Unit 2
Broker's Compensation
-The broker's compensation is specified in the contract with the consumer. -Compensation may be a commission or broker's fee (computed as a percentage of the total sale price), a flat fee, a fee for service, or an hourly rate. -The amount of a broker's compensation is negotiable in every case. -Even subtle attempts to impose uniform commission rates are clearly a violation of state and federal 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. Violations of antitrust laws in the real estate business generally involve group boycotting (brokers conspiring to avoid working with a competitor), price-fixing (brokers conspiring to set fixed compensation rates), or allocation of customers or markets (brokers agreeing to limit their areas of trade or dealing to certain areas or properties).) -A broker may set the minimum rate acceptable for that broker's firm. -The important point is for broker and client to agree on a rate before the agency relationship is established. -A commission is usually earned when the work for which the broker was hired to perform has been accomplished. -Most sales commissions are paid when the sale is consummated by delivery of the seller's deed. -This provision is generally included in the listing agreement. -When the sales or listing agreement specifies no time for the payment of the broker's commission, the commission is usually earned when 1. a completed sales contract has been executed by a ready, willing, and able buyer; 2. the contract has been accepted and executed by the seller; and 3. copies of the contract are in possession of all parties. -To be entitled to a sales commission, an individual must be 1. a licensed real estate broker, 2. the procuring (The effort that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission.) cause of the sale, and 3. employed by the buyer or the seller under a valid contract. -To be considered the procuring cause of a sale, the broker must have started or caused a chain of events that resulted in the sale. -For example, activities such as: 1.conducting open houses, 3.placing advertisements in the newspaper, and 4. showing the house to the buyer are considered procuring cause. -A broker who causes or completes such an action without a contract or without having been promised payment is a volunteer and may not legally claim compensation. -Once a seller accepts an offer from a ready, willing, and able buyer, the real estate broker is entitled to a commission. -A ready, willing, and able buyer is one who is prepared to buy on the seller's terms and ready to take positive steps toward consummation of the transaction. -Courts may prevent the real estate broker from receiving a commission if the real estate broker knew the buyer was unable to perform. -If the transaction is not consummated, the broker may still be entitled to compensation: 1. if the seller had a change of mind and refuses to sell, 2. had a spouse who refuses to sign the deed, 3. had a title with uncorrected defects, 4. committed fraud with respect to the transaction, 5. was unable to deliver possession within a reasonable time, 6. insisted on terms not in the listing (for example, the right to restrict the use of the property), or had a mutual agreement with the buyer to cancel the transaction. **In Pennsylvania According to Pennsylvania license law, a broker may share fees with a salesperson licensed with the broker, another licensed broker, or a consumer represented by the broker. -A broker may not pay fees, commissions, or other compensation to unlicensed persons for services for which real estate licensure is required. -Compensation is construed (interpret) to include personal property (a new television or other premiums, such as vacations and the like) as well as money. -This is not to be confused with referral fees paid between brokers for business. -Such fees are legal as long as the individuals are licensed brokers.
Legal Consideration and Technology
-The internet has brought tremendous change to the real estate industry. -Real estate practitioners and consumers rely heavily on the internet for a variety of services. -The internet is a powerful tool for consumers in finding information about properties, relocation services, and particular communities. -Often, real estate website information is updated daily.
Antitrust Laws
-The real estate industry is subject to federal and state antitrust laws. -Three federal laws form the basis of state antitrust laws: 1. Sherman Antitrust Law (prohibits contracts or conspiracies that create monopolies), 2. Clayton Act (prohibits exclusive tie-in sales, price discriminations and mergers and acquisitions that unfairly restrain trade), and 3. the Federal Trade Commission Act that fills in loopholes (ambiguity) of other laws and allows monetary relief, and permits investigations of such activities. -The most common antitrust violations are: 1. price-fixing, 2. group boycotting, 3. allocation of customers or markets, and 4. tie-in agreements. -Federal laws are enforced by the Antitrust Division of the U.S. Department of Justice or the Federal Trade Commission. - In Pennsylvania The Antitrust Section in the Attorney General's office enforces the Pennsylvania Unfair Trade Practices and Consumer Protection law acting as a watchdog to maintain a free and open marketplace. -When anticompetitive practices are detected, it takes legal action.
