(Lesson 4) Real Estate brokerage (Unit #5)

Question 1

Overview of a real estate brokerage

Answer 1

brokerage is simply the business of bringing parties together. A real estate license is required to exchange, purchase, or lease real property for others to charge a fee for these services.

A brokerage business may take many forms. It may be sole proprietorship (single-owner company), corporation, or partnership. The office may be independent or part of a regional or national franchise.

**a typical real estate brokerage may specialize in one kind of transaction or service, or it may offer variety of services.

Question 2

Define sponsoring broker responsibilities when running a business

Answer 2

faces the sane challenges as an entrepreneur in any other industry. In addition to mastering the complexities of real estate transactions, she 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.

• *the 3 type of real estate licenses for individuals in Illinois are:
• broker,
• managing broker,
• residential leasing agent

Question 3

define sponsoring broker

Answer 3

the one who certifies the department of the real estate company.. assigns tasks and is ultimately responsibly for all activities in the brokerage.

Question 4

Define designated managing brokers

Answer 4

a managing broker license is obtained by taking additional courses receiving a managing broker license. The sponsoring broker assigns the designated managing broker with supervisory duties and legally appoints that individual to oversee the office.

**a sponsoring broker may also be the designated managing broker of an office or may appoint designated managing broker to serve for serval branch offices.

**the designated managing broker is responsible for the supervision of all real estate activities performed by affiliated licensees

Question 5

define employees in regards to IRS tax classifications given by the sponsoring broker

Answer 5

with employees the sponsoring broker is required to withhold social security tax from wages to those employees…. sponsoring broker must also pay unemployment compensation tax.. also employees might receive benefits such as health insurance, profit sharing plans or workers compensation.

Question 6

define independent contractor

Answer 6

in order to be treated as an independent contractor for federal tax purposes, a licensee must meet three specific criteria set out by the internal revenue service:

• the individual must hold an active real estate license
• the individual must agree in writing not to be treated as an employee for federal tax purposes
• at least 90% of the individuals income as a licensee must be based on sales production rather than hours worked

**independent contractors are responsible for paying their own income taxes and social security taxes

Question 7

responsibilities of sponsoring broker vs managing broker

Answer 7

sometimes in the case of sole proprietorship, the designated managing broker and the sponsoring broker are one and the same… if they are not the same the sponsoring broker can delegate to the designated manager the responsibilities of registering the sponsorship of licensees with the department

**designated managing brokers has the responsibilities for handling all earnest money, escrows, and contract negotiations for all transactions where the designated agent for the transaction has not completed the 45 hours of post license education.

**licensees who have not completed their 45 hours of post license education cannot bind the sponsoring broker to contracts

Question 8

unexpected loss of designated managing broker

Answer 8

a written request for authorization allowing the continued operation of the office may be submitted to the department within 15 days…

the extension may be granted for up tp 60 days,,,, where a representative of the estate can run the office for up to 60 days..

IN most cases the loss of a sponsoring broker or designated managing broker, a licensed managing broker temp. assumes the management of the office..

the appointed licensee must sign a written promise to personally supervise the office operations and accept responsibility for the office until a permanent replacement is located.

Question 9

planning a business

Answer 9

a business plan takes resources, time and money.. however the benefits should be worth it.. The development of a business plan begins with creating a mission statement.

The mission statement provides the focus for the company. everything else is the business plan supports the mission statement.

**the mission statement must be achieved by goals with supporting strategies

Question 10

policy and procedures manual

Answer 10

every brokerage should have a policy and procedures manual for their licensees.. About the companies rules and how to handle given situations.. These policies should be updated to keep up with the times.

Question 11

define errors and omissions insurance

Answer 11

a real estate licensee needs insurance protection from claims made by clients, customers, and consumers related to the provision of real estate activities, called professional services by the insurance industry.

Question 12

define fiduciary standard

Answer 12

a fiduciary standard is a legal standard that holds a licensee to the highest ethical standards that the law provides.

**brokers are licensed professionals who are held to fiduciary standards.

Question 13

Define commission

Answer 13

licensees earn a specified commission or negotiated fee (typically based on some percentage of the final sale or annual rental cost). because they help secure buyers and tenants for various kinds of real property usually owned by third parties.

Question 14

define cooperative commission

Answer 14

cooperative commission allows the listing brokerage to work with the buyers brokerage and to pay the amount advertised in advance on the multiple listing service MLS.

Question 15

define procuring clause

Answer 15

to be considered the procuring clause of a sale, the broker must have started or caused a chain of events that resulted in the sale.

Question 16

antitrust laws/ include

Answer 16

antitrust violations include:

• price-fixing
• group boycotting
• allocation of customers
• allocation of markets and
• tie in agreements

Question 17

define price fixing

Answer 17

price fixing is the practice of setting prices for products or services rather than letting competition in the open market establish those prices.

in real estate price fixing occurs when competing real estate companies agree to set standard sales commissions, fees, or management rates…

**price fixing is illegal real estate companies use independently determine any minimum commission rates or minimum fees.

Question 18

define group boycotting

Answer 18

group boycotting occurs when two or more businesses conspire against other business, or agree to withhold their patronage, in order to reduce competition.

Question 19

Define tie in agreements

Answer 19

tie in agreements.. are 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…

**tie in agreements are illegal when they restrict competition without benefit to the consumer

Question 20

define national do not call registry

Answer 20

is a list of phone numbers of consumers who do not want to be contacted by commercial telemarketers..

Question 21

define the CAN SPAM ACT

Answer 21

targets emails used to promote or advertise products and services offered for commercial purposes

Question 22

define the junk fax prevention act

Answer 22

the junk fax prevention act of 2005 does not legalize unsolicited fax advertisements or solicitations but does allow for an established business relationship exception.