Real Estate Brokerage Dec6

REAL ESTATE

BROKERAGE

by Maya Bandolon-Cartojano, REC, REA, REB

12/6/2015Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

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Real Estate as a Business

… connotes trading in real estate where the principal invests his own money and / or avails of financing in the acquisition and/or improvement of real estate for subsequent sale, lease or other income.


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Real Estate as a Practice… refers to the rendition of professional service for or in behalf of

• seller/buyer

• lessor/lessee

• financier/borrower

• user or investor

• or other clients

in the acquisition, utilization, disposition, and/or development of real estate.


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Real Estate Professionals & Businesses

Real Estate Professionals

• Real Estate Consultants (REC)

• Real Estate Appraiser (REA)

• Real Estate Broker (REB)

• Real Estate Salespersons (RES)

RE Businessmen/Entrepreneurs

• Real Estate Developer

• Real Estate Dealer

• Real Estate Lessor


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Real Estate Brokerage

Contract of Agency

• Real estate brokerage is a

contract of agency. Agency,

in general, is a contract

wherein a person binds

himself to render service to

do something

in representation of or on

behalf of another, with the

consent or authority of the

latter.


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Real Estate Brokerage

Essential Elements of Agency

• Mutual consent of parties to

establish a relationship

• Object is the execution of a

juridical act

• Agent acts for the principal

and not for himself.

• Agent acts within the scope of

his authority.


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Real Estate BrokerageModes of Extinguishing Agency

• Expiration of the period

• Death of principal or agent

• Withdrawal of agent

• Accomplishment of purpose

• Revocation

• Dissolution of a firm which

granted or accepted

agency


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Roles of Real Estate Brokers

oBuying

oSelling

oLeasing

oFinancing

oDeveloping


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Kinds of Real Estate Brokerage• Sales - residential, commercial,

industrial, agricultural,

investments (condominium,

proprietary shares, others)

• Lease - residential,

commercial, industrial,

agricultural, investments

(condominiums, proprietary

shares, others)

• Mortgage or loan brokerage

• Real Estate Exchange (Trading)


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Concepts of Real Estate Brokerage

12/6/2015

Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

12 AS TO FUNCTION OF BROKERS

• Sales Agency

• Purchase Agency

• Lease Agency

• Exchange Agency

• Loan Agency

• Joint Venture Development

Scope of Real Estate BrokeragePurchase Agency - authority to look for a property.

Lease Agency - authority given by the owner of a rental property for

the broker to secure tenants, or authority given by a prospective

tenant of the broker to look for a space to be rented.

Exchange Agency - negotiation for exchange of properties

Loan Agency - authority given by a borrower for the broker to secure

a loan to be collateralized by real estate, or authority given by a

financial institution for the broker to procure borrowers.

Joint Venture Development Agency - authority given by a landowner

or developer for the broker to negotiate a joint venture agreement or

development.

Sales Agency - authority given by the seller for the broker to look for a

buyer and negotiate the sale. 12/6/2015Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

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Essential Elements of Real Estate Brokerage

• Employment of the Broker as

an agent.

• Functions to be performed

by the Broker must be

specific.

• Performance of service

• The services rendered by the

Broker are for a fee,

commission, compensation

or any other valuable

consideration12/6/2015Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

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Concepts of Real Estate Brokerage

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AS TO BASIS OF COMMISSION

• Percentage listing - one

wherein the commission of

the broker is based on

stipulated percentage of the

price or consideration.

• Net listing - one wherein the

compensation of the broker

is the amount

obtained over and

above the price quoted by

the seller.

General Steps of Real Estate Brokerage

A. SECURE LISTING - look for

real estate for sale, lease,

mortgage and exchange

to be listed by the broker.

B. SECURE PROSPECTS - look for

persons who are interested

to buy, lease, mortgage

and exchange to be listed

by the broker.


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PROCURING PROSPECTS

• A prospect is a person who is in

need and can afford to buy.

• A person who has the willingness

but without capacity or one who

has capacity but without

willingness is only a suspect.

• One with willingness without

capacity but has willingness to

have the capacity is a future

prospect.


