Lecture 17

Brokerage and
Leasing
Issues in Buyer Brokerage
 Determining Needs and Wants

 Qualifying Buyers

 Searching the Market for Property

 In-Depth Submarket Analysis

 Contract Negotiation

 Closing Process
Issues in Seller Brokerage
 “Ready, Willing, Able” Buyers

 Competition between Agents

– Commission Rates
– Marketing / Advertising
– Service Record

 Marketing Property for Buyers

 Market Studies
– Identifying most appropriate listing (asking) price

 Contract Negotiation

 Disclosure / Material Defects

 Follow-Up with Closing Process

Success in Real Estate Brokerage

 Long Hours, High energy

 Drive to Succeed
 Well-Networked
 “Word-of-Mouth” Advertising
 Ability to use up-to-date technology
 Service After Contract
 Service After the Sale
 Strong Referral Network
Lecture 17

Real Estate Agency

Agency Terms

Agent: Specialist who provides professional representation

Commission: Fee charged for time and expenses by an agent to a

client

Client vs. Customer

Types of Agents and Agency
in Real Estate
Broker: Licensed by state; represents “Agency” in real estate
transactions
– Establishes Agency
– Assembles Sales Agents who are responsible to the Broker

Sales Agents: Licensed by state UNDER the Broker; assigned by

the Broker in agency
Types of Agents and Agency
in Real Estate (Late 1990’s)

Owner/Seller Agency: Most prominent agency form in real estate

– Owner instructs Agent to locate a customer or buyer who is
“ready, willing, and able” to purchase a property at a set price
– “Listing Agreement” is the governing agency agreement

Buyer’s Agent: Agent who solely represents a buyer of real estate

Dual Agent: Represented BOTH PARTIES to the transaction

Types of Agents and Agency
in Real Estate (Current)

No Agency (Non-Representation): Occurs before an offer is made

with an agent

Single Agency: Represents one party in a transaction

– Represents seller, buyer, lessor, lessee

Transaction Agent (Facilitator): Brings two parties together for a fee;

Only requires basic fiduciary responsibilities
Agent Responsibilities

 Accountability of all funds

 Confidentiality of known facts which could harm a
client’s position
 Disclosure of all relevant facts
 Obedience of client’s legal instructions
 Skill, Care, and Obedience must be practiced in
gathering facts and negotiating contracts
Agent Misrepresentation
Intentional Misrepresentation: Can be considered FRAUD on the
part of the Agent if the following can be proven:
– Intent by the Agent
– Information was used by the Agent for making a decision
– Monetary loss occurred

Unintentional Misrepresentation: Occurs when unverified facts are

given to a potential buyer/seller
– Recovery Funds
– Errors & Omissions Insurance

Puffing: Exaggeration of a property’s features

How Agency is Terminated
Actions by Agent:
– Completion of Agency Purpose
– Mutual Agreement by Both Parties
– Unprofessional Actions
– Loss of License
– Conviction of a Felony
– Death
Actions by Principal (Client):
– Death
– Breach of Agency by Principal
– Mutual Agreement by Other Parties
Other Means of Termination:
– Expiration of Agency Agreement
– Condemnation of Property
– Destruction of Property
Lecture 17

Closing Expenses &

The Settlement
Statement
Settlement:
Typical Seller (Grantor) Expenses

 Title Abstract and Miscellaneous Title Charges

 Title Insurance (typically Owners’ policy only)
 Recording of New Deed
 Satisfaction of Existing Mortgage
 Documentary Stamps
 Survey
 Agency Commission
 Proration of Ad Valorem Expenses
 Repairs
 Home Warranty
Settlement:
Typical Buyer (Grantee) Expenses

 Appraisal and Credit Report

 Processing and Application Fees to Lender
 Other Mortgage Fees and Title Endorsements
 Origination Fees and Loan Points (if applicable)
 Escrow Accounts
 Recording Fees for New Mortgage
 Simultaneous Title Insurance Policy
 WDO and Inspections
 Hazard Insurance
 Proration of Homeowners Asso. Dues
The Settlement Statement

Shows Money Owed/Received at Settlement (Closing)

Debits: All expenses OWED at Settlement

Credits: All funds TO BE RECEIVED at Settlement

Settlement:
“Prorations” of Expenses

Dividing Income and Expenses

Between Grantor and Grantee for Settlement
 Expenses Paid in Advance
– Homeowners’ Association Dues
– Rental Income
– Termite Bond Policies

 Expenses Paid in Arrears

– Ad Valorem Property Taxes
Settlement:
“Prorations” of Expenses

 Day-of-closing expenses are responsibility of

Buyer/Grantee

 Expenses Paid in Advance: Seller credited,

Buyer debited.

 Expenses Paid in Arrears: Buyer credited,

Seller debited.
Settlement:
“Prorations” of Expenses
Lecture 17

The Settlement
Statement (HUD-1)