Transcript Document
Agency Contracts (Sales) and Related Practices Learning Objectives Define types and characteristics of a listing contract Describe function and agency characteristics of the multiple listing service Define the essential and common provisions of the listing contract Define the broker’s entitlement to commission Describe the various commission arrangements Describe the property data sheet Describe the North Carolina Residential Property and Owner’s Association Act and related forms © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Broker’s Entitlement to a Commission Commission Sharing: • Three elements of a broker’s right to claim a commission: • The broker must have a valid real estate license • There must be a valid written contract for employment • Procurement of “ready, willing, and able buyer” In-house sales: • Listing broker receives share of listing commission • Selling broker receives share of selling commission • Brokerage company keeps its share of commission © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Broker’s Entitlement to a Commission Co-brokered sales: • Listing broker shares with the selling broker the commission he receives from the owner • Reached by agreement between the two cooperating brokers prior to the selling broker’s participation in the transaction • Selling broker must disclose his agency relationships at the outset Co-brokerage with an Out-of-State Broker: • A N.C. broker may share a commission with an out-of-state broker • Out-of-State broker may not engage in activities in North Carolina which require a real estate license © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Broker’s Entitlement to a Commission Earning Commission as a Buyer’s Broker: • Buyer Agency Agreement controls how the buyer’s agent is compensated • Agent is allowed to receive a retainer fee up front from the buyer • Agent is allowed to receive a success fee from the buyer or seller at closing per terms of the contract General Requirements for Agency Contracts: • Must be in writing from the inception • Possible exception for some non-exclusive buyer agency agreements • Agency agreements must be for a specified period of time • Not allowed to have any renewal or extension clauses • Possible Exception for property management agreements • Having one type of agency agreement does not protect in cases where an additional agency agreement is required • All agency agreements shall contain Commission prescribed discrimination clause © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Contracts and Practices Definition & Purpose of Listing Contracts Types of Listing /Contracts: • Open Listing: • Seller can list with as many different brokers as desired and still retains rights to sell himself without commission • The broker effecting the sale is entitled to the commission • Exclusive Agency Listing: • The property is listed exclusively with one broker but seller retains the right to sell the property himself without commission • If the broker effects the sale of the property, he/she is entitled to a commission © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Contracts and Practices (continued) • Exclusive Right to Sell Listing: • The property is listed with only one broker • Broker is entitled to a commission if the property is sold by anyone during the term of the listing contract even the seller • Limited Service Listing Contracts • Protection Agreement: • Seller agrees to pay a fee to the broker for the sale to a specific buyer • Does not list the property for sale to the general public • Owner consents to have his property shown to this specific buyer, but only under established terms • Listing Contract Provisions © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Contracts and Practices (continued) Brokerage Fee: • Percentage of final sales price: • Most common arrangement found in listing contracts • Flat fee and limited service arrangements: • Specified payment of money by he seller to the broker • Net listing: • Broker receives the difference between the sales price and specified net to seller • Strongly discouraged but not illegal • Referral fees © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Contracts and Practices (continued) Duration of the Listing: • Must be for specified period of time • No automatic renewals are allowed Override or Extender Clause: • Protects the broker’s right to compensation for a period of time after expiration of the listing • Many REALTOR®/MLS agreements will terminate this clause if property is re-listed with another member firm Property Data Sheet: • Contains information on the listed property © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Contracts and Practices (continued) Termination of Listing Contracts: • Successful conclusion of transaction • Expiration of the term of the listing • Breach of contract by seller • Death of the listing agent (in many cases) • Destruction of the subject matter • In the event the agent cannot legally perform • No automatic renewals are allowed © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Multiple Listing Service Arrangements Refers to an Organized Method of Placing Listings in a Pool by Member Brokers Not a type of listing Typically involves and Exclusive Right to