Texas Brokerage Flashcards
Why is it important for a broker to be empathetic?
Without empathy, a broker cannot build trust. And without trust, brokers will never be able to get the best effort from their salespeople.
What is the basis of the initial planning stage?
Having goals
Before you set goals, what must you analyze?
Your office, your sellers, your buyers, your salespersons, your staff, and yourself
A startup is
where the broker is starting from scratch
A purchase is
simply the buying of an existing brokerage
There are many factors that a broker must weigh to determine what is right for a particular brokerage. This includes such things as
location, cost, equipment, leases, name recognition, and long-term viability
The types of business structures include:
Sole Proprietorship
Partnership
Limited Liability Corporation
Corporation
Sole proprietorship is
the ownership of a brokerage by one person or one group (like a husband and wife).
Sole proprietorship
the easiest to set up and the fastest to get operational
To terminate a sole proprietorship
the broker must just notify any licensed agents under the broker and notify TREC.
If the designated broker does not own at least 10% of the entity
the entity must maintain E&O insurance in the amount of $1 million.
If the designated broker owns 10% or more of the entity,
the broker needs to provide proof of ownership.
Examples of acceptable proof of ownership documents are as follows but are not limited to:
1) Minutes of the company meeting designating ownership percentages
2) A Company Resolution indicating the percentage owned by the designated officer/manager/partner
3) Articles of Organization/Incorporation that include ownership percentages
4) Schedule K-1 (Form 1120S) from the IRS
5) Schedule C (Form 1040) from the IRS
6) Limited Partnership Agreement designating ownership percentages
A partnership
can be two people or multiple people that form a company for the mutual benefit of all the partners.
General partnerships are formed
and all members of the partnerships are full partners
In a general partnership
Each has the ability to bind the partnership to agreements and all share in profits and losses. General partnership is assumed if no partnership agreement limits these actions. General partnership is the most frequently formed type of partnership.
Limited partnerships
allow for one or more general partners to operate a business and multiple limited partners that invest in the business.
The limited partners are only liable for
their investment
A Limited Liability Corporation (LLC) is
each member of the LLC must have a real estate broker’s license. Then each broker works separately and is responsible only for him or herself. No income is shared and no liability is shared.
Liability
The sole proprietor assumes all risk of operation.
In a partnership the general partner(s) assumes all risk of operation.
With an LLC the individuals share the liability
With a corporation the entity itself is the one that has the liability.
Who typically runs a small-scale startup?
Who typically runs a small-scale startup?
If you are interested in purchasing an existing brokerage, what can you accomplish by taking local brokers out to lunch?
You will establish a rapport with the target broker.
You will position yourself as an option if a local broker wants to sell in the future.
What are the two types of partnerships and which one is the most frequently formed?
General and limited are the two types of partnerships and general is the most frequently formed.
What are three additional conditions of choosing a business structure?
Liability
Cost and ease of setup
Ease of operation
What two issues could hurt a brokerage that is named after the broker/owner?
It may be hard to recruit new and particularly experienced agents
What should a broker do after choosing a name for the brokerage?
Go to the state offices and check against their records to be sure there is not another brokerage with the same or similar name.
What would be the minimum requirements for a conference room setup?
A long table and chairs for at least four people
What two types of items are typically stored in a brokerage office?
Infrequently needed items
Past client files
Bootstrapping
This is when you do it yourself. However you do it, you come up with the money (retirement accounts, money market accounts, savings, cash, etc.).
An angel investor is
is a person who invests in a company when it is still new and has the possibility of strong growth. The investor lends money in exchange for equity and the chance to guide the company.
Venture capitalists are
individuals with money to lend that count on terrific returns.
The number of people needed to form a partnership is?
2
Five possible funding sources.
Bootstrapping Going into debt Friends and family Angel investors Venture capitalists
What three types of experts are important to have on your professional team?
Lawyer
Accountant
Financial advisor
What type of business entity can provide a broker with payroll and tax return capabilities?
Payroll Service Provider
What characteristic is required for a broker to build and maintain powerful relationships?
Socially bold
The major principle of ethics comes from the Latin
‘Primum non nocere’ - ‘First do no harm’.
Ethics is
a system of moral principles by which human actions are judged right or wrong, good or bad.
TREC developed a list of business ethics for the license holders of the state of Texas to follow. They are:
CANON 1 – Fidelity CANON 2 – Integrity CANON 3 – Competency CANON 4 – Consumer Information CANON 5 – Non-Discriminatory Actions
A fiduciary is
acting as an agent for another
Name three defenses that would probably work in a DTPA lawsuit.
Having an inspection report
Having a seller’s disclosure statement
Having information given by the government that can be assumed to be true
NAR timeline
May 12, 1908 - National Association of Real Estate Exchanges was founded
1913 - Code of Ethics was adopted with the Golden Rule as its theme
1916 - National Association of Real Estate Exchange’s name was changed to The National Association of Real Estate Boards (NAREB)
1916 - “REALTOR” was adopted to identify real estate professionals who are members of NAR and subscribe to its strict Code of Ethics
1972 - the name of the National Association of Real Estate Boards was changed to the National Association of REALTORS® (NAR)
1973 - The block “R” logo was adopted by the Association
The Lanham Act is
the primary federal trademark statute of law in the United States. The Act prohibits a number of activities, including trademark, trademark dilution, and false advertising.
