User:Jdperes/Real estate agent

Agency relationships in residential real estate transactions involve the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person(s) is a buyer or a seller. The broker and his licensed real estate salespersons (salesmen or brokers) then become the agents of the principal.


 * Agency relationship: Conventionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or a "buyer representation" agreement with a buyer, thus creating under common law in most states an agency relationship with fiduciary obligations. The seller or buyer is then a client of the broker. Some states also have statutes that define and control the nature of the representation.


 * Non-agency relationship: where no written agreement or fiduciary relationship exists, a real estate broker and his sales staff work with a principal who is known as the broker's customer. When a buyer who has not entered into a Buyer Agency agreement with the broker buys a property, that broker functions as the sub-agent of the seller's broker. When a seller chooses to work with a transaction broker, there is no agency relationship created.

There are state laws defining the types of relationships that can exist between clients and real estate licensees, and the lawful duties of real estate licensees to represent clients and members of the public. Rules on the types of relationships between clients and real estate licensees vary substantially as defined by the law from state to state.

Real estate licensing and education
To become licensed in the United States, real estate brokers and salespersons are licensed by each state, not by the federal government. Each state has a real estate commission (governing body) who monitors and licenses real estate brokers and agents. For example, some states only allow lawyers to create documentation to transfer real property, while other states also allow the licensed real estate agent to do so. Most states require that an applicant must attend a pre-license course with a minimum number of classroom hours to study real estate law before taking the state licensing exam. Such education is often provided by real estate firms or by education companies, either of which is typically licensed to teach such courses within their respective states. The courses are designed to prepare the new licensee primarily for the legal aspects of the practice of transferring real estate and to pass the state licensing exam. Some states, like Massachusetts, require as little as 40-hours classroom time to get licensed. Others, like California, mandate over 100 hours. Many states allow candidates to take the pre-licensing class virtually. Candidates must subsequently pass the state exam for a real estate agent's license.

Upon passing, the new licensee must place their license with an established real estate firm and must work under a broker's license. Typically there may be multiple licensees holding broker's licenses within a firm, but only one broker for the firm itself is the managing or principal broker and that individual is then legally responsible for all licensees held under their license.

In most jurisdictions in the United States, a person must have a license to perform licensed activities, and these activities are defined within the statutes of each state. The main feature of the requirement for having a license to perform those activities is the work done "for compensation". Hence, hypothetically, if a person wants to help a friend out in either selling or buying a property, and no compensation of any kind is expected in return, then a license is not needed to perform all the work. However, since most people would expect to be compensated for their efforts and skills, a license would be required by law before a person may receive remuneration for services rendered as a real estate broker or agent. Unlicensed activity is illegal and the state real estate commission has the authority to fine people who are acting as real estate licensees, but buyers and sellers acting as principals in the sale or purchase of real estate are usually not required to be licensed. It is important to note that in some states, lawyers handle real estate sales for compensation without being licensed as brokers or agents. However, even lawyers can only perform real estate activities that are incidental to their original work as a lawyer. It cannot be the case that a lawyer can become a seller's selling agent if that is all the service that is being requested by the client. Lawyers would still need to be licensed as a broker if they wish to perform licensed activities. Lawyers do however get a break in the minimum education requirements (for example, 90 hours in Illinois).

Requirements vary by state but after some period of time working as an agent, one may return to the classroom and test to become a broker. For example, California and Florida require licensees to have a minimum experience of two years as a full-time licensed agent within the prior 5 years. Where as Indiana only requires one year experience as a real estate salesperson and Arizona requires three out of the prior five years. Brokers may manage or own firms. Each branch office of a larger real estate firm must be managed by a broker.

Some other states have recently eliminated the salesperson's license and instead, all licensees in those states automatically earn their broker's license.

The term "agent" is not to be confused with salesperson or broker. An agent is simply a licensee that has entered into an agency relationship with a client. A broker can also be an agent for a client. It is commonly the firm that has the actual legal relationship with the client through one of their sales staff, be they salespersons or brokers.

In all states, the real estate licensee must disclose to prospective buyers and sellers the nature of their relationship within the transaction and with the parties. See below for a broker/licensee relationship to sellers and their relationship with buyers.

