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Real Estate Brokerage Activities: Guides for Salespersons

Terms in this set (25)

Branch Offices -Home Office
Whenever a broker wishes to conduct business in more than one location, each office must be registered with DBPR (Department of Business and Professional Regulation) and the appropriate fee/s paid. All advertising (i.e. phone numbers, letterhead, etc.) of the broker must be displayed to indicate to the public that such an office is operated at that location by the broker.
If a broker closes a branch office and opens a different branch, the registration of the first branch may not be transferred. The new location must be registered and the fee paid for that location. However, if a broker wishes to re-open a branch office at its previous location before the license expires, he may do so without an additional fee.
The branch office must have an entrance sign located on the door of, or adjacent to the front entry.
Brokerage Office Located in Home
The residence of a broker may also be the brokerage business location as long as zoning allows. (Rule 61J2-10.022) NOTE: There is a difference between a home office and a business located within the home. A sales associate may not conduct business from a personal residence. Sales associates must be affiliated or registered from and work out of an office maintained in the name of the broker or employer.
If the office is located within a residence, the broker must:
Comply with the sign requirements of 475.22 F.S.
Deducting the Home Office Expense:
If the home office is used in connection with a trade or business and there is no other business location, deductions may be allowed.
A pro rata share of expenses may be deducted on the federal tax return if the home is used exclusively and regularly.
Examples of deductible expenses are: Maintenance, utilities, insurance and depreciation.
Correspondence and business documents must be kept at the location, in the area used for business.
Sales associates that perform outside sales would probably NOT qualify for the home office deduction because the income is earned from outside sales and not from activity located within the home.
CAUTION: The home office deduction is a complicated and controversial portion of the tax code. While tax law has changed in recent years with regard to the home office deduction, when deducting expenses for the home office, professional advice should ALWAYS be sought.
Brokers must always advertise in a manner that alerts the public that they are dealing with a real estate professional. All advertisements in the name of the brokerage are the broker's responsibility, no matter who composed it. All advertising must contain the name of the brokerage firm which is registered with the Department. Such name must be conspicuous within the advertisement
No real estate advertisement by a licensee shall show only a post office box number or telephone number or other vague information so that the public does not know that it is a licensee. Such an ad is called a Blind Ad and is illegal under Florida Law.
If a sales associate or broker associate's name appears in the ad, the name of the firm must be identified. If a phone number included in the ad is NOT the number to the brokerage firm, it must be identified as such. "cell phone, home phone."
Advertising includes ads for purchasing; renting, or leasing real property as well as any advertising given to the public such as pens, note pads, etc.
When advertising on the Internet, the brokerage firm name shall be placed adjacent to or immediately above the POINT of CONTACT information. "Point of Contact" refers to any means by which to contact the brokerage firm or individual licensee including mailing address, physical street address, e-mail address, telephone number or FAX number.
No real estate advertisement placed or caused to be placed by a licensee shall be fraudulent, false, deceptive or misleading.
When the licensee's personal name appears in the advertisement, at the very least the licensee's last name must be used in the manner in which it is registered with the Commission. Any sales associate, even if they purchase their own advertising cannot advertise or conduct business in his or her own name.
For Sale or Lease Signs, when used, must also have the brokerage identified. Sales associates may place "pending" and "Sold" signs upon these signs with the permission of the owner.
When a property sells or the listing expires, the advertising sign must be removed.
Punishment for misleading or false information placed by a broker is punishable by an administrative fine of up to $5,000 per count to a one year suspension.
Any person who advertises real estate services for another is interpreted as acting as a broker. Sales associates CANNOT advertise or conduct business in their name only.
Remember, Blind Ads are illegal! -
A blind ad is an advertisement that does not make it clear that a broker or real estate company is advertising the property for sale, rent or lease. The name of the brokerage must always appear in an advertisement, no matter what type of advertisement. Refer to FREC Rule 61J2.10.25
During the normal course of business the broker or his firm handles money that belongs to others. This can be security deposits, rent money, earnest money deposits or any type of money being held by the broker in escrow for the buyer or seller.
Escrow is an amount of money or property granted to somebody but held by a third party and only released after a specific condition has been met.
If the item collected is not money, the seller must agree in writing that the item in question is acceptable. It is the responsibility of the broker to keep careful records of all items received and to deliver the funds when dispersal is required. It is also the responsibility of the broker to deposit money received in his care in the proper escrow account immediately.
A separate account is required for a broker to deposit these funds apart from his own personal or operating funds. To mix personal and public money is called Commingling and is illegal under Florida law, with the exception of $1000 that a broker may deposit in the escrow (or trust) account to keep the account open. Conversion means taking money that should be held in escrow for the parties and using the money for the broker's own needs (such as operating money). This is an illegal act.
