The Beginning Broker.pptxThe Beginning Broker.pptx

CE Class
CE.5959000-RE (Classroom)
3 Hours Broker Management
Copyright 2019 Real Estate School of Nevada, Inc. All Rights Reserved. 1

The Beginning Broker
Course Objectives:
1. to address the need for beginning brokers to prepare for managing
a successful real estate office; Brokers who complete this course
will be better able to make appropriate choices for what type of
office they will run, how to work with agents, and prepare risk
management. They will be more likely to succeed in attracting an
maintaining quality agents.
2. to meet the educational requirements for Nevada real estate
continuing education courses for license renewal
3. to provide the student with the knowledge that is necessary to best
represent clients as the broker

Course Content
This is a 3 hour course divided into
multiple sections:
 What is a Broker? - 40 minutes
 Preparing an Office – 20 minutes
 The Franchise Opportunity – 20 minutes
 Key Traits of a Successful Real Estate Broker – 20 minutes
 Evaluating and Retaining Agents – 40 minutes
 Use of Intranet and Social Media - 20 minutes
 Risk Reduction - 20 minutes

From Agent to Broker is a Huge Step:
 So, you've earned your broker's license and you've decided to
step out on your own.
 Since you're at this place, you've been successful as an agent,
which means you had a plan and followed it.
 It's no different now, just more complex with the addition of
other people and more responsibility.
 Using the resources of this course, you'll find help starting your
new brokerage, setting up your business systems, and growing
your business for an exit strategy.
 Real estate brokerage office management begs a plan. Let's
profile some of the considerations here.

 While some people may refer to any licensed real estate agent as a “broker,” a
“broker” is a professional who has met the educational requirements and
obtained a real estate broker's license.
 After gaining some years of experience in real estate sales, a salesperson
may decide to become licensed as a real estate broker in order to own,
manage, or operate a brokerage firm.
 Some states allow licensed attorneys to become brokers upon passing the
broker exam without having to take the requisite courses required of
agent.
 Upon obtaining a broker's license, a real estate licensee may continue to
work for another broker in a similar capacity as before (often referred to as
a broker-salesperson or associate-broker).
 Becoming a branch office manager may or may not require a broker's
license, depending on the state. In Nevada, a managing broker must be a
broker or broker-salesperson.

Broker Services
Some examples:
 Comparative Market Analysis (CMA) - an estimate of the home's value
compared with others. This differs from an appraisal in that property
currently for sale (listings) may be taken into consideration as competition
for the subject property.
 Exposure - marketing the real property to prospective buyers
 Facilitating a Purchase - guiding a buyer through the process
 Facilitating a Sale - guiding a seller through the selling process

 FSBO document preparation - preparing necessary paperwork for “For Sale
By Owner" sellers
 Home Selling Kits - guides to how to market and sell a property
 Hourly Consulting for a Fee - based on the client's needs
 Leasing - for a fee or percentage of the gross lease value
 Property Management
 Exchanging Property
 Auctioning Property
 Preparing Contracts and Leases (in most states)
Broker Services(continued)

 These services are also changing as a variety of real estate trends
re-engineer the industry.
 The sellers and buyers themselves are the principals in the sale, and real
estate brokers (and the broker's agents) are their agents as defined in the
law.
 Although a real estate agent commonly fills out the real estate contract
forms, agents are typically not given power of attorney to sign the real
estate contract or the deed as the principals sign these documents.
 The use of a real estate broker is not a requirement for the sale or
conveyance of real estate or for obtaining a mortgage loan from a lender.
However, once a broker is used, the settlement attorney (or party handling
closing) will ensure that all parties involved be paid.

 Most real estate agents coordinate various aspects of the
closing.
 Some real estate brokers may be associated with loan officers
who may help finance buyers to make their purchase.
 negotiating skills and knowledge of financing options
 Real estate brokers (and their agents) typically do not:
 provide title service such as title search or title insurance.
 conduct surveys or formal appraisals of the property such as
those required by lenders.
 act as lawyers for the parties, although they may "coordinate"
these activities with the appropriate specialists.

