or Social Security taxes

Employee

-Paid for time worked on salary -Broker withholds income and Social Security taxes

So why would anyone become a real estate professional if it's so hard to succeed? Well, because the rewards are there if you work for them. Identify the reasons that real estate is a great career.

-Potential for good money -Meet lots of people -Satisfaction of helping others -Be your own boss

One-time costs

-Pre-licensing education -Exam fee -Licensing fee

Brokerage firms (and you) usually get paid based on a percentage of a property's sales price. The terms "procuring cause" and "protection clause" impact your compensation. Which two of these statements about these terms are correct?

-Rowena's exclusive-right-to-sell agreement with her seller client Connie guarantees that Connie will pay the brokerage firms fee no matter who sells the property. -Morey's listing agreement includes a 45-day protection clause. Three days after the agreement ends, Morey sells his house to a buyer that his agent originally brought to the property. Morey may owe this agent a commission.

Which of the following is considered retail property?

-Shopping mall

You're working with Stacey and Mark to help them settle down in a farmhouse in the country. You've shown them a few properties, but they're still searching for that perfect fit. Today, you'll be showing them two properties: Property One is a home you've listed for a seller, Tammy. It's a smaller house set on five acres, but it's a great deal for the money. Property Two is listed through another brokerage and is being sold by Nancy and Troy. Who's who in this scenario? Indicate whether each of the following individuals in the scenario is your customer or client.

-Stacey & Mark (client) -Nancy & Troy (customer) -Tammy (client)

The IRS is quite particular about independent contractor status. Which three of these statements about that status are correct?

-To qualify for independent contractor status, you must be able to set your own hours. -Independent contractors can't be paid an hourly wage or monthly salary. -Independent contractors can deduct certain business expenses.

It's a good idea to prepare for your interview with a broker by making a list of the questions you'll ask. Identify each of the following questions as one that should be on your list, and one that you don't want to ask a broker. Part 2

-What kind of salary do you offer? (Don't ask) -What costs would I be responsible for? (Ask) -What type of technology support do you provide? (Ask) -Tell me about the training program you provide to new licensees. (ask)

It's a good idea to prepare for your interview with a broker by making a list of the questions you'll ask. Identify each of the following questions as one that should be on your list, and one that you don't want to ask a broker.

-What will you do to guarantee my success? (Don't ask) -Are you still a practicing broker? (Ask) -What strategies do your top producers use to succeed? (Ask) -What types of marketing materials do you provide to your licensees? (Don't ask) -What's your floor time policy? (Ask)

According to Delaware law, which four of these events could magically transform them into clients to whom you owe all of the statutory duties prescribed by Delaware law?

-When they make an offer -When you show them a house -When you perform work for them -At the first scheduled appointment

Employee

-Worker's expenses are covered by the broker. -Worker's hours are set by the broker. -Worker is required to work at a specified location chosen by the broker. -Worker is required to do the work in the order specified by the broker.

Independent Contractor

-Worker's hours are set by the worker. -Worker is responsible for expenses and must provide own work tools. -Worker can choose to work from home or in the broker's office. -Worker is paid by the job, not by the hour. -Worker is supervised by the broker, but the broker doesn't direct or control the worker's work.

Chris, a real estate broker, represents Beverly, a seller. Beverly tells Chris, "If you can get my house sold within 30 days, I'll pay you and the buyer's agent a $1,000 bonus." Is this legal?

-Yes, but it must be disclosed to all parties. -Yes, but the fee must go through the brokers.

One recommendation for finding a broker who works as hard as you will to avoid liability is to review the firm's policies and procedures manual. But what should you be looking for when you crack that manual open? Select the best two answers.

1. Clear Policies 2. Thoroughness

On the surface, most brokers may seem pretty similar. So it's up to you to do a little probing to discover what makes one broker different than another. That's where you'll start to determine if you and the broker are a good fit. Which five of these areas should you inquire about when looking for a broker?

1. Reputation 2. Policies and Procedures 3. Training Program 4. Culture 5. Specialites

What's the maximum percentage of your income that you should plan to spend on marketing?

30%

What's the difference between a dual agent and a dual agent with designated sales agent?

A dual agent situation exists when one agent represents both buyers and sellers in a transaction. Dual agent with designated sales agent occurs when different agents represent the buyers and sellers, but they both work for the same broker.