Sell listing © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Anti-Trust Law Sherman Antitrust Act prohibits acts in the restraint of trade: • Price-fixing • Group boycotts against different business models © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Laws Affecting Solicitation of Clients/Customers Solicitation of Active Clients of Other Firms/Brokers: • Article 16 of the REALTOR® Code of Ethics prohibits the solicitation of an active clients of another REALTOR® member Do Not Call Laws/Rules (Federal and N.C.): • Establishes a Do Not Call Registry for residential and wireless phone numbers • Prohibits the making of calls for a commercial purpose to a registered number • Exceptions include: • With permission • Existing business relationship • Calls made within 120 days of termination of business relationship • Calls within 90 days of an inquiry into business products/services • Telemarketers required to search registry at least every 31 days © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Laws Affecting Solicitation of Clients/Customers “Junk Fax” Laws/Rules: • Restrict unsolicited faxes without recipient’s permission • Exemption for existing business relationship • Must contain a prominent “opt-out” on the cover sheet “CAN-SPAM Act”: • Regulates SPAMMING by email • Requires subject of the email to be accurately presented • Email must contain the name and physical address of sender • Must contain a prominent “opt-out” feature © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Procedures Preliminary Listing Procedures: • By first substantial contact with a seller the agent must review the Working with Real Estate Agents brochure: • Seller must sign perforated panel to acknowledge receipt • Broker to keep on file for at least 3 years • Agent must educate the seller (client): • Discuss contract provisions and seller and agent duties/responsibilities • Explain duties to provide buyers required disclosure forms • Discuss company’s marketing plan • Discuss company’s commission policy and additional fees • Explain importance of proper pricing • Provide seller sample copy of NCAR sample Offer to Purchase and Contract • Agent must sell himself and his company © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Procedures (continued) Final Listing Procedures: • Broker should inspect property with the seller and assist seller in proper completion of the Residential Property and Owner’s Association Disclosure Statement • Broker should measure the structure according to Commission’s Residential Square Footage Guidelines • Gather appropriate documents (i.e. deeds, title policy, protective covenants) • Prepare and present a CMA • Assist the seller in determining listing price • Prepare of estimate of net proceeds sheet • Review accuracy of property data sheet • Use a well-drafted listing contract form © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Listing Procedures (continued) Final Listing Procedures: • Ensure seller understands the contract provisions • Gives seller’s copies of every they signed • Process listing according to: • North Carolina real estate law, rules, and regulations • Company procedures • Implement marketing plan • Maintain communication throughout the listing period: • Set appointments • Offer feedback • Discuss prices changes when necessary • Maintain a communication log • Changes to listing contract should be in writing © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency Buyer agency contract: • Agreement between a prospective buyer and a broker • Broker acts as the buyer’s agent in the purchase of real estate Agency Disclosure & Nonexclusive Buyer Agency Agreement: • Less comprehensive than the Exclusive Right to Represent Buyer • Establishes a buyer agency relationship • Does not require the buyer to pay or assume the payment of a brokerage fee • Broker is entitled to a commission when the broker is the procuring cause of the purchase © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency (continued) Exclusive Buyer Agency Agreement: • Prospective buyer retains a broker as his/her exclusive agent • Broker is the only real estate agent with whom the buyer can work in the purchase of a property as described in the agreement © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency (continued) Typical Provisions of a Buyer Agency Contract: • Type & general location of property is described • Specific duration for the contract must be stated • Effect of the agreement is to employ the broker as the buyer’s exclusive agent, but buyer may allow or disallow dual agency • Amount & method of compensation are defined • Agent is given permission to disclose buyer’s identity • Buyer is informed of and consents to agent’s representation of other prospective buyers • Agent duties are described © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency (continued) Typical Provisions of a Buyer Agency Contract: • Buyer duties are described • Standard nondiscrimination language is included • Buyer has the right to purchase a home warranty if one is not provided by the seller • Additional provisions that may be negotiated between buyer and agent • Entire agreement is contained herein • Parties agree to mediation first if a dispute arises © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency (continued) Typical Provisions of a Buyer Agency Contract: • Buyer is advised that agent cannot give professional advice outside of his/her field of expertise and cannot guarantee quality of service from any provider whose name the agent may provide to buyer. • Buyer further agrees to pay for any authorized services and to hold agents harmless in regard to acts of contractors and quality of services provided by them. • Buyer acknowledges that he/she received a sample copy of the Offer to Purchase and Contract and a copy of the pamphlet “Questions and Answers on: Home Inspections.” • Confidentiality of offers is addressed. • Individual broker’s license number is required below the signature line. © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency (continued) Procedures for Buyer’s Agents: • Review “Working with Real Estate Agents” at first substantial contact • Buyer chooses the type of agency he/she wants • Assist the buyer to qualify for necessary financing • Develop a thorough understanding of the buyer’s needs and preferences • Carefully observe properties for undisclosed material facts, including but not limited to defects, limitations on intended use, and potential changes in zoning, roads, and annexation status • Identify property Prepare, present, and negotiate the offer to purchase Assist the buyer with preparations for the closing • Inspections • Coordination with the attorney • Coordination with lender • Final walk-through before closing • Notification of the buyer of necessary certified funds • Confirming the accuracy of the closing statement © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Buyer Agency (continued) Procedures for Buyer’s Agents: • Prepare, present, and negotiate the offer to purchase • Assist the buyer with preparations for the closing: • Inspections • Coordination with the attorney • Coordination with lender • Final walk-through before closing • Notification of the buyer of necessary certified funds • Confirming the accuracy of the closing statement © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Dual Agency Dual agency addendum: • Used to commit informed consent of both parties to writing • Modifies agency duties to both parties: • Duty of loyalty is replaced by duties due to third parties: • Duty of fairness and honesty • Duty to disclose material fact and avoid misrepresentation and omission. • All other agency duties still apply © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Dual Agency (continued) Seller’s informed consent must be in writing as follows: • If seller authorizes dual agency in writing when seller agency is first authorized, no further written authorization from him is necessary • Note: Seller’s listing agreement must be in writing from outset • Seller may only authorize dual agency orally if both Buyer Agency and Dual Agency are oral • Seller must authorize in WRITING BEFORE OFFER IS PRESENTED if buyer’s agreements are ORAL © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Dual Agency (continued) Seller’s informed consent must be in writing as follows: • Seller must authorize in WRITING BEFORE PROPERTY IS SHOWN if Buyer Agency is in WRITING • Seller must authorize dual agency BEFORE property is shown to a buyer under an EXCLUSIVE agency agreement within the same firm • If agreement is exclusive, it is in writing • Better to get in writing before showing property in all cases © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Dual Agency (continued) Buyer’s informed consent must be in writing as follows: • If buyer authorizes buyer agency and dual agency in writing at first substantial contact, no further authorization from him is necessary • Buyer may orally authorize buyer agency with or without dual agency • Must reduce buyer agency to writing before making offer in any case • Must reduce dual agency to writing before being shown property in dual agency situation in which buyer has previously authorized buyer agency, but not dual agency in writing • Undisclosed dual agency is a breach of a broker’s fiduciary (trust) duty and is a violation of North Carolina Real Estate Licensing Law © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Dual Agency (continued) Designated agency – A form of dual agency which may be authorized by checking that option on the Dual Agency Agreement • One firm represents both buyer and seller • One agent in the firm can be designated to represent the interest of only the seller • Another agent can represent only the interest of the buyer • The firm acts as the dual agent with each designated agent acting in the interest of his/her respective principal © OnCourse Learning. All Rights Reserved. Agency Contracts (Sales) and Related Practices Dual Agency (continued) Designated agency: • The Broker-in-charge of a firm: • Cannot act as a designated agent when a provisional broker represents the other principal • To do so would create a conflict of interest for the Broker-in-charge • The Broker-in-charge can act as a designated agent when the broker representing the other principal is a broker without provisional status • No agent with prior confidential information about the other party can be appointed a designated agent © OnCourse Learning. All Rights Reserved.