Chapter 6 Practice of Real Estate

Transcription

1 Chapter 6 Practice of Real Estate Learning Goals: Define the term procuring cause. Explain how the broker's and the salesperson's compensations are determined and the forms that such compensations may take. List the reasons for antitrust laws, how they relate to real estate brokerage practices and the penalties for violating them. Differentiate between an employees and an independent contractor. VOCABULARY Brokerage agreement: Brokerage agreement" means an oral or written contract between a client and a licensee in which the licensee agrees to accept valuable consideration from the client or another person for assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property. Errors and Omission Insurance: Errors and omissions insurance (E & O) is a professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. I typically doesn t cover any intentionally legal violations, such as discrimination. It is usually purchased by the broker, charged to the salesperson, and covers all transactions performed within a specific period of time. Procuring Cause: The National Association of Realtors defines procuring cause as the uninterrupted series of causal events which results in a successful transaction. In addition to procuring cause, a contractual obligation is also important for the earning of a compensation. Did the licensee cause the successful transaction and is there a contractual obligation for compensation upon that action? Is the licensee responsible for the chain of events that resulted in the closing? Did the licensee earn a commission? ABC Real Estate School 3 st ed National Workbook August 2010 Page 226

2 Independent Contractor (Self-Employed) or Employee? It is critical that a business owner correctly determine whether the individuals providing services are employees or independent contractors. Generally, an employer must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. An employer does not generally have to withhold or pay any taxes on payments to independent contractors. In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered. Common Law Rules Facts that provide evidence categories: of the degree of control and independence fall into three 1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job? 2. Financial: Are the business aspects of the worker s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.) 3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business? Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no magic or set number of factors that makes the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another. The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination Accessed March 23, ABC Real Estate School 3 st ed National Workbook August 2010 Page 227

3 Employee vs. Independent Contractor (IRS rules) Issue Employee Independent contractor compensation hourly or salary commission control employer controls how, when, where employee controls how, when, where federal and state taxes withheld by employer employee pays SIIS, unemployment taxes withheld by employer employee pays insurance varies employee pays perks varies employee pays In Nevada, most real estate licensees work as independent contractors. This means that the real estate agent doesn t get paid unless he/she performs. These independent contractors work for commissions. Some new-home developers and marketing firms hired by developers do pay their agents as employees, and many pay both a minimum salary and commissions. Remember your commission split with your broker is negotiable. Brokerage relationships 1. The employing broker is directly responsible for supervising all salespersons' real estate activities. 2. The salesperson is responsible to his or her employing broker. All activities must performed in the name of the employing broker. 3. Salesperson cannot receive compensation from anyone other than own broker. be Procuring cause defined: Procuring cause is a cause that directly produces an event and without which the event would not have occurred. It is an uninterrupted series of events that obtained a desired outcome. When a commission is in dispute, courts must identify whether the licensee was the procuring cause of the transaction closing. How do I get paid? Most licensees are employed as independent contractors. Independent contractors don t get paid unless they perform. The real estate broker passes on the income after he takes his share. ABC Real Estate School 3 st ed National Workbook August 2010 Page 228

4 The written independent contractor s agreement states the licensee and broker obligations and the fee for those obligations. The office/broker charge may be a percentage of the commission earned or a flat fee or combination. Some offices offer both options and some offices offer a graduated charge. For example, under a graduated charge the licensee owes the broker 40% of all commissions until the broker earns $10,000. After $10,000, the fee drops to 20%. After $30,000, the remainder of the year is free of charge. Some offices will charge an annual fee just to keep your lic ense active, and require that you refer any business into the office to full time agents. Some offices will charge a monthly flat fee and a transaction fee. Some will also charge you for errors and omissions insurance (E & O), a professional liability insurance that protects companies and individuals against claims made by clients for inadequate work or negligent actions. Some offices will charge you a percentage of your commissions. Some may rent you an office. Some o ffices will require you to work certain hours, attend office meetings, help out with the phones, advertise in their products; and others may not care if you ever step foot in the office. Post-licensing and continuing education may be included in your charges, or may cost extra. The office may employ a full-time technical expert and an office-manager, or the office may only employ one broker. Commission Types (Many offices offer both types.) Split: salesperson splits his commissions with his/her broker some independent contractor agreements bind the agent to pay a dollar amount ($2,500 for example), if they quit before the end of the first year 100% office/coop: salesperson keeps 100% of their commission usually open seating may be able to rent a private office or desk salesperson usually pays a monthly fee, and a transaction fee to his broker some brokers require the salesperson to have experience, because there is limited training and support Combination: combination of flat fee and percentage combination of percentage with a bonus the split changes after a licensee pays in a certain dollar amount to the office within a specific period of time. Expense Split 100% license/realtor dues/mls fees not provided not provided receptionist/managers/ some provide (depends on most provide at least some of training staff price) these office computers usually provided usually provided errors and omissions insurance (E & O) recommend that broker provide recommend that broker provide pre-printed advertising/postage/copies often provided at a discount usually not provided voice mail usually provided usually not provided continuing education/ usually provided usually not provided (depends sales training on price) desk/telephone/office often provided usually open seating ABC Real Estate School 3 st ed National Workbook August 2010 Page 229

5 Real Estate Business Models The business model varies dramatically between offices. This is why it is important for a licensee to interview several brokers and offices in his/her area before signing an independent contractors agreement. After you complete this course, you will understand the laws, principles and procedures of a real estate career, but who will teach you how to sell it? That is the job of your broker. When you interview, ask these questions: 1) Who will accompany me on my first listing? 2) Who will help me close my first short sale? 3) Who will help me write my first sales contract? 4) How should I market my new business? 5) How much will the office charge me? 6) What if I want to change offices? Is there a fee? What happens to my transactions that are preparing to close? 7) How financially stable is the company? 8) Will I also need to pay a franchise fee? 9) Can I change programs if I find out that another financial arrangement is more lucrative for me? National Do Not Call Registry The National Do Not Call Registry gives consumers an opportunity to limit the telemarketing calls they receive. Once they register their phone number, telemarketers covered by the National Do Not Call Registry have up to 31 days from the registration date to stop calling. The National Do Not Call Registry applies to any plan, program, or campaign to sell goods or services through interstate phone calls. This includes telemarketers who solicit consumers, often on behalf of third party sellers. It also includes sellers who provide, offer to provide, or arrange to provide goods or services to consumers in exchange for payment. The National Do Not Call Registry does not limit calls by political organizations, charities, or telephone surveyors. By purchasing something from the company, they established a business relationship with the company. As a result, even if they put their number on the National Do Not Call Registry, that company may call them for up to 18 months after their last purchase or de livery from it, or their last payment to it, unless they ask the company not to call again. In that case, the company must honor the request not to call. If they subsequently call again, they may be subject to a fine of up to $16,000. An established business relationship with a company a lso will be created if a consumer makes an inquiry to the company, or submits an application to it. This kind of established business relationship exists for 3 months after the inquiry or application. During this time, the company can call. If the co nsumer makes a specific request to that company not to call, however, then the company may not call, eve n if he/she has an established business relationship with that company, evidenced by written record. ABC Real Estate School 3 st ed National Workbook August 2010 Page 230