Key Terms
1) Antitrust laws: 1. Sherman Antitrust Law (prohibits contracts or conspiracies that create monopolies), 2. Clayton Act (prohibits exclusive tie-in sales, price discriminations and mergers and acquisitions that unfairly restrain trade), and 3. the Federal Trade Commission Act that fills in loopholes (ambiguity) of other laws and allows monetary relief, and permits investigations of such activities. 2) Brokerage: Is simply the business of bringing parties together. 3)Commission: Is usually earned when the work for which the broker was hired to perform has been accomplished. 4)Employee: State license laws generally treat the real estate salesperson as the employee of the affiliate broker, regardless of whether the real estate salesperson is considered an employee or an independent contractor for income tax purposes. 5)Group boycotting: brokers conspiring to avoid working with a competitor 6)Independent contractor: Are responsible for paying their own taxes and cannot receive anything from the broker that could be construed as an employee benefit. 7)Internet advertising: Must be a true representation and not be misleading. 8)Multiple listing service (MLS): Expedited sales by increasing a single property's exposure to more potential buyers. 9)National Do Not Call Registry: The registry, managed by the Federal Trade Commission (FTC) is a list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls they receive. 10)Personal assistant: May perform duties that include clerical tasks, office management, telemarketing, market strategy development, and limited direct contact with consumers. 11)Price-fixing: is the practice of competitors setting prices for products or services rather than letting competition in the open market establish those prices 12)Procuring cause: The broker must have started or caused a chain of events that resulted in the sale. 13)Ready, willing, and able buyer: Is one who is prepared to buy on the seller's terms and ready to take positive steps toward consummation of the transaction.
Marketing Listing Service
A marketing organization composed of member brokers who agree to share their listing agreements with one another in hopes of procuring ready, willing, and able buyers for their properties more quickly than they could on their own.
Group Boycotting
Group boycotting occurs when two or more businesses conspire against other businesses or agree to withhold their patronage (backing up) to reduce competition. Group boycotting is also illegal under the antitrust laws.
Real Estate Salesperson's Compensation
- The amount of compensation a salesperson receives is set by mutual agreement between the broker and the salesperson. -A broker may agree to pay a fixed salary or a share of the commissions from transactions originated by a salesperson. **-In some cases, a salesperson may draw from an account against earned shares of commissions. -Some brokers require salespersons to pay all or part of the expenses of advertising listed properties. -Some firms have adopted a 100% commission plan in which salespersons pay a monthly service charge to their brokers to cover the costs of office space, telephones, and supervision in return for keeping 100% of the commissions from the sales they negotiate. -Salespersons on a 100% commission plan pay all of their related business expenses. -Other companies have graduated commission splits based on a salesperson's achieving specified production goals. -For instance, a broker might agree to split commissions 50/50 up to a $25,000 salesperson's share, 60/40 for shares from $25,000 to $30,000, and so on. -Commission splits as generous as 80/20 or 90/10 are possible, particularly for high producers. -Some companies charge a monthly service charge or desk fee to cover the cost of office space, technology, and other services used by the agent. -Agents paying a desk fee may be 100% agents or on a split, depending on the office and plan chosen. -There are many options available to the agent, and one size does not fit all. -In choosing an office, agents need to compare not just commission splits and percentages, but also expenses and total fees paid to the broker. -No matter how the salesperson's compensation is structured, only the employing broker can pay it. -In cooperating transactions, the commission must first be received by the employing broker and is then paid to the salesperson, unless otherwise permitted by license laws. -In Pennsylvania, agents may not take any compensation at all from a consumer or a broker who is not their employing broker. -Real estate teams are a relatively new trend in brokerages. -In this model, a top producer forms a team of buyer's agents, seller's agents, and/or support staff under his business structure. -All members of the team still operate under the employing broker's umbrella, and the broker is ultimately responsible for their actions. -The team model currently is not recognized in Pennsylvania licensing law, but other states have stepped in to regulate their formation and operation. -Pennsylvania Association of REALTORS® formed a Presidential Advisory Group (PAG) in 2016 to address this issue and assist the Pennsylvania Real Estate Commission with defining the term and regulating their roles and operation. -As of early 2019, the PAG suggestions are in consideration by the real estate commission. -Eventually, teams may be controlled by state statute, and agents considering joining teams should be aware of the rules and regulations.
