FAQ on Real Estate Brokerage - Part 1 of 3 Real Estate Broker is a duly registered and licensed natural person who,

for a professional fee, commission or other valuable consideration acts as an agent of a party in a real estate transaction to offer, advertise, solicit , list, promote, mediate, negotiate or effect the meeting of the minds on the sale, purchase, exchange, mortgage, lease or joint venture, or other similar transactions on real estate or any interest therein. What is Real Estate Broker? What is the difference between Real Estate Broker as an agent from an agent under the law on agency? A Real Estate Broker, under M.O. No.39, is an agent of another person who, for and in consideration of a fee, commission or other compensation, negotiates, mediates or effects the meeting of the minds on the sale, purchase, exchange, mortgage, or lease of or joint venture or other transaction in real estate or in any interest therein. On the other hand, an agent under the law on agency is a person who binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority or the latter. In other words, a real estate broker is one who in behalf of others and for a commission or a fee negotiates contracts relative to real property and interest therein. He is the negotiator between parties, never acting in his own name, but in the name of those who employ him; he is strictly a middleman, and for some purposes, the agent of both parties. Indeed, he is one whose occupation it is to bring parties together or to bargain for them in matters of sale, purchase, lease, mortgage, or other transaction relating to real estate property. Although a real estate broker is an agent, he is distinguished from a true agent, generally by reason of the fact that his authority is of special character, being limited only to the acts of negotiation or mediation for on behalf of his principal, while a true agent acts in representation or on behalf or in lieu of his principal, within the scope of his authority, and for which reason, when authorized under a special power of attorney as an attorney-in-fact, he is exempted from the licensing requirement of MO No.39, although performing any of the acts of a real estate broker. What is the difference between a real estate broker and a real estate dealer? As to function: A real estate broker performs his acts in behalf of another, while a real estate dealer perform the same acts in his own behalf. As to income: A real estate broker receives a fee or commission for his services, while a real estate dealer transacts his business with the object of making a profit. As to license: A real estate broker is required to secure a license from the Professional Regulation Commission (PRC), while a real estate dealer is only required to register with the Local Government Unit as a business entity and pay a privilege tax on a graduated scale under the Local Tax Code.

What is the difference between a real estate broker and a real estate salesman? For licensing purposes, a Real Estate Broker is required to pass a written examination, while a Real Estate Salesman is not so required, as he is licensed as such merely on the recommendation of his broker-employer A Real Estate Broker is required to file a P20,000 bond, while a Real Estate Salesman is not, as he is covered by the bond of his broker-employer A Real Estate Broker is an independent entity subject only to government regulations, while a Real Estate Salesman does not have such independence. A salesman has to work under a broker and acts only in behalf of his employer-broker.

What is an agent? An agent is the one who represents the interests of another (the principal, i.e. client or real estate broker). What is a principal? Principal is commonly known as the person who engages the agent for representation. What is a client?

