Lecture 17 Brokerage and Leasing

Determining Needs and Wants Qualifying Buyers Searching the Market for Property In-Depth Submarket Analysis Contract Negotiation Closing Process Issues in Buyer Brokerage

“Ready, Willing, Able” Buyers Competition between Agents – Commission Rates – Marketing / Advertising – Service Record Marketing Property for Buyers Market Studies – Identifying most appropriate listing (asking) price Contract Negotiation Disclosure / Material Defects Follow-Up with Closing Process Issues in Seller Brokerage

Long Hours, High energy Drive to Succeed Well-Networked “Word-of-Mouth” Advertising Ability to use up-to-date technology Service After Contract Service After the Sale Strong Referral Network Success in Real Estate Brokerage

Lecture 17 Real Estate Agency

Agency Terms Agent: Specialist who provides professional representation Commission: Fee charged for time and expenses by an agent to a client Client vs. Customer

Types of Agents and Agency in Real Estate Broker: Licensed by state; represents “Agency” in real estate transactions – Establishes Agency – Assembles Sales Agents who are responsible to the Broker Sales Agents: Licensed by state UNDER the Broker; assigned by the Broker in agency

Types of Agents and Agency in Real Estate (Late 1990’s) Owner/Seller Agency: Most prominent agency form in real estate – Owner instructs Agent to locate a customer or buyer who is “ready, willing, and able” to purchase a property at a set price – “Listing Agreement” is the governing agency agreement Buyer’s Agent: Agent who solely represents a buyer of real estate Dual Agent: Represented BOTH PARTIES to the transaction

Types of Agents and Agency in Real Estate (Current) No Agency (Non-Representation): Occurs before an offer is made with an agent Single Agency: Represents one party in a transaction – Represents seller, buyer, lessor, lessee Transaction Agent (Facilitator): Brings two parties together for a fee; Only requires basic fiduciary responsibilities

Agent Responsibilities Accountability of all funds Confidentiality of known facts which could harm a client’s position Disclosure of all relevant facts Obedience of client’s legal instructions Skill, Care, and Obedience must be practiced in gathering facts and negotiating contracts

Agent Misrepresentation Intentional Misrepresentation: Can be considered FRAUD on the part of the Agent if the following can be proven: – Intent by the Agent – Information was used by the Agent for making a decision – Monetary loss occurred Unintentional Misrepresentation: Occurs when unverified facts are given to a potential buyer/seller – Recovery Funds – Errors & Omissions Insurance Puffing: Exaggeration of a property’s features

How Agency is Terminated Actions by Agent: – Completion of Agency Purpose – Mutual Agreement by Both Parties – Unprofessional Actions – Loss of License – Conviction of a Felony – Death Actions by Principal (Client): – Death – Breach of Agency by Principal – Mutual Agreement by Other Parties Other Means of Termination: – Expiration of Agency Agreement – Condemnation of Property – Destruction of Property

Lecture 17 Closing Expenses & The Settlement Statement

Settlement: Typical Seller (Grantor) Expenses Title Abstract and Miscellaneous Title Charges Title Insurance (typically Owners’ policy only) Recording of New Deed Satisfaction of Existing Mortgage Documentary Stamps Survey Agency Commission Proration of Ad Valorem Expenses Repairs Home Warranty

Settlement: Typical Buyer (Grantee) Expenses Appraisal and Credit Report Processing and Application Fees to Lender Other Mortgage Fees and Title Endorsements Origination Fees and Loan Points (if applicable) Escrow Accounts Recording Fees for New Mortgage Simultaneous Title Insurance Policy WDO and Inspections Hazard Insurance Proration of Homeowners Asso. Dues

The Settlement Statement Shows Money Owed/Received at Settlement (Closing) Debits: All expenses OWED at Settlement Credits: All funds TO BE RECEIVED at Settlement

Settlement: “Prorations” of Expenses Dividing Income and Expenses Between Grantor and Grantee for Settlement Expenses Paid in Advance – Homeowners’ Association Dues – Rental Income – Termite Bond Policies Expenses Paid in Arrears – Ad Valorem Property Taxes

Settlement: “Prorations” of Expenses Day-of-closing expenses are responsibility of Buyer/Grantee Expenses Paid in Advance: Seller credited, Buyer debited. Expenses Paid in Arrears: Buyer credited, Seller debited.

Settlement: “Prorations” of Expenses

Lecture 17 The Settlement Statement (HUD-1)