When a sales associate obtains money to be deposited in the escrow account, it must be given to the broker immediately. This means no later than the end of the next business day.
When a broker receives money to be deposited in an escrow account, he must deposit it immediately within three business days. (Holidays and weekends are excluded)
An escrow or trust account is a separate account in a bank or trust company, title company having trust powers, credit union or a savings and loan association within the State of Florida. This must be an account separate from the broker's own operating funds.
The broker must be a signatory on all escrow accounts. If there is more than one broker, then a broker licensee must be designated as the signatory. If the deposit is in securities, intended by the depositor to be converted into cash, the conversion shall be made at the earliest practical time, and the proceeds shall be immediately deposited in the account.
A broker may maintain more than one escrow account and maintain up to $1000 of his own money in each sales escrow account or up to $5,000 in a property management account. The broker must reconcile the accounts no more than 30 days from the date of the last reconciliation was performed or should have been performed. This requirement cannot be delegated to any other person.
A broker is NOT required to have an escrow account. When earnest money or deposit funds are entrusted to a title company or attorney, the licensee who prepares the contract, must indicate on that purchase agreement the contact information for the depository where the funds will be held. Included must be:
Escrow Agent Name
Address
Phone, email, and FAX
Other requirements:
Within 10 BUSINESS DAYS of the date of receipt, the broker shall make a written request to the title company or attorney to provide a written verification of receipt of the deposit.
Within 10 days of verification of deposit, the broker shall provide the seller (if unrepresented) or seller's broker a copy of written verification.
The broker must keep careful, exact records of the money in trust accounts.
Brokers who fail to reconcile their escrow accounts monthly (or more frequently) are subject to a citation. Failure to properly maintain escrow accounts is the one of the most common problems found during a DBPR Audit.
The broker must keep copies of all records pertaining to the escrow account including but not limited to deposit slips, books, and statements of accounts. These records must be available to the DBPR or its authorized representatives during regular business hours.
Once a month, the broker shall have a written statement made comparing the broker's total liability with the reconciled bank balances of all trust accounts. This includes the sum total of all deposits received, pending and being held by the broker at any point in time.
The minimum information to be included in the monthly report is
the date used to reconcile the balances,
the name of the bank(s),
the name(s) of the account(s),
the account number(s),
the account balance(s),
deposits in transit,
outstanding checks identified by date and check number,
an itemized list of the broker's trust liability,
other items necessary to reconcile the bank account with the balance per the broker's checkbook(s) and other trust account books and records disclosing the date of receipt and source of funds.
The broker must review, sign and date the monthly statement-reconciliation. If the accounts do not balance with the broker's books, a description or explanation of the difference as well as the corrective action must be included in the report.
After the broker notifies the FREC of the problem, the broker may wish to request:
An Escrow Disbursement Order (EDO) from the FREC. Once the EDO is requested, the broker must follow the instructions of the FREC. If the EDO is overturned on appeal, the broker may be liable for civil damages in a civil suit. However, if the broker has followed the EDO, damages to the broker can be reimbursed from the Real Estate Recovery Fund without jeopardy to the broker's license, and the broker is not required to repay the Fund. The FREC may refuse to issue a Disbursement Order, in which case the other procedures must be used.
Mediation: Both parties agree in writing to mediation by a mediator. If the issue is not solved within 90 days, the licensee must use the other types of dispute procedures.
Arbitration: If the buyer and seller cannot agree, the issue is submitted to arbitration and a third party (arbitrator) makes a decision for one party or the other. If this fails, the parties go to Litigation.
Litigation: is simply a law suit, asking the courts through a process called Interpleader to determine the rightful owner of the disputed escrow. The court issues a declaratory judgment which is a binding determination of the rights and status of the parties.
Once the dispute is settled, the broker must notify the FREC within 10 days that the dispute is over.
A situation that is considered good faith doubt is when one party to the dispute does not respond to the broker's correspondence about the escrow money when a transaction fails to close on time or if the buyer (or his spouse) refuses to close at all.
The broker or sales associate is considered an expert in many aspects of property transfer. There are areas however, when the line of the law could be crossed and unintentional trouble may follow.
The broker must be very careful not to give an opinion as to the validity of title to a property since the broker is not an expert in that field. Only an attorney may give an opinion of title, after reviewing the chain of ownership over a period of time.
Trying to sell a property often requires a creative touch. However, sales associates and brokers could go too far when describing a property. If the write up on the property provides information that is a subjective opinion that is called Puffing.
Puffing is making such statements as "The transportation, shopping and schools in this area are terrific." or "Isn't this the most beautiful yard you have ever seen."