Client is a person who empowers another to act as his or her representative or agent. Client relationship is equals to fiduciary relationship. What is a customer? Customer generally refers to person without representation involved in the transaction involved in the transaction. All agents have a duty to treat customers fairly. How the Agency Relationship is created? Appointment means that the principal gives express authorization to the agent. Under both common and statutory law, this requires writing when the sale of real estate is involved. Estoppel means that if the principal causes third persons to believe that someone is his agent and that third party deals with the agent, then the principal cannot deny the agency relationship even though it did not exist in fact. Ratification means that if a person having no authority whatsoever, purports to act as an agent and the purported principal later adopts the acts of that agent, an agency relationship has retroactively been created. What are the powers of an agent? An agent has the powers which are conferred upon him by the principal. In addition, the agent has all such powers as are necessary, proper, or usual to enable him to accomplish the purpose of the agency. The powers granted to an agent may be restricted by contract or by statute. What are the duties of an agent/broker to his principal? The broker must be loyal to his or her principal. All relevant information within the knowledge of the broker should not be withheld from the owner. The broker should advise the principal on anything that concerns the principals interest. The broker acts as a fiduciary. The broker should never hold any interest that is not beneficial to the principal. He is prohibited from buying for himself or for relatives the sellers property without prior knowledge of the principal. The broker must account for money deposits. In serving as an agency, the broker should immediately remit and account all monies in behalf of the principal such as deposit or earnest money. The broker must obey the instructions of his or her principal. The broker should never deviate from the instruction of the principal most especially on the terms of payment. If the seller requires a cash down payment, the broker should accepting nothing but cash from the buyer. If he accepts a check then he violates the instructions of the buyer. The broker must act in person. A seller employs a broker based on his confidence and reputation of the broker. He relies on the personal services of the broker thus a broker should never delegate his task to others. The broker must not have a personal interest in the property for which he or she acts as broker without full disclosure to the principal. The broker is prohibited from acting for both the buyer and the seller without full disclosure. On rare occasions, should the broker need to represent both the buyer and the seller and collect a commission from both parties, there should be full disclosure to both and should give their consent. Without disclosure, the broker is in violation of his or her agency if he or she accepts a commission both from the principal and some third persons. What are the liabilities of a principal? The principal is liable for the actions of his agent under the doctrine of respondeat superior. The knowledge of an agent is imputed to the principal and the principal is deemed to know all facts known by the agent. The knowledge imputed to the principal includes relevant knowledge received prior to the commencement of the agency. Torts committed by the agents such as negligence and fraud are also attributed to the principal. What are the liabilities of an agent? An agent is liable to his principal for any violation of his duties imposed upon him by virtue of the agency. An agent may also be liable to a third party for his acts that have been directed towards that third party. What are the brokers duties to the prospects? Common observation of the role of real estate brokers suggests that the broker works diligently with the prospects in satisfying his or her needs. In this respect, the broker does not earn a commission unless the prospect is satisfied; a property must be found that suits the buyer and that may be financed within the limitations of the buyers income and cash reserves. In pursuing this objective, the broker must not make any misinterpretations or false promises or commit any fraudulent act. Although the broker may promote the property by such statements as price are going up, or this house is constructed of only the best quality

materials, he should not make promises or false statements which the buyer may rely on. If the broker states that I can sell this land for P500 per square meter more next year, this is a false promise; and it is in violation of his duties to the prospect. What are the principles or elements of agency applicable to a real estate broker as an agent? There must be a meeting of the minds or mutual consent as to the establishment of the agency relationship There must be a determine subject matter for which the agency is established That the fee, commission, or compensation must be certain in money or its equivalents That the agent must act within the scope of his authority That the agent must act in behalf of his principal and not in his own name How is a contract of agency extinguished? Expiration of the period for which the agency was constituted Death, civil interdiction, insanity or insolvency of the principal or agent Withdrawal of the agent Accomplishment of the object or purpose of the agency Revocation of the authority of the agent by the principal Dissolution of the firm which entrusted or accepted the agency What is a Real Estate Salesman? A real estate salesman is a natural person who performs for and in behalf of a real estate broker under whom he is licensed, any of the functions of a real estate broker, for or in expectation of a share in the commission, fee, compensation or other valuable consideration. What is a real estate brokerage? Real estate brokerage is the profession, occupation, practice or calling regulated and/ or governed by MO No.39, Series of 1985; whereby a natural or juridical person acting as an agent of another person, and for and in expectation of a fee, commission or other valuable consideration, negotiates the sale, purchase, lease, mortgage or exchange of real estate or of any interest therein is real estate brokerage. What are the steps in real estate brokerage? 1. Securing Listings 2. Procuring Prospects 3. Presentation and Demonstration 4. Negotiation 5. Consumation What is Securing Listing as part of the steps in real estate brokerage? Looking or searching for properties for sale, mortgage or exchange.

What is Procuring Prospect as part of the steps in real estate brokerage? Looking for persons who want to buy, sell, lease mortgage or exchange real estate;

What is Presentation and Demonstration as part of the steps in real estate brokerage? The process of showing the property to a prospective buyer, lessee or exchanger by underscoring its favorable physical qualities and such other benefits and advantages as to arouse the desire to buy, lease or exchange. The process of presentation and demonstration generally involves the following procedures: Preparation of sales or lease materials such as plans, price lists, brochures, maps, etc., and a check list of data about the property; Organization of selling points; Anticipation of possible objections; Arrangement of appointment; Selection of the best route to give the most favorable impression of the neighborhood What is Negotiation as part of the steps in real estate brokeragee?

 The process of reconciling or bringing together the opposing views of the parties; Closing The process whereby through mediation of the broker, the minds of the parties meet on mutually acceptable price or consideration, terms and other conditions.