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Real Estate BrokerageSources of Prospects

• Adjacent and neighbour owners

• Tenants of the property

• Previous clients

• Referrals

• Fellow brokers

• Advertisements

• Club membership

• Newspaper announcements

• Apartment dwellers

• Companies with provident housing

benefits for employees

• Social media12/6/2015Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

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FACTORS TO CONSIDER IN

QUALIFYING PROSPECTS

• Need of the prospect

• Cash position or capacity to

secure financing

• Verification whether or not

prospect is authentic and not only

a window shopper


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REASONS WHY PEOPLE BUY

REAL ESTATE

a. For occupancy and use for rental

purpose

b. For investment

c. For speculation

Note: People in the first group will

usually pay more that those in the

second group, and the lowest price

of all is paid by the speculator who is

interested in quick turnover or profit.12/6/2015Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

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C. PRESENTATION AND

DEMONSTRATION

• Showing of pictures,

brochures, price, site,

• To arouse interest

• To create desire

• which could lead him to

act and buy the

property.


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General Steps of Real Estate BrokeragePRESENTATION

it is the orderly written / oral explanation of facts and figures that make a

given property attractive to a prospective purchaser.

Scope of coverage:

a. Property identification - location (street, house, number, city); lot area

and dimensions; type of property; description of improvements; zoning

classification; price and terms;

b. Advantages and benefits - quality of neighborhood, availability of

public transportation, proximity to public market/ malls/ schools/ hospitals;

reasonableness of price.

c. For income properties - present and potential

income, durability of income stream, return on investment.

d. Lot and vicinity plan and pictures of property 12/6/2015


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General Steps of Real Estate BrokerageDEMONSTRATION

-it is the process of showing the property and pointing out its physical

utilities and other advantages and benefits to arouse the desire to

possess or own it.

Preparing for demonstration:

• Preparation of checklist of the physical attributes and other data

which may be the object of prospects inquiry.

• Organization of selling points to be emphasized.

• Anticipation of possible objections.

• Selection of ideal route to create favourable

impression of the neighborhood.


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D. NEGOTIATION

involves transmittal of

purchase offers,

counteroffers and

conciliation of parties as to

the price and terms.


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General Steps of Real Estate BrokerageNEGOTIATION

-it is the process of reconciling the

opposing views of the parties to a transaction as to price

and terms.

Items which should be covered in negotiation.

• Price and terms

• Expenses for execution and registration of sale

• Date of delivery of property

• Pro-rating of income or rental from the property.

• Pro-rating of insurance premiums and utilities

• Items included or excluded in sale such as telephone, cable,

furnitures, etc.12/6/2015


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General Steps of Real Estate BrokerageNEGOTIATION

Common Difficulties

• Hesitancy of prospect to express

his objection,thereby depriving the broker the

opportunity to answer or overcome it.

• Presence of supposed advisers of the prospect who give

negative remarks which tend to undermine the transaction.

• Prejudice on either both parties because of differences in religion,

political beliefs, superstition, etc.

• d. Failure or inability to analyze prospects affordability.

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E. CLOSING &

CONSUMATION

the process effecting the

meeting of minds of the

parties in the transaction.

The execution and signing

of the documents,

payment of the

consideration, delivery and

the registration of the

property in the name of the

buyer.


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CLOSING -it is the process when , thru the mediation of the broker,

the minds of the parties meet where the buyer’s offer of price, terms,

and other conditions become acceptable to the seller, or vice versa.

General Steps

• Persuading the prospect to submit

a written offer to purchase,

preferably with earnest money.

• Securing the acceptance of the

offer to purchase, or assisting the

seller is preparing a counter offer.

• Preparation of drafts of agreements for consideration of the parties.

• Arrangement of appointment between parties for contract signing

and payment. 12/6/2015


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CLOSING

Earnest Money - the amount

accompanying an offer to

purchase to manifest good faith

or genuine desire of the buyer to

purchase the property. If the

offer is accepted by the seller,

the earnest money forms part of

the purchase price; otherwise it

must be returned immediately

to the buyer.

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General Steps of Real Estate BrokerageCLOSING

Escrow - an agreement wherein the consideration of a

contract or a portion thereof is deposited with a third party

known as escrow agent who is authorized to release payment

upon fulfillment or performance of some act or condition.

Applicability of escrow may occur in the following cases:

• When the property is occupied by squatters and the seller assumes

the responsibility to eject them.

• When the title to the property has certain annotations which the seller

assumes cancellation of.

• When the seller is given time to vacate the premises and escrow is

provided to ensure delivery within the stipulated period.12/6/2015


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Option - a contract between the seller and the buyer

where the former, for a consideration known as option

money, binds himself to reserve the property for the

latter purchase within a stipulated period of time and at

a specified price and terms.

Option money is the consideration of an

option contract without which the option is

not binding. Generally option money is

separate and distinct from the purchase

price.

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Reason for Option:

1. Buyer does not have sufficient cash or still has to raise

financing.

2. Buyer’s money is tied up with the money market or

time deposit and the buyer oes not want to withdraw

the placement before maturity because

of the interest income, etc.