Listing Broker Services
 The fiduciary duty is to the seller.
 list the property for sale to the public,
often on a Multiple Listing Service
 based on state law, provide the seller with a real property condition
disclosure form and other forms that may be needed
 create marketing, advertising, flyers, internet, etc.
 place a "For Sale" sign on the property indicating how to contact the real
estate office and agent
 advertise the property; advertising is often the biggest outside expense in
listing a property
 In some cases, hold an Open House to show the property

 be a contact person available to answer any questions about the
property and to schedule showing appointments
 ensure buyers are prescreened so that they are financially qualified
to buy the property; the more highly financially qualified the buyer
is, the more likely the closing will succeed
 negotiate price on behalf of the sellers
 The seller's agent acts as a fiduciary for the seller.
 This may involve preparing a standard real estate purchase contract.
 in some cases, hold an earnest payment check in escrow from the
buyer(s) until the closing
Listing Broker Services, continued

Selling Broker Services
 The fiduciary duty is to the Buyer.
 search for desired properties through means such as the Multiple Listing
Service, Sales Traq, and Internet Sites
 show and demonstrate properties of interest
 based on state law, provide the Buyer with all mandated disclosures and
prepare forms that may be needed
 assist the Buyer with the loan qualification
 as needed, be of service in selling the Buyer’s present home
 assist the Buyer with the moving process including inspections, home
repairs, housing related vendors

 be a contact person available to answer any questions about
the property or the process
 negotiate the price on behalf of the Buyer
 The buyer's agent acts as a fiduciary for the buyer.
 This may involve preparing a standard real estate purchase
contract.
 in some cases, hold an earnest payment check in escrow until
the closing
Selling Broker Services, continued

The Franchise Decision:
 When a broker decides to associate with a real estate
franchise, it's normally for instant brand recognition,
immediate structure, training, and ongoing support the
franchiser provides.
 From national marketing exposure, to group buying power (for
everything from signage to advertising space), the franchise
provides immediate "bigness" to the brokerage.
 Of course, all this comes at a cost, both up front and ongoing.
 Most franchisors charge a significant up-front fee and an
ongoing percentage of revenue.

The Franchise Opportunity
Franchise opportunities are everywhere.
Although it often seems like the logical next step in growing a brokerage,
buying into a franchise brand should not be a quick decision.
Before you choose, you should do some careful and meticulous research.

 Meet with and get written franchise offerings from as many franchisors as
possible. The more information you have, the better prepared you will be
to make a decision based on the facts.
 Talk to several franchise owners from each franchise and ask these crucial
questions:
 How do they like the system?
 Are they satisfied with what they received versus what they expected?
 How has the franchise name impacted profitability?
 Ask about ironclad agreements.
 What happens if your franchised brokerage does not succeed?
 What is your territory? Is it big enough? Or are there too many offices of the
same franchise operating within a small area?
 Will yours be an exclusive franchise for the company?
Choosing a Franchise

 Are you protected from another owner of the same franchise
opening close enough to your office to hurt your business?
 What is the cost to buy in?
 What are the projected costs to operate? Are you in a position to
carry those costs?
 What is the cost to keep the franchise rights? Are there renewal fees
every few years?
 Will the franchiser provide any support at the state level? At the
national or international level?
 Do your homework:
 Reputable franchisers will gladly give you a list of owners to call.
 Talk to owners that may not have been prompted for your call.
 Contact owners who live out of state to get a more well-rounded sampling.
 As an owner, you deserve access to the most accurate information and the
most credible people to provide that information. If that person is the
franchise CEO, you should feel comfortable contacting him or her
personally.

 If you are thinking about making the leap from sales to
broker/owner, you need to be honest with yourself.
 Are you able to make this business work, or should you continue to
work as an agent?
 Not everyone is cut out to run/own a real estate office.
 No franchise, no matter how good, will give you the ambition,
personality or financial backing required to succeed. That all comes
from within.

The Office Facility:
As the Broker, you incur costs and obligations of a building or
large space that must accommodate multiple agents, the
support staff, and meeting and storage space. This is a big step
in the cost of doing business. New considerations include:
 Privacy for agents and clients
 Communications equipment
 Computers and information technology
equipment
 Visibility and client presentation
 Access and parking space
 Training/conference areas

Operating Procedures and Systems
 Efficient and productive offices don't get that way by accident.
 Written operations and procedure manuals that give step-by-
step instructions for even the most obvious tasks are
necessary.
 Do the "leg work" and put together the necessary personnel
and systems before you open the doors.