Sharing Commissions
-A commission might be shared by many people: 1. the listing broker, 2. the listing salesperson, 3. the buyer's broker, and the 4. buyer's salesperson. A diagram may help you determine which licensee is entitled to receive what amount of the total commission. -For example, a salesperson, while working for the broker, took a listing on a $189,000 house at a 6% commission rate. -A second salesperson, while working for a different broker, found the buyer for the property. -If the property sold for the listed price, the listing broker and the buyer's broker shared the commission equally, and the buyer's broker kept 45% of the commission received, how much did the buyer's salesperson receive? (If the broker retained 45% of the total commission received, the broker's salesperson would receive the balance: 100% - 45% = 55%.)
Allocation of Customers or Markets
-Allocating customers or markets involves an agreement between brokers to divide their markets and refrain from competing for each other's business. -Allocations may be made on a geographic basis, with brokers agreeing to specific territories within which they will operate exclusively. -The division may also occur by price range or category of housing. -These agreements result in reduced competition.
Broker-Salesperson Relationship
-Although brokerage firms vary widely in size, few brokers today perform their duties without the assistance of salespersons. -Consequently, much of the business's success hinges on the broker-salesperson relationship. -A real estate salesperson is any person licensed to perform real estate activities on behalf of a licensed real estate broker. -The broker is fully responsible for the actions performed in the course of the real estate business by all persons licensed under the broker. -In turn, all of a salesperson's activities must be performed in the name of that broker. -The salesperson can carry out only those responsibilities assigned by the employing broker and can receive compensation only from that broker. -As a general agent of the broker, the salesperson has no authority to make contracts with or receive compensation from any other party. -The broker is liable for the acts of the salesperson within the scope of the employment agreement. In Practice Brokers are responsible for supervising all real estate activities performed by salespeople in their offices. -The broker cannot delegate office supervision of salespersons to an unlicensed person. -A real estate assistant (also known as a personal assistant (An individual who is employed to perform certain activities to assist real estate licensees in the course of their business.) A personal assistant may be licensed or unlicensed; this status determines the scope of the activities that are permitted and whether the broker or an associate broker or salesperson is the assistant's employer. or professional assistant) is a combination office manager, marketer, organizer, and facilitator who has a fundamental understanding of the real estate industry. -An assistant may or may not have a real estate license, depending on state law. -The extent to which the assistant can help the real estate broker or real estate salesperson with transactions is often determined by licensing laws. -An assistant may perform duties that include clerical tasks, office management, telemarketing, market strategy development, and limited direct contact with consumers. -A licensed assistant can set up and host open houses and assist in all aspects of a real estate transaction.
Real Estate Brokerage
-Brokerage is simply the business of bringing parties together. -A real estate broker is a person licensed to buy, sell, exchange, or lease real property for others and to charge a fee for these services. -A brokerage business may take many forms. -It may be a sole proprietorship (a single-owner company), a corporation, or a partnership with another real estate broker. -The office may be independent or part of a regional or national franchise. -The business may consist of a single office or multiple branches. -Brokers' offices may be located in highrises, suburban shopping centers, or their homes. -A typical real estate brokerage may specialize in one kind of transaction or service, or it may offer a variety of services. -No matter what form it takes, a real estate brokerage has the same demands, expenses, and rewards as any other small business. -The real estate industry, after all, is made up of thousands of small businesses operating in defined local markets. -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, the real estate broker must be able to handle the day-to-day details of running a business and to set effective policies for every aspect of the brokerage operation: 1. maintaining space and equipment, 2. hiring employees and real estate salespersons, 3. determining compensation, 4. directing staff and sales activities, and implementing procedures to follow in carrying out agency duties. -Each state's real estate license laws and regulations establish the business activities and methods of doing business that are permitted. -In Practice: Although real estate brokers and salespersons may bring buyers and sellers together, and in most states may fill in preprinted blank purchase agreement forms, only an attorney may offer legal advice or prepare legal documents. -Licensees who are not attorneys are prohibited from practicing law. Licensees should always encourage all parties to seek legal counsel to protect their interests.
