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1© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Lesson 4
Units: 4, 5 & 14
Agency Relationships & The Law
2© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Copyright ©2021 by Real Estate Institute• All rights reserved. No part of this presentation may be recorded,
reproduced, stored in any retrieval system or transcribed in any form or by any means (electronic, mechanical, photocopy, recording or otherwise) without the prior written permission of the Real Estate Institute.
• A considerable amount of care has been taken to provide accurate and timely information. However, any ideas, suggestions, opinions, or general knowledge presented are those of the authors and other contributors, and are subject to local, state, and federal laws and regulations, court cases, and any revisions of the same. The viewer is encouraged to consult legal counsel concerning any points of law. This presentation should not be used as an alternative to competent legal counsel.
• This presentation is available exclusively for students enrolled in a course with Real Estate Institute.
Policy
3
Real Estate Agency
Unit 4
Real Estate Institute © 2021
Lesson 4 - Page 1 (800) 995-1700 InstituteOnline.com
4© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Identify – the various types of agency relationships common in the real estate profession and the characteristics of each
• Describe – the fiduciary duties involved in an agency relationship
• Explain – the process by which agency is created and terminated and the role of disclosure in an agency relationship
• Distinguish – between the duties owed by an agent to the client from those owed to customers
Learning Objectives
44
5© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Agency Law
44
Agency describes the special relationship between real estate licensees and the people they represent.
6© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Common Law
Statutory Law – IL
Agency is defined in Article 15 of the
Real Estate License Act of
2000
Agency Law
44
Real Estate Institute © 2021
Lesson 4 - Page 2 (800) 995-1700 InstituteOnline.com
7© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• A relationship, either express or implied, in which a real estate broker or licensee enters into an agreement with a consumer to represent that consumer in a real property transaction.
Agency
44
8© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Brokerage Agreement• written or oral agreement for brokerage
services to be provided to a consumer in return for compensation or the right to receive compensation from another.
Agency
44
9© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In ILLINOIS……
• Relationships are governed under statutory law. • The body of law on which Illinois agency is
based is Article 15 of the Real Estate License Act of 2000
Agency
44
Real Estate Institute © 2021
Lesson 4 - Page 3 (800) 995-1700 InstituteOnline.com
10© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Client –
person who is represented by a licensee
Consumer –
person or entity seeking or receiving licensed activities
Customer –
A consumer who is not being represented by a licensee
Statutory Definitions
44
11© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In ILLINOIS . . .
• The agent’s fiduciary relationship of trust and confidence with the principal mandates that the broker owes the principal specific duties.
Fiduciary Responsibilities
44
12© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
According to Illinois Real Estate License Act, agents must perform the terms of the brokerage agreement and promote the best interests of the client by: • presenting all offers to and from the client in a
timely way, unless the client waives this duty• disclosing to the client known material facts
concerning the transaction, unless that information is confidential
• accounting in a timely way for all money and property received in which the client has, may have, or should have an interest in a timely manner
Fiduciary Responsibilities (Slide 1 of 2)
44
Real Estate Institute © 2021
Lesson 4 - Page 4 (800) 995-1700 InstituteOnline.com
13© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• obeying specific directions of the client that are not otherwise contrary to applicable statutes, ordinances, or rules
• acting in a manner consistent with promoting the client’s best interests as opposed to any other person’s
• exercise reasonable skill and care in the performance of brokerage services
• keep confidential all confidential information received from the client
• comply with all the requirements of the law
Fiduciary Responsibilities (Slide 2 of 2)
44
14© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care
• Obedience
• Loyalty
• Disclosure
• Accounting
• Confidentiality
Fiduciary Responsibilities
44
15© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care
• The agent should know all facts pertinent to the principal’s affairs.
• Obedience
• Loyalty
• Disclosure
• Accounting
• Confidentiality
Fiduciary Responsibilities
44
Real Estate Institute © 2021
Lesson 4 - Page 5 (800) 995-1700 InstituteOnline.com
16© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care
• Obedience
• The agent must act in good faith, obeying the principal’s instructions.
