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Real Estate Law Real Estate Brokers
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Page 1: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

                                    

Real Estate Law

Real Estate Brokers

Real Estate Law

Real Estate Brokers

Page 2: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Real Estate BrokersReal Estate Brokers

Subjects Covered:Subjects Covered:

The Role of the BrokerThe Role of the Broker

Types of Listing AgreementsTypes of Listing Agreements

Broker’s AgreementsBroker’s Agreements

Page 3: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Real Estate BrokersReal Estate Brokers

Real Estate Agents – Definitions:Real Estate Agents – Definitions:

BrokerBroker

One employed to negotiate the sale, One employed to negotiate the sale, purchase or exchange of land. purchase or exchange of land. Compensation generally in the form of a Compensation generally in the form of a commission. commission. 

SalespersonSalesperson

Employee of broker. Receives Employee of broker. Receives compensation from broker. Responsible compensation from broker. Responsible only to the Broker. Salesman's activities only to the Broker. Salesman's activities performed in the name of the Brokerperformed in the name of the Broker..

Page 4: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Licensing RequirementsLicensing Requirements

All states and Canadian provinces require All states and Canadian provinces require Real Estate Brokers to be licensed. Real Estate Brokers to be licensed.

Purpose of licensing laws:Purpose of licensing laws:

− protect public from dishonest or protect public from dishonest or incompetent Brokers.incompetent Brokers.

− prescribe standards and qualifications for prescribe standards and qualifications for licensing Brokers.licensing Brokers.

− maintain high standards in real estate maintain high standards in real estate profession.profession.

− protect licensed Brokers from unfair protect licensed Brokers from unfair competition.competition.

Page 5: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Licensing Requirements (cont’d)Licensing Requirements (cont’d)

Real Estate Broker NOT entitled to Real Estate Broker NOT entitled to commission unless he had license at time commission unless he had license at time he was hired to perform services for which he was hired to perform services for which he received the commission.he received the commission.

Criminal penalties often imposed on Criminal penalties often imposed on person who violates Broker's licensing person who violates Broker's licensing statutes. statutes.

Page 6: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Agency RelationshipAgency Relationship

The Listing Agreement serves as an The Listing Agreement serves as an employment contract and establishes an employment contract and establishes an agency relationship. agency relationship.

Parties in Agency Relationship:Parties in Agency Relationship:

Principal (Seller or Buyer)Principal (Seller or Buyer)

Agent (Broker)Agent (Broker)

Page 7: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Agency RelationshipAgency Relationship

Powers and Duties of AgentPowers and Duties of Agent

Authority limited to agreement between Authority limited to agreement between principal and agent. Some duties set forth principal and agent. Some duties set forth in agreement (e.g., Buyer’s Broker to in agreement (e.g., Buyer’s Broker to ““assist Buyer in locating property, assist Buyer in locating property, negotiating the purchase thereof, and negotiating the purchase thereof, and obtaining financing therefore”)obtaining financing therefore”), others are , others are implied by law.implied by law.

Page 8: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Agency Relationship (cont’d)Agency Relationship (cont’d)

Broker is generallyBroker is generally notnot given broad authority given broad authority to act for principal.to act for principal.

Example:Example: Broker may not represent condition of property Broker may not represent condition of property (but (but mustmust disclose known material defects), disclose known material defects), receive all or part of the purchase price, or make receive all or part of the purchase price, or make representations to a Buyer that the deposit will representations to a Buyer that the deposit will be returned if there is no sale unless these be returned if there is no sale unless these powers are specifically provided for in Listing powers are specifically provided for in Listing Agreement.Agreement.

Note situations where Broker is given express Note situations where Broker is given express authority to perform certain acts and other authority to perform certain acts and other apparent authoritiesapparent authorities are assumed granted. are assumed granted.

Page 9: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Implied Duties of Real Estate BrokersImplied Duties of Real Estate Brokers

Derived from general agency principles. Derived from general agency principles.

Broker always must put interest of Principal Broker always must put interest of Principal first. first.

Guidelines:Guidelines:

CareCare

Broker must exercise a reasonable amount Broker must exercise a reasonable amount of care while transacting business.of care while transacting business.

ObedienceObedience

Broker must act in good faith and in Broker must act in good faith and in conformity with Principal's instructions and conformity with Principal's instructions and authority.authority.

Page 10: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Implied Duties of Real Estate Brokers Implied Duties of Real Estate Brokers (cont’d)(cont’d)

LoyaltyLoyalty

Broker owes Principal 100% loyalty. Place Broker owes Principal 100% loyalty. Place Principal's interest above those of any other Principal's interest above those of any other person he/she is dealing with.person he/she is dealing with.

AccountingAccounting

Broker must be able to report status of all Broker must be able to report status of all funds entrusted to them by Principal.funds entrusted to them by Principal.