-Email and texting is speeding communication between real estate agents and consumers. -Licensees should be prepared for consumers who primarily want to communicate by email and texting. -In communicating with clients or consumers via email, the following are suggested: use the subject line in a useful and helpful manner; avoid spelling errors; respond promptly to all email messages; be specific, to the point, and brief; and pay attention to the size of any attachments you send. -Do not send unsolicited emails. -Email is an excellent opportunity for the ongoing marketing of your business. Make sure that all your contact information is up to date in your signature line, and use automated signatures. Consumers are conditioned to immediate responses when they place orders, buy airline tickets, and make restaurant reservations, and they expect that same level of immediacy from their real estate agent. -Savvy agents use at least an auto responder and many work with virtual assistants.
Tie-in Agreements
-Finally, tie-in agreements (also known as tying agreements) are agreements to sell one product only on the condition that the buyer also purchases product as well. -The sale of the first (desirable) product is tied to the purchase of a second (less desirable) product.
National Do Not Call Registry
-In 2003, federal do-not-call legislation was signed into law, and real estate licensees must comply with the provisions of the National Do Not Call Registry. -The registry, managed by the Federal Trade Commission (FTC) is a list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls they receive. - The registry applies to any plan, program, or campaign to sell goods or services through interstate phone calls. -The registry does not limit calls by political organizations, charities, collection agencies, or telephone surveyors. -Real estate licensees may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last purchase, delivery, or payment, even if the consumer is listed on the National Do Not Call Registry. -Also, a real estate licensee may call a consumer for up to three months after the consumer makes an inquiry or submits an application. -Note that if a consumer asks a company not to call, despite the presence of an established business relationship, then the company must abide by the consumer's request, which stays in effect for five years. -To access the National Do Not Call Registry, visit www.donotcall.gov. -Since January 2005, telemarketers and sellers are now required to search the registry at least once every 31 days and drop registered consumer phone numbers from their call lists. -Most states also have do-not-call rules or regulations. It is important to keep up to date with your own state's laws regarding do-not-call policies, as well as the national law.
Internet websites
-Most real estate agencies have websites that provide extraordinary databases for property and other searches. - Firms have developed mobile versions of their websites as well as mobile apps to appeal to younger consumers. -Keep in mind that NAR has adopted a new Internet Listing Display Policy that replaces the Virtual Office website (VOW) and the Internet Data Exchange (IDX) policies. -The new NAR policy allows all multiple listing service (MLS) members to have equal rights to display MLS data, and it respects the rights of property owners and their listing real estate brokers to market a property as they wish. -A blanket opt-out provision provides that those MLS participants interested in keeping their listings off of competitors' websites cannot then display other real estate brokers' listings. Real estate brokers who opt out of displaying their listings on competitors' websites can, at the direction of a seller, make an exception and display the seller's property on the MLS website. -Many real estate websites have disclaimers to indicate that the material on the site is solely for informational purposes and that no warranties or representations have been made.
Internet Advertising
-Pennsylvania law states that real estate licensees may not make a "substantial misrepresentation" or a "false promise," and may not engage in any "misleading or untruthful advertising." (§455.604(a)(1)-(4)). -All advertising is covered, whether in print, yard signs, emails about listings, websites developed by a broker, brokerage, or salesperson, paid ads on search engines, including Craigslist, Facebook as well as text messages or Twitter "tweets". -Facebook does not allow business activities on personal pages. -An advertisement must be a true representation and not be misleading. -Before setting up their websites and Facebook pages or sending tweets, salespeople should consult their broker's policy manual for guidance. -If they have any doubt, they should speak directly to their broker and/or IT department. -The broker's website must include the broker's registered name, telephone number, and the state(s) in which the brokerage is licensed to sell real estate. -All electronic communication by a real estate licensee must include the licensee's name, office address, and broker affiliation. -Real estate professionals must disclose their status as a real estate broker or real estate salesperson on each page of a website that contains an advertisement. -The listing of only a salesperson's name without the sponsoring broker's name in an advertisement is prohibited. -A good policy is to set up personal and business accounts for your social media and networking sites. -Remember, though, that all marketing must be done through the brokerage.