Alison, an agent with XYZ Agency, is assisting Ryan, the listing agent from RST Brokerage, with marketing a property on 7th Street.

Broker's agent

The Grays have been touring local open houses but are now ready to get serious about owning their dream home. Evan is just the agent they need. He's acting as a

Buyer's agent

We know that agency is the relationship between the real estate professional and the person being represented. But who's the person being represented?

Client Yes! In an agency relationship, the real estate professional represents and works for the client. A customer, on the other hand, doesn't receive representation. For instance, a seller's agent may greet a prospective buyer at an open house. The buyer is a customer of the seller's agent, not a client.

This worker is classified by the common understanding of the profession, such as a food server.

Common law employee

Ed is the listing agent for Larry's condo and also represents Kathleen, who is interested in buying it.

Dual agency

Alison has listed just the property her buyer clients, the Lopezes, want. It's the Pinskis' home, which Alison put on the market last week.

Dual agent

Broker pays federal unemployment (FUTA) and state unemployment taxes.

Employee

Broker prepares quarterly reports (941) and annual reports (W-2, W-3, and Form 940) and submits them to the IRS for income-reporting purposes.

Employee

Broker withholds federal, state, and Social Security taxes (FICA) for the worker.

Employee

Ms. Bumblegard receives a regular paycheck each pay period from the brokerage firm for which she works. Her broker withholds money from her paycheck and pays her state unemployment taxes. Ms. Bumblegard cannot file Schedule C to deduct business expenses, and her broker does not send her a 1099 for income-reporting purposes. When she started with the brokerage firm, her broker asked her to fill out a W-4 form. Is Ms. Bumblegard an independent contractor or an employee?

Employee

Worker fills out a W-4 form.

Employee

A salesperson's compensation comes directly from the client or customer.

False

Although the CIS must be provided, it's not necessary to get consumers to sign it. (T/F)

False

The CIS is required for all real estate transactions. (T/F)

False

The industry has a "standard" compensation fee.

False

Which of these are types of leisure properties

Golf courses, hotels, movie theaters, restaurants, and motels

Which of these are types of industrial properties?

Heavy industrial, Light manufacturing & Warehouse buildings

Renata is contacting the people in her sphere to ask them her all-important Mayor Campaign question. What will she be asking?

If you or someone you know was buying or selling a home, do you have a real estate professional you would refer them to?

Broker doesn't withhold taxes from the worker's pay.

Independent Contractor

Broker makes no tax payments or deposits on the worker's behalf.

Independent Contractor

If the worker earned $600 or more, the broker prepares forms 1096 and 1099, distributes form 1099 to the worker for tax-preparation purposes, and submits both of the forms to the IRS for income-reporting purposes.

Independent Contractor

Mr. Brady works in real estate for a brokerage firm called Whosit Properties. His broker provides him with training and supervision. His work hours and the work he does aren't set by his broker. As long as Mr. Brady gets the job done, his broker doesn't care how much time it takes. Mr. Brady isn't required to work in the office, and he must pay for his own work supplies. Is Mr. Brady an independent contractor or an employee?

Independent Contractor

Worker fills out a W-9 form.

Independent Contractor

Worker pays self-employment taxes.

Independent Contractor

This individuals sets their own hours, pay their own expenses, and are compensated according to their results and not time spent.

Independent Contractors

Because of the lack of control over the individual by the "employing party," this worker is not classified as an employee, such as a doctor.

Independent contractor

Meeting or violating Statutory Duties? Judy presents a standard form to all parties that informs them they aren't vicariously liable for anything she does.

Meeting

Meeting or violating Statutory Duties? When a buyer asks why a house is for sale, Judy keeps the fact that the sellers are involved in a nasty divorce to herself.

Meeting

Shawna's keeping herself quite busy: She's also the listing agent for Basil, who's selling his 28-unit apartment building. Is she required to present the CIS to Basil?

No. The CIS isn't required since the transaction doesn't involve a one- to four-family property or a lot intended for a one- to four-family residence. However, Shawna must still abide by all statutory duties and requirements and include specific language in the purchase agreement.

As the owner of an apartment complex near the college, Bill needs someone to act in his interests. He hired Carter as his agent.

Property manager

Agency

Relationship between the real estate professional and the person being represented

Law of agency

Rules governing the relationship between the real estate professional and the person being represented

Natalie is working for the Browns, who own a condo. They just put the condo on the market and are optimistic they'll receive a competitive offer in no time. Natalie is acting as a

Seller's agent

Ed is the listing agent for Arlene and Matt, who are selling their four-bedroom Colonial. He also represents several buyers in other transactions.