• Loyalty
• Disclosure
• Accounting
• Confidentiality
Fiduciary Responsibilities
44
17© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care
• Obedience
• Loyalty
• Requires the agent to place the principal’s interests above those of others.
• Disclosure
• Accounting
• Confidentiality
Fiduciary Responsibilities
44
18© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care
• Obedience
• Loyalty
• Disclosure
• It is the agent’s duty to keep the principal informed.
• Accounting
• Confidentiality
Fiduciary Responsibilities
44
Real Estate Institute © 2021
Lesson 4 - Page 6 (800) 995-1700 InstituteOnline.com
19© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care
• Obedience
• Loyalty
• Disclosure
• Accounting
• Requires the agent to report the status of all funds or property received.
• Confidentiality
Fiduciary Responsibilities
44
20© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
COLD - AC• Care• Obedience• Loyalty• Disclosure• Accounting• Confidentiality
• Client information obtained during the term of the brokerage agreement must be kept confidential.
Fiduciary Responsibilities
44
21© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Statements of opinion are permissible only as long as they are offered as opinions and without any intention to deceive.
• Statements of fact must be accurate.
• Exaggeration of a property’s benefits is calledpuffing. While puffing is legal, licensees must ensure that none of their statements can be interpreted as fraudulent.
Opinion vs. Fact
44
Real Estate Institute © 2021
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22© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Fraud is the intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person.
Opinion vs. Fact
44
23© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Negligent Misrepresentation occurs when the broker should have known that a statement about a material fact was false. If the buyer relies on the broker’s statement, the broker is liable for any damages that result.
• If a broker accidentally fails to perform some act, the broker may be liable for damages from such a negligent omission.
Opinion vs. Fact
44
24© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• If a contract to purchase real estate is obtained as a result of fraudulent misstatements, the contract may be disaffirmed or renounced by the purchaser. The broker can be liable for damages if either party suffers loss.
• If the licensee’s misstatements were based on the owner’s inaccurate statements and the licensee had no independent duty to investigate their accuracy, the broker may be entitled to a commission, even if the buyer rescinds the sales contract.
Opinion vs. Fact
44
Real Estate Institute © 2021
Lesson 4 - Page 8 (800) 995-1700 InstituteOnline.com
25© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Munjal v. Baird & Warner held that a licensee has no duty to discover “latent material defects” in a property if a seller has not disclosed these defects to the broker prior to sale.
A latent defect is a hidden structural defect that would not be discovered by ordinary inspection. Buyers have been able to either rescind the sales contract or receive damages when a seller fails to reveal known latent defects.
Defects and Disclosures
44
26© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Defects and Disclosures
Residential Real Property Disclosure Report
44
27© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Stigmatized Properties
44
In Illinois, no cause of action shall arise against a licensee for the failure to disclose “stigmatized properties”.
Real Estate Institute © 2021
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28© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In Illinois, Under Article 15 of the Real Estate License Act:
• “No cause of action shall arise against a licensee for the failure to disclose that an occupant of that property was afflicted with HIV or any other medical condition or that the property was the site of an act of occurrence which had no effect of the physical condition of the property or its environment or the structures located thereon.”
Fiduciary Responsibilities
44
29© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Federal Law requires law enforcement authorities to make information available to the general public regarding registered sex offenders.
• Sex offenders must notify law enforcement of any change of address or employment.
Megan’s Law
44
30© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In Illinois, Under Article 15 of the Real Estate License Act:
• Listing agents have no legal duty to disclose that a known sex offender resides in a property near a listed home, but skilled buyers’ agents should be watchful of signals of hard-to-identify issues.
Megan’s Law
44
Real Estate Institute © 2021
Lesson 4 - Page 10 (800) 995-1700 InstituteOnline.com
31© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Express - an agency relationship between a
principal and a broker is generally created by a
written employment contract.
Implied - occurs when the actions of the
licensee indicate that they have formed an agency relationship.
Compensation -source of compensation
does not determine agency.
Creation of Agency
44
32© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• In Illinois, the law requires that all exclusive listing agreements must be in writing.
