Brokerage

Question 1

Broker

Answer 1

licensed to buy, sell, exchange, or lease real property for others for a fee and may operate as a sole proprietorship, partnership, a or limited liability company.

Question 2

Real estate sales associate

Answer 2

a salesperson or broker who is licensed to perform real estate activities only on behalf of a licensed real estate broker.

Question 3

Broker-Employer

Answer 3

liable for the actions of the sales associate within the scope of the employment agreement or as provided by state law.

Question 4

Independent Contractor

Answer 4

an employee who usually receives a commission, with no withholding for Social Security, income tax, and other purposes : freedom to set hours and accomplish goals.

Question 5

Employee

Answer 5

may receive salary in lieu of orin addition to commission; may receive benefits, such as health insurance, profit-sharing, and workers’ comp and has an employer who is required to withhold Social Security, income taxes, and other applicable federal and state taxes from earnings.

Question 6

IRS Requirements for Independent Contractor Status

Answer 6

1. The sales associate must have a current real estate license.
2. There must be a written contract between the broker and the associate stating that the sales associate will not be treated as an employee for federal tax purposes.
3. A substantial portion of the associate’s income must be based on sales production or output, not on hours worked.

Question 7

Real Estate Assistant

Answer 7

a licensed employee of the employing broker who is compensated by the broker, or, if unlicensed, is paid by either the sales or broker and is limited in the activities that can be undertaken.

Question 8

Unlicensed Assistants

Answer 8

may be paid directly by the sales associate.

May Perform:
- Clerical and office management tasks
- Website development and maintenance
- Marketing production
- Limited or no direct client contact

Question 9

Licensed Assistants

Answer 9

must be paid by the employing broker.

May Also:
- Set up and host open houses
- Have direct contact with clients
- Assist in all stages of real estate transactions

Question 10

Broker compensation is defined:

Answer 10

in the contract with the client and often required by real estate license law or the statute of frauds to be in writing.

Question 11

Types of broker compensation

Answer 11

Commission (percentage of sales price)

Flat fee

Hourly rate

Question 12

Commission Rules:

Answer 12

Negotiable in every transaction

Cannot be standardized across firms (violates antitrust laws)

May be shared with other brokers (e.g., through MLS agreements)

Question 13

To be entitled to commission, a broker must be:

Answer 13

1. A licensed real estate broker
2. Employed by the client under a valid agreement
3. The procuring cause of the sale (initiated the unbroken chain of events leading to the transaction)

Question 14

Sales Associate’s Compensation
Determined by:

Answer 14

agreement between the broker and associate.

Question 15

Associate Compensation Types

Answer 15

Percentage of commissions earned

Fixed salary

Draw against future commissions

Question 16

100% commission model:

Answer 16

Associate pays a monthly service charge to the broker, keeps all commissions, but pays all business expenses.

Question 17

Graduated commission splits:

Answer 17

Associate’s share increases based on production milestones (e.g., 50/50 up to $25,000, 60/40 above that, etc.).

Question 18

Fee for Services

Answer 18

broker’s compensation is based on charges for separate activities that the client desires (unbundling of services). Some state require minimum services to be offered by the broker.

Question 19

Price fixing

Answer 19

the agreement among competitors to set prices or terms for products or services—removing competition from the equation.

Occurs when competing brokers agree on commission rates, management fees, or transaction costs instead of setting them independently.

Question 20

Group Boycott

Answer 20

Occurs when two or more businesses conspire to exclude or isolate another competitor

Often seen when traditional brokers refuse to show listings from a discount broker or fee-for-service brokerage.

Question 21

Allocation of customers/markets

Answer 21

Two or more competing firms agree to divide up customers or territories and avoid competition in those areas.

Question 22

Tie-In Agreements

Answer 22

An agreement to sell one product or service only if the buyer also agrees to purchase another.

Question 23

Sherman Antitrust Penalties

Answer 23

Individuals: Up to $1 million fine and 10 years in prison

Corporations: Up to $100 million fine

Private parties harmed by antitrust violations may sue for treble damages (3× actual damages) and recover attorney fees and costs

Question 24

Internet Data Exchange Policy

Answer 24

allows members to limit the internet distribution of listing information.

Question 25

Uniform Electronic Transactions Act (UETA)

Answer 25

Key provisions: A contract can’t be denied legal effect solely because it’s electronic. A record or signature in electronic format has legal effect. An electronic signature satisfies legal signature requirements. An electronic record satisfies legal writing requirements.

Question 26

Electronic Signatures in Global and National Commerce Act (E-Sign)

Answer 26

Applies in states without UETA and supplements it in states that have adopted it. Ensures contracts and records created or signed electronically are legally enforceable.

Question 27

National Do Not Call Registry

Answer 27

Managed by the Federal Trade Commission (FTC). Prohibits telemarketing to consumers who’ve opted out of calls

Question 28

Telephone Consumer Protection Act (TCPA) & Junk Fax Prevention Act:

Answer 28

Prohibit most unsolicited faxes.

Question 29

CAN-SPAM Act of 2003:

Answer 29

Requires commercial emails to include opt-out options. Full guidance:

Question 30

Risk Management A plan to reduce liability through four steps:

Answer 30

Avoid – Stay informed about laws, practices, and emerging risks. Control – Prepare for emergencies in advance. Transfer – Use insurance to shift risk. Retain – Decide to accept minimal risks when response costs outweigh the threat.