Association of Real Estate License Law Officials (ARELLO)
good source of information on current laws
Real estate license laws
Protect the public by ensuring a standard of competence and professionalism in the real estate industry
Real estate license laws achieve their goal by
- establishing basic requirements for obtaining a real estate license and, in most cases, requiring continuing education to keep a license
- defining which activities require licensing
- describing the acceptable standards of conduct and practice for lice
Main objective of real estate license laws
To make sure that the rights of purchasers, sellers, tenants, and owners are protected from unscrupulous or negligent practices
Each state has a licensing authority (a commission, department, division, board, and/or agency-for real estate professionals. This authority has the power to
Issue licenses, make real estate information available to licensees and the public, and enforce the statutory real estate law
Each licensing authority has also adopted a set of administrative regulations that administer the statutory law and set operating guidelines for licensees. The regulations have the same force and effect as statutory law, though if they conflict, which wil
the statute will prevail. Both enforce through fines and the denial, suspension, or revocation of licenses
A licensed brokerage business may take many forms
sole proprietorship, corporation, llc, or partnership with another real estate broker
Real estate broker must be able to handle the day-to-day details of running a business and set effective policies for every aspect of the brokerage operation:
- Maintaining space and equipment
- Hiring licensed real estate professionals, as well as unlicensed support staff
- Determining compensation
- Directing staff
- Implementing procedures for licensees to follow in carrying out activities permitted by the s
The broker for whom the salesperson works is called the employing broker and both will be subject to the terms of
an employment agreement, even when the salesperson is an independent contractor for tax and other purposes
Vicarious liability
the broker can be held responsible for the conduct while performing brokerage activities of every sales associate employed by the the broker
Managing broker or supervising broker
responsible for supervision of the real estate professions who act on behalf of the brokerage
The employment agreement between a broker and sales associate should
define the nature, obligations, and responsibilities of the relationship
Independent contractors are
responsible for paying their own income and Social Security taxes and receive nothing from the employer that could construed as an employee benefit, such as health insurance or paid vacation time
Under the qualified real estate agent category set out in the Internal Revenue Code, three requirements must be met for a sales associate to establish a nonemployee status with the employing broker for tax purposes:
- The sales associate must have a current real estate license
- The sales associate must have a written contract with the broker that specifies that the sale associate will not be treated as an employee for federal tax purposes
- A substantial portion of
A licensed personal assistant working for a sales associate must be paid by
the employing broker
Commission
compensation or broker's fee (computed as a percentage of the total sales price) a flat fee, or an hourly rate
Broker's compensation can be affected by
the participation in the transaction of a broker from another firm
Membership in a multiple listing service (MLS) provides
marketing opportunity and the rules of the MLS set out the terms under which brokers agree to cooperate in a transaction, including the sharing of the compensation earned
A commission is considered earned when the work for which the real estate broker was hired has been accomplished which is different from
the time at which the commission is paid; most sales commissions are payable when the sale is consummated by deliver and acceptance of the seller's deed
To receive compensation from a real estate sales transaction, an individual must be
- a licensed real estate broker
- employed by the buyer or seller under a valid contract
- the procuring cause of the sale
Procuring cause
of a sale, a broker must have started or caused an uninterrupted chain of events that resulted in the sale
A ready, wiling and able buyer is one
who is prepared to buy on the seller's terms and is ready to take positive steps toward consummation of the transaction
If the transaction is not consummated, the real estate broker may still be entitled to a commission if the seller
- has a change of mind and refuses to sell
- has a spouse who refuses to sign the deed
- has a title with uncorrected defects
- committed fraud with respect to the transaction
- is unable to deliver possession within a reasonable time
- insists on terms n
In some cases, the sales associate may draw from an account against earned shares of commissions
providing a minimal level of regular income
Some firms have adopted a 100% commission plan in which each sales associate
pays a monthly service charge to the broker to cover the cost of office space, telephone, and supervision in return for keeping 100% commissions from the sales the sales associate negotiates
Graduated commission splits
Based on a sales associate's achieving specified production goals, gradually increases
In a transaction involving two firms
the entire commission is received by the broker representing the party who pays the commission, and the agreed-upon share of the commission is paid to the cooperating broker
A real estate professional may want to offer a seller the following services, as permitted by state law
- Helping the seller prepare the property for sale
- Performing a comparative market analysis (CMA) to assist the seller in pricing the property
- Assisting with marketing the property using the MLS and websites
- Locating and screening a buyer
- Helping
Services directed towards buyers
- Working out the economics of renting versus owning
