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Real Estate - 260
Brokerage
| Question | Answer |
|---|---|
| independent contractors | 1.control over the manner in which services are performed 2.taxation of independent contractors, and avoidance of the tax attributes of employer/employee relationships |
| Real estate agency’s variations from traditional, common law principal -agency relationships: | 1.Licensing requirements 2.Lack of authority to bind the principal (absent special powers)3.duties to persons who are not principals 4.potential for dual agency |
| licensing requirements | 1.brokers 2.supervised sales people “associates” |
| absent special powers | Note: Express Authority leads to Implied Authority (Karp 258-9) |
| broker vs realton -the role of professional associations and forms | 1.always consider the source of the form – who is the language designed to protect? 2.even when the government approves or develops a form, look for the handiwork of “the industry |
| Brokerage as a licensed profession Disclosures to clients and others RM 7005-7006 and 7008-7009 Trust Account handling Unauthorized Practice of Law RM 7001-7002 | 1.licensing requirements, including mandatory basic and continuing education 2.ethical rules for behavior Disclosures to clients and others RM 7005-7006 and 7008-7009 Trust Account handling Unauthorized Practice of Law RM 7001-7002 |
| ethical rules for behavior | 1.disclosures to clients and others RM 7005-7006 and 7008-7009 2.trust account handling 3.unauthorized practice of law RM 7001-7002 |
| broker’s duties to the principal | 1.Not put broker’s personal gain ahead of principal’s interests – broker is a fiduciary 2.good faith and loyalty 3.skill and care |
| good faith and loyalty | 1.fully disclose negotiations and other facts 2.follow lawful instructions 3.carefully handle funds |
| skill and care | 1.principal is generally responsible for misconduct of broker - You want an effective broker, but one who is honest Q: How much of a burden does state law put on a broker to be an expert? |
| agreements with brokers | 1.Statute of Frauds–“no paper, no pay” in most states 2.“Listing Contracts” - Agreements to Represent Sellers* |
| kinds of listing agreements | 1.open listing agreement 2.exclusive agency listing agreement 3.exclusive right to sell listing agreement * These are to be distinguished from the multiple listing service, which is a mechanism for brokers to cooperate on listings they have obtained. |
| “Listing Contracts” - Agreements to Represent Sellers* | Agreements with Brokers Statute of Frauds – “no paper, no pay” in most states These are to be distinguished from the multiple listing service, which is a mechanism for brokers to cooperate on listings they have obtained |
| Common Terms in listing agreements | 1.Disclosures – to be sure brokers satisfy their legal obligations 2.Exclusions 3. Carryover or Extension Provisions 4.Description of Marketing Efforts and permission to use MLS 5.Definition of When Compensation is Earned 6.Non-Assignability of Duties |
| exclusions | Imagine a seller had shown her property to a prospective buyer, and later chose to list the property with a broker. What can the seller do to avoid paying a commission if that buyer later comes back to make a deal? (RM 7003 at line 41) |
| carryover or extension provisions | Extension or "carryover" coverage of exclusive right to sell listing agreement - to protect brokers from sellers who try to avoid commissions. See RM 7004 (at line 64) and Karp (for common law limits on bypassing broker) |
| Non-Assignability of Duties | Absent special provisions, a brokerage agreement is a personal services contract that is not assignable to another broker (note cooperation language and MLS provisions in listing contract, however) |
| When is commission earned? Karp 273-274 | 1.“Procuring Cause” 2.Presentation of "Ready, Willing and Able" 3.Some movement to "no close/no commission" arrangements |
| “Procuring Cause” | clearly relates to an open listing or exclusive agency situation-if a deal is made while an exclusive right to sell listing is in place & there are no exclusions applicable to transaction, agent gets a commission without putting any effort into the sale |
| Presentation of "Ready, Willing and Able" buyer | earning a commission when the seller backs out. These disputes usually focus on whether the buyer was financially “able” |
| Net listing | "You can sell my property for whatever you can get, so long as I clear $X." Generally Illegal: too great a potential for conflict with the principal’s interests. |
| Termination of Agency – Karp at 275-6 | 1.Agency is a consensual relationship and either party has the power to end it, at any time. 2.Agency coupled with an interest – this comes up in odd ways (look back at the license coupled with an interest discussion in Ch. 9 of Karp.) |
| Agency is a consensual relationship | NOTE: There is a distinction between having the POWER to terminate an agency going forward, and having the RIGHT to do so, however. Damage claims can arise from wrongful termination. But, Wisconsin’s form deal with this RM 7005, lines 80-83 |
| Multiple Listing Service – cooperation and sharing of compensation among those agents with listings and those agents who can actually deliver a buyer for the transaction - inconsistent with open listings | Born in the belly of brokers’ trade associations 1.Can increase the efficiency of market;BUT members must follow rules 2.Can be exclusionary to fix prices for service 3.Provides a ready-made way for brokers to use subagents Inconsistent with open listing |
| What is the future of the brokerage industry (at least for residences)? | 1.Intrusion by free Internet and FSBO activity. 2.Flat fee, “limited service” brokerage. 3.Negotiation of flat and reduced percentage fee arrangements |
Created by:
rainesv