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Listing & Option

Listing is generally a contact between the seller and the broker, while option

is contract between the seller and the buyer. Listing generally refers to the

authority to sell, while option refers to reservation to buy.

Earnest Money & Option Money:

Earnest money is the amount accompanying

an offer to buy, while option money is generally

separate and distinct from the price.

Lease Agency & Property Management:

The function of the lease broker is only to secure

tenants. The function of the property manage include: determining rental

rate, securing tenants, rent collection, property maintenance, and handling

owner-tenant relationship.

In lease agency, the compensation of the broker is the commission


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F. REGISTRATION

is the cancellation of the

seller’s title and issuance of

new title in the buyer’s

name, or annotation of the

mortgage or lease at the

back of the title.


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General Steps of Real Estate BrokerageCOMMISSION

Rate - There is no law prescribing

the rate of commission. Rather,

it is determined by agreement

between the principal and the

broker.

Requisites for commission:

• Broker must be duly authorized by the principal

• Broker must procure a ready, willing and able buyer.

• Broker must be the procuring cause, that is, he must be instrumental in

effecting a meeting of minds between the parties.

• Broker must close the transaction during the period of his authority.

• Broker must close at the price and terms authorized.12/6/2015Maya Bandolon-Cartojano, REC, REA, REB www.cartojanorealty.com

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COMMISSION

Rate - There is no law prescribing

the rate of commission. Rather,

it is determined by agreement

between the principal and the

broker.

Hold-over clause in listing - a provision in a listing which entitles the broker

commission even the sale was closed after the period of his authority,

provided the buyer is a party whom he has negotiated during the period of

his authority.


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Concepts of Real Estate Listings

Listings are otherwise known as “STOCK IN

TRADE” or inventory. They may be residential,

commercial, industrial, agricultural, beach

resort, or other investment properties12/6/2015


37 Listing - is the authority

given by the seller /

buyer, lessor / lessee,

financier / borrower, or

landowner / developer

for the broker to

negotiate the sale,

purchase, lease,

exchange, mortgage,

development joint

venture of real estate,

for a certain period of

time, at certain price

and terms, for a

stipulated rate of

commission.


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12/6/2015


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KINDS OF LISTING:

I. AS TO FORM

Oral Listing - one

where the authority to

sell is verbally given.

Written Listing - one

where the authority to

sell is given in writing


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KINDS OF LISTING:

I. AS TO EXCLUSIVENESS

• Open, None Exclusive,

or “First Come First

Serve”

• Exclusive Listing

• Multiple Listing

• Restricted Listing


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A. Open, None Exclusive, or

“First Come First Serve”

- authority given to two or

more brokers. The sale made

by one of the brokers

automatically terminates the

contract of all brokers

concerned. The broker who is

the procuring cause of sale

receives the commission. If the

owner sells or leases the

property directly, he needs not

to pay any broker.


12/6/2015


42 B. Exclusive Listing

a listing wherein only one broker

is authorized to negotiate.

Exclusive Agency Contract

an exclusive listing wherein the

listing broker is not entitled to a

commission if the owner

negotiates the sale of the

property.

Exclusive Right To Sell

a listing where the solely

authorized broker is entitles to

commission even if the principal

closes the transaction.


12/6/2015


43C. Multiple Listing

the Broker who holds the Exclusive

Contract to Sell re-lists it to a

multiple listing service (MLS). The

MLS is usually available from the

real estate organizations and /or

boards. The real estate org or

board, after accepting the listing,

provides copies of necessary

sketches, location maps, and lot

plans, pictures and other

pertinent data about the

property, and distributes these to

the participating members.


12/6/2015


44D. RESTRICTED LISTING

the owner, for some special

reasons, may want the

authority to sell he gave the

broker to be treated as “strictly

confidential”. He may

impose conditions such as:

• It must not be advertised nor

placed in a multiple listing.

• It must be handled by the

broker himself and his office

staff should not know about it.

Restricted listings are usually practiced by big

corporations and influential persons where

information or news of their selling certain properties may adversely affect their business

and / or standing in the community.


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45D. RESTRICTED LISTING

the owner, for some special

reasons, may want the

authority to sell he gave the

broker to be treated as “strictly

confidential”. He may

impose conditions such as:

• It must not be advertised nor

placed in a multiple listing.

• It must be handled by the

broker himself and his office

staff should not know about it.

Whenever the property is offered to

prospective buyers, it must be presented

in such a manner that it would appear

that the broker is not offering the

property for sale but is merely informing

the buyer that if he is interested to buy,

he may be able to persuade the owner to

sell the property.