Trademark Counterfeiting Act of 1984
criminalized the intentional trade in counterfeit goods and services.
Uniform Trade Secrets Act and the Economic Espionage Act of 1996
forbids misappropriation of trade secrets occurs when one competitor uses espionage, bribery, or outright theft to obtain economically advantageous information in the possession of another
Tortious interference
occurs when one competitor convinces a party having a relationship with another competitor to breach a contract with, or duty to, the other competitor
Federal Trade Commission’s Bureau of Consumer Protection prohibits
unfair, deceptive, and fraudulent business practices and protects consumers by:
receiving complaints and conducting investigations
bringing litigation against companies and people that violate the rules
developing rules to maintain a fair business environment
educating consumers and business people about their rights and responsibilities
Which FTC Division is responsible for enforcing the Fair Credit Reporting Act?
The Division of Privacy and Identity Protection
The Texas Fair Housing Act was passed in 1989. The purposes of the Texas law are to:
Provide for fair housing practices in this state.
Create a procedure for investigating and settling complaints of discriminatory housing practices.
Provide rights and remedies substantially equivalent to those granted under federal law.
What agency enforces the Americans with Disabilities Act?
Department of Labor
The Southwest ADA center services which five states?
Arkansas, Louisiana, New Mexico, Oklahoma, and Texas which make up Region 6.
What protected class was added by the 1988 amendments to the Civil Rights Act of 1968?
Handicap (disability)
What types of residential housing may be exempt from Fair Housing Laws under certain circumstances?
A building with no more than four units (a four-plex) and the owner is living in one of the units
A single-family home
Agency is defined as
the business of any person, firm, etc. empowered to act for another
O - Obedience L - Loyalty D - Disclosure C - Confidentiality A - Accounting R - Reasonable care
note
Express Agency
the parties “express” the fact that they want to form an agency relationship
Implied Agency
A written agreement is not necessary to create an agency relationship – the relationship can be implied.
Agency by Estoppel (also called ostensible agency or apparent agency)
arises by the actions of the parties involved, rather than by a written agreement.
Estoppel is defined as
a legal doctrine by which a person is prevented from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct or silence.
Ratification is defined as
the adoption or confirmation of an act already performed on behalf of a person without prior authorization
Universal agent
authority and power is virtually limitless
The Truth-in-Lending Act (REG Z) was enacted in 1969 to
“assure the meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him/her to avoid the uniformed use of credit.”
What are the three types of agency authority
Universal
General
Specific
According to Fair Housing Law, what should an agent do when writing an advertisement to avoid any violation?
The agent should describe the property, not the seller, landlord, or appropriate buyers and tenants.
A contract must have four essential elements to be valid. They include:
competent parties
legal subject matter
consideration for the promises contained in the contract
mutual assent
What four actions does the Sherman Antitrust Act prohibit?
Price fixing
Boycotting
Market allocation
Tie-in arrangements
What is meant by an “established business relationship” exemption ?
The do-not-call and do-not-fax rules do not apply to calls made and faxes sent when an established business relationship exists.
NAR Research Resource Guide
a guide to the surveys, reports, data, and products that NAR Research has created, updated for the current year
Pending Home Sales Index
leading indicator for housing activity is released each month and measures housing contract activity
Housing Affordability Index
measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent monthly price and income data
Metropolitan Median Home Prices and Affordability
reflects sales prices of existing single-family homes by metropolitan statistical area (MSA)
Commercial Real Estate Lending Survey
provides insights into REALTORS®’ commercial financing conditions. The report details liquidity conditions, market impact, funding sources, and respondents’ comments
Commercial Real Estate Outlook
quarterly report covers the economic conditions underpinning current commercial real estate markets and presents trends in market fundamentals, investments, and financing
Commercial Real Estate Market Survey
measures activity in the commercial real estate markets. It is designed to provide members with an overview of the market performance, sales and rental transactions, current economic challenges, and future expectations.
Real Estate Center
a group of economists commissioned by the Texas Real Estate Commission to track real estate data and report that data to the public
What kinds of reports does the Texas Real Estate Center provide that could be useful to brokers and agents?
Reports on housing activity, rural land, building permits, employment, and population
What is the main use of a business plan?
To define the goals and objectives of the business based on concrete information
What is an Executive Summary and when should a broker write it?
a brief synopsis of the business concepts that will give the reader a clear initial understanding of the business, its strength, and validity. The broker should write it last and present it first.
What should the broker include in the Company Section of the business plan?
Company history
Company strategy
Management team
What are the three financial statements the broker should include in the business plan?
Cash flow
Income statement
Balance sheet
Decision theory is concerned with
calculating the consequences of uncertain decisions
Risk management is concerned with
making decisions to manage uncertainties and their consequences
There are three main ways a broker can limit risk:
Avoidance
Transfer
Reduction
There are many types of business insurance for real estate brokerages such as:
Liability Insurance Building Insurance Contents Insurance Errors and Omissions Insurances Key Man Insurance Automobile Insurance
Key person insurance is
insurance in case one of the key persons of the brokerage dies.
