13) RECP Chapter 13 The Brokerage Business [Complete]

co-brokerage

A transaction involving a cooperating sub-agent is called co-brokerage; listing broker splits the commission with the "co-broker," typically on a 50-50 basis

MLS (Multiple Listing Service)

A form of broker cooperation, in which members enter all exclusive listings intor a distribution network so every member is promptly informed of new listings as the arrive on the market; listings include all disclosures relevant to the listing

real estate advisory services

Consulting services for real estate investment, development, or management; involves services of providing value estimates, performing market analysis, and managing property\

sole proprietorship

A business owned by one person, whose profits are taxed as that person's; as a real estate broker, must be properly licensed

corporation for profit

A legal entity owned by stockholders for profit; consists of one or more persons authorized to conduct business for profit; overseen by board of directors; distinguishing characterisitics include:

-perpetual existance

-fstatutory legal formation of incorporation

-liability to the extent of the value of one's shares

-double taxation, on business profits and on corporate profits, then on the shareholder's distributed personal income

non-profit corporation

A coprorate entity which is not legally entitled to generate profit, managed by board of directors, and not subject to taxation; may NOT broker real estate

general partnership

A for-profit partnership of two or more owners sharing business profits may not be a distinct legal entity, though a corporation may be a partner in one; MAY broker real estate; distinguished by:

-formation through written/oral agreement

-with/without finanical investment

-dissolution as means of ended the partnership (mutual/death/withdrawal/legal action)

-full liability, jointly and severally

-single taxation on profits

limited partnership

A partnership with general partners (who are wholly responsible for operations) and limted partners (who particpated only in profits, typically as an investor); distinguished by:

-the requirement to invest (determines range of liability

-single taxation on distributed profits

-do not bear debt/obligations liability

joint venture

A partnership formed to complete a specific business endeavor/major project, such as a real estate development; general, limited, and corporation may participate; MAY broker real estate IF co-venturers are duly licensed

business trust

A group of investors who invest in a pooled trust fund managed by their elected trustee; trustee makes investments, distributes profits to trustors; may NOT broker real estate, but MAY buy/sell its own real estate

Real Estate Investment Trust (REIT)

A type of business trust that invests mostly in real estate ; may NOT broker real estate, but BUYS/SELLS its own real estate; purchase certificates of ownership in the trust, which in turn invests the money in real property and distributes the profits back to the investors free of corporate income tax

cooperative association

A non-profit alliance promoting common goods or services; may NOT broker real estate

independent brokerage

A brokerage unaffiliated with a franchise; independently owned; do not require franchise fees, but they also do not offer franchise benefits; expose the broker to a larger market, while maintaining individual identity; typically cater to more experienced advisors who generate high streams of revenue from a sophisticated client base

franchised brokerage

An independently-owned company that enters into a licensing arrangement with a franchisor to participate in various benefits offered in exchange for compensation:

-use of trade name

-national/regional advertising

-training programs

-standardized operating procedures

-national referral system

commercial brokerage

Real estate brokers specializing in the sale and lease of retail, office, and industrial properties; may be a seperate division within a larger brokerage company

residential brokerage

Real estate brokers specialzing in the business of helping homeowners sell and homebuyers purchase homes; may at times broker a small amount of commercial properties

transaction-specialized brokerage

A brokerage that concentrates/organizes aorund a particular type of transaction, such as in apartment rentals, exchanges, or most commonly in residential sales

buyer- and seller-oriented brokerages

Companies that specialize even further by choosing to represent only one side in a transaction; thus a brokerage may represent only commercial tenants, or only residential buyers, or some other limited type of client

real estate trade organizations

An association formed by members of a the industry to develop common standards and goals for the industry; NAR National Association of Realtors is the largest (a protected trade name only permitted for use by members)

NAR Realtor

A broker belonging to the association as a member; in some states, also applies to sales agent

NAR Realtor-Associate

A sales-agent (need clarification***)

authority of a broker license

A distinct state license that:

-allows the holder to represent clients directly in brokering real estate and carry out all fiduciary responsibilities on the client's behalf

authority of a salesperson/sales agent license

A distinct state license that:

-allows the holder represent a broker and carry out tasks legitimately delegated by the broker (offer properties for sale, procure buyers, etc.)

