Section 3 - Opening a Real Estate Office

Question 1

Business Entity - Sole Proprietorship

Answer 1

Simplest entity
No personal protection to owner

Question 2

Business Entity - Partnership

Answer 2

General partnership
* All partners share full personal liability in proportion to % of ownership
Limited Partnership
* Limited partner has a statek but not a role beyond financial participation
Limited Liability Partnership
* Each partner responsible for actions of other partners or employees

Question 3

Business Entity - Limited Liability Company (LLC)

Answer 3

• Tax advantage of partnership
• Legal shield like corporations
• Owners of LLC participate in brokerage’s profit and losses without taxation to company
• Do not need a board of directors

Question 4

Business Entity - Corporation

Answer 4

• Governed by its own articles of incorporation
• centralized management
• Protects individuals from liability

General Corporation
* Elected officers govern affairs of company
* Broker responsible for real estate transactions

Close Corporation
* Stockholders, directors and offers are the same people
* No board of directors

Question 5

Business Entity - Entities that may not register as a brokerage

Answer 5

• Corporation sole - church organization
• Joint venture - temporary arrangement for a single business transaction
• Business trust - group of individual investors buying/selling real estate
• Cooperative association - Can buy/sell own property only
• Unincorporated associations - Group organized for common purpose. Not partners. Not incorporated.

Question 6

DBA or Trade Names

Answer 6

• Business name other than the legal name of the broker or business
• Sales associates cannot have a DBA

Question 7

Broker of record dies, resigns or is removed

Answer 7

• No new business can be conducted
• Must fill position within 14 days
• If not, will dissolve the registration of the business

Question 8

What business affiliation is used as part of an operational strategy in which broker participants cooperatively share listing data and offer consumer access to databases?

Answer 8

Multiple Listing Service

Question 9

Brokerage Office Requirements

Answer 9

• At least one closed room (may be home if zoned for it)
• Signs must indicate it is a brokerage. Show trade name
  
  • “Licensed (or Lic.) Real Estate Broker” on the sign

North Star Realty Development
Marsha Coffee
Licensed Real Estate Broker

Question 10

Rental Listing Services requirements

Answer 10

• Has to be current, property exists, is available, hasn’t been described in a misleading way
• Rental list must contain:
  
  • “If the rental information provided under this contract is not current or accurate in any material aspect, you may demand within 30 days of this contract date a return of your full fee paid. If you do not obtain a rental you are entitled to receive a return of 75% of the fee paid, if you make demand within 30 days of this contract date.”
• Lists not current or are inaccurate is first degree misdemeanor and $1,000 fine or up to year in prison.

Question 11

Blockbusting

Answer 11

implying that members of protected classes are moving into or out of a
neighborhood.

Question 12

Telephone Consumer Protection Act

Answer 12

• Prohibits your firm from contacting individuals on the Do Not Call Registry * must search the registry every 31 days to update records.
• allowed to call existing customers, which is defined as those with whom you’ve done business in the past 18 months.
• may also call owners of FSBO properties if you legitimately have a buyer for the property

Question 13

Agent calls a Do Not Call Registry number and calls a few days later. Which federal act is violated?

Answer 13

Do Not Call Implementation Act of 2003

Question 14

Gregory has been bombarded with emails from a local real estate licensee. He keeps opting out of these emails, but they just keep coming. What federal law is the licensee possibly violating?

Answer 14

CAN-SPAM Act of 2003

Question 15

Penalties for Deceptive or Unfair Advertising

Answer 15

Federal Trade Commission may impose:
* Cease and desist order
* Civil penalties
* Corrective advertising, disclosures in new ads to notify consumers

Question 16

Vicarious Liability

Answer 16

A broker is liable for the misconduct of the licensees and employees associated with the brokerage. If a lawsuit is brought against one of the broker’s licensees because of misconduct, the broker will be held liable for not supervising, and may also be held liable 1for the misconduct through the legal concept of vicarious liability

Question 16

Policy and Procedures Manual (PPM)

Answer 16

Describes rules under which licensees must work and steps to perform various tasks.

Question 16

3 Tests to see if someone is an independent contractor

Answer 16

1. Individual is a licensed real estate agent
2. All individual’s income is result of services performed as an agent and not for the number of hours worked
3. Written contract exists that describes the real estate services that agent will perform

This makes them a “statutory nonemployee” by the IRS

Question 17

Permissible Activities of an Unlicensed Assistant

Answer 17

• Answer phone
• Fill out and submit listings to MLS
• Follow up on loan commitments after contract negoitated
• Assemble closing docs
• Keys made
• Write ads for approval of the licensee or supervising broker
• Handle earnest money deposits
• Monitor licenses
• Compute commission amounts
• Place signs on property
• Order repairs
• Schedule appointments
• Be at open house for security or to hand out materials
• Gather information for CMA’s or appraisals
• Hand out written information on a listing or rental