- Helping a buyer with a mortgage pre approval
- Consulting on a buyer's desired location
- Visiting properties with a buyer and checking property information
- Helping fill in the blanks of an offer to
Minimum level of services a consumer should expect from a real estate professional
- accept delivery of and present offers and counteroffers to the client
- assist the client in developing, negotiating, and presenting offers and counteroffers
- answer the client's questions about offers, counteroffers, and contingencies
Fee-for-service concept
can create marketing opportunities for specific services, such as preparing a property for sale, but can also lead to a recognition by the consumer of the blue of the real estate professional's knowledge and expertise
a specific list of services to help people who decide to sell their own home known as
for sale by owners (FSBOs)
Communicating with consumers to identify their real estate needs is key to developing a
successful real estate business
Antitrust laws
The Sherman Antitrust Act provides specific penalties for a number of illegal business activities (common antitrust violations are price-fixing, the group boycott, allocation of customers or markets, and tie-in agreements
Price-fixing
a practice in which competitors agree to set prices or other terms and conditions for products or services rather than letting competition in the open market establish those prices
In real estate price-fixing occurs when
competing brokers agree to set sales commissions, fee, or management rates, real estate brokers must independently determine commission rates or fees for their own firms only
No discussion of commissions or fees should ever take place
at any gathering of two or more real estate professionals from different brokerages
The broker and sales associates must make it clear to clients that the rate stated is
only what that brokerage charges
a group boycott occurs when
two or more businesses conspire against another business or agree to withhold their patronage to reduce competition. illegal
Allocation of customers or markets involves an agreement between real estate brokers to
divide their markets and refrain from competing for each other's business
Tie-in agreements or tying agreements
agreements to sell one product only if the buyer purchases another product as well. The sale of the first (desired) product is tied to the purchase of a second (less desirable) product
Under the federal Sherman Antitrust Act the penalty for fixing or allocating markets is a maximum
$1 million fine and 10 years in prisons. for corporations the penalty may be as high as $100 million
An individual who has suffered a loss because of an antitrust violation may sue for
treble damages-three times the actual damages sustained
Professional ethics/moral principles do two things
- establish standards for integrity and competence in dealing with consumer of an industry's services
- define a code of conduct for relations within the industry among its professionals
Code of ethics
a written system of standards for ethical conduct
The National Association of Real Estate Brokers (NAREB)
members are known as Realitists also adheres to a code of ethics
REALTORS are expected to subscribe to
NAR's Code of Ethics
The National Association of REALTORS has adopted an Internet Data Exchange (IDX) policy
allows all MLS members to have equal rights to display MLS data, while also respecting the rights of the property owner and the real estate broker who provides that those MLS participants interested in keeping their listings from competitors' websites can
State law may require that all communications by a real estate professional include
the licensee's name, address, license number, and (for a sales associate) the name of the employing broker
NAR's Internet Data Exchange policy, internet advertising laws and regulations frequently include the following stipulations:
- All electronic communication by a real estate professional must include the professional's name, office address, and broker affiliation
- Real estate professionals must disclose their license status on each page of a website that contains an advertiseme
Electronic contracting
growing part of real estate practice because it quickly and efficiently integrates information in a real estate transaction between clients, lenders, and title and closing agents
Two federal acts govern electronic contracting:
the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (E-Sign)
The primary purpose of UETA is to
remove barriers in electronic commerce that would otherwise prevent enforceability of contracts
UETA's four key provisions are the following:
- A contract cannot be denied its legal effect just because an electronic record was used
- A record or signature cannot be denied its legal effect just because it is in an electronic format
- If a state's law requires a signature on a contract, an electr
National Do Not Call Registry
list of telephone numbers from consumers who have indicated their preference to limit the telemarketing calls
Telemarketers and sellers are required to search the registry at least once every
31 days and drop registered consumer phone numbers from their call list
Real estate professionals may call consumers with whom they have an established business relationship for up to
18 months after the consumer's last purchase, delivery, or payment, even if the consumer is listed on the National Do Not Call Registry, may call a consumer for up to 3 months after the consumer makes an inquiry or submits an application
Junk emails (spam) are prohibited by
the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, known as the CAN-SPAM act
An important feature of this law (CAN-SPAM) that applies to commercial electronic mail messages is that email solicitations must include a means by which
the recipient can "unsubscribe" from future messages
Additional restrictions on the use of the internet, mobile apps and ad networks
Children's Online Privacy Protection Act (COPPA), requires the posting of a privacy policy and limits the personal information that can collected from children younger than 13