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Real Estate Servises

REAL ESTATE BROKERAGE


A. Brokers are intermediaries: they bring buyers and
sellers together
1. In real estate needs
2. Physically
3. Emotionally

B. Brokers charge commissions for their services


1. Normally, percentage of price
2. Net commission: Difference between required price and
actual price

REAL ESTATE BROKERAGE


C. What do Brokers bring to the table?
1. Prices and terms in current market
2. Marketing approaches that work
3. Legal obligations of buyers and sellers
4. Properties in market
5. Potential customers and their needs
6. Procedures and requirements of transaction

Law of Agency and Agents


A. Law of agency: Governs relationship between a
principal (client) and someone charged to act on
principal's behalf
1. Rights and obligations of agent
2. Rights and obligations of principal

B.Types of Agents
1. Universal agent: Power to act for principal in all
matters
2. General agent: Power to act within limits of a business
or employment relationship
3. Special agent: Power to act in a specific event or
transaction

3 Types of Agents
Universal Agent:
Can act for the principal
Medical
in ALL matters
documents
Personal agreements
Taxes and other
business with govt.
Living
arrangements
Insurance

General Agent:
Can act for principal
within a specific business

Property
managers

Special Agent:

Can act for principal


in a specific
transaction
Brokers

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Duties or Fiduciary Responsibilities


A.Brokers have a fiduciary responsibility to
their clients
1.
2.
3.
4.
5.
6.
7.

Disclosure open and honest


Maintain confidentiality
Follow the instructions of their principal
Keep principal informed of all financial aspects
Dont subordinate interest of principal to others
Disclose all relevant information to the principal
Always represent the interest of their principals to the
best of their ability (loyalty)

B. Principal Resposibilities: Open, Honest, Fair

Duties or Fiduciary Responsibilities


Agency relationship begins with a listing
contract
B.

1. Open listing: property may be listed with other brokers


(MLS)
2. Exclusive agency listing: owners may sell the property
without paying commission
3. Exclusive right of sale listing: broker gets commission
regardless of who sells the property

Listing Contract
A. Creates an agency relationship (special
agent)
B. A contract for services, not for real estate
C. Usually a contract between seller and broker
D. Increasingly between buyer and broker
E. Frequently involves sub-agency through
multiple listing service (MLS).
F. Dual agency: Representing both buyer and
seller

Listing Contract
A. A broker earns a commission by finding a
ready, willing and able buyer for the
specified price and terms
B.Types of contracts
1. Exclusive right of sale
2. Exclusive agency
3. Open listing

Commission Splitting:
Example

The Problem of Dual Agency


A.Natural tendency in brokerage for dual
agency
1. Salesperson works closely with buyer but is
distant from seller
a.FTC Study (1984): 74.2 percent of buyers
believed the sales agent worked for them
b. This misunderstanding appears to be
unchanged
2.Firm with both seller and buyer agents could
represent both sides of transaction

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The Problem of Dual Agency


B. Solutions?
1. Designated agent: Brokerage representing
both sides appoints separate agent for each
2. Buyer agent by law: Salesperson showing a
house becomes buyer agent unless declaring
otherwise
3. Transaction broker: Not an agent for buyer or
seller

The Problem of Unintended Dual


Agency

Licensing of Brokers and


Salespersons
A. Must be licensed to provide real estate
transaction services for others: buying,
auctioning, renting, selling, appraising,
leasing, exchanging
B.Two levels of licensure
1. Salesperson: Must work for a broker
2. Broker: Can operate own brokerage agency

Licensing of Brokers and


Salespersons
C. General requirements for licensure:
1. Minimum age, high school diploma, good
reputation
2. Pre-licensing education requirement
3. Pass state licensing exam
4. Minimum experience (for brokers license)

D. Exemptions from licensure: Attorneys,


resident managers, government
employees, trustees, executors, and those
with power of attorney

Industry Certifications or
Designations
A. Realtor or Realtor-Associate:
Affiliation, through local board, with
National Association of Realtors
B. CCIM: Certified Commercial
Investment Member
C. SIOR: Society of Industrial and Office
Realtors

Anti-Discrimination Laws Affecting


Real Estate Services
A. Title VIII of the Civil Rights Act of 1968 prohibits
discrimination by race, color, religion, national origin,
sex, familial status, and handicap, including:
1.Refusing to rent or sell
2.Offering different terms and conditions
3.Selective advertising
4.Blockbusting
5.Denying home loans
6.Denying real estate services
7.Coercing, intimidating or interfering with exercise of these
rights

Growth Areas in Real Estate


Brokerage
A. Internet Marketing
1. Residential
www.realtor.com
www.homestore.com
2. Commercial
www.costar.com
www.loopnet.com

B.International brokerage
1. Foreign purchases in the United States
2. U.S. interests purchasing abroad

Considerations in Selecting a Broker


A.How will the firm market the property?
B.Amount and type of advertising?
C.Experience of others with the firm?
D.General reputation in the community?
E.Much like the process of selecting any
other professional

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Single Agent vs. Transaction Broker


A.Single Agent
1. Dealing honestly
and fairly
2. Loyalty
3. Confidentiality
4. Full disclosure

B. Transaction Broker
1. Dealing honestly
and fairly
2. Limited
confidentiality
3. Disclosing all
known facts
affecting value
that are not readily
observable to
buyer
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REAL ESTATE BROKERAGE


HOMEWORK ASSIGNMENT
A. Key terms: Fiduciary Relationship,
Law of Agency, Principal, Agent
B.What are the 3 types of agents?
C. List and describe at least 5 duties of
an agent
D. List and describe the three main
types of listing contracts.

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