Sales and Lead Management
 Most brokerages promise their agents some form of prospect
generation from the brokerage advertising, floor time and other
company sources.
 Untold millions of dollars are lost each year when the broker doesn't
set up a system to manage these leads and require agent
accountability.
 At the very least, any leads that come in from the company web site
should be carefully tracked and the agent's follow-up actions
monitored.
 Identifying top performers for more leads will pay great rewards.

The Business Model for Earnings
 In consideration of the brokerage successfully finding a
satisfactory buyer for the property, a broker anticipates receiving a
commission for the services the brokerage has provided.
 Usually, the payment of a commission to the brokerage is contingent
upon:
 finding a ready, willing, and able buyer for the real estate for sale.
 the successful negotiation of a purchase contract between a buyer and seller.
 the settlement of the transaction and the exchange of money between buyer
and seller.
 Commissions on real estate transactions are negotiable.
 Local real estate sales activity usually dictates the amount of commission agreed
to.
 Real estate commission is typically paid by the seller at the closing of the
transaction as detailed in the listing agreement but may be paid in total or
in part by the buyer.

 Before you get started, first decide how to pay your agents.
 There are two models, known as "desk-fee" and "commission-split." Some
firms use a hybrid of the two.
 Desk-Fee Model
 In the desk-fee model, agents pay a flat monthly fee to the brokerage
firm (which in turn covers operating expenses like rent, computers and
office supplies) and keep 100% of the sales commission.
 They also take on the volatility in the housing market.
 With this model, start with your target profit margin and work
backward. Factor in operating costs such as rent, utilities, insurance,
marketing, office supplies, listing fees, etc., to determine the fee.
The Business Model for Earnings

 Commission-Split Model
 Still used by most brokerages, agents split the commission with the broker.
 Splits may starts at lower levels such as 50%.
 As agents prove their worth, they can earn a greater percentage.
 Like the desk-fee model, the broker owner still covers administrative costs, but agents pay to
market their own properties.
 While revenues can fluctuate dramatically with this model, administrative costs generally
absorb between 10% and 30% of the top line (larger offices, with 30 agents or more, gain
economies of scale).
 Rent and property taxes can run as high as 35%; equipment and supplies up to 20%; marketing
and advertising up to 20%.
 Listing fees, insurance and other items will also cut into your profits.
 While the most profitable brokerages can earn pre-tax margins in the 20% range, anything
above 5% is considered respectable.
 No matter which model you choose, you will need an office. One formula estimates that
brokerage owners should allot 75 square feet to 100 square feet per agent.
 Consider setting aside enough cash to cover at least six months of operating costs during
startup.

Key Traits of a Successful Real Estate Broker
 As a real estate broker, you are required to:
 deliver exceptional customer service.
 assist your clients with transactional and financial questions.
 tend to client needs.
 prospect for new business.
 Key Traits:
 Confidence
 Deals with fall through, people will change their minds, and other brokers
will compete against you.
 It is important to handle these situations as objectively and confidently as
possible.
 Good People Skills
 As the broker, you will interact with different people every day.
 You need to be able to effectively communicate with them and have
an innate understanding of their needs.

 Key Traits:
 Organization
 This is an essential part of your real estate broker career!
 When you have multiple clients, you need the ability to stay on top of
everything -- conducting open houses, showing properties, taking
listings, handling offers, negotiating prices, etc.
 Problem-Solving
 Handling problems and coming up with quick-fix solutions are a huge part of
a broker career.
 Real estate negotiations can be tough and require someone that can adapt
quickly and compromise.
 Self-Motivated
 As a real estate broker, you are in charge of the real estate office, sales team
and your overall broker career.
 It is important that you be able to take initiative, from marketing your
business to building your client base.

Financial Metrics
 Being a real estate broker or owner is especially challenging in the current
marketplace.
 The competition level has increased, the units sold fluctuate, and the
average sales price and commission go up and down as well.
 All these factors create an opportunity for a smart broker, manager, or
owner.
 There is a series of key numbers, Financial Metrics, you must know to
increase performance and market share for your company and your
associates:

 Cost Per Salesperson, or Desk Costs
 A surprising few brokers and owners actually know this crucial figure.
 To calculate your desk costs, take the total expenses for your business ...
 Rent
 Phones
 General Overhead
 Computers, Internet Marketing, Office Technology
 Staff salaries, benefits, and compensation
 … all the legitimate expenses for your office or business, and divide by the
number of associates in your office.
 This is the contribution each person must make in company dollar for you
to break even.
 In most real estate offices, there are too few who bring in the required
company dollar on a per-person basis to break even.
Financial Metrics