Price-Fixing
-Price-fixing is the practice of competitors setting prices for products or services rather than letting competition in the open market establish those prices. -In real estate, price-fixing occurs when competing brokers agree to set uniform sales commissions, fees, or management rates. -Price-fixing is illegal. -Brokers must independently determine commission rates or fees for their own firms only. -These decisions must be based on a broker's business judgment and revenue requirements without input from other brokers. -The broker of record has the authority to require that the salespeople affiliated with the brokerage charge a certain commission rate; - the salespeople are obligated to follow that charge as a condition of employment. -Multiple listing organizations, REALTOR® associations, and other professional organizations may not set fees or commission splits. -Nor can they deny membership to a broker based on the broker's compensation schedule. -The challenge for real estate brokers and salespersons is to avoid even the impression of price-fixing. -Hinting (a small piece) to a prospective client that there is a "going rate" of commission or "normal" fee implies that rates are, in fact, standardized. -The broker must make it clear that the rate stated is only what the broker's firm charges.
Social networking sites
-Social networking sites such as Facebook, LinkedIn, YouTube, Twitter, Pinterest, blogs, et cetera are becoming increasingly useful in business—and the real estate industry is no different. -Brokers of record should set clear guidelines in policy manuals and brokerage agreements to permit and guide the use of these technologies by licensees. -Brokers must also learn about the potential risks and liabilities of these sites—for instance, recognizing that communication through these sites establishes a permanent record of sorts—and should incorporate this understanding into the policies and guidelines they establish for licensees on the use of social networking in their businesses. -They must also work to ensure that clients understand the helpful role these sites can play in real estate transactions and consent to their use.
CAN-SPAM Act of 2003
-The CAN-SPAM Act of 2003 (Controlling the Assault of Non-Solicited Pornography and Marketing Act) establishes requirements for sending commercial email, spells out penalties for those that don't comply (not just "spammers"), and gives consumers the right to have emailers stop emailing them. -The CAN-SPAM Act targets email used to promote or advertise products and services (including online products and services) offered for commercial purposes. -The act does not apply to "transactional or relationship content"; that is, those messages meant to facilitate or alter existing customer agreements (for instance, by giving a customer additional information about an existing agreement or conducting business as part of an existing agreement). -However, these emails must not explicitly or implicitly operate for the purposes of advertising or promotion because this would be in violation of the law. -The CAN-SPAM Act is enforced by the FTC as well as by federal and state agencies that have jurisdiction over the company or companies in question. In addition, companies that violate the CAN-SPAM Act can be sued by internet service providers. -Criminal sanctions can be brought against violators by the U.S. Department of Justice. -Briefly, the CAN-SPAM Act requires the following: False or misleading header information is banned. -An email's "From" field, "To" field, and routing information—including the original domain name and email address—must be accurate and identify the person who initiated the email. -Deceptive (giving appearance) subject lines are prohibited. -The subject line cannot mislead the recipient about the contents or subject matter of the message. -Email recipients must have an opt-out method. Each message must include a return email address or another internet-based response mechanism that allows a recipient to request no future email messages to that email address and requests must be honored. -Commercial email must be identified as an advertisement and include the sender's valid physical postal address. -Each violation is subject to fines. -Deceptive commercial emails are also subject to laws banning false or misleading advertising. -Additional fines are provided for commercial emailers who violate the rules and do any of the following: 1. "Harvest" email addresses from websites or web services that have published a notice prohibiting the transfer of email addresses for the purpose of sending email 2. Generate email addresses using a "dictionary attack"—combining names, letters, or numbers into multiple permutations (arrangement) 3. Use scripts or other automated ways to register for multiple email or user accounts to send commercial email 4. Relay emails through a computer or network without permission—for example, taking advantage of open relays or open proxies (represent ) without notification
Junk Fax Prevention Act of 2005
-The Junk Fax Prevention Act of 2005 does not legalize unsolicited fax advertisements or solicitations but does allow an established business relationship (EBR) exception. -As a rule, a real estate licensee could not legally send an unsolicited commercial fax message without express written consent or without an established business relationship with the recipient. -Following are the provisions of the fax law: Sets guidelines for what constitutes an established business relationship (EBR) and reaffirms that EBR when customers pose exceptions to the ban on unsolicited commercial faxes -Does not place time limits on EBRs Requires companies to offer a free method by which fax recipients may opt out of receiving future fax communications. -The opt-out method must be available at any time of day, every day; and the opt-out information must be made available on the first page of the fax. -Requires businesses to receive customers' written or oral consent to send fax advertising, or in the case of new business relationships, to send only to those customers who have provided their fax numbers willingly to some other source with permission for such use by other parties (including the sender) -Permits businesses to send faxes to numbers that they had access to via an EBR prior to July 9, 2005, when the act became law -Requires businesses to receive direct consent from EBR customers for whom they did not already have fax numbers before the effective date of the legislation, or to obtain these numbers via some other source to which the EBR customer willingly provided them with permission for such use by other parties (including the sender). -In 2008, the FCC added the following clarifications to the law: -Senders have met the consent requirement if they buy the fax number(s) from companies who have obtained the information from published sources; however, if there are errors in the list, the sender could be held liable. -Senders must make a reasonable effort to ascertain whether recipients have given consent. -Senders are permitted to provide a website, which must be easily accessible and usable, through which recipients may opt out of receiving fax communications.
