Real estate agent

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Real estate agents and real estate brokers are people who represents sellers or buyers of real estate or real property. While a broker may work independently, an agent usually works under a licensed broker to represent clients. [1] Brokers and agents are licensed by the state to negotiate sales agreements and manage the documentation required for closing real estate transactions. Buyers and sellers are generally advised to consult a licensed real estate professional for a written definition of an individual state's laws of agency.

Contents

Categories of representation

A real estate broker typically receives a real estate commission for successfully completing a sale. Across the U.S, this commission can generally range between 5-6% of the property's sale price for a full-service broker but this percentage varies by state and even region. [2]

Real estate licensing and education

In most jurisdictions in the United States, a person must have a license to perform licensed activities, and these activities are defined within the statutes of each state. The main feature of the requirement for having a license to perform those activities is the work done "for compensation". Hence, hypothetically, if a person wants to help a friend out in either selling or buying a property, and no compensation of any kind is expected in return, then a license is not needed to perform all the work. However, since most people would expect to be compensated for their efforts and skills, a license would be required by law before a person may receive remuneration for services rendered as a real estate broker or agent. Unlicensed activity is illegal and the state real estate commission has the authority to fine people who are acting as real estate licensees, but buyers and sellers acting as principals in the sale or purchase of real estate are usually not required to be licensed. It is important to note that in some states, lawyers handle real estate sales for compensation without being licensed as brokers or agents. However, even lawyers can only perform real estate activities that are incidental to their original work as a lawyer. It cannot be the case that a lawyer can become a seller's selling agent if that is all the service that is being requested by the client. Lawyers would still need to be licensed as a broker if they wish to perform licensed activities. Nevertheless, lawyers do get a break in the minimum education requirements (for example, 90 hours in Illinois). [3]

Some other states have recently eliminated the salesperson's license, instead, all licensees in those states automatically earn their broker's license.

The term "agent" is not to be confused with salesperson or broker. An agent is simply a licensee that has entered into an agency relationship with a client. A broker can also be an agent for a client. It is commonly the firm that has the actual legal relationship with the client through one of their sales staff, be they salespersons or brokers.

In all states, the real estate licensee must disclose to prospective buyers and sellers the nature of their relationship [4]

Specific representation laws

Some U.S. state real estate commissions – notably Florida's [5] after 1992 (and extended in 2003) and Colorado's [6] after 1994 (with changes in 2003) created the option of having no agency or fiduciary relationship between brokers and sellers or buyers.

As noted by the South Broward Board of Realtors, Inc. in a letter to State of Florida legislative committees:

"The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and provides the legal documentation of the details of the legal agreement between the same. The Transaction Broker is not a fiduciary of any party, but must abide by the law as well as professional and ethical standards." (such as NAR Code of Ethics).

The result was that, in 2003, Florida created a system where the default brokerage relationship had "all licensees ... operating as transaction brokers, unless a single agent or no brokerage relationship is established, in writing, with the customer" [7] [8] and the statute required written disclosure of the transaction brokerage relationship to the buyer or seller customer only through July 1, 2008.

In the case of both Florida [8] and Colorado, [6] dual agency and sub-agency (where both listing and selling agents represent the seller) no longer exist.

Other brokers and agents may focus on representing buyers or tenants in a real estate transaction. However, licensing as a broker or salesperson authorizes the licensee to legally represent parties on either side of a transaction and providing the necessary documentation for the legal transfer of real property. This business decision is for the licensee to decide. They are fines for people acting as real estate agents when not licensed by the state.

In the United Kingdom, an estate agent is a person or business entity whose business is to market real estate on behalf of clients. There are significant differences between the actions, powers, obligations, and liabilities of brokers and estate agents in each country, as different countries take markedly different approaches to the marketing and selling of real property.

The difference between salespersons and brokers

Before the Multiple Listing Service (MLS) was introduced in 1967, when brokers (and their licensees) only represented sellers by providing a service to provide legal documentation on the transfer real property, the term "real estate salesperson" may have been more appropriate than it is today, given the various ways that brokers and licensees now help buyers through the legal process of transferring real property. Legally, however, the term "salesperson" is still used in many states to describe a real estate licensee.[ citation needed ]

Real estate broker (or, in some states, qualifying broker)