In the United States, there are commonly two levels of real estate professionals licensed by the individual states but not by the federal government:

Continuing education
States issue licenses for an annual or multi- year period and require real estate agents and brokers to complete continuing education prior to renewing their licenses. For example, California licensees must complete 45 hours of continuing education every 4 years in topics such as agency, trust fund handling, consumer protection, fair housing, ethics, and risk management. Many states recognize licenses from other states (reciprocal licenses) and issue licenses to existing agents and firms upon request without additional education or testing; however, the license must be granted before real estate service is provided in the state.

California does not have license reciprocity with other states. An applicant for licensure is not, however, required to be a resident of California to obtain a license.

In Illinois, the salesperson license was replaced by a broker license in 2011. the new license requires 90 hours of pre-license education, 15 of which must be interactive, and 30 hours of post-license education. The pre-license education requirement includes a 75-hour topics course and a 15-hour applied real estate principles course.

A real estate agent or broker is a person who represents sellers or buyers of

Flat-fee real estate agents charge a seller of a property a flat fee, $500 for example, as opposed to a traditional or full-service real estate agent who charges a percentage of the sale price. In exchange, the seller’s property will appear in the Multi Listing Service (MLS), but the seller will represent him or herself when showing the property and negotiating a sales price. The result is the seller pays less commission overall (roughly half) when the property sells. This is because a seller will pay a percentage of the sales price to a buyer’s agent but not have to pay a percentage to a seller’s agent (because there isn’t one – the seller is representing himself).

Article Draft The Social Embeddedness of Transactions: Evidence from the Residential Real-Estate Industry by Steve Sawyer, Kevin Crowston, Rolf T. Wigand and Marcel Allbritton
== In this study, the authors, Sawyer et al., provide data on how digital technologies can have a potentially negative impact on the role of the real estate agent in the real estate sales process (Sawyer, 2013). They take a two-pronged approach in their research. The first is to analyze the “transaction-cost perspective” (136), which is the utilization of all of the resources needed for two or more parties to successfully exchange a good or service (in this case, the “good” would be real estate). The second approach is the “social-capital perspective” (136). This the value of an individual’s or society’s network of social relationships (138) that can be used for a mutually beneficial purpose (in this case, it’s the real estate transaction). Their research ultimately leads to the conclusion that real estate agents actually benefit from digital technologies because it can expand their social reach and provide more technological support in the real estate transaction (151). ==

== Sawyer et al. seek to define the changing relationship between real estate agents and their customers (buyers and sellers) with the increased availability and use of information technology. Historically, the only way buyers and sellers would find each other is through an intermediary (the real estate agent). Presently, the internet (and homes listed for sale on the internet) allows for the increased probability of buyers and sellers finding each other. So, what is the purpose of the real estate agent? Agents not only act as a transaction facilitator, but they have a network of professionals (home inspectors, mortgage brokers, title attorneys, etc.) to rely upon for a value-added service. ==

Residential Real Estate Data on the Internet: Benefits and Limitations by Harold Gee
== This article provides an overview on the availability of real estate information on the internet, and questions the purpose of the real estate agent as an intermediary give the availability of such information (Gee, 2010). He outlines the benefit of having real estate information readily available online, which is the abundant number of websites that a buyer would use to search for a home. Those sites often include supplemental information such as area maps, proximity of neighborhood amenities, comparable sold information, etc. (111). The limitation of such information is potential lack of accurate data on the internet and the level of information literacy of each person looking at online real estate data (119-120). He concludes by saying that the availability of information on the Internet does not devalue the role of real estate agents, but rather it provides an additional means of doing business (121). ==

== The benefit of real estate data information on the internet is, in theory, a more informed consumer. However, the availability of information cannot replace the experience and expertise of a real estate professional when it comes to navigating the ins and outs of one of the largest investments people make in their lives. A limitation is the level of information literacy of the individual consumer. This varies greatly with everyone. Having access to the information does not equal knowing what do with it. Real estate agents assist consumers with interpreting available data (how much a seller should list a home for, or how much a buyer should offer for a home, as examples) as a part of their service. ==

The Impact of Agent Experience on the Real Estate Transaction by Bennie D. Waller and Ali M. Jubran
== Waller et al. examine the production of real estate agents who they define as “rookies” (agents who have been licensed for two years or less) versus agents who are “veterans” (licensed for 10 years or more) [Waller 2012]. Productivity was measured by the sold price of properties, length of time on the market and likelihood of a successful transaction (a property is sold). Overall, the sold price of properties where rookie agents were involved was 10% less (80) than veteran agents, properties listed by veteran agents sold approximately 32% faster (80) than those listed by rookie agents and the likelihood of a completed sale was 1.6 times higher (80) when a veteran agent listed a property as opposed to a rookie. ==