Creation of Agency
44
33© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Death or incapacity of either the client or the sponsoring broker
• Destruction of condemnation of the property
• Expiration of the terms of the agency
• Mutual agreement by all parties to the contract
• Breach
• By operation of law, as in bankruptcy
• Completion, performance, or fulfillment
Termination of Agency
44
Real Estate Institute © 2021
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34© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Agency relationship in which the agent has an interest in the property being sold
Agency Coupled with an Interest
44
35© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Universal
General
Special
Designated
Types of Agency
44
36© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Seller as principal• Buyer as principal• Landlord as principal
• Tenant as principal
The agent owes
fiduciary duties
exclusively to one
principal who may be
the:
Single Agency
44
Real Estate Institute © 2021
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37© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
The agent represents both buyer and seller in the same transaction, such as selling one’s own listing
In Illinois, must be in writing and signed by both parties
Dual Agent
44
38© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Dual Agency
44
39© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In ILLINOIS:
• Licensees are presumed to represent the consumer with whom they are working as the consumer’s designated agent, unless there is a written agreement between them specifying another relationship.
Disclosure of Agency
44
Real Estate Institute © 2021
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40© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The client is the principal to whom the agent gives advice and counsel.
• The agent is entrusted with certain confidential information and has fiduciary responsibilities.
• The agent is an advocate for the principal, not for the customer.
Client vs. Customer
44
41© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The customer is entitled to factual information and fair and honest dealings as a consumer but does not receive advice and counsel or confidential information about the principal.
• The agent works for the client (principal) and with the customer.
Client vs. Customer
44
42© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In Illinois, consumers must receive the following disclosures no later than the time a brokerage agreement is entered into:• that a designated agency relationship will exist unless
there is a written agreement providing otherwise;• any other agency relationships available through the
brokerage;• the names of any designated agents; the amount and
manner of the broker’s compensation; and• whether or not the broker will share the
compensation with brokers who represent other parties in a transaction and disclosure of the amount to be paid to the cooperating broker.
Disclosure of Agency
44
Real Estate Institute © 2021
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43© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Quick-Fire Review
44© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• What possible relationships exist in Illinois between licensees and the people they serve in the real estate industry?
Quick-Fire Review
45© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Quick-Fire Review
Real Estate Institute © 2021
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46© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The real estate broker’s responsibility to keep the principal informed of all of the facts that could affect a transaction is the duty of care.
Quick-Fire Review
47© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The real estate broker’s responsibility to keep the principal informed of all of the facts that could affect a transaction is the duty of care.
• FALSE!
Quick-Fire Review
48© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Upon discovering a latent defect in the property, the licensee should discuss the problem with the seller and then inform any prospective buyers of the defect.
Quick-Fire Review
Real Estate Institute © 2021
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49© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Upon discovering a latent defect in the property, the licensee should discuss the problem with the seller and then inform any prospective buyers of the defect.
• TRUE!
Quick-Fire Review
50© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Under Illinois law, the person who receives brokerage services but is not represented by the licensee is called a client.
Quick-Fire Review
51© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Under Illinois law, the person who receives brokerage services but is not represented by the licensee is called a client.
• FALSE!