In some cases, salespersons and brokers may exaggerate the benefits or representation of a property's value and added features. This is a misrepresentation of the property and could result in a loss of perceived value on the part of the buyer. If the broker or salesperson causes a material loss to a party as a result of misrepresentation, a resulting charge of FRAUD could follow.
The broker must take great care to avoid Fraud. This is deception intended to cause unsuspecting person harm, such as giving up a lawful right to a building inspection, etc. Fraud is not always done with the intent to take advantage of another person to the benefit of the original person. Fraud can also be an intentional or unintentional misstatement of fact or an omission of fact, where person makes a decision based on bad information.
An example of misrepresentation of value by a broker could include lack of information on material facts such as a leaky roof or electrical problem that the broker knew or should have known by asking the seller. Such misinformation could be considered fraud, breach of contract or a breach of trust, depending on the situation.
A broker may never give advice about contract law or explain the meaning of contract areas to anyone; nor should the broker discourage the use of an attorney in assisting the buyer or selling in the process of the sale.
A commission is compensation paid to a real estate broker for real estate service. It can be paid as a
Percentage of sale price
Flat Fee or Salary
Or a combination of both, as set forth in the listing agreement, management agreement or agreement.
Established by some type of written agreement (listing agreement, property management agreement or agreement) the commission between the parties is always negotiable. Only brokers can contract with Principals or customers. A sales associate works under the direction and guidance of a broker and cannot contract directly with the Principal or customer.
The fact that one party such as the seller or another party such as the buyer pays a commission does NOT create an agency relationship. An agency relationship is created by disclosure and written agreement between the parties.
In order to collect a commission, a broker:
Must be a licensed real estate broker or sales associate working under the supervision of an employing broker. A broker can only pay a sales associate licensed and registered under him. A sales associate can never collect a payment from other than the employing broker.
Must have been employed by the principal under a valid contract such as a listing agreement, agreement etc.
Must have been the procuring cause of the sale. Procuring cause is a series of events leading to the sale/purchase or renting of real property.
Must have a ready, willing and able buyer, seller or tenant, depending who the contract calls for. (There will be more about this under contracts.)
Many real estate professionals change employers. Any time a sales associate changes employers (brokers) he must notify the FREC within 10 days on the current form prescribed by the DBPR. All forms required for real estate changes for individuals and schools are available at: http://myfloridalicense.com/ under the real estate section.
By changing employers, the sales associate does not give up his obligation of confidentiality to a Principal. Remember, the sales associate is an agent of the broker who is his or her principal. All information that is confidential to the Principal shall remain confidential, regardless of where a broker or sales associate is employed.
A broker-sales associate relationship does not end with termination (firing) of employment. Copying records from the previous broker to take new listings to the new broker would be considered a breach of trust and removal of records from a previous employer's office constitutes theft, because all business was done in the initial broker's name.
When a broker or real estate school changes business address, they must file a notice of change and the names of the licensees no longer associated with the firm. This action fulfills the change of address notification requirement of licensees who remain with that firm. Licensees whose names are included in the list of non-associates if not already inactive will become involuntary inactive. The broker or school will have ten business days to notify the FREC, failure to notify will cause the license of the broker or school to be ineffective and the licenses of all who work under that license to be ineffective. A fine will also be charged to the broker for failure to report.
When a sales associate changes his or her address, he or she has 10 business days to notify the FREC. Failure to notify the FREC may result in a fine to that sales associate.
Sales associates and brokers are also required to keep their email addresses current with the DBPR as some requests and communications are now being electronically transmitted.
Corporation: is a company that is an entity, rather than a single person. It may have a trade name associated with it. A corporation is formed by filing Articles of Incorporation with the Secretary of State which specify the duties and powers of the corporation. The corporation must be registered with the FREC. Stockholders own the business but it is managed by a board of directors, acting through its officers. The Corporation may be either for profit or nonprofit.
All directors and officers must be active brokers, inactive brokers or unlicensed persons, but at least one officer must be an active broker licensed by the FREC. Sales associates and broker associates cannot be officers or directors. Only active brokers can conduct meetings, direct the sales staff, or can communicate in any way with the public. The word company must appear in all ads in a for-profit company. A corporation may either be a Florida corporation or a foreign corporation, meaning organized under another state besides Florida . Either foreign or domestic corporations must be registered with the FREC.
Corporations may cease to exist when:
the stockholders act to dissolve the company
a court order dissolved the company
the life span has expired, as provided in the charter
the corporation fails to file an annual report with the State of Florida
the annual fee required by the state of Florida is not paid.
If the firm only has one active broker, and that broker dies, the company has 14 calendar days to notify the FREC. If this is not met, the corporation's registration will be cancelled and the licenses of all its associates become involuntarily inactive. If there is more than one active broker, the associates are not affected by the change of leadership.