Single agency

Ed represents Delia and John, his buyer clients, while Annie represents Susan, her seller client.

Single agency

Delaware licensees are, by default, which one of these?

Statutory agents (independent contractors)

An independent contractor who's treated as an employee for employment tax purposes, such as a delivery driver paid on commission.

Statutory employee

This worker is treated as self-employed by statute for all federal tax purposes, such as a licensed real estate agent.

Statutory nonemployee

Kristy needs an agent to act on her behalf to negotiate a lease on an apartment while she finishes grad school. Andre fits the bill.

Tenant's agent

What defines the vicarious liability assumed by a supervising broker?

The broker is responsible for the actions of supervised licensees and can be held liable for those actions, or omissions, as a result.

One recommendation is to find out about the size of the firm. Why is this an important item to research?

The size of the firm can affect the ways you can relate to your fellow licensees and your broker.

Danielle is a new licensee who just landed her first listing. The listing agreement will be between which two parties?

The sponsoring broker and the principal Licensees are required to take listings only in the broker's/brokerage's name. The listing agreement, and all other agreements, are between the broker/brokerage and the principal(s).

Aaron doesn't represent either party in the transaction. He's just there to facilitate.

Transactional broker

Brokerage compensation options include a flat fee, fee for service, or percentage of sale.

True

Consumers compensate brokers for their services, generally in the form of a percentage of the sales price of the property involved in the transaction.

True

If a licensee is the procuring cause for a sale, that licensee may still earn compensation.

True

If you represent the buyer, and the seller's already received a copy of the CIS from the listing agent, you're not required to provide a second copy to the seller. (T/F)

True

It's important to give consumers time to read the CIS before signing it. (T/F)

True

Licensees must retain a signed copy of the CIS and also provide one to the consumer. (T/F)

True

The amount a salesperson is compensated is dependent upon the agreement with the broker.

True

When a transaction is completed, the agency relationship terminates. (T/F)

True. Agency relationships can also be terminated by expiration, breach of contract, or other terms defined in the agreement.

Meeting or violating Statutory Duties? Judy is just about to leave to spend the weekend on Dewey Beach when she receives an offer for one of her listings. She decides there's no harm in waiting until she returns to present the offer.

Violating

Meeting or violating Statutory Duties? Judy tells her buyer client that the seller will accept less than list price, even though the seller has asked her not to.

Violating

Meeting or violating Statutory Duties? When a client asks Judy if the stains on the ceiling mean there's a water leak, she says, "No, probably not. You know these older houses."

Violating

Real Estate Settlement Procedures Act (RESPA)

You may not receive or give referral fees or finder fees from/to mortgage brokers, title reps, or any other settlement service provider. Referral fees to and from other real estate licensees are perfectly legal—however, they must be disclosed, and such referral fees must go through the brokers first.

Brokerage compensation options include

a flat fee, fee for service, and percentage of sale.

As a Delaware licensee, most of your initial experience will likely be with one- to four-family residential transactions. When it comes to these properties, Delaware law requires you to present the Consumer Information Statement (CIS) to

all consumers.

Brokers are compensated by

consumers for their services, generally in the form of a percentage of the sales price of the property involved in the transaction.

Independent contractors and employees are taxed

differently, and different tax rules apply. Both brokers and independent contractors must ensure that they don't take actions that would classify the independent contractor as an employee.

A supervising broker is responsible for

he business actions of all licensees at the brokerage.

Independent contractors don't have

income tax or Social Security tax withheld from their commission by the broker.

Referral fees of any kind are

prohibited between settlement service providers.

Salespersons and any associated brokers may only receive compensation for

real estate services through their broker.

Brokerage agreements are between

the broker and the principal (buyer/seller or landlord/tenant), not the licensee and principal.

If a broker's licensee is found guilty of misconduct

the broker can be held liable for failure to supervise and may also be held liable for the misconduct through the legal concept of vicarious liability.

Referral fees and bonuses paid to real estate licensees involved in a transaction must be paid through

the licensees' brokers and must be disclosed to all parties.

Shawna is the listing agent for Darryl, who is selling his single-family home. Is she required to provide the CIS to Darryl?

yes. The transaction involves a one- to four-family residence, so she must provide it.