Quick-Fire Review
Real Estate Institute © 2021
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52© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Agency Agency Coupled with an Interest Agent Brokerage Agreement Buyer Agency Agreement Client Commingling Compensation Confidential Information Consumer Conversion
Key Terms Review
44
53© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Cooperative Commission Customer Designated Agent Dual Agent Express Agency Express Contract Fiduciary Duties Fraud General Agency General Agent Gratuitous Agency
Key Terms Review (cont’d)
44
54© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Implied Agency Implied Contract Latent Defect Listing Agreement Material Facts Negligent Misrepresentation Principal Puffing Single Agency Special Agency Universal Agent
Key Terms Review (cont’d)
44
Real Estate Institute © 2021
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55© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Identify – the various types of agency relationships common in the real estate profession and the characteristics of each
• Describe – the fiduciary duties involved in an agency relationship
• Explain – the process by which agency is created and terminated and the role of disclosure in an agency relationship
• Distinguish – between the duties owed by an agent to the client from those owed to customers
Learning Objectives - Review
44
56
Real Estate Brokerage
Unit 5
57© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Identify – the role of technologies, personnel, and license laws in the operation of a real estate business
• Describe – the various types of antitrust violations common in the real estate industry and the penalties involved with each
• Explain – how a licensee's compensation is usually determined
• Distinguish – employees versus independent contractors and explain why the distinction is important
Learning Objectives
55
Real Estate Institute © 2021
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58© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Real Estate Brokerage
55
59© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Brokerany person licensed
to perform real estate activities on behalf of a licensed real estate
sponsoring broker
Real Estate Brokerage
55
60© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Sponsoring Broker
fully responsible for the actions performed
in the course of the real estate business
by all persons sponsored
all activities performed by a
sponsored licensee must be performed in
the name of the sponsoring broker
Real Estate Brokerage
55
Real Estate Institute © 2021
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61© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Managing BrokerEach office must
have a designated managing broker
Real Estate Brokerage
55
62© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Designated Managing Broker Responsibilities:
• Supervision of all licensees
• Maintenance of licenses
• Change of business address
• Advertising
• Planning
• Policy and Procedures Manual
• Licensee safety
Real Estate Brokerage
55
63© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Whether a sponsored licensee is treated as an employee or an independent contractoraffects the structure of the sponsored licensee’s responsibilities and the sponsoring broker’s liability to pay and withhold taxes from the sponsored licensee’s earnings
Independent Contractor vs. Employee
55
Real Estate Institute © 2021
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64© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Three requirements must be met to establish an independent contractor status:
• Current real estate license• Written contract specifying that the licensee will
not be treated as an employee for federal tax purposes
• 90% of income based on production, not number of hours worked
Independent Contractor vs. Employee
55
65© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The person or entity initiating the termination shall notify the Department of the termination within 24 hours.
• License of terminated licensee automatically becomes inactive.
• New sponsoring broker notifies the Department of new sponsorship relationship within 24 hours after establishing sponsorship.
• License becomes active.
Termination of Sponsorship
55
66© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Business Planning
55
Real Estate Institute © 2021
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67© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Real Estate License Act of 2000 requires an office policy
• Exception is sole owner with no sponsored licensee
• Topics should include:
o Agency policy
o Fair housing, nondiscrimination and harassment
o Confidentiality of client information
o Advertising
The Policy and Procedures Manual
55
68© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Errors and Omissions (E&O) Insurance
55
69© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Assistants
• Combination office manager, marketer, organizer, and facilitator with a fundamental understanding of the real estate industry
• May or may not have a real estate license
If licensed
• Must be paid by sponsoring broker• Must have a written agreement with the
sponsoring broker
Assistants
55
Real Estate Institute © 2021
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Broker Pre-License Topics
May…• Perform administrative and clerical functionsMay Not…• Host public open houses• Interpret information related to a real estate
transaction• Explain or interpret real estate documents with
anyone outside the employing licensee’s firm• Negotiate commission or fees on behalf of a
licensee• Perform any other activity for which a license is
required
Unlicensed Assistants
55
71© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Amount of a broker’s commission is negotiable in every case
Broker’s Compensation
55
72© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Broker must cause the action that results in a real estate transaction to be considered the procuring cause of sale
Even if the transaction is not consummated, the broker may still be entitled to a commission
Broker’s Compensation
55
Real Estate Institute © 2021
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73© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
In Illinois:• It is illegal for a sponsoring broker to pay a
commission to anyone other than the sponsored licensee
Broker’s Compensation
55
74© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Technology And Brokerage
55
The internet has brought big changes to the real estate industry.
75© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Price Fixing
Group Boycotting
Allocation of Customers or Markets
Tie-In Agreements
Antitrust Laws
55
Real Estate Institute © 2021
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76© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
National Do Not Call Registry
55
77© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
It is illegal to call names on the national list…
• Unless you have an existing business relationship
within the last 18 months or
the consumer inquired about your services within the last 3 months.
