contingency fee provision
A provision in purchase agreements and escrow instructions calling for
a specific event to occur or
act to be performed
before a fee is payed
exclusive right to buy listing agreement
A written employment agreement by a broker and a prospective buyer of RE
- employing broker
- entitling the broker to a fee when property is purchased during a listing period
unilateral fee instructions
Instructions signed only by the seller which authorize escrow to pay the broker fee from net proceeds of sale
fee-splitting
Allows for payments to another broker (horizontal) or payments to an agent or finder w/in brokers office (vertical) allowed under RESPA & Calbre
finder's sole purpose must be to locate business for that broker and finder does not have freedom to direct pr
fiduciary duty
the duty of an agent to act in the highest good faith toward their client and not to obtain any advantage over the client by the slightest misrepresentation, concealment, duress or undue influence
financial services
...
finder
An unlicensed person who - for a fee - provides leads about individuals who may participate in RE transactions
finders fee
Fee paid to an individual who solicited or referred someone to a broker principal etc for re transaction services
Real Estate Settlement procedures act (RESPA)
fed law to promote lender transparency in mortgage origination process. protects consumers from kickbacks an uncompetitive or duplicadte fees.
referral fee
a fee paid illegally by one service provider to another , both rendering re services in a transaction in exchange for a fee when buyers mortgage subjects transaction to RESPA
What is fee consequence if buyer and his broker have an oral fee agreement and seller interferes with the agreement causing buyers broker to lose fee?
If seller knowingly interferes with written or oral fee agreement between buyer & his brokercausing buyer to breach on fee the seller becomes obligated to pay buyer brokers fee
When is broker fee typically "earned" on a sales transaction
When broker presents a full price (or otherwise acceptable) offer from ready willing and able buyer.
If a fee is earned but a transaction fails to close escrow because buyer or seller can't perform is fee forefit or earned?
Broker fee is earned typically when offer is signed. The contingency fee provision calling for fee to be payed at close of escrow is just a convenience.
What is default fee provision used in escrow instructions if agent dictating instructions fails to specify the type of payment of fee provision
seller alone instructs escrow by way of a suplemental (unilateral) escrow instructions to pay the brokers from funds accruing to the account of selelr on close of escrow.
What are different types of payment arrangements available to brokers when dictating escrow instructions for payment of fee (in order of importance/enforceability from least to greatest)
unilateral instructions signed only by the seller
an assignment accompanied by unilateral instructions signed by seller
a lien against sellers proceeds for fees
Instructions signed by sellers and brokers
instructions signed by both seller and buyer
Which fee arrangement available to brokers for payment of fee give brokers least assurance of payment of their fee
unilateral fee instructions signed only seller
What is disadvantage of unilateral fee instructions to escrow - for brokers
gives seller the sole & absolute ability to cancel revoke or alter broker fee instruction and still close escrow. All fees may be paid out to seller leaving no funds for broker to recover fee from
why do mutual instructions to escrow signed by buyer and seller for payment of broker fees at close of escrow provide the best assurance of payment
Both seller and buyer must agree to and sign instructions so they would have to collaborate to alter
If there is collaboration to deprve broker of fee both buyer and seller become liable for the fee
Mutual instructions can call for any change to fee provi
What are the 3 classes of agents in CA
licensed broker
licensed sales agent
unlicensed finder
what is difference in relationship between principal & licensed agents vs unlicensed finder
licensed broker/agent must perform fiduciary duty with utmost care & diligence
finder has no fiduciary duty - is just paid to solicit, identify & refer potential clients to broker in exchange for a fee
what are legal limitations on what services a finder can perform?
Finder cannot participate in any part of giving out property info or negotiating transactions
What is potential penalty for broker who allows a non licensed individual to do "licensed" work?
May have their license suspended or revoked
what is penalty for engaging in brokerage activities w out a license
penalty of up to $20k and up to 6 mo in jail
What transactions are not subject to RESPA restrictions
apartment building w/ 5or more units
commercial building
agricultural property
business opportunities
vacant land
25+ acre property
lease/rental
all cash transaction
seller carryback w/ no federal loan origination
How does RESPA limit brokers ability to collect referral fee
If broker is already collecting a fee for transactional duties RESPA prohibits them from collecting a referral fee
Can a broker employ an agent, finder or administrative person without a written employment agreement?
no
RESPAs goal
Prohibit activity that artificially drives up the costs buyers & sellers of RE pay for services to close a sale
Blanket rule set out by RESPA
No referral fee can be payed or received by a settlement service provider(broker/escrow/lender) who will be rendering transactional services in exchange for compensation in a RESPA sale
(concurrent origination of mortgage financing as part of a 1-4 unit r
What are exceptions to RESPAs blanket rule?
Referral fees paid to /from one broker to another as long as neither broker is involved as a loan broker or lender
Fees paid by broker to licensed agents or unlicensed finders within the brokers office
3 classes of finders under RESPA
friends or past customers who pass on tips to broker
individuals who sell lead lists to brokers
bona fide employees of broker who generate business fo employing broker
financial services representative
bona fide employee of a broker who generates business for the broker
What type of finder is entitled to a fee under RESPA?
a bona fide employee of a broker OR
a person who sells lead lists