Hegger Exam 4

ch 12

brokers bring buyers and sellers together in what ways

• in real estate needs

• physically

• emotionally

brokers collect commission for a successful transaction

• normally, % of price

• rarely, net commission (actual price - target price)

special knowledge brokers offer

• prices and terms in current market

• marketing approaches that work

• legal obligations of buyers and sellers

• properties in market

• potential customers and their needs

• procedures and requirements of transaction

law of agency

governs relationship between a principal (client) and someone charged to act on principal’s behalf

• setup rights and obligations of agent and principal

universal agent

power to act for principal in all matters

• some attorneys and people with power of attorney

types of agents

• universal

• general

• special

general agent

power to act within limits of a business or employment relationship

• property manager

special agent

power to act in a specific event

• broker

duties or fiduciary responsibilities of agents (COALDS)

• confidentiality

• obedience

• accounting

• loyalty

• disclosure

• skill and care

confidentiality

never betraying confidential information

obedience

following instructions of the principal fully

accounting

keeping principal informed about financial aspects of assignment

loyalty

never subordinating the best interest of principal

disclosure

being completely open and honest

skill and care

representing principal as agents would represent themselves

duties of principal

• open

• honest

• fair

problem of dual agency

natural tendency in brokerage for dual agency

• salesperson works with buyer but not with seller

• broker firm often is engaged with both buyer and seller

solutions to dual agency

• designated agent

• buyer agent by law

• transaction broker

designated agent

brokerage representing both sides appoints a separate agent for each party

buyer agent by law

salesperson showing a house becomes buyer agent unless declaring otherwise

transaction broker

not an agent for buyer or seller

• also called facilitating or intermediary broker

single agent has to

• deal honestly and fairly

• loyalty

• confidentiality

• full disclosure

transaction broker has to

• deal honestly and fairly

• limited confidentiality

• disclosing all known facts…affecting value…that are not readily observable to buyer

need license to offer real estate services to others

• buying

• auctioning

• renting

• selling

• appraising

• leasing

• exchanging

• bar sale

two levels of license

• salesperson: must work for a broker

• broker: can operate own brokerage agency

exemptions from licensure

• attorneys

• resident managers

• government employees

• trustees

• executors

• those with power of attorney

general requirements of licensure

• minimum age (18)

• high school diploma

• good reputation (no felonies)

• pre licensing education requirement

• pass state licensing exam

• minimum experience (for broker’s license)

industry certifications

• Realtor or Realtor-Associate

  • local association

  • National Association of Realtors

• CCIM

  • Certified Commercial Investment Member

• SIOR

  • Society of Industrial and Office Realtors

  • requires a lot more transactions to be

how commercial brokerage is different

• more emphasis on financial concerns

• more contracts involved, more complex

• more complex and sophisticated negotiations

emphasis on financial concerns of commercial brokerage

• income and expense details

• construction of and interpretation of proformas

contracts involved with commercial brokerage

• commercial leases

• tenant analysis and relations

• property service contracts

complex and sophisticated negotiations of commercial brokerage

• more experienced buyers and sellers

• more complex issues

• more at stake in each deal

segmentation examples in brokerage markets

• residential

  • condo vs single family

  • specific neighborhoods

  • vacation and second homes vs primary homes

• non-residential

  • property type: retail, office, industrial, apartments

  • scale and firm size

  • geography: local, regional, national, international

Title VIII of the Civil Rights Act of 1968

prohibits discrimination by

• race

• color

• religion

• national origin

• sex

• familial status

• handicap

in activities like

• refusing to rent or sell

• selective advertising

• denying home loans

• denying real estate services

• coercing, intimidating, or interfering with exercise of these rights

blockbusting

broker would target a street that was dominantly white and bring client of color to street to convince white people to sell

redlining

segregation of color in specific neighborhoods

discrimination by familial status allowed for elderly

designated elderly residential property can refuse occupancy to persons under age 62 or families with children

listing contracts

a broker earns a commission by finding a ready, willing and able buyer for the specified price and terms

• traditionally created special agent relationship

• a contract for services, not for real estate

• usually between seller and broker

• increasingly between buyer and broker

• frequently has involved subagency through MLS

• sometimes dual agency

types of contracts

• exclusive right of sale

• exclusive agency

• open listing

exclusive right of sale

agent is compensated if anyone finds a buyer

exclusive agency

agent is compensated i any agent finds a buyer, but not if owner does

open listing

agent is compensated only by finding a buyer

innovations in brokerage

• buyer brokerage

• unbundling of brokerage services

  • advertising

  • document preparation

  • administration of transactions

• discount brokerage

• electronic marketing for local brokerage firms

target net price

= gross price - commission rate x gross price

= (1 - commission rate) x gross price

gross price

= target net price / (1- commission rate)