National Do Not Call Registry
55
78© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
To avoid penalties, managing brokers must demonstrate that they:
• Have written procedures to comply with the do-not-call requirement
• Train personnel in those procedures
• Monitor and enforce compliance with these procedures
• Maintain a company-specific list of phone numbers that they may not call
National Do Not Call Registry (Page 1 of 2)
55
Real Estate Institute © 2021
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79© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
To avoid penalties, managing brokers must demonstrate that they:
• Access the national registry every 30 days before calling any consumer and maintain records documenting this process
• They must show that any call made in violation of the do-not-call rules was the result of an error
National Do Not Call Registry (Page 2 of 2)
55
80© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
The CAN-SPAM Act
55
The CAN-SPAM Act establishes requirements for sending commercial e-mail, spells out penalties for those who don’t comply, and gives consumers the right to have e-mailers stop sending messages to them.
81© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
The Junk Fax Prevention Act of 2005
55
The act does not legalize unsolicited fax ads or solicitation, but it does allow for an established business relationship exception.In general, a licensee may not legally send an unsolicited commercial fax message without express written consent or without an established business relationship with the client.
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Broker Pre-License Topics
Quick-Fire Review
83© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• When would one use the services of a broker?
Quick-Fire Review
84© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Quick-Fire Review
Real Estate Institute © 2021
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85© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The amount of commission due to a sponsored licensee is determined by state law.
Quick-Fire Review
86© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• The amount of commission due to a sponsored licensee is determined by state law.
• FALSE!
Quick-Fire Review
87© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• A real estate broker was responsible for a chain of events that resulted in the sale of one client’s properties. This is called procuring cause.
Quick-Fire Review
Real Estate Institute © 2021
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88© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• A real estate broker was responsible for a chain of events that resulted in the sale of one client’s properties. This is called procuring cause.
• TRUE!
Quick-Fire Review
89© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Antitrust Laws Broker CAN-SPAM Act of 2003 Commission Cooperative Commission Employee Errors and Omissions (E&O) Insurance Fiduciary Standard Group Boycotting Independent Contractor
Key Terms Review
55
90© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Junk Fax Prevention Act of 2005
Managing Broker
National Do Not Call Registry
Price-Fixing
Procuring Cause
Ready, Willing, and Able Buyer
Regular Employee
Sponsoring Broker
Tie-In Agreement
Key Terms Review (cont’d)
55
Real Estate Institute © 2021
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91© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Identify – the role of technologies, personnel, and license laws in the operation of a real estate business
• Describe – the various types of antitrust violations common in the real estate industry and the penalties involved with each
• Explain – how a licensee's compensation is usually determined
• Distinguish – employees versus independent contractors and explain why the distinction is important
Learning Objectives - Review
55
92
Illinois Real Estate License Law
Unit 14
93© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Identify – the various categories of licensure
• Describe – the actions that result in discipline against a licensee
• Explain – the statutory duties of the agency relationship
• Distinguish – the process involved in sponsoring versus terminating a license
Learning Objectives
1414
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Broker Pre-License Topics
Illinois Department of Financial and Professional Regulation (the Department)
• Division of Real Estate
• Real Estate Coordinator
• Real Estate Administration and Disciplinary Board (READ Board)
• Real Estate Research and Education Fund
Administration of The Illinois Real Estate License Act
1414
95© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
• Who needs to be licensed?