After gaining some years of experience in real estate sales, a salesperson may decide to become licensed as a real estate broker (or Principal/qualifying broker) in order to own, manage, or operate their own brokerage. In addition, some states allow college graduates to apply for a broker's license without years of experience. College graduates fall into this category once they have completed the state-required courses as well. California allows licensed attorneys to become brokers upon passing the broker exam without having to take the requisite courses required of an agent. Commonly more coursework and a broker's state exam on real estate law must be passed. Upon obtaining a broker's license, a real estate agent may continue to work for another broker in a similar capacity as before (often referred to as a broker associate or associate broker) or take charge of their own brokerage and hire other salespersons (or broker), licensees. Becoming a branch office manager may or may not require a broker's license. Some states allow licensed attorneys to become real estate brokers without taking any exam. In some states, there are no "salespeople" as all licensees are brokers. [9]

Types of services that a broker can provide

Real Estate Services are also called trading services [10]

Real estate brokers and sellers

Flat-fee real estate agents

Flat-fee real estate agents charge a seller of a property a flat fee, $500 for example, [11] as opposed to a traditional or full-service real estate agent who charges a percentage of the sale price. In exchange, the seller's property will appear in the multiple listing service (MLS), but the seller will represent him or herself when showing the property and negotiating a sales price. [11] The result is the seller pays less commission overall (roughly half) when the property sells. [11] This is because a seller will pay a percentage of the sales price to a buyer's agent but not have to pay a percentage to a seller's agent (because there isn't one; the seller is representing himself).

Brokerage commissions

In consideration of the brokerage successfully finding a buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a buyer for the real estate, the successful negotiation of a purchase contract between the buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller. Under common law, a real estate broker is eligible to receive their commission, regardless of whether the sale actually takes place, once they secure a buyer who is ready, willing, and able to purchase the dwelling. [12]

Economist Steven D. Levitt famously argued in his 2005 book Freakonomics that real estate brokers have an inherent conflict of interest with the sellers they represent because their commission gives them more motivation to sell quickly than to sell at a higher price. Levitt supported his argument with a study finding brokers tend to put their own houses on the market for longer and receive higher prices for them compared to when working for their clients. He concluded that broker commissions will reduce in future. [13] A 2008 study by other economists found that when comparing brokerage without listing services, brokerage significantly reduced the average sale price. [14]

RESPA

Real estate brokers who work with lenders can not receive any compensation from the lender for referring a residential client to a specific lender. To do so would be a violation of a United States federal law known as the Real Estate Settlement Procedures Act (RESPA). RESPA ensures that buyers and sellers are given adequate notice of the Real Estate settlement process. [15]

Realtor

In the United States, the term realtor is trademarked by the National Association of Realtors, which uses it to refer to its active members, who may be real estate agents or brokers. [16] [17] [18] In Canada, the trademark is used by members of the Canadian Real Estate Association. [19] Both organizations advise against the use of realtor as a generic synonym for real estate agent. [19]

Continuing education

States issue licenses for an annual or multi-year period and require real estate agents and brokers to complete continuing education prior to renewing their licenses. For example, California licensees must complete 45 hours of continuing education every 4 years in topics such as agency, trust fund handling, consumer protection, fair housing, ethics, and risk management. [20]

Organizations

Several notable groups exist to promote the real estate industry and to assist professionals.

See also

Related Research Articles

<span class="mw-page-title-main">Sales</span> Activities related to the exchange of goods

Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. A period during which goods are sold for a reduced price may also be referred to as a "sale".

This aims to be a complete list of the articles on real estate.

A multiple listing service is an organization with a suite of services that real estate brokers use to establish contractual offers of cooperation and compensation and accumulate and disseminate information to enable appraisals. A multiple listing service's database and software is used by real estate brokers in real estate, representing sellers under a listing contract to widely share information about properties with other brokers who may represent potential buyers or wish to work with a seller's broker in finding a buyer for the property or asset. The listing data stored in a multiple listing service's database is the proprietary information of the broker who has obtained a listing agreement with a property's seller.

<span class="mw-page-title-main">National Association of Realtors</span> American trade association for real estate brokers

The National Association of Realtors (NAR) is an American trade association for those who work in the real estate industry. It has over 1.5 million members, making it the largest trade association in the United States including NAR's institutes, societies, and councils, involved in all aspects of the residential and commercial real estate industries. The organization holds a U.S. trademark over the term "Realtor". NAR also functions as a self-regulatory organization for real estate brokerage. The organization is headquartered in Chicago.

Property management is the operation, control, maintenance, and oversight of real estate and physical property. This can include residential, commercial, and land real estate. Management indicates the need for real estate to be cared for and monitored, with accountability for and attention to its useful life and condition. This is much akin to the role of management in any business.