12/6/2015


46CONTENTS OF LISTING

• Name, address, and signature

of principal and broker

• Description of property;

Lot/Block/Plan/Title No.,

Location, Area,

Improvements,

• Mortgages (if any), Utilities

and facilities

• Period of authority

• Price and terms

• Rate of commission


12/6/2015


47 • SOURCE OF LISTING

• Personal contacts

• Referrals

• Multiple listing and fellow brokers

• Memberships in clubs and

associations

• Foreclosure notices

• Banks and financing institutions

• Classified ads and newspaper

advertisements

• For sale signboards of owners

• Adjoining owner of the property

which is for sale, etc.


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48FACTORS TO CONSIDE IN LISTING

1. Price quotation of owner is within

the realm of the market value.

2. Title is free from any condition or

annotation which may pose legal

obstacle to is disposition.

3. Person giving authority is the owner

or duly authorized representative.

4. Verification whether the property

or portion thereof will be

expropriated.

5. Verification, in case of agricultural,

wether disposition is feasible under

agrarian reform law.


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Essential Attributes of Real Estate Brokers

12/6/2015


50AMIABILITY - having a pleasant

and friendly disposition, coupled

with an easygoing temperament

and a genuine interest in people.

CREATIVITY - having or

characterized by imagination,

originality, productivity, an artistic

skill, etc. No formula work twice;

each formula is simply a solution

to a particular problem that

occurred in the past. Every new

problem requires a new solution or

a fresh approach depending on

circumstances surrounding it.


12/6/2015


51DEPENDABILITY - ability to keep

promises since customers want to

know that the broker will be there

when he says he’ll be there.

EMPATHY Empathy- a liking and

understanding of people coupled

with the ability to involve

themselves in the problems and

decisions of others.


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52ENTHUSIASM & OPTIMISM -the

broker must have a positive

outlook in his daily undertaking

and should treat his profession as

something that both enjoyable

and rewarding to do.

HONESTY - being trustworthy,

honorable, upright. As the Proverb

says, “Honesty is the best policy”,

being honest in every transaction

clears away all doubts if any, in

the minds of all the parties

involved and as a result, further

boosts the credibility of the broker.


12/6/2015


53INDUSTRIOUS - having an earnest,

steady effort in following up even

the smallest details in every

transaction.

INTELLIGENCE - a recognition of all

the facts pertinent to every

transaction and maintaining a

high quality of salesmanship.

PATIENCE - an invaluable asset

that is a pre-requisite in any type

of transaction.

TACK & DIPLOMACY - an ability to

appreciate delicate situations

and to act accordingly.



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COMMON PITFALLS IN BROKERAGE

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55• ARISING FROM PRINCIPAL- BROKER RELATIONSHIP

• The principal is averse to giving written authority and the broker is hard put in proving his

verbal authority.

• Seller and buyer collude with each other by postponing consummation after expiration

of broker’s listing which does not contain a hold-over clause.

• After broker has spent time, effort and money is photocopying documents, and follow

ups, spending gasoline, etc., the buyer purchases the property thru another broker who

happens to be his relative or friend.

• After the broker has registered his buyer with the seller, the buyer purchases the property

not in his name but in that of his company; thus buyer is no longer the person registered

by the broker.

• The authority of the broker is a “net-selling”, and the seller accepts an offer to buy at the

listed price or lower, thereby depriving the broker of the overprice compensation.

• With the effectiveness presentation of the broker, or after the broker has prepared a

feasibility study, the seller realized new values on the property and decides not to sell.


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56• ARISING FROM BROKER- BROKER RELATIONSHIP

• The listing broker extends his authority to another broker who

then goes directly to the owner-seller to secure a listing in his

own name.

• In a cooperative transaction, the selling broker obtains an

extension of authority from the “listing” broker, only to find out

that the supposed “listing” broker himself does not have the

authority from the seller.

• In a cooperative transaction, the listing broker who receives

the full commission refuses or fails to remit the share of the

selling broker.


12/6/2015


57• ARISING FROM BROKER- BROKER RELATIONSHIP

• The listing broker extends his authority to another broker who

then goes directly to the owner-seller to secure a listing in his

own name.

• In a cooperative transaction, the selling broker obtains an

extension of authority from the “listing” broker, only to find out

that the supposed “listing” broker himself does not have the

authority from the seller.

• In a cooperative transaction, the listing broker who receives

the full commission refuses or fails to remit the share of the

selling broker.


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Real Estate Brokerage Dec6

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Transcript of Real Estate Brokerage Dec6