Chapter 12 Real Estate Brokerage and Listing Contracts FINANCE 331

real estate brokerage Brokers are intermediaries: they bring buyers and sellers together Brokers charge commissions for their services What do Brokers bring to the table? 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 and Agents Law of agency: Governs relationship between a principal (client) and someone charged to act on principal's behalf Types of Agents Universal agent: Power to act for principal in all matters General agent: Power to act within limits of a business or employment relationship Special agent: Power to act in a specific event or transaction

Duties or Fiduciary Responsibilities Brokers have a fiduciary responsibility to their clients Disclosure – open and honest Maintain confidentiality Follow the instructions of their principal Keep principal informed of all financial aspects Don’t subordinate interest of principal to others Disclose all relevant information to the principal Always represent the interest of their principals to the best of their ability (loyalty) Agency relationship begins with a listing contract Open listing: property may be listed with other brokers (MLS) Exclusive agency listing: owners may sell the property without paying commission Exclusive right of sale listing: broker gets commission regardless of who sells the property

Listing Contract Creates an agency relationship (special agent) A contract for services, not for real estate Usually a contract between seller and broker Increasingly between buyer and broker Frequently involves sub-agency through multiple listing service (MLS). Dual agency: Representing both buyer and seller

Licensing of Brokers and Salespersons Must be licensed to provide real estate transaction services for others: buying, auctioning, renting, selling, appraising, leasing, exchanging Two levels of licensure Salesperson: Must work for a broker Broker: Can operate own brokerage agency General requirements for licensure: Minimum age, high school diploma, good reputation Pre-licensing education requirement Pass state licensing exam Minimum experience (for broker’s license)

Growth Areas in Real Estate Brokerage Internet Marketing Residential www.realtor.com www.homestore.com Commercial www.costar.com www.loopnet.com International brokerage Foreign purchases in the United States U.S. interests purchasing abroad

Commission Splitting: Example

real estate brokerage homework assignment Key terms: Fiduciary Relationship, Law of Agency, Principal, Agent What are the 3 types of agents? List and describe at least 5 duties of an agent List and describe the three main types of listing contracts.