<span class="mw-page-title-main">For sale by owner</span> Selling real estate without a broker or agent

For sale by owner (FSBO) is the process of selling real estate without the representation of a broker or agent. Homeowners may employ the services of marketing, online listing companies, or market their own property. Typically, they represent themselves with the help of a lawyer or solicitor throughout the sale. As in most areas, there are detailed legal requirements pertaining to sellers and disclosures they must make.

Closing costs are fees paid at the closing of a real estate transaction. This point in time called the closing is when the title to the property is conveyed (transferred) to the buyer. Closing costs are incurred by either the buyer or the seller.

A listing contract is a contract between a real estate broker and an owner of real property granting the broker the authority to act as the owner's agent in the sale of the property.

<span class="mw-page-title-main">Business broker</span>

Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held businesses in the buying and selling process. They typically estimate the value of the business; advertise it for sale with or without disclosing its identity; handle the initial potential buyer interviews, discussions, and negotiations with prospective buyers; facilitate the progress of the due diligence investigation and generally assist with the business sale.

<span class="mw-page-title-main">Real Estate Settlement Procedures Act</span>

The Real Estate Settlement Procedures Act (RESPA) was a law passed by the United States Congress in 1974 and codified as Title 12, Chapter 27 of the United States Code, 12 U.S.C. §§ 2601–2617. The main objective was to protect homeowners by assisting them in becoming better educated while shopping for real estate services, and eliminating kickbacks and referral fees which add unnecessary costs to settlement services. RESPA requires lenders and others involved in mortgage lending to provide borrowers with pertinent and timely disclosures regarding the nature and costs of a real estate settlement process. RESPA was also designed to prohibit potentially abusive practices such as kickbacks and referral fees, the practice of dual tracking, and imposes limitations on the use of escrow accounts.

A buyer brokerage or buyer agency is the practice of real estate brokers and their agents representing a buyer in a real estate transaction rather than, by default, representing the seller either directly or as a sub-agent. In the United Kingdom and Australia, the most common term is buying agent.

Flat-fee multiple listing service or flat-fee MLS refers to the practice in the real estate industry of a seller entering into an "à la carte service agreement" with a real estate broker who accepts a flat fee rather than a percentage of the sale price for the listing side of the transaction. A flat-fee MLS brokerage typically unbundles the services a traditional real estate brokerage offers and lists the property for sale in the local multiple listing service (MLS) à la carte without requiring the seller to use all services.

Property finders are companies and individuals representing a buyer in a property transaction. The term is more common in the United Kingdom, but in the United States the situation is referred to as buyer brokerage, and in Australia it is known as buyer advocacy.

A real estate trend is any consistent pattern or change in the general direction of the real estate industry which, over the course of time, causes a statistically noticeable change. This phenomenon can be a result of the economy, a change in mortgage rates, consumer speculations, or other fundamental and non-fundamental reasons.

Sub-agent (Sub-agency) is a real estate term in the United States and Canada describing the relationship which a real estate broker and his/her agents have with a buyer of a business, home, or property.

A real estate license is an authorization issued by a government body to give agents and brokers the legal authority to represent a home seller or buyer in a real estate transaction. Real estate agents and real estate brokers are required to be licensed when conducting real estate transactions in the United States and many other countries.

An exclusive buyer agent (EBA) (also known as an exclusive buyer broker (EBB)) is a U.S. real estate firm (or an agent or broker who works in such a company) that represents only buyers of real estate. EBA firms never take listings and, therefore, never represent the seller in a real estate transaction.

Forsalebyowner.com is the United States largest "by owner" real estate website. It provides a real estate advertising and information service that charges a flat fee to property owners who advertise their property on the company’s Website. It created a business model that competed directly with traditional real estate firms, connecting buyers and sellers without the use of brokers. Property sellers devise and customize the content and format of their advertisement. ForSaleByOwner.com then charged to the owners a listing fee that is directly proportional to the length of the advertisement and the period of time it appears on its Web site. For an additional fee, property owners can have also list their properties on the MLS with a real estate agent affiliated with ForSaleByOwner.com. Interested buyers can use the service to search listed properties for free. However, ForSaleByOwner.com does not represent or negotiate on behalf of either the seller or the buyer. On its Website, a disclaimer clearly states that it is not a real estate agent and is legally prohibited from taking part in the actual sales transaction.

NeighborCity was a residential real estate information and service company that rated real-estate agents in the United States, offering a way for buyers and sellers of homes to compare and evaluate agents. It was based in San Francisco.

