Author: ft Editorial Staff

The broker’s use of supervisors

This article explains the broker’s continuing responsibilities when delegating his supervisory duties to an office manager or transaction coordinator. Supervision delegated, not agency A salesperson employed by a broker is the agent of the broker, not the client. In turn, the broker is the agent of the client. As an agent representing the broker, a real estate salesperson is authorized to prepare listings, sales documents, disclosure sheets, etc., on behalf of the broker.   The broker may employ others to carry out his supervisory responsibility to review documents and maintain files. The DRE’s supervisory scheme requires the broker to reasonably supervise a salesperson’s activities. Reasonable supervision includes establishing policies, rules, procedures and statements to review and manage: transactions requiring a real estate license;   documents having a material effect upon the rights or obligations of a party to the transaction;   the filing, storage and maintenance of documents;   the handling of trust funds;   the advertisement of services that require a license;   the salesperson’s knowledge of anti-discrimination laws; and   the reports of the activities of the salespersons. [Department of Real Estate Regulation §2725] The broker may employ others to carry out his supervisory responsibility to review documents and maintain files, including: another licensed real estate broker; or a real estate salesperson employed by the broker. [DRE Reg. §2725] The review of documents and file maintenance should not just be a mechanical function...

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Community property

This article discusses the effect a marriage has on a spouse’s ability to sell real estate. The broker’s role A broker who represents a married person in the sale, lease or financing of community real estate must know whether the married person can avoid performing under a listing (paying the brokerage fee) or under a transactional purchase agreement (closing escrow) by raising community property defenses in order to inflict a loss on the broker. For example, a broker obtains an exclusive right-to-sell listing signed only by the wife. The real estate listed is community property, vested in the name of the husband and wife as joint tenants. During the listing period, the husband and wife sell the property without the aid of the listing broker. The listing entitles the broker to a fee if the property is sold by anyone during the listing period. [See first tuesday Form 102 §4.1(a)] The broker claims both the husband and wife are liable for the brokerage fee since the property was sold during the listing period. The wife claims the listing is unenforceable without the husband’s signature since the property listed cannot be sold and conveyed without her husband’s written consent.  Is the broker entitled to his fee? Yes! While the husband, who did not sign the listing agreement, is not personally liable for the brokerage fee, the wife is liable for...

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Fire safety programs

This article discusses fire safety requirements for landlords, including smoke detectors, posting fire safety information and security bars. Fireworks safety first tuesday wishes you a fun and safe 4th of July holiday, and as a reminder, the state of California permits only “safe and sane” fireworks. Safe and sane fireworks are those inspected and approved by the State Fire Marshal and not defined as dangerous and exempt. [Calif. Health and Safety Code §§12529; 12562] Prohibited fireworks include: skyrockets, rockets, roman candles, chasers, sparklers over 10″ long or 1/4″ in diameter, torpedoes, friction fireworks, surprise fireworks, and any fireworks containing arsenic, boron, gallates or gallic acid, chlorates, magnesium, mercury salts, titanium, picrates or picric acid, thiocyanates, phosphorus, zirconium, or gunpowder. [Health & S C §12505] Fireworks safety laws are also enforced to different degrees on the city and/or county level, so please contact your local fire department to check on the legal status and use requirements of specific fireworks. For more information on fireworks, please visit the following websites: www.fireworks-safety.com – checks the legal status of fireworks in your California county and also offers a fire safety kids’ page; www.fireworksafety.com – provides safety tips for selecting and displaying fireworks; and osfm.fire.ca.gov/fireworks.html – the official site of the California State Fire Marshal, including a handbook on safe and sane fireworks. Smoke detectors, security bars and safety information A residential apartment building...

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No downpayment carryback sales

This article comments on the reasons for accepting an offer with little to no down payment, the presentation of the offer and brokerage fee aspects, and alternative structuring to generate cash. Minimizing the carryback risks A couple decides to purchase income property to begin a real estate investment program. Each has an excellent income, with a combined discretionary disposable income in excess of $20,000 annually which they will commit to real estate investments. Over the years, the couple spends most of their disposable income on the cost of high living. Consequently, they have accumulated insufficient cash savings for a down payment on a purchase. Despite the lack of savings, the couple’s high income enables them to make a “deferred down payment” through significant additional monthly or quarterly principal payments on carryback financing. Thus, the couple creates a self-enforcing savings program. A deferred down payment investment program builds up an equity in the property purchased through additional, periodic principal payments. The principal reduction is in addition to regular amortized payments and is treated as a deferred cash down payment. Additional principal payments will be made during the first few years following the purchase of property. With the couple’s $20,000 excess annual income, they have the capacity to pay a seller an additional $60,000 in principal over a three-year period. At their broker’s suggestion, the couple signs an offer to purchase...

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Broker’s duty to advise on the tax aspects

This article clarifies the extent of the broker’s duty to disclose the tax aspects of a real estate transaction to his client. Knowledge of material facts disclosed An owner of income-producing real estate wants to sell the property. Pricing and marketing of the property are discussed with a few brokers. One broker, viewing the owner as a potential client for further transactions, asks the owner what he intends to do with the net proceeds from a sale. The owner indicates he will eventually use the proceeds to purchase land to hold as a long-term investment. The broker is aware the owner can avoid reporting and paying some or all of the taxes on his profit if he reinvests the sales proceeds in replacement property as a tax-free §1031 transaction. Further, the broker candidly informs the owner he has not personally handled a §1031 transaction, but he has studied them and discussed them with brokers and escrow officers experienced in §1031 procedures. The broker knows he can assist the client by locating replacement property and by investigating the proper §1031 procedures if he is retained to market the property under a sales listing. Conversely, a second broker contacted by the owner does not want to become involved in a review of the tax aspects of selling property. The second broker, now aware of the owner’s tax concerns, informs the owner:...

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Zestimates are great conversation starters with sellers and buyers. Zillow has done more for our bottom line than NAR ever has or will. Don’t fight the current of the river, learn to run with it. Disruption is inevitable in any industry that is fragmented or inefficient. Granted, it does feel like armchair experts and platforms are plentiful in real estate these days, but when the tide rolls out we will see the value proposition of the truest professionals in this industry shine once again.

Justin Bonney, on Zillow’s impact on the real estate industry

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