NoticeNotice

Broker must keep Principal fully informed at Broker must keep Principal fully informed at all times of all facts which might affect all times of all facts which might affect Principal's business decisions.Principal's business decisions.

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Types of AgentsTypes of Agents

Single AgentSingle Agent

Licensee who is acting as agent of only one Licensee who is acting as agent of only one principal in a transaction, either the Buyer or principal in a transaction, either the Buyer or the Seller (i.e., either “Buyer’s Agent” or the Seller (i.e., either “Buyer’s Agent” or “Seller’s Agent”).“Seller’s Agent”).

Dual AgentDual Agent

Licensee who is acting as agent of both the Licensee who is acting as agent of both the Seller and the Buyer. General rule prohibits Seller and the Buyer. General rule prohibits dual agent situation except when parties dual agent situation except when parties provide written consent.provide written consent.

Page 12: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Types of Agents (cont’d)Types of Agents (cont’d)

SubagentSubagent

Licensee who is authorized by an agent to aid Licensee who is authorized by an agent to aid in a transaction for a Principal, if authorized in a transaction for a Principal, if authorized under the original Agency agreement.under the original Agency agreement.

Facilitator (non-agent)Facilitator (non-agent)

Licensee who assists the Seller and Buyer in Licensee who assists the Seller and Buyer in reaching an agreement but does not represent reaching an agreement but does not represent either in the transaction. either in the transaction.

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Types of Agents (cont’d)Types of Agents (cont’d)

Problem arises when the Seller is represented by Problem arises when the Seller is represented by one employee of a brokerage, and the Buyer is one employee of a brokerage, and the Buyer is represented by another employee of the represented by another employee of the samesame brokerage (e.g., Coldwell Banker).brokerage (e.g., Coldwell Banker).

Ordinarily, employees of a single firm could Ordinarily, employees of a single firm could represent only represent only eithereither the Seller or the Buyer, since the Seller or the Buyer, since they are they are both both employees of the employees of the samesame brokerage. brokerage.

Massachusetts permits an exception – the Massachusetts permits an exception – the brokerage can brokerage can designatedesignate one employee as the one employee as the Seller’s Agent, and the other as the Buyer’s Agent Seller’s Agent, and the other as the Buyer’s Agent (i.e., “Single Agents) – the brokerage itself then (i.e., “Single Agents) – the brokerage itself then becomes a Dual Agent.becomes a Dual Agent.

Page 14: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Sherman Antitrust ActSherman Antitrust Act

A federal antitrust law protecting against A federal antitrust law protecting against unlawful restraints in trade and unlawful restraints in trade and commerce, such as monopolies and price-commerce, such as monopolies and price-fixing.fixing.

Two concerns:Two concerns:1.1. Per se violations where activities are found to Per se violations where activities are found to

cause a “restraint of trade”.cause a “restraint of trade”.

2.2. Whether activities affect Interstate Whether activities affect Interstate Commerce.Commerce.

Page 15: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Sherman Antitrust Act (cont’d)Sherman Antitrust Act (cont’d)

Four Common Violations:Four Common Violations: 1.1. Price fixingPrice fixing - discussion of commissions with - discussion of commissions with

competitors competitors

2.2. Group BoycottGroup Boycott - two or more competitors - two or more competitors boycott a non competitor boycott a non competitor

3.3. Dividing the MarketDividing the Market - division based on - division based on geography, race or any other criteria geography, race or any other criteria

4.4. Contingent SalesContingent Sales - making the sale of a - making the sale of a product or service contingent on consumers product or service contingent on consumers purchase of another product of servicepurchase of another product of service

Page 16: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Sherman Anti-Trust Act (cont’d)Sherman Anti-Trust Act (cont’d)

Penalties:Penalties: Corporations - up to $1 million per offense Corporations - up to $1 million per offense

Individuals - up to $100,000 plus 3 yrs. Individuals - up to $100,000 plus 3 yrs. imprisonment per offense imprisonment per offense

Civil Penalties - Triple Damages plus Civil Penalties - Triple Damages plus attorneys fees plus court costsattorneys fees plus court costs

Page 17: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Types of Listing AgreementsTypes of Listing Agreements

Open ListingOpen Listing Most favorable to the Seller. Most favorable to the Seller.

Seller retains right to retain any number Seller retains right to retain any number of Brokers to act as his or her agents. of Brokers to act as his or her agents.

Brokers act simultaneously, all looking for Brokers act simultaneously, all looking for buyers. buyers.

Seller only pays commission to Broker Seller only pays commission to Broker who successfully produces a ready, who successfully produces a ready, willing and able buyer.willing and able buyer.

Page 18: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Types of Listing Agreements (cont’d)Types of Listing Agreements (cont’d)

Exclusive AgencyExclusive Agency One Broker is authorized to act as the One Broker is authorized to act as the

exclusive agent of the principal, BUT exclusive agent of the principal, BUT Seller retains right to sell the property Seller retains right to sell the property himself or herself without obligation to the himself or herself without obligation to the Broker.Broker.

