A real estate broker is a person who has been officially licensed to provide real estate advice and services on behalf of their clients. They can act as an agent for both the buyer and seller of property, with the seller generally retaining the broker and working with the buyer. The broker works for the seller in order to solicit potential buyers; the seller then evaluates the proposed offers in order to determine whether a sale is in their best interest.
Real estate brokers must be licensed by a state regulatory agency in order to provide their services. They may operate independently, or they may collaborate with other brokers in order to create a group, which is referred to as a brokerage. The brokerage operates to provide real estate services to its surrounding area.
A broker is different from a real estate agent, although people sometimes use the same term to apply to any real estate worker. The defining difference between the two would be that agents technically work for brokers, and are not required to be licensed by the state. Additionally, they often perform different tasks, leaving major decisions and procedures for the brokers to decide.
What Services Do Real Estate Brokers Provide?
As previously mentioned, real estate brokers can represent either sellers or buyers in the transactions. Traditionally, they represented sellers in the market; currently, however, brokers can represent either party. In some cases, the broker represents both parties.
When the broker’s client is a seller, the real estate broker will generally provide the following services:
- Ensuring that the home has property sales exposure through listings, advertising, and other outlets;
- Informing the homeowner of potential buyers and offers;
- Holding open house events in order to showcase the property to potential buyers;
- Acting as a liaison or point of contact for those who have questions regarding the property;
- Managing all of the various paperwork and forms;
- Engaging in negotiations with potential buyers;
- Pre screening applicants and performing financial background checks; and
- Closing deals when an offer has been made and accepted.
When the broker’s client is a buyer, the real estate broker will generally provide the following services:
- Alerting the client of potential buying opportunities;
- Assisting with offers and initial negotiations;
- Informing the client of any responses to their offers;
- Assisting with further negotiations;
- Accompanying the buyer when attending home walk-throughs;
- Arranging for inspections and appraisals; and
- Acting as the buyer’s fiduciary.
What Are Some Common Examples Of Disputes Associated With Real Estate Brokers?
Violations of client rights or confidentiality frequently lead to legal disputes between the broker and their client. Claims against agents and brokers are among the most common types of real estate disputes, and generally result in a damages award or other similar remedy, depending on the violation involved.
Another common example of disputes associated with real estate brokers concerns commission. Commission disputes frequently occur when agents agree to split the commission on a listing, or agree to share the buyer on an open house, and the agreement is made orally. These disputes generally involve a disagreement in terms of who is the procuring cause agent in the transaction; or, the agent who ultimately leads the buyer to purchase the property, and as such is entitled to receive the commission.
The best way to avoid disputes over the definition of procuring cause is to inform and educate clients regarding the process of real estate purchase transactions. An example of this would be how buyers are generally advised to contact only their own agents if they wish to see a property, and not to share any information with other agents. Additionally, if agents decide to work together, they should put that transaction into writing to be referenced should any disputes arise.
Broker manuals generally contain arbitration policies which address disputes between agents from different firms. Additionally, both state and local real estate associations offer mediation and arbitration as potential alternatives to address disputes. However, all parties involved must voluntarily agree to participate in any dispute resolution measures. If all agents involved cannot come to an agreement, the local civil court may need to render a decision in order to resolve the dispute.
What Is A Listing Agreement?
As previously mentioned, a real estate broker assists with the listing agreement. A listing agreement is an employment contract between the property’s seller and broker, and generally authorizes the broker to show the property to potential buyers. There are two types of listing agreements:
- Open Listing: A broker only earns a commission if they successfully sell the real estate. As such, if someone else finds the buyer, the real estate broker is not entitled to a commission; and
- Exclusive Listing: The broker is entitled to a commission, no matter what, even when another person sells the property.
The real estate broker will create a market listing, which is a list of homes for sale in the general area, containing important information such as sales prices. As previously discussed, the broker and the seller will also create a listing agreement, which is a contract stating the terms under which the broker can promote the seller’s home. These various types of listings may be regulated by state and local real estate standards, as well as professional standards for brokers and real estate agents.
A real estate listing agreement must include specific information in order to be considered valid. Some examples of what a valid listing agreement should contain include, but may not be limited to:
- The start and end date of when the property will be posted in the listing;
- The price at which the home is going to be offered up for sale, or, the list price;
- How the sales broker is to be compensated, such as through flat fees or percentages of the sale (or, broker’s commission);
- Terms governing brokerages fees paid by the selling party; and
- The broker’s scope of authority in terms of co-agreements with other brokers, as well as the existence of previous offers.
According to real estate laws and guidelines, these provisions must be included and followed in any real estate listing agreement. Failure to include any of these legal issues may result in the document being voided. Additionally, violations can affect subsequent home sales transactions.
An example of this would be how the seller may lose opportunities to sell their home if a misunderstanding has occurred. A common mistake involves an error or even negligence regarding the price of the home. In such cases, the broker could become liable to the seller, and would be required to pay damages for any losses. In especially serious cases, the broker may be penalized by their licensing authority.
What Else Should I Know About Real Estate Brokers?
Generally speaking, listing agreements allow a broker to collect a commission when they are able to present a ready, willing, and able purchaser, or when a person is able to pay the purchase price. The buyer must be able to perform the contract by demonstrating that they have the available finances to purchase the property.
If a prospective buyer makes an offer which satisfies the terms in the listing agreement, the broker has earned their commission, even if the buyer refuses to sell. However, the offer must satisfy the terms of the listing agreement. What this means is that a buyer’s offer that is less than the asking price does not entitle the real estate broker to a commission.
Do I Need An Attorney For Assistance With A Real Estate Broker?
If you are considering working with a real estate broker, or are experiencing issues with your real estate broker, you should consult with an experienced and local real estate lawyer. An attorney can help you understand your state’s specific real estate laws, and can help you locate a reliable real estate broker. Should any legal issues arise, your real estate attorney will also be able to represent you in court, as needed.