Independent contractors vs. employees
-The employment agreement between a broker and a salesperson should define the nature, obligations, and responsibilities of the relationship. -Essentially, the real estate salesperson may be either an employee or an independent contractor. -State license laws generally treat the real estate salesperson as the employee of the affiliate broker, regardless of whether the real estate salesperson is considered an employee or an independent contractor for income tax purposes. -Whether a real estate salesperson is treated as an employee or an independent contractor affects the structure of the real estate salesperson's responsibilities and the real estate broker's legal obligation to pay and withhold taxes from the salesperson's earnings. -A real estate broker can exercise certain controls over salespersons who are employees. -The real estate broker may require an employee to follow rules such as those governing working hours, office routine, attendance at sales meetings, assignment of sales quotas, and adherence to dress codes. -As an employer, a broker is required by the federal government to withhold Social Security taxes and income taxes from wages paid to employees. -The broker is also required to pay unemployment compensation taxes on wages paid to one or more employees, as defined by state and federal laws. -In addition, employees might receive benefits such as health insurance, profit-sharing plans, and workers' compensation. -A broker is permitted to control what the independent contractor does, but not how it is done. Independent contractors are responsible for paying their own taxes and cannot receive anything from the broker that could be construed as an employee benefit. -In Pennsylvania: The broker is also required to withhold state income tax and pay unemployment and workers' compensation. -In addition, employees might receive benefits such as health insurance and profit sharing. -The Internal Revenue Service (IRS) often investigates the independent contractor-employee situation in real estate offices. -Under the qualified real estate agent category in the Internal Revenue Code, the following three requirements are needed to establish an independent contractor status: 1. The individual must have a current real estate license. 2. The licensee must have a written contract with the broker that specifies that the licensee will not be treated as an employee for federal tax purposes. 3. At least 90% of the individual's income as a licensee must be based on sales production and not on the number of hours worked. In Practice -Pennsylvania's real estate license law treats the affiliated licensees (associate broker or salesperson) as an employee of the broker, regardless of whether the salesperson is considered an employee or an independent contractor for income tax purposes. -The broker is accountable for the salesperson's licensed activities and, therefore, can control what that individual does to ensure that the conduct complies with the law. -Note that this is the "what" in the independent contractor discussion, so the salesperson's status for income tax purposes is immaterial in the context of license law.
Fee for Services
-The internet has revolutionized the real estate profession in many ways. -One of its more notable effects is that it allows buyers and sellers to have tremendous access to information about real estate, housing, financing, and law. -The internet has caused a radical shift in that the average consumer is now much more knowledgeable about real estate matters. -With instant access to real estate knowledge and information, the consumer is more innovative and independent. -While real estate licensees want to encourage consumers to use all their services (full service) for a commission rate, when it becomes apparent that a consumer wants help with one or several services only, then it would be helpful for the real estate licensee to have in mind the best compensation model. -With the permission of the employing broker, many real estate licensees use either an hourly rate or a flat fee for particular services. -Real estate licensees may also want to develop their own lists of services for sellers and buyers and also a specific list of services to help unrepresented sellers, also known as for sale by owners (FSBOs). -Communicating with consumers and identifying their real estate needs are key. -Licensees provide an array of valuable services that consumers can pick and choose from. -Knowledgeable and independent consumers can seem threatening to a licensee; however, the licensee has the opportunity to emphasize the value and variety of real estate services offered, for varying fees. -Remember that it is ultimately the broker who decides whether an unbundling of services is good for the company. -Example A buyer wants to buy a house without contracting with a licensee but needs help writing an offer. -The buyer asks a broker friend to write an offer to purchase. -The broker consults with the buyer, writes the offer to purchase, and charges the buyer a set fee for the service.
