Chapter 13 - The Brokerage Business Flashcards
A broker is reviewing the balance sheet of her new listing to sell a business. Three of the entries on the books are licenses, trademarks, and goodwill. These would be examples of
intangible assets
_____ is a valid distinction between a corporation and a proprietorship?
A corporation has perpetual existence; a proprietorship terminates upon the owner’s death
The three principal brokerage firms in a market agree to pay sales agents 15% more than any other competitor currently in practice. This is an example of
collusion.
A locally-owned brokerage affiliated with a national franchisor for purposes of enhanced image and resources is an example of a …
real estate franchisee
critical skills in real estate brokerage
Listing, marketing, facilitating transactions, and managing information
Real estate sales agents are legally authorized to
represent their employing broker in procuring clients and customers
_____ is the core activity of real estate brokerage
Procuring customers for clients and effecting transactions
A salesperson’s commission rate and structure is established by
competitive conditions
The core activity of real estate brokerage is the
business of procuring a buyer, seller, tenant, or property on behalf of a client for the purpose of completing a transaction.
To generate business, as well as achieve the transactional objectives of clients, a broker must be proficient in four skill areas:
obtaining a client listing
marketing a listing
facilitating the closing of a transaction
managing market information
Types of business ownership that may broker real estate
individual
sole proprietor for-profit corporation general partnership limited partnership joint venture
Types of business ownership that may not broker real estate
non-profit corporation business trust
co-operative association
In addition to being organized as a sole proprietorship, partnership, corporation or joint venture, a brokerage may be:
independent or affiliated
specialized in a type of property
specialized in a type of transaction
specialized in a type of client
A brokerage that is not affiliated with a franchise is an
independent agency.
A franchised brokerage is an
independently-owned company that enters into a licensing arrangement with a franchisor to participate in various benefits offered in exchange for compensation
Franchisors generally offer local franchisees:
the use of a recognized trade name
national and regional advertising
training programs
standardized operating procedures
a national referral system
In exchange, a franchisee pays the franchisor start-up fees and a portion of gross income.
State real estate license laws provide for two distinct licenses to conduct real estate brokerage:
the broker license and the salesperson or sales agent license.
A salesperson may not:
bind a client to any contract
receive compensation directly from a client
accept a listing or deposit that is not in the name of the broker
In accepting employment from a broker, a salesperson generally makes a commitment to:
work diligently to sell the broker’s listings
work diligently to procure new listings
promote the business reputation of the broker
abide by the broker’s established policies
fulfill the fiduciary duties owed clients as their subagent
maintain insurance policies as required by the broker
have transportation for conducting business, as required by the broker
conform to ethical standards imposed by broker and trade organization
uphold all covenants and provisions of the employment agreement
In employing a salesperson, a broker generally makes a commitment to:
make the brokerage’s listings available
make the brokerage’s market and property data available
provide whatever training was promised at the time of hiring
provide whatever office support was promised at the time of hiring
uphold the commission structure and expense reimbursement policy
conform to ethical standards imposed by the broker’s trade organization
uphold all covenants and provisions of the employment agreement
An agent’s commission schedule is a comprehensive summary of commission splits under various circumstances, including:
listing and selling side
salesperson’s level of sales performance
broker’s level of expense reimbursement to agent
the particular policies or organization of the agency
prevailing commission splits in the market
When marketing activities produce prospects, the agent’s marketing role becomes more interpersonal. An agent must now:
qualify prospects’ plans, preferences, and financial capabilities
show properties that meet the customer’s needs
elicit the buyer’s reactions to properties
report material results to the seller or listing agent
Pre-closing responsibilities are:
An agent’s foremost duty following acceptance of an offer is to submit the contract and the earnest money to the employing broker
assisting the buyer in obtaining financing
assisting the seller in clearing title
assisting the seller in completing property repairs
recommending inspectors, appraisers, attorneys, and title companies
assisting in communications between principals
assisting in the exchange of transaction documents
Conversion is the act of
misappropriating escrow funds for the broker’s business or personal use.
Sherman Antitrust Act.
Enacted in 1890, the Sherman Antitrust Act prohibits restraint of interstate and foreign trade by conspiracy, monopolistic practice, and certain forms of business combinations, or mergers.
Clayton Antitrust Act
The Clayton Antitrust Act of 1914 reinforces and broadens the provisions of the Sherman Act
Anti-competitive behavior
The effect of antitrust legislation is to prohibit trade practice and trade restraints that unfairly disadvantage open competition.
Collusion.
Collusion is the illegal practice of two or more businesses joining forces or making joint decisions which have the effect of putting another business at a competitive disadvantage. Businesses may not collude to fix prices, allocate markets, create monopolies, or otherwise interfere with free market operations.
Price fixing
is the practice of two or more brokers agreeing to charge certain commission rates or fees for their services, regardless of market conditions or competitors
Market allocation
is the practice of colluding to restrict competitive activity in portions of a market in exchange for a reciprocal restriction from a competitor: “we won’t compete against you here if you won’t compete against us there.”
Tie-in agreements
the sale of one product or performance of a service is tied to the sale of another, less desirable product or service. For instance, “I will sell you this car, but you have to hire my brother-in-law to drive it.” Or, more likely, “I will list and sell your old home if you hire me to find you a new home to purchase.” Tie-ins restrict competition and limit the freedom of the consumer.
A _____ sets forth all terms and conditions of the agreement, including exactly what is being sold.
sale contract
An ___________ is an agreement for transferring any and all real property involved in the transaction
assignment or real estate sale agreement
Tangible business assets include
cash and marketable securities
inventory
trade fixtures and equipment
real property
accounts receivable
Intangible business assets include:
the company name
trademarks
copyrights
licenses
contracts for future sales of goods or services
goodwill
In any case, the value of the business is a function of the following:
past, present, and future net profits, and capitalized value of these
amount of risk and certainty associated with realizing future profits
value of all assets as reflected in the books of account
impact of goodwill on the value of the business
prices paid for similar businesses
all other risks associated with the business
A real estate syndication is
a form of investment in which two or more investors contribute capital to a pool for the purpose of acquiring, managing, and selling an investment property for a profit.