Obtaining and Keeping a License
1414
96© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Any person who performs any of the following services for someone else for compensation must have a license:
• Sells, exchanges, purchases, rents, or leases real estate, or offers to do so
• Negotiates, offers, attempts, or agrees to negotiate the sale, exchange, purchase, rental, or leasing of real estate
• Lists, offers, attempts or agrees to list real estate for sale, lease, or exchange
• Buys, sells, offers to buy or sell, or deals in options on real estate or improvements
• Buys, sells, markets for sale, exchanging, or otherwise dealing in contracts or options (wholesaling)
Who Needs To Be Licensed? (Slide 1 of 2)
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Broker Pre-License Topics
• Supervises the collection of, offers, attempts or agrees to collect rent for the use of real estate
• Advertises or represents himself or herself as being engaged in the business of buying, selling, exchanging, renting, or leasing real estate
• Assists in or directs the procuring of prospects intended to result in the sale, exchange, lease, or rental of real estate
• Assists in or directs the negotiation of any transaction intended to result in the sale, exchange, lease, or rental of real estate
• Opens real estate to the public for marketing purposes• Sells, leases, or offers for sale or lease, real estate at auction
Who Needs To Be Licensed? (Slide 2 of 2)
1414
98© Real Estate Institute | InstituteOnline.com
Broker Pre-License Topics
Exemptions From Licensing Requirements
Obtaining and Keeping a License
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• Owners or lessors (whether individuals or business entities) or their regular employees who sell, lease, or otherwise deal with their own property in the ways described under Section 1-10 in the course of the management, the sale, or another disposition of their or their employer’s property
• Attorneys-in-fact acting under duly executed and recorded powers of attorney to convey real estate from the owner or lessor or performing their duties as attorneys-in-fact
• The services rendered by an attorney at law in the performance of his or her duties as an attorney at law
• Any person acting as receiver, trustee in bankruptcy, administrator, executor or guardian or while acting under a court order or under the authority of a will or a testamentary trust
• A resident apartment manager working for an owner or working for a broker employed to lease the property, if the apartment is his or her primary residence
License Requirement Exemptions (Slide 1 of 3)
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• Any officer or employee of a federal agency, state government or other political subdivision performing official duties
• Any multiple listing service or other information exchange of real estate information
• Railroads and other public utilities regulated by the state or their subsidiaries or affiliates and the employees of such organizations
• Any medium of advertising that routinely sells real estate advertising but provides no other related services
• Any resident lessee of a residential dwelling unit who refers no more than three prospective tenants in any 12-month period and who receives no more than $5000- or two-month’s rent (whichever is less) in compensation (or finder’s fees)
License Requirement Exemptions (Slide 2 of 3)
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Broker Pre-License Topics
• Any person who is licensed without examination under Section 10-25 of the Auction License Act for the limited purpose of selling or leasing real estate at auction
• A hotel operator who is registered with the Illinois Department of Revenue and pays taxes under the Hotel Operator’s Occupation Tax Act and rents rooms for a period of not more than 30 consecutive days and not more than 60 days in a calendar year
License Requirement Exemptions (Slide 3 of 3)
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Broker Pre-License Topics
Civil Penalty for the Unlicensed Practice of Real Estate:
$25,000 per offense
Obtaining and Keeping a License
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General Requirements
• Broker’s License• Managing Broker’s License• Residential Leasing Agent
License Categories and Requirements
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Broker Pre-License Topics
Corporations
Limited Liability
CompaniesPartnerships
License Categories And Requirements
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Broker Pre-License Topics
PSI/AMP
• 100 National Questions
• 45 Illinois Specific Questions
• Passing Score 75%
• Multiple choice
• 3.5 hours
• 4 attempts
• Transcripts are good for 2 years
The Licensing Examination
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• The licenses of sponsored licensees are to be available at the place of business.
• Other points to know:
• Changing business address or name
• Leaving or changing firms
• Inactive or expired license
The Real Estate License
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Nonresidents and License by Reciprocity• A broker licensed in a state that has a reciprocal
licensing agreement with Illinois may be issued an Illinois license without examination under certain conditions, but they must successfully take the Illinois portion of the state exam.
• Illinois has reciprocity with Colorado, Connecticut, Florida, Georgia, Indiana, Iowa, Nebraska, and Wisconsin.
The Real Estate License
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Expiration and Renewal• Broker licenses expire on April 30 of every
even-numbered year.
• Managing Broker licenses expire on April 30 of every odd-numbered year.
• Residential Leasing Agent licenses expire July 31 of every even-numbered year.