Exclusive Right to SellExclusive Right to Sell Most common form for residential sales. Most common form for residential sales.

One broker is appointed as the sole agent One broker is appointed as the sole agent of Seller and given the exclusive right to of Seller and given the exclusive right to represent the Seller in marketing the represent the Seller in marketing the property and finding a purchaser.property and finding a purchaser.

Page 19: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

Broker’s CompensationBroker’s Compensation

The Broker’s CommissionThe Broker’s Commission Broker is paid usually in form of commission Broker is paid usually in form of commission

ONLY entitled to commission IF:ONLY entitled to commission IF:

1.1. LicensedLicensed

2.2. Employed by SellerEmployed by Seller

3.3. Procuring cause of sale (i.e., from a ready, Procuring cause of sale (i.e., from a ready, willing and able buyer).willing and able buyer).

To be considered the procuring cause of sale, To be considered the procuring cause of sale, Broker must have taken action to start or cause Broker must have taken action to start or cause a chain of events that resulted in the sale.a chain of events that resulted in the sale.

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Real Estate Brokers (cont’d)Real Estate Brokers (cont’d)

““Ready, Willing and Able Buyer”Ready, Willing and Able Buyer” Generally, once a Seller accepts an offer from Generally, once a Seller accepts an offer from

a ready, willing and able Buyer, Seller is liable a ready, willing and able Buyer, Seller is liable for Broker's commission regardless of for Broker's commission regardless of whether or not the Buyer completes the whether or not the Buyer completes the purchase.purchase.

"Ready, Willing and Able Buyer""Ready, Willing and Able Buyer" is one who is is one who is prepared to buy on the Seller's terms as prepared to buy on the Seller's terms as specified in the listing contract and ready to specified in the listing contract and ready to take necessary steps to close the deal.take necessary steps to close the deal.

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Real Estate Brokers (cont’d)Real Estate Brokers (cont’d)

Broker gets commission in the following Broker gets commission in the following situations: situations: 

1.1. If Seller refuses to sign purchase agreement, If Seller refuses to sign purchase agreement, generally no liability to buyer, generally no liability to buyer, butbut Seller must Seller must pay Broker commission; orpay Broker commission; or

2.2. Seller's title has uncorrected defects; or Seller's title has uncorrected defects; or 

3.3. purchase agreement signed and sale never purchase agreement signed and sale never consummated, Seller MUST pay commission; consummated, Seller MUST pay commission; oror

4.4. Seller's spouse refuses to sign deed, Seller Seller's spouse refuses to sign deed, Seller MUST pay.MUST pay.

Principal may terminate listing agreement but Principal may terminate listing agreement but must be acting in good faith and agreement is must be acting in good faith and agreement is not for a set term.not for a set term.

Page 22: Real Estate Law Real Estate Brokers Real Estate Law Real Estate Brokers.

QuizQuiz

1.1. The term “real estate agent” may refer to either a The term “real estate agent” may refer to either a real estate sales person or a real estate broker.real estate sales person or a real estate broker.

2.2. A special agent is one who is authorized to A special agent is one who is authorized to conduct a single transaction, or a finite series of conduct a single transaction, or a finite series of transactions not anticipated to be of an ongoing transactions not anticipated to be of an ongoing nature.nature.

3.3. A transaction broker is considered an agent of A transaction broker is considered an agent of both parties to a transaction.both parties to a transaction.

4.4. The fiduciary duty of obedience includes the The fiduciary duty of obedience includes the prohibition of both negligent and intentional prohibition of both negligent and intentional misrepresentation.misrepresentation.

5.5. A title company can act as an escrow agent for A title company can act as an escrow agent for funds received by a broker.funds received by a broker.

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6.6. The duty of disclosure is owed to principals as well as third parties.The duty of disclosure is owed to principals as well as third parties.

7.7. Escrow agents are required to open separate escrow accounts for Escrow agents are required to open separate escrow accounts for each client.each client.

8.8. The fiduciary obligations that transaction brokers do not owe to The fiduciary obligations that transaction brokers do not owe to any one party are the obligations of disclosure and accounting.any one party are the obligations of disclosure and accounting.

9.9. The federal antitrust law prohibiting price-fixing is known as the The federal antitrust law prohibiting price-fixing is known as the Sherman Act.Sherman Act.

10.10. An exclusive listing agreement is one in which the listing broker is An exclusive listing agreement is one in which the listing broker is entitled to receive compensation if the listing broker or any person entitled to receive compensation if the listing broker or any person other than the seller procures a buyer within the listing term.other than the seller procures a buyer within the listing term.

Quiz (cont’d)Quiz (cont’d)

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