== While this research does focus on the differences between the final sales price of a home and it’s time on the market when listed by a veteran real estate agent versus a rookie, the value of a real estate professional in a transaction lies not only in the measured numbers, but the increase in the likelihood of a sale when a real estate agent is employed. An experienced agent has a higher probability of a successful transaction, though. Agents with 2 – 10 years of experience were not part of the study. ==

Real Estate Brokers and Commission: Theory and Calibrations by Oz Shy
== Shy’s research explores the built-in conflict of interest between a property seller and real estate agent, which is the seller intends to sell a property for the highest price possible while the real estate agent motivates the seller to lower the price to encourage a quicker sale (Shy 31). He also considers how the standard real estate agent’s commission rate of 6% of the sales price affects the agent’s motivation to sell, and why discount real estate agents, or flat-fee agents, are not employed more often in the United States (31), which would eliminate the conflict of interest. The conclusion is that, when a real estate agent is employed, the buyer has the advantage in that the agent has incentive to encourage the seller to reduce the sales price to encourage a quick sale (32). Sellers are also at a disadvantage if the commission rate is less than the standard 6% of the sale price since a higher commission is often needed to motivate the agent to maximize the sales price. ==

== The assumption that real estate agents’ motive to “lower the price” of a property to encourage a quick sale is misleading. Real estate agents intend to obtain fair market value for properties. If a seller overprices a property, then an agent would naturally try to persuade the seller to lower the price – not to secure quick sale but to price a property accurately for the current market conditions. Shy’s research doesn’t address this situation. ==

Antitrust Implications of Outcomes When Home Sellers Use Flat-Fee Real Estate Agents
== Flat-fee real estate agents charge a seller of a property a flat fee, $500 for example (Levitt et al. 2008), as opposed to a traditional or full-service real estate agent who charges a percentage of the sale price. In exchange, the seller’s property will appear in the Multi Listing Service (MLS), but the seller will represent him or herself when showing the property and negotiating a sales price (Levitt 69). The result is the seller pays less commission overall (roughly half) when the property sells (70). This is because a seller will pay a percentage of the sales price to a buyer’s agent but not have to pay a percentage to a seller’s agent (because there isn’t one – the seller is representing himself). Yet, even with this option, the number of traditional real estate agents had nearly doubled in the decade leading up to this study (48). Levitt et al. explored a few theories, one being collusion amongst traditional real estate agents to essentially “steer” (68) buyers away from properties listed by flat-fee agents, thus ensuring the viability of traditional agents. A lawsuit filed by the Department of Justice (DoJ) prior to the study against the National Association of Realtors (NAR) led to some changes in policies and practices (50), but evidence into allegations of steering was insufficient. The general outcome of properties listed by flat-fee agents was that those properties take longer to sell (72), have a lower probability of ever selling (72) and there is no observable difference in the final sales price (73), even with the savings on commissions (73). ==

The Selling Real Estate Broker and the Purchaser: Assessing the Relationship
== When a seller hires a real estate agent to list a property for sale, the agent’s fiduciary responsibility is to the seller (Hopper 1992). The agent is obligated to look out for the seller’s best interests. The agent does not have the same responsibility to a buyer or potential buyer. However, the seller’s agent does have a duty to be fair and honest with a prospective buyer, and the public in general. ==

== In conclusion, it’s in a buyer’s best interest to have a real estate agent represent him or her with one of the biggest investments of their lives, especially for first-time home buyers and even more so if a seller has an agency relationship. ==

Citation/Reference List:
== Sawyer, S., Crowston, K., Wigand, R. T., & Allbritton, M. (2003). The Social Embeddedness of Transactions: Evidence from the Residential Real-Estate Industry. Information Society, 19(2), 135. https://doi-org.ezproxy.uno.edu/10.1080/01972240309460 ==

== Gee, H. (2010). Residential Real Estate Data on the Internet: Benefits and Limitations. Journal of Business & Finance Librarianship, 15(2), 104–122. https://doi-org.ezproxy.uno.edu/10.1080/08963560903554658 ==

== Waller, B. D., & Jubran, A. M. (2012). The Impact of Agent Experience on the Real Estate Transaction. Journal of Housing Research, 21(1), 67–82. https://doi-org.ezproxy.uno.edu/10.1080/10835547.2012.12092052 ==