What is Consummation as part of the steps in real estate brokerage? The process whereby the consideration is paid, the proper document is executed, the commission is paid, the instrument is notarized, filed and registered with the register of deeds concerned.

When is commission due? In the absence of any stipulation, the commission is due and payable in full upon the consummation of the contract, even if the price is to be paid in installments only. What are the essential elements of real estate brokerage? Employment of the broker as an agent A real estate broker acts on behalf of his principal without acting on his own name and without entitled to the possession of the property which is the subject of the transaction Function - a broker must perform only specific functions; Service rendered a broker must be the procuring cause of the sole instrumentality in effecting the meeting of the minds of the parties in the transaction during the period of agency. Compensation For services rendered, a real estate broker is paid a fee, commission or other value consideration. What is the difference between Real estate as a profession and real estate as business? Real Estate as profession refers to the practice of real estate brokerage in which a duly licensed real estate broker acts as an agent of another person, and for a fee, commission, compensation or other valuable consideration, negotiates the sale, purchase, lease mortgage or exchange of real estate, and/ or renders appraisal reports or advise on real estate matters. The practitioner does not have any propriety interest on the real property involve, neither does he use his own funds in the process. While real estate as a business refers to the activities of a real estate dealer engaged in the buying, selling, exchanging, leasing or renting, financing or developing real properties with use of his own funds, with the main purpose of delivering profit or gain from the processor or activities.

What is a real estate listing? Listing is a contract between a property owner and a real estate broker where the property owner authorizes the real estate broker to sell or lease or mortgage or exchange the formers property, as the case maybe, wit in a certain period of time, at a certain price and terms, and a certain fee or commission. What are the contents of real estate listing? Description of the property, i.e., Block No., Lot No., TCT No. Lot area and technical description of lot Description of improvement, if any Mortgage, if any Commission rate

 Terms of authority Hold-over clause, if any Authority to receive earnest money

What are the different kinds of real estate listing? As to Form Verbal where the authority is orally given; Written where the authority is given in writing. As to the Nature of Function of the Broker Sales agency where the owner or principal gives authority to a real estate broker to look for a buyer and negotiates the sale of his property; Purchase agency where a principal gives authority to a real estate broker to look for a certain property and negotiates the purchase thereof; Lease agency where a principal gives authority to a real estate broker to look for prospective tenant or lessees, or where a prospective tenant or lessee gives authority to a real estate broker to look for space to be rented or leased; Exchange agency where a principal gives authority to a real estate broker to negotiate the exchange of his property for another property; Loan agency where a principal gives authority to a real estate broker to look for a money lender and negotiates for a loan. As to Exclusiveness Non-Exclusive or Open Listing where a principal gives authority to two or more real estate brokers to negotiate the sale of his property. The agents may act simultaneously but the principal is obligated to pay commission only to the broker who successfully procures a ready, willing and able buyer. If the principal himself sells the property without any aid or assistance from the authorized brokers, he is not obliged to pay any commission. However, should any one of the authorized be in any way a procuring cause in the transaction, the principal is obliged to pay the commission agreed upon. Exclusive Listing - a listing wherein only one real estate broker is authorized to negotiate the sale of the property of the principal. Exclusive Agency Listing where only the broker is specifically authorized to act as exclusive agent of the principal. However, the principal retains the right to sell the property himself without obligation to pay commission to the exclusive agent if he makes the sale himself, unless another broker makes the sale, or that the exclusive agent acted as a procurement cause in the transaction, whereby he is entitled to the commission agreed upon. Exclusive Right to Sell this is a cooperative arrangement among members of a real estate board or organization, whereby each member brings his real estate listings to the attention of the other members so that if a sale is made, the commission is divided between the member who submitted the listing and the member who made the sale, with a small percentage previously agreed upon deducted from their respective commissions and paid to the multiple listing service of the real estate board or organization. As to Basis of Commission Percentage Listing - the commission of the broker is a pre-agreed percentage of the total compensation Net Listing - the compensation of the broker depends on the overprice What are the steps for securing real estate listing? Contracting owner-seller