 Net Profit Goal per Person
 To calculate, consider the net profit you desire annually from the business
or office you run.
 Then take that number and divide by the number of associates in your
office or company.
 What is the net profit goal per person?
 With these numbers, you can start assessing the performance of your
personnel.
 Segment your salespeople into categories based on performance and revenue
to the company.
 The first category would be new associates who have been in the business less
than a year.
 How many do you have?
 How are they doing?
 Are they close to hitting desk cost?
Financial Metrics

 Then categorize the people who've been in the business more than one
year who have contributed less in company dollar than your desk costs per
person.
 How many of these did you have this year?
 Who has been there consistently for a few years?
 Why are you keeping them?
 How much time do they take of yours?
 Then we want to group the people that cover their desk costs but below
the profit goal per person.
 These people at least are covering their costs, but you're not making the profit
you really want for your energy, effort, and the risk of business ownership.
 Finally, how many people are above the profit goal?
 These are the ones who are really performing for you and the company.
 Unfortunately, too few associates in most companies occupy this territory.

 Your strategy and plan for success will come out of where you
currently are in your personnel mix.
 If you have one-third or more of your staff in the new-associate or
below-desk-costs categories, it's a big danger sign for your business.
 If you have more than 75 percent of your salespeople in the bottom
three categories you need to make some changes, but you have some
time.
 If you have 40 percent exceeding profit expectations and another 30
percent above desk costs but below profit, then congratulations —
you're on track to achieve success, profits, and market-share growth.

How to Retain Agents
New Agents are Attracted by the Offer of a Personal Web Site:
 Many of today's new real estate agents are much more tech savvy than their
brokers.
 Couple that with their awareness of personal branding in their marketing,
and they are quite aware that a personalized web presence is mandatory for
success.
 Your agent recruiting will be energized if you can offer a turnkey web site
that's unique for them.
 You don't have to sacrifice corporate branding or consistency of image to do
it.

Producing Agents Will Stay if Their Web Sites are Bringing
Business:
 Use services or web design structures that build the brand. Look
across the individual sites and inter-link them for search engine
optimization and produce traffic and business.
 Determine what is required in site personalization for the agent,
while company logo, brand and theme are consistent across all the
sites.
 Done properly, an agent can market their site, even using pay-per-
click if desired, while contributing to the search engine visibility of
all the linked sites.

Keep Control, Build Business, and Maybe Even Cut Broker
Costs:
 Using these tiered and inter-linked structures, the brokerage can
actually realize an increase in business while possibly decreasing
their online marketing expense.
 When agents can see that their individual marketing efforts and
expenditures are bringing business directly to them, they'll likely
spend more.
 One agent's success will spur others to emulate and improve their
marketing.
 All this is better than a roster looking for company generated leads.

It's All About Getting, Tracking, and Converting Prospect Leads:
 A properly designed brokerage web presence will:
 have some cohesive method of capturing leads.
 get leads to agents very quickly.
 track how leads are handled and brought to a transaction.
 This should also be the same method across all the linked agent sites.
 A consistent process for the prospect is necessary.
 This leads to a consistent process inside the brokerage to make it all work.

Effective Brokerage Management
through an Intranet
 Technology is bringing a lot of change to the business of real estate brokerage.
 Many are not up to speed in learning to use technology that can enhance
customer service, cut costs, and better manage all the functions in a brokerage.
 The online Intranet is one technology tool that is woefully under-utilized in our
business.
 What's an Intranet?
 It is a network setup that resides not on a computer in our office, but on the
Internet.
 It allows us to network our employees, agents, and management via any Internet
computer, no matter where they choose to work.
 There's a lot you can do with an Intranet, including involving your customers, clients,
and transaction vendors.