Continuing Education
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Course Content and Core Requirements for Brokers
• 4-Hour Core requirements
• 8 Hours of Elective Courses
Continuing Education
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Place of Business• Each real estate managing broker must maintain a
definite office or place of business within Illinois
• Exceptions - reciprocity
• Multiple offices
Your Real Estate Business and The Act
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• Employment Agreements
• Agency relationships
• Disclosure
• Handling client funds
• Assistants
• Advertising regulations
• Compensation and business practice
Your Real Estate Business and The Act
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Material Facts/Known
Latent Physical Defects
Designated Agency
Dual Agency
Agency Relationships
No-Agency
Compensation Sources
Contemporaneous Offers
Disclosure
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Must include business name and franchise affiliation
(if any).
Must include business name and franchise affiliation
(if any).
Blind ads are prohibited.
Blind ads are prohibited.
May not be fraudulent,
deceptive, or misleading.
May not be fraudulent,
deceptive, or misleading.
Must communicate accurate
information.
Must communicate accurate
information.
Brokers cannot place a sign on any
property without the written consent
of the owner.
Brokers cannot place a sign on any
property without the written consent
of the owner.
Advertising Regulations
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IDFPR may impose the following
disciplinary actions:
Refuse to issue or
renew any license
Suspend or revoke
any license
Censure or
reprimand a licensee
Place a licensee
on probation
Disciplinary Provisions and Loss of License
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Licensees may be subject to disciplinary action if they:
• make a false or fraudulent representation in attempting to obtain a license;
• have been convicted of a felony or of a crime involving dishonesty, fraud, larceny, embezzlement, obtaining money, property or credit by false pretenses or by means of a confidence game;
• have been convicted of a crime that constitutes a felony under Illinois law;
• have been convicted of a felony in a federal court;
Causes for Discipline (Slide 1 of 8)
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• perform or attempt to perform any act as a licensee in a retail sales establishment in a space not separated from the main retail business;
• have been subjected to disciplinary action by another state, if at least one of the grounds for that discipline is the same as or equivalent to a cause for discipline in Illinois;
• have engaged in real estate activity without a valid license (an additional civil penalty of up to $25,000 may be imposed for this violation); or
• attempt to subvert or cheat on the licensing exam or assist someone else in doing so.
• Cheating on continuing education courses or examinations.
Causes for Discipline (Slide 2 of 8)
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• making any substantial misrepresentation or untruthful advertising;
• making any false promises likely to influence, persuade, or induce;
• pursuing a continued and flagrant course of misrepresentation or false promises;
• using any misleading or untruthful advertising;• using any trade name or insignia of membership in
any real estate organization of which the licensee is not a member;
• acting as an undisclosed dual agent;
Causes for Discipline (Slide 3 of 8)
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• failing to account for or to remit any monies or documents belonging to others;
• failing to maintain and deposit in a special non-interest bearing account, separate from a personal or other business accounts, all escrow monies belonging to others;
• failing to make all escrow records and related real estate business documents available to IDFPR;
• failing to furnish on request copies of all documents relating to a real estate transaction;
• failing by a sponsoring broker to submit termination documentation in a timely manner;
Causes for Discipline (Slide 4 of 8)
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• demonstrating unworthiness or incompetency;• commingling the money or property of others with their own;• employing any person on a purely temporary or single-deal
basis as a means of evading the law regarding payment of commission to nonlicensees;
• permitting the use of their license as a broker to enable a salesperson or an unlicensed person to operate a real estate business;
• engaging in any conduct, whether or not specified in the license act, that constitutes dishonest dealing;
• displaying a sign on any property without the written consent of an owner or advertising that a property is for sale or for rent without the owner’s consent;
Causes for Discipline (Slide 5 of 8)
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• failing to provide information requested by IDFPR within 30 days of the request;
• disregarding or violating any provision of the license law, rules, or regulations;
• assisting any individual or business entity in disregarding the license act;
• advertising any property for sale, or advertising any transaction of any kind relating to the sale of property, without clearly disclosing the name of the firm with which the licensee is associated or evidence of the broker’s occupation;
• influencing or attempting to influence a prospective seller, purchaser, occupant, landlord, or tenant so as to promote the continuance or maintenance of racially and religiously segregated housing or to retard, obstruct, or discourage racially integrated housing;
Causes for Discipline (Slide 6 of 8)
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• engaging in any act that constitutes a violation of the Illinois Human Rights Act
• inducing any party to a contract of sale or listing agreement to break the contract for the purpose of substituting a new contract or listing agreement with a third party;
• negotiating a sale, exchange, or a lease of real property directly with an owner or lessor without authority from the listing broker if the licensee knows that the owner or lessor has a written exclusive listing agreement with another broker;
• where the licensee is an attorney, acting as both the lawyer and the licensee for either the buyer or the seller in the same transaction;
Causes for Discipline (Slide 7 of 8)
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• advertising free merchandise, awards, prizes, or services if any necessary conditions are not disclosed;
• recruiting at license testing facilities;
• failing to repay Illinois student loans;
• violating the terms of a disciplinary order by IDFPR; or
• paying commissions directly to a licensee employed by another;
• failure to pay Illinois taxes;
• failure to pay child support.