-allows the holder to be a fiduciary to the employing broker

-does not allow for direct representation of a client to the broker, but act only on behalf of the broker as directed by them

-does not allow the holder to bind a client to a contract, recieve any direct compensation from a client, or accept a listing/deposit not in the name of the broker

independent contractor (IC) sales agent

Also called and employee, a person who acts under a broker who is in turn responsible and liable for their actions and is subject to the EEOC/cannot act in illegal discrimination; the employee cannot be demanded to perform specific methods for completing work, and must be responsible for their own taxes

broker employee

A person working dependently for a broker, who in turn can impose specific sales methodologies, withholds taxes/pays unemployment on the person's behalf, and may provide certain benefits to them

real estate/personal assistant

An employee who assists in a variety of tasks for a broker or salesperson; licensed employees must be compensated by the broker/are subject to their supervision; unlicensed employees make be paid direclty by the sales associate the work under, but may not perform any work requiring a license

prospecting

Any activity designed to generate listing prospects

commingling

A broker violation in which the broker places escrow funds into an account that holds personal or business money (can result in license suspension or revocation)

escrow regulations

Laws that require brokers to deposit escrow funds in a timely manner, and in specific accounts that are separate from other accounts (personal/business)

conversion

A broker violation in which the broker uses escrow funds for the broker's business or personal use; is effectively an act of theft and carries serious consequences

TCPA (Telephone consumer protection act)

A law regulating telephone solicitation (including real estate) calls to a residence; requires solicitors to identify themselves and their business affiliation; must comply witth the "Do-Not-Call" lists

CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing)

A federal law that supplements TCPA; bans the sending of unwanted emails to wire devices; requires express authorization for communicationl requires giving senders an opt out choice

Sherman Antitrust Act

First federal action against monopolies; prohibits the restraining of interstate and foreign trade by conspiracy

Clayton Antitrust Act

1914 law that strengthened the Sherman Antitrust Act; prohibits certain exclusive contracts, predatory price cutting, and inter-related boards of directors and stock holdings between same-industry corporations (also legalized labor strikes, pickerting, boycotts)

price fixing

An agreement between two or more brokers to charnge certain rates/commission fees, regardless of market conditions/competitors; disturbs the dynamics of a free, open market

market allocation

The practice of colluding to restrict competitive activity in portions of a market in exchange for reciprocal restrictions from a competitor (ex. we won't compete against you here, if you won't sell houses there)

group boycott

An agreement between two or more real estate brokers to exclude other brokers from fair participation in real estate activities (ex. a group collectively deciding to refuse to show a certain broker's listings)

tie-in agreement

An antitrust violation in which one transaction or agreement is contingent on a second transaction or agreement; also called "Tying Agreement" (ex. I will list and sell your old home if you hire me to find you a new home to purchase)

opportunity brokerage

A small business, usually a proprietorship or partnership, where the transaction

consists of a sale of assets and an assignment of a lease

enterprise brokerage

A larger business, usually a corporation, where the transaction involves the sale of stocks and multiple real estate parcels leased or owned by the seller

asset sale

A sale in which the purchaser takes possession of some or all of the assets of the business, as well as the real estate, in exchange for the sale price

stock sale

A sale in which the purchaser acquires complete ownership of a business, including the legal corporate entity, all assets, all financial liabilities, and any current or future legal liabilities arising from incidents that have occurred prior to the sale

no-compete agreement

A seller's covenant, for compensation, not to compete with the buyer under prescribed conditions and time periods

tangible assets

Those assets that can be appraised by value or seen or touched (ex. cash, inventory, trade fixtures)

intangible assets

Those assets that do not have physical substance (ex. a company name, trademarks, copyrights, licenses, goodwill)

goodwill

An intangible asset consisting of any factor that an owner values in the business, and apart for other specific assets (ex. location, product quality, reputation, and managerial skill; may also refer to the difference between an owner's price and the value of all other business assets

UCC (Uniform Commercial Code)

The body of laws governing commercial transactions in the US; forms the basis for standardized sale documents

Bulk Sales Act

An act that requires recording and publication of a sale not in the normal course of business; protects creditors against the loss of collateral (ex. a business sells over half of its inventory to a buyer and must record the sale as an asset sale)