 Contact and Prospect Management
 a complete and highly customizable set of databases for managing all contacts and
prospects, with the ability to segregate them by agent, branch or other variables
 Listings Management
 manage listings information, tasks, ongoing records of activities, seller
communications and more
 Transaction Management
 manage all transactions by type, with tasks tracked by agent, transaction type,
branch, or any other variable
 Lead Management
 assign and manage leads, while monitoring the activity of the agent in working the
leads
 Document Archiving and Management
 store all documents for the company and transactions securely, with access assigned
for total control
Intranet Uses

 Company Management and Training
 place training and policy documents online for secure permitted access
 Extensive Reporting
 every database and module provides customized reports output and design
 Companywide Task Sharing
 manage tasks by person, group or department, with the ability to maintain private,
public and group viewing
 Brokerage Wide Calendar
 same as with tasks, the brokerage can have individual agent and personnel calendars
feeding a full company calendar, with private, public and group permissions
You can accomplish complete and efficient brokerage management with an online
Intranet. You don't have to buy special servers, software, or hardware of any kind.
All you need is reliable, high speed, Internet access.
Intranet Uses

Target Marketing
 identify your target markets: demographics
 know their needs and problems and provide solutions
 reprint helpful articles from industry experts
 offer a tip of the day
 provide helpful industry news and links to industry resources
 find articles not intended for your market, then rewrite them
 do case studies
 get content from leading journals
 explain what makes you different from your competitors and how that benefits
them
 don’t just say “multimillion dollar producer” or “we’re #1”
 offer something of value
 downloadable audio or video demonstrations

 shock or surprise them
 big announcement
 hilarious cartoon on the home page, etc.
 get them to join something
 news group
 a list
 discussion group
 a blog
 create a FREE offer
 call for action
 ask your visitor to do something:
 i.e. – send in pics of the worst foreclosure lawn!

Company Website
 As a broker, you may want to provide a
company-branded website for your
agents.
 Showcase your company’s listings.
 Marketing your website is necessary to
draw traffic to your site.
 There are things you can do behind the
scenes to draw surfers to your website,
and there are things you can do out in
the open.
 The best things happen when you lose
control and let the Worldwide Web take
over.

 Make your web site search engine friendly.
 Make it easier for people to find you by using natural search engine optimization.
 Make sure your web page has a title on every page.
 The title is what they see up top (instead of the www.yournamehere.com/12345?psp
(sample)
 Make it keyword-friendly according to your specialty whenever possible.
 For example: Nevada Short Sale Listings, Nevada Short Sale Negotiations
 Embed key words or meta tag words in your HTML coding.
 None of this information is seen by your web viewers, but it will be devoured by search
engine crawlers and will raise your ranking.
 The Meta description is a mini ad that would show up in the search results on sites
such as www.google.com or www.yahoo.com.
 Finally, the meta tags are keywords such as Nevada short sale agent, Nevada short sale
specialist etc.
 If you don’t understand or can’t find where to change this information, simply add as
many appropriate keywords in your text as possible. And remember, stick to your
specialty. Too many keywords in various area’s will decrease your rankings.
 Take advantage of profiles. Google LOVES to show profile pages in results.
Company Website

 Linking
 Link within your site - this will raise your visibility online.
 Linking to other sites increases your search engine optimization.
 When you link to outside locations, have a new window open up to
keep them at your site while visiting others.
 Make sure the other sites are linking back to you as well.
 Many people use link exchanges to boost their rankings.
 Stick with sites that are in a similar field to yours.
 For example: A Short Sale specialist might exchange links with credit
counselors, banks, mortgage companies, foreclosure specialists, lawyers
and so on.

 Offering quality content is an important step in creating a
web presence.
 Work hard on the back end of your website to increase your web
audience.
 Realize that web surfers are not always coming to your site to buy
something. They may want to know something. Tell them.
 Give your web visitors something free and they will come back to you
for more.
 Expand on your specialty.
 Add articles about the subject property, HOA, newsletters about the
area, MLS listings in that area, upcoming events, places to dine,
school links, and so on.
 Remember – you are the expert – you have to show it.

 Insert your web address in everything.
 Place your web address on your email signature, your business cards,
your marketing materials, your text messages, your letterhead, your
signs, your car, etc. Put it on anything and everything.
 Ask friends, colleagues and satisfied customers to link to your
website.
 Get on a professional site like LinkedIn.com and share your
website with your connections.

Build Your Brand Using Social Networks
 A social network service focuses on building online communities
of people who:
 share interests or activities; and
 are interested in exploring the interests and activities of others.
 Most social network services are web-based and provide a
variety of ways for users to interact, such as e-mail and instant
messaging services.

