Unit 1: The Business of Real Estate Flashcards by Shane Barker

Caveat Emptor

Let the buyer beware (doesn’t apply to real estate in the same way. Seller must disclose. Agents have a duty to visually inspect.)

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Business and Professions Code

All real estate laws are found in the Business and Professions Code (B&P)

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California Bureau of Real Estate

Administers the Real Estate Law in California

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Real Estate Commissioner

1) Appointed by the Governor
2) Screens applicants for licensure
3) Investigates complaints against licensee (fraud, theft forgery, etc. Not commission disputes).

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Business Structures for Brokerages

1) Corporation
2) Sole Proprietorship
3) Partnership

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Corporation

One officer of the corporation is a licensed broker and is designated the responsible broker-officer.

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Partnership

Between 2 brokers, a broker and a salesperson, or a broker and someone who is unlicensed. Unlicensed partners cannot do anything requiring a license.

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Sole Proprieter

Real estate activities can be carried out under a licensed broker. The owner has all liability. For business liability and tax purposes, most brokerages choose to incorporate.

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A salesperson cannot

Work for more than one broker at a time.

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The license of any salesperson working for the broker must:

Be available for inspection at the broker’s main office.

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For compensation purposes, salespeople are:

Independent Contractors

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For work hour requirements, salespeople are:

Independent Contractors

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For tax purposes, salespeople are:

Independent Contractors

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From a liability perspective, salespeople are:

Employees

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What can you do with Real Estate License

-Residential Real Estate
-Commercial Real Estate
-Manufactured/Mobile Homes
-Mortgage Loan Transactions
-Mineral, Oil, and Gas Transactions
-Property Management
-Selling Business Opportunities (not real estate transactions. Personal property transferred using a bill of sale). Bill of sale for the business, deed for the property.
-

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Pre-paid rental listing service license (PRLS)

Sell a list of available rental property.
Only good for 2 years (Real Estate 4 years)
Requires $10,000 surety bond per location

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Exemptions from real estate licensing requirements

A person who deals only with his/her own property
Anyone holding a duly executed power of attorney from the owner of the property.
A trustee selling under a deed or trust.

One reason you might get denied a license in the state of California

Back child support. You may get a temporary 150-day license to make it right.

One thing they don’t check in your background

Credit

2 criteria for a brokers license

Experience- two years of a full-time salesperson
Education- bachelor’s degree or higher in real estate.
8 college-level courses

70/30 rule

If you’re over 70 and have over 30 years of experience, no more educational requirements for renewals.

The Real Estate License Number

CalBRE requires that the real estate licensee’s identification number appear on materials used to solicit consumers, including Business cards, Stationary, Websites owned, promotional, or advertising flyers.

Business Opportunities

Need a real estate license but it is purchased using a bill of sale, not a deed.

The Real Estate Law is found in

The Business and Professions Code

The Real Estate Commissioner reports to

The Governor

A salesperson owns 25% of the outstanding shares of Rollo Realty, Inc., and the broker owns the remaining shares. This division of ownership is:

Acceptable

A salesperson is part owner of Rollo Realty, Inc. In the broker's absence, the salesperson frequently reviews the work of sales associates. This is:

Prohibited

A real estate business that is a partnership can have more than one office location, provided

A broker partner obtains an additional license for each location.

The sale or transfer of goods ordinarily held for sale in the course of business is governed in California by

the Uniform Commercial Code.

An officer of Ajax Corporation, who is not a real estate licensee, successfully negotiated the purchase of the Smith Widget Plant on behalf of Ajax. The officer received a commission on the sale in addition to his normal salary. The officer of Ajax Corporation:

Should have had a real estate license

If a real estate license is NOT renewed before it expires, the licensee

Must cease all real estate activities.

A real estate licensee can offer a mobile home for sale that is:

In a location where it can legally remain for one year.

A couple desperately wants to move to Pine Bend, and they like the Seller's house, which is listed with the Broker. The couple tells the broker they will "make it worth his while" if he can persuade the sellers to accept their offer, and they send an expensive food basket to the broker as a sign of their good faith. The broker neglects to mention this to the sellers. This practice is:

Prohibited

A broker routinely places earnest money deposits in his personal account for overnight safe keeping. This practice is:

Prohibited

A broker has an exclusive listing agreement with a property owner. The listing will terminate "when the parties agree." This practice is:

Prohibited

When a broker exercised his option to buy Whiteacre, he presented to the owner of Whiteacre a written statement of his expected profit in the transaction. The seller agreed in writing to proceed with the sale. This conduct is:

Mandated

The broker-officer of XYZ Realty, Inc., does not like the overly aggressive sales tactics of XYZ's salespeople but has not reprimanded them because business is so good. The broker's conduct is:

Discouraged

A broker wants to help out his neighbor's son, who recently acquired a B.A. in history from Back East University. The broker hires the graduate to show property to prospective buyers. Because the new employee has no real estate license, the broker handles all the negotiating. This practice is:

Prohibited

A salesperson is selling the Greenacre Estate. An offer has been accepted, and the closing will take place in two weeks. While the owners are out of town, the buyer asks if the closing can be put off for one day. The salesperson agrees on behalf of the owners, for she is sure they will not object. The salesperson's conduct is:

Prohibited

A house is for sale following a murder in the house six months earlier. A salesperson, showing an out-of-town prospect through the house, decides to keep information about the murder to himself. The salesperson's conduct is:

Prohibited

A broker is so busy that he never has the time to return the phone calls of his principals. He prefers to spend his time in the field making sales and acquiring new listings. This practice is:

Discouraged