Unit 9 Flashcards
Learning Objective: Describe the rights and obligations of a license holder as set forth in a sample independent contractor agreement.
Answer: The independent contractor agreement outlines several rights and obligations for license holders, including the right to determine their own work schedule and methods of conducting business, as long as they comply with the brokerage’s standards and procedures. License holders must pay their own taxes and expenses, maintain an active real estate license, and comply with the Texas Real Estate Commission’s (TREC) rules. The agreement also specifies that the license holder cannot bind the broker in any agreement without the broker’s written approval and must follow specific procedures for client interactions and transaction management.
Learning Objective: Differentiate between an independent contractor and an employee.
Answer: Employees work under the direct supervision and control of an employer, who withholds income taxes and Social Security contributions from their paychecks. Employees may also receive benefits such as health insurance and paid time off. Independent contractors, on the other hand, are self-employed, pay their own taxes, do not receive employee benefits, and have the flexibility to determine how they carry out their work, as long as it aligns with their agreement with the broker.
Learning Objective: Describe the employment relationships and compensation concerns for brokers, principals, sales associates, and personal assistants.
Answer: Brokers can engage license holders as either employees or independent contractors. Compensation for license holders working under a broker is typically based on commission agreements specified in the independent contractor agreement. Personal assistants, if unlicensed, are limited to non-licensed activities such as administrative tasks and must not engage in activities that require a license. Brokers must ensure that any compensation agreements adhere to Texas Real Estate Licensing Act (TRELA) regulations and guidelines. For brokers licensed in other states, compensation can only be shared if all Texas negotiations are conducted by Texas-licensed holders.
Learning Objective: Describe the complex relationships that can occur in real estate transactions and how compensation is handled in these situations.
Answer: Real estate transactions can involve various relationships, such as subagency, dual agency, and intermediary roles. Brokers may enter into subagency agreements with other brokers to represent their clients, either through an MLS or through direct agreements. Intermediary relationships arise when a broker represents both the buyer and seller in the same transaction, which requires clear consent and understanding from both parties. Compensation is typically outlined in the listing or representation agreement and must comply with TRELA, including any agreements with brokers from other states or countries.
Key Term: Employee
Meaning: An individual who works under the supervision and control of an employer. Employers withhold income taxes and Social Security contributions from employees’ wages, and employees may receive benefits like health insurance or retirement plans.
Key Term: Independent Contractor
Meaning: A self-employed individual who provides services under terms specified in a contract. Independent contractors are responsible for their own income tax and Social Security contributions and do not receive employee benefits.
Key Term: Broker
Meaning: A person licensed to arrange transactions between buyers and sellers in real estate. Brokers may employ agents or act independently to conduct transactions.
Key Term: Texas Association of Realtors® (TAR) Independent Contractor Agreement
Meaning: A formal contract defining the relationship between a broker and an associate as independent contractors rather than employer-employee, outlining expectations, compensation, and other key elements.
Key Term: Prospects and Operations
Meaning: Prospects refer to potential clients or business leads. Operations include the procedures and strategies used to handle prospects and other business activities.
Key Term: Assignment of Prospects
Meaning: The process by which a broker assigns business leads or clients to agents or associates within the brokerage.
Key Term: Waiver
Meaning: The voluntary relinquishment of a known right. A waiver in a contract context is often included to indicate that a party’s failure to enforce a particular term will not affect their ability to enforce other terms.
Key Term: Survival Clause
Meaning: A clause in an agreement stating that certain terms and conditions will remain in effect after the termination of the agreement.
Key Term: Fee Schedule
Meaning: A list of fees and commissions applicable to brokerage services, usually attached as an addendum to the agreement.
Key Term: Compensation Agreement
Meaning: The agreement that outlines how an associate will be compensated for their services, including commission splits and additional bonuses or fees.
Key Term: Indemnity Clause
Meaning: A provision in the contract where one party agrees to reimburse the other for any damages or losses incurred as a result of specific actions or circumstances.