History of Brokerage
-The nature of real estate brokerage services, particularly those provided in residential sales transactions, has changed significantly in recent years. -In the 1950s, real estate brokerage firms were primarily one-office, minimally staffed, family-run operations. -The real estate broker listed an owner's property for sale and found a buyer without assistance from other brokerage companies. -The sale was negotiated and closed. -The common-law doctrine of caveat emptor ("let the buyer beware") was the rule; buyers were pretty much on their own. -In the 1960s, brokers started to share information about properties they listed, resulting in two brokers cooperating to sell a property. -The brokers formalized this exchange of information by creating a multiple listing service (MLS). -The MLS expedited sales by increasing a single property's exposure to more potential buyers. -Because it generated more sales, the MLS quickly became a widely used industry service. -But one thing remained the same: both brokers still represented the seller's interest. -By the late 1980s, buyers began to demand not only accurate, factual information but also objective advice, particularly in the face of increasingly complex real estate transactions. -Today, buyers seek representation as well. -Most states recognize buyer agency today, and buyer's agents are involved with a large percentage of sales contracts.
Penalties
-The penalties for antitrust violations are severe. -For violations committed after 2004, individuals face a fine up to $1 million and/or up to 10 years imprisonment; -corporations can be fined up to $100 million per offense. -Under the Clayton Act, injured parties may be awarded up to three times the amount of damages sustained, attorney fees, and other litigation costs. -The Federal Trade Commission can issue cease and desist orders to stop violators from antitrust practices.
Quiz
1. The real estate website should include: A: A disclaimer that the site is for information only. The website is as correct as it was last checked, but much can happen to listings and sales in a short period of time. Check for accuracy, and make disclaimers. 2. A broker advertises the commission rates that her firm charges sellers. This advertising is: A: The answer is permitted by antitrust laws. Antitrust laws permit a broker to charge sellers whatever is appropriate for that firm. The broker is free to advertise those rates to the public. 3. In general, under the Junk Fax Prevention Act of 2005, without express written consent or without an established business relationship with the recipient, real estate licensees. A: The answer is may not legally send out an unsolicited commercial fax message. Although the Junk Fax Prevention Act of 2005 does allow for an established business relationship exception, as a general rule, a real estate licensee could not legally send an unsolicited commercial fax message without express written consent or without an established business relationship with the recipient. 4. Pennsylvania's real estate licensee law considers the broker's affiliated licensees, whether associate broker or salesperson, as A: The answer is an employee of the broker. Pennsylvania's real estate license law treats the affiliated licensees (associate broker or salesperson) as employees of the broker, regardless of whether they are considered employees or independent contractors for income tax purposes because the broker is accountable for their licensed activities and, therefore, can control what they do to ensure that their conduct complies with the law. 5. A broker was accused of violating antitrust laws. Of the following, the broker was MOST likely accused of: A: The answer is price-fixing. Brokers have been accused of setting fees between them (i.e., price-fixing). Undisclosed dual agency is a violation of state license law; fair housing laws determine whether an equal opportunity poster should be displayed. 6. Price-fixing and group boycotting are: A: The answer is illegal activities prohibited by antitrust laws. State and federal antitrust laws prohibit price-fixing and group boycotting. These activities are more than unethical; they are illegal. 7. Which of the following is required under the CAN-SPAM Act? A: The answer is email recipients must have an opt-out method. The CAN-SPAM Act prohibits false or misleading header information and deceptive subject lines. It also requires that commercial email be identified as an advertisement and that email recipients have an opt-out method. 8. A real estate salesperson, classified by the IRS as an independent contractor, receives A: The answer is negotiated commissions on transactions. To be treated, for IRS purposes, as an independent contractor, the licensee must receive more than 90% of income as a result of negotiated commissions, not hours worked or a salary. 9. After a particularly challenging transaction finally closes, the client gives the listing salesperson a check for $500 "for all your extra work." Which statement is TRUE? A: The answer is the salesperson may receive compensation only from the broker. As a licensed salesperson, the only party the salesperson can receive compensation from is the employing broker. Acceptance of any fee, compensation, or other valuable consideration by a salesperson or from anyone other than the employing broker violates the licensing law.