• offering a guaranteed sales plan which does not comply with the Act.
Causes for Discipline (Slide 8 of 8)
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• A sales plan in which a sponsoring broker enters into a contract with the seller, promising to purchase the property for a specific price if the property is not sold within an agreed period of time.
• In Illinois, a sponsoring broker must:• Provide written details• Offer evidence of financial resources• Market the listing in the same manner as other
listings• Not purchase the property until the listing
terminates
Guaranteed Sales Plans
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Procedure for disciplinary hearings • Disciplinary consent orders
• Judicial review
• Criminal prosecution and penalties
• Injunctions
• Disciplinary statute of limitations
• Index of decisions
Disciplinary Provisions and Loss of License
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The Real Estate Recovery Fund
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Recovery Amounts • Amounts as adopted by Rules
The Real Estate Recovery Fund
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• Collection From The Recovery Fund
• To recover from the fund, all proceedings, reviews, and appeals must be completed.
• Statute of Limitations
• A suit that may result in collection from the fund must be commenced within two years after the date the alleged violation occurred.
The Real Estate Recovery Fund
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Financing The Recovery Fund • Fines, penalties, and application funds are
deposited in the State Treasury in a specific Real Estate Recovery Fund.
• If the balance goes down to $750,000, the Treasurer will cause sufficient funds to increase the balance to $800,000 with monies from the Real Estate License Administration Fund.
The Real Estate Recovery Fund
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Quick-Fire Review
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• Why are there so many requirements for becoming a real estate licensee?
Quick-Fire Review
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Quick-Fire Review
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• Sponsored real estate brokers may represent only the sponsoring broker under whom they are licensed.
Quick-Fire Review
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• Sponsored real estate brokers may represent only the sponsoring broker under whom they are licensed.
• TRUE!
Quick-Fire Review
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• The purpose of the Real Estate Recovery Fund is to protect the public from dishonest real estate licensees.
Quick-Fire Review
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Broker Pre-License Topics
• The purpose of the Real Estate Recovery Fund is to protect the public from dishonest real estate licensees.
• FALSE!
Quick-Fire Review
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Broker Pre-License Topics
Blind Ad
Broker
Designated Agency
Division of Real Estate
Illinois Financial And Professional Regulation (IDFPR)
Informed Written Consent
License
Key Terms Review
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Managing Broker
Real Estate Administration And Disciplinary Board
Real Estate Recovery Fund
Real Estate Research And Education Fund
Residential Leasing Agent
Sponsoring Broker
Sponsorship
Key Terms Review (cont’d)
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• Identify – the various categories of licensure
• Describe – the actions that result in discipline against a licensee
• Explain – the statutory duties of the agency relationship
• Distinguish – the process involved in sponsoring versus terminating a license
Learning Objectives - Review
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What did You learn in this class?
140
Broker Pre-License Topics
Read Units: 4, 5, 14
Read:State of IL Real Estate License Act of 2000 in Student Portal
Take Online: Lesson Exam 4
Homework
141© Real Estate Institute | InstituteOnline.com
Thank You For Attending Today’s Class!
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