1. Real Estate Principles, 11th Edition
By Charles F. Floyd
and Marcus T. Allen

2. Chapter 8
Real Estate Brokerage

3. The Real Estate Sales Process
Listing agreement
Marketing the property and qualifying buyers
Presentation and negotiations
Contracts and closing

4. Real Estate Brokers and Sales Associates
A broker is an intermediary who
brings together buyers and sellers
assists in negotiating agreements between buyers and sellers
executes orders of buyers and sellers
receives a commission (or brokerage) in compensation for services rendered.

5. Real Estate Brokers and Sales Associates, cont.
Real estate brokers are individuals licensed by state governments to arrange real estate sale or lease transactions for a commission
Real estate sales associates are individuals licensed by state governments to arrange real estate sale or lease transactions under the supervision of a real estate broker

6. Licensing of Sales Associates & Brokers
All states have a minimum education and testing requirement
Most states require continuing education to renew license

7. Real Estate Brokerage Regulation
All states have regulatory bodies to ensure compliance with regulations
Licenses may be revoked and other penalties imposed for violations

8. Legal Aspects of Broker-Client Relationship
In an “agency relationship,” one party (the principal) authorizes another party (the agent) to act on his or her behalf.
The agent is a fiduciary of the principal

9. Agency Relationships in Real Estate
Broker may be hired to help a buyer find and purchase property
Broker may be hired to help a seller sell a property
Broker may hire associates to assist in locating buyers or properties

10. The Role of Real Estate Brokers
Many transactions have more than one broker involved (e.g., a listing broker and a buyer’s broker)
Dual agency – broker represents buyer and seller at the same time (illogical, right?)
Transactional agency is allowed in some states where broker helps both parties reach a deal while carefully avoiding working to the detriment of either party

11. Broker-Seller Relationship (Seller’s Agent)
Listing agreements establish the agency relationship between sellers and brokers.
Open Listing – owner hires several brokers and is only obligated to pay the broker who finds the actual buyer
Exclusive-Brokerage Listing – owner agrees to hire only one broker to search for a buyer, but reserves the right to sell the property without the assistance of the broker and thus avoid paying a commission
Exclusive-Right-to-Sell Listing – seller agrees to hire only one broker and to pay that broker a commission if the property is sold, even by the owner, while the listing is active

12. Broker-Seller Relationship (Seller’s Agent), cont.
Net listing – Seller guaranteed certain amount, broker keeps excess. Illegal in some states.
Limited-Service Listing – Broker places listing on the multiple listing service but provides little service

13. Broker-Buyer Relationship (Buyer’s Agent)
Types of buyer representation agreements are similar to listings
Open
Exclusive right to represent

14. Broker-Buyer Relationship (Buyer’s Agent), cont.
Compensation to buyer’s agent
Retainer fee
Fixed fee
Percentage of purchase price
Commission split for property listed on the multiple listing service

15. Duties & Rights Under Agency Relationships
Legal duties imposed by statutes and regulations
Ethical duties (e.g., National Association of REALTORS® Code of Ethics)
An agent is in a position of trust and confidence in relation to another person or his or her property. Fiduciaries must act in the best interest of their clients at all times.

16. Fraud & Misrepresentation
Elements of fraud
Intention to mislead
False statement material to the transaction
Client justifiably relies on the statement
Client is injured
Misrepresentation can be innocent with no intention to mislead or even simple negligence, but the broker is still responsible.

17. Seller’s Agent’s Duties to Seller
Locate a buyer and keep the seller informed

18. Seller’s Agent’s Duties to Buyers
Disclose negative factors that might adversely affect the property’s value
See Legal Highlight “The Seller’s Agent’s Obligations to the Buyer”
Keep any money deposits in a neutral location

19. Buyer’s Agent’s Duties to Buyer
Buyer’s agent is a fiduciary of the buyer
Act diligently to locate property that matches buyer’s criteria

20. Buyer’s Agent’s Duties to Seller
Treat all sellers fairly, honestly, and with due care.

21. Fair Housing Prohibits discrimination based on: Sex Race Color
Religion
National origin
Disabilities
Familial status

22. Fair Housing, cont. Cannot engage in steering or blockbusting
Civil Rights Act of 1866 prohibits public and private racial discrimination
Fair Housing Act of 1988 provides penalties for violation
See Legal Highlight “Fair Housing”

23. Disclosure of Agency Relationships
Most states have enacted laws that require brokers to disclose the nature of their agency relationships

24. Termination of Agency Relationships
When a transaction occurs
When the agreement expires
When the parties agree to terminate
When one party breaches the agreement
When one party becomes contractually incapacitated
The listing property is destroyed
The listing property is condemned

25. Types of Brokerage Firms
Franchises
Desk fee arrangements
Multiple-listing services

26. Broker & Sales Associate Compensation
Usually a percentage of the transaction amount
Broker and sales associate usually have an agreed “split”
Cooperating brokers – listing broker, through multiple listing service shares fee with buyer’s broker