Farm land is a real estate niche that deals with the purchase and sale of Arable land. This niche requires the real estate agent to have very particular knowledge about the land and farming industry. A Real Estate agent or broker that specialises in farms must be knowledgeable in the following: City, County and State regulations of farms. The agent must be familiar with P&L statements for farms. Farm land can be very large: some farms are more than 100 acres.

References

  1. ↑ "Real Estate Professionals Explained: Agent, Broker, REALTOR". Real Estate News and Advice | Realtor.com. 2014-03-10. Retrieved 2018-12-27.
  2. ↑ "How Much Is Real Estate Agent Commission?". Bankrate. Retrieved 2018-12-20.
  3. ↑ "FAQs". www.illinoisrealtors.org. Illinois Realtors. Retrieved August 16, 2018.
  4. ↑ "Realtor Code of Ethics - Disclosure" (PDF). Real Estate Association Standards of Business Practice.
  5. ↑ "Statutes & Constitution :View Statutes : Online Sunshine". Leg.state.fl.us. Retrieved 2014-02-10.
  6. 1 2 "Outline of types of representation available in Colorado, including Transaction Brokerage" (PDF). Dora.state.co.us. Retrieved 2014-02-10.
  7. ↑ Evans, Blanche (2 July 2003). "Florida Implements Default Transactikn Brokerage Statute". realtytimes.com/. Realty Times. Retrieved 2 February 2014.
  8. 1 2 The 2007 Florida Statutes. Chapter 475 Real Estate Brokers — Part I; Real Estate Brokers, Sales Associates, and Schools (ss. 475.001-475.5018), Section 475.278 Authorized brokerage relationships; presumption of transaction brokerage; required disclosures (1) Brokerage Relationships: (a) Authorized brokerage relationships. — A real estate licensee in this state may enter into a brokerage relationship as either a transaction broker or as a single agent with potential buyers and sellers. A real estate licensee may not operate as a disclosed or non-disclosed dual agent ... (b)Presumption of transaction brokerage. — It shall be presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer."
  9. ↑ "Real Estate Broker's License: Examination and Licensing Application Requirements". New Mexico Administrative Code. State of New Mexico Commission of Public Records. 21 January 2021.
  10. ↑ "Real Estate Laws Website". BC Real Estate Laws - Pat 1 Trading Services.
  11. 1 2 3 Quigley, John M. (2000). "A Decent Home: Housing Policy in Perspective". Brookings-Wharton Papers on Urban Affairs. 2000 (1): 53–88. CiteSeerX   10.1.1.369.6806 . doi:10.1353/urb.2000.0011. ISSN   1533-4449. S2CID   154714417.
  12. ↑ "Getting a Brokerage Commission Paid | New York Law Journal".
  13. ↑ Daniel Gross (20 February 2005). "Why a Real Estate Agent May Skip the Extra Mile" . The New York Times. Archived from the original on 29 May 2015.
  14. ↑ B. Douglas Bernheim; Jonathan Meer (13 January 2012). "Do Real Estate Brokers Add Value When Listing Services Are Unbundled?". The National Bureau of Economic Research. Working Paper Series. doi: 10.3386/w13796 . Retrieved 3 September 2016.
  15. ↑ "CFPB consumer laws and regulations RESPA" (PDF). Consumer Financial Protection Bureau. Retrieved 13 October 2021.
  16. ↑ Buch, Clarissa (20 April 2023). "What Is a Realtor? A Member of the National Association of Realtors". Realtor.com. National Association of Realtors . Retrieved 17 June 2023.
  17. ↑ "Understanding the Difference Between a Realtor and a Real Estate Agent". The CE Shop. Retrieved 19 June 2023.
  18. ↑ Colestock, Stephanie (August 13, 2021). "Realtor vs. real estate agent: What's the difference?". Fox Business. Retrieved 20 June 2023.
  19. 1 2 "Using the REALTOR® Trademark in Advertisements - CREA". 12 November 2020.
  20. ↑ "Continuing Education Requirements". Ca.gov. California Department of Real Estate . Retrieved 26 June 2023.
  21. ↑ "Professional Recognition of our Programs". Real Estate Division at Sauder, UBC. January 8, 2019.
  22. ↑ "Real Estate Institute of Canada (REIC)". Thomson Reuters Canada Limited. Retrieved 8 January 2019.
  23. ↑ "Lobbying Spending Database: National Assn of Realtors : 2007" . Retrieved 2008-10-25.
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