 Inspection of property for details necessary for selling (location, size, improvement utilities, etc.) Determine reasonableness of sellers asking price taking into consideration the following: (1) Character of the neighborhood where the property is located; (2) Favorable and unfavorable physical features of the property which may affect its price; and (3) Market data on nearby or comparable properties as obtained from registered sales, offering in the Multiple Listing Service, advertisement, etc. Examination of titles and other documents as to liens, encumbrances, restrictions, and information which may affect salability and value of the property. Formalizing of listing contract. Prepare selling presentation which includes plans, pictures, maps, etc

What are the sources of real estate listings? Where can it be obtained from? Personal contacts, such as friends, relatives, fellow brokers, associates, affiliates in civic clubs, professional or religious organizations; For Sale signboards of owners; Acquired assets and real estate departments of banks and other financial institutions; Referrals; Classified ads and newspaper advertisements; Legal notices, such as foreclosure proceedings, extrajudicial and judicial partitions. What is a real estate listing contract? Listing contract is an agreement between the broker and the owner of real property whereby the owner of authorizes the broker to negotiate for the sale, lease, joint venture, exchange, or mortgage of his or her real property for a commission or any valuable consideration. What are the contents of a real estate listing contract? Date of the authority Name and address of the broker, license number Functions to be performed or service to be rendered by the broker Type of listing Description of the property; to include location, kind, title, area of land and improvement, if any; utilities included, if any; liens and encumbrances, if any. Price and terms Duration of the authority Note: Hold over clause is a provision in the listing contract which entitles the broker to a commission even though if the sale is consummated after the period of his authority provided that the buyer has been registered by him with the owner/ seller during the period of his authority. Commission or compensation of the broker and terms of payment Name, address and signature of the owner/seller Acceptance by the broker n what ways a real estate listing agreement may be terminated? Sale of the property Events that prevents performance (ex. Death of the principal or destruction of the property) By mutual agreement or consent of the parties By revocation If the owner/ seller cancel the listings agreement before the expiration date, the broker is entitled to compensation for the time and money expended in exercising the agency.

Or if the broker has completed the agency assignment with a ready, willing, and able buyer, the owner cannot cancel the agreement to avoid payment of a commission. By expiration of the period for which the agency was constituted. What is an option? What is the difference between option and listing? An option is a contract between the seller and the buyer wherein the seller for a certain consideration called the option money reserves the property for the buyer to purchase within a stipulated period of time at a specified price and term. While a listing is a contract between the seller or owner and a broker, where by the seller/ owner authorizes the broker to negotiate the sale of his property within a certain period of time, at a stipulated price and terms at a stated rate of commission. What is an escrow? Escrow is an agreement whereby a contract of sale together with its consideration is deposited with or entrusted to a third party, called an escrow agent, authorizing him to release the said consideration to the seller upon the fulfillment of certain conditions stipulated in the contract of sale, and to deliver the said contract and supporting papers to the buyer upon release of the consideration of the seller. When will an escrow may be applied in real estate transaction? When the property sold is still occupied by the seller, tenants, or squatters, the balance of the contract price is deposited in escrow, to insure the delivery of possession within the period agreed upon When the certificate of title show subsisting encumbrances which the seller promises to a clear within a definite period, the full or balance of the contract price is deposited in escrow until such encumbrances are cleared by the seller When the building sold is deposited in escrow to be released upon the completion of the building What is the difference between a hold over clause and a procuring clause in a real estate transaction? A hold-over clause or safety clause is a stipulation in a listing contract which entitles the broker to a commission even if the sale is closed after the period of his authority has expired, provided that he submitted or registered in writing to the seller the name of the buyer during the period of his authority. While a procuring clause, means that the broker was solely instrumental, or was the direct and efficient cause in effecting the meeting of the minds of the parties. In short, the broker was the one who procured a ready, willing and able buyer that lead to the execution of the sales contract.