 Creating the homepage – each network is like your own web site
 maintain your brand
 select colors and styles similar to your web site
 think about the design – who are you trying to reach?
 your username (or the closest variation possible) should be the
same across the Internet
 Add links to all of the places you can be found online (Your Website,
Blog, Twitter, Facebook).
 ALWAYS have an exclusive offer to get people to go to your web site
and capture email addresses.
 example: Get a FREE Short Sale kit by visiting www.listsitehere.com

 Choose an Avatar and stick with it.
 This can be your photo or a cartoon photo.
 People will start recognizing your picture as your brand.
 Show your personality.
 It is important to be multi-dimensional around the net.
 Don’t only focus on real estate and your brand – remember you are also a human
with other interests.
 The art of mastering social networking depends on your use of these tools and
they each have a learning curve.
 Start with one site and after you get the hang of it, move to the next, etc.
 Make yourself stand out.
 Create a great experience for your fans.
 Create unique videos as additional content.
 people LOVE videos.
 make a YouTube channel to house all of the videos

 Choose your favorite.
 Don't jump at every offer to join a social networking service.
 Focus on sites that are devoted to professional interests.
 Understand site culture and rules.
 Hone your profile.
 Even social networking spots devoted to fun (over work) can lead to career connections.
 Make sure your profile doesn't include anything you wouldn't want a would-be
boss/client to see.
 Don't be pushy.
 Many members of social networking groups have had bad experiences with pushy types.
 Be sensitive to individuals' networks.
 Do not be overly aggressive in trying to 'get in' with someone's network.
 Someone who is too persistent can be annoying and actually will damage their own
reputation if they try too hard.

 Prepare for face-to-face introductions.
 Just because your network is developed online, doesn't mean relationships stay there.
 Social networking sites often connect people offline through individual meetings or group
events.
 Just remember: A face-to-face meeting requires you to respond without the time
afforded by email to craft your message.
 Know what you want from a meeting.
 Help yourself by helping others.
 Networking is reciprocal, so do unto others as you'd want done to you.
 If you're able to help people, they'll be more likely to remember you and return the favor.

 Use tags (keywords) consistently.
 Remember, the goal is to get the search engines to find you and for customers to
need your services.
 Whenever you post on any of these sites, make sure they are keyword rich.
 Become savvy in your use of social media.
 There is a surge of brokers who have realized that social networks can build
business with fewer resources, just as their salespeople have done.
 With growing numbers in social networks, there's still plenty of growth
potential in the brokerage community.
 Brokers are recognizing that social networking can help enormously in building
a brand, not just promoting events and property listings.
 For example, the value of posting Twitter messages goes far beyond whether your
followers actually read your tweets.
 The messages themselves can come up in Google searches, boosting your
brokerage's place in the search engine hierarchy and driving traffic to your business.
 The best benefit we find from social media comes from search engine results.

 Facebook
 a convenient way to stay connected with sales associates and staff
 By making contact on Facebook, with its nonintrusive way to build rapport,
many associates will join a firm even though phone calls to them weren't
getting returned before.
 It's a great way to recruit.
 Social networking isn't for everyone.
 If you're not committed to spending regular time online working your
networks, don't bother.
 The ones who dabble won't get any sustainable benefits.
 Also, don't look to the medium as a way to pare your marketing budget.
 It's an add-on, not a replacement for paid marketing.
 There's also the risk that others could try to tarnish your company's image.
 The biggest fear among brokers is that you'll create a page on Facebook,
someone will post something negative about you, and you'll have to run
damage control.
 You need a point person who's monitoring that regularly.

Insurance and Risk Management
 Develop a plan to avoid lawsuits.
 Carefully consider Errors and Omissions Insurance.
 Train, train, train should be a priority.
 Passing the license exam doesn't make an expert, or even a safe novice.
 There's a huge amount of sales training going on, but your brokerage
will benefit greatly from some legal, forms, ethics and contracts training
to go with it.
 Be available for your agents. Make it easy for them to seek your
advice.

Minimizing Risks
 Allegations of misrepresentation, including failures to disclose, have long
been the No. 1 complaint against real estate sales associates.
 Probably 90 percent of liability cases against associates involve
misrepresentation.
 and 90 percent of those charge negligent misrepresentation (internet studies
show)
 Negligent misrepresentation occurs when sales associates say something they
believe to be true based on what the client, often the seller, says—the water
heater is five years old, for example—but the statement turns out to be false.
 Although courts overwhelmingly tend to decide in favor of sales
associates in these cases 80 percent to 85 percent of the time, the
complaints keep coming.
 That