What are the requirements for the real estate brokers to be entitled to a commission? The broker must be the procuring cause of the sale. The broker must hold a valid license as real estate broker issued by the DTI. The broker must prove employment. The broker must meet the purpose of the agency to find a willing and qualified buyer who is agreeable to the terms of the seller. What is a real estate client and customer prospect, suspect, and future suspect? Prospect is a person who is in need and qualified to buy, lease, exchange or mortgage real estate. Suspect is one who is willing but without capacity to buy or one with ability to buy but without willingness. Future suspect is one with willingness but without ability to buy may improve his qualification to buy. What can the real estate practitioners do to surpass real estate consumer expectations and satisfaction? Consumers today have the information and will personally discount the amount of effort and level of service they see the real estate practitioner offer. The practitioner will be delivering quality service. They will do this by adding value to the information already available to the consumer and by adding value to the home-buying and home-selling transaction. The practitioner will add value in at least five (5)

ways. The real estate professional will be sorting through information that is available and giving the consumer quality information that more closely meets the needs of that particular consumer. There is so much information available now to the consumer that the consumer is starting to get overwhelmed. Information will be increasingly available in the future. The astute real estate professional will assist the consumer by qualifying the consumers needs and then helping them find or giving them the information that meets those needs. Real estate professional used to have to qualify the buyers/sellers needs in buying or selling the home. When they were assisting the buyer, they also had to assess the consumers purchasing power. The real estate professionals job is still the same, but now it also includes giving consumers the information that meets their needs and helping them find the information that is most pertinent to their needs. The practitioner of today and tomorrow will be a buffer around all this information and save the consumer the time, efforts and frustrations associated with sorting through all this information. The real estate professional will be interpreting and integrating the information. In other words, the real estate professional will turn information into usable knowledge. Consumers can get the information on their own. Unless the consumers have been through the home-buying process numerous times, they still need help understanding what that information mean. The real estate professional should not allow the consumer or the availability of all these information in ways beyond their thoughts. You will add value to the relationship by demonstrating your expertise. Consumers who value information especially value someone who can effectively and efficiently use that information. These consumers will more highly value knowledgeable real estate professional. The real estate professional will be adding to this knowledge by showing wisdom about the marketplace, the property, the real estate transaction, etc. Wisdom occurs when someone shows significant insight beyond the information. Effectively identify the buyers/sellers needs above and beyond consumers awareness of their needs, and then use that information in their home-buying and home-selling experience. For example, note that the buyer really wants a low maintenance property, even though his or her past property was far from maintenance free. Show the consumer the pros and cons of certain information you have or he or she has available that relates to that newly realized need. This is wisdom. This is the value-added service. The real estate professional will give true quality service. This means speedily meeting the needs of consumer throughout the entire transaction and after the transaction, etc. Also, the real estate professional will do things that keep the home-buyer and eventual seller emotionally attached to that particular real estate professional. As people move less often and realize that they do not need a real estate professional to help them stay where theyre at, it will become increasingly important to capture those who do not move or people they know in their influence circles who will be moving. Follow-up mechanisms will need to be put in place to effectively meet these needs. The real estate professional in the future will need to offer the consumer all the services the consumer is interested in. A shopping list of quality service offered by the brokerage or the agent can be given to the home buyer or seller. Let consumers choose their interests. Because most agents do not like to deal with these ancillary services, it makes sense that brokers offer to service the real estate agents client/ consumer on this dimension. The real estate broker of the future will have greater services expected of them by the more knowledgeable and demanding consumer. To effectively compete in the marketplace, real estate professionals should consider being more flexible, being more willing to actually change, being better listeners and being quicker learners. What is the summary of Real Estate Brokerage practice? Getting started in Real Estate Brokerage Secure your license Register as sole-proprietorship, partnership, or corporation Business permit from a local government unit where you will hold office Register with the BIR (TIN, VAT) Securing Listing- the process of soliciting authority to sell, lease, joint venture, etc. over properties from owners. Decide whether to go into general brokerage, project selling (developer based), or a combination of both. The trend now is to focus on a particular market or a specific geographical location. Kinds of properties to choose from- rawland, residential lots, commercial properties, industrial properties, condominium, leisure properties, and memorial lots. As to kind of transaction- sale, lease, joint venture, packaging projects, syndication.

 Learn some negotiating techniques for getting of listing. Manage your listing-manual or use of information technology Source of listing- relatives, friends, neighborhood associations, civic organization, fellow brokers, realty association, banks, real estate developers, and newspaper ads. Marketing of Listing Prospecting- generating leads for customers Qualifying- evaluating the capacity, need, and urgency of the customer Presenting- making presentation of possible and suitable property for the qualified customer Tripping- bringing the customer to the site of the property being offered Negotiating- bringing the client and the customer into an agreement Closing, leading the customer and the client to finally sign a contract and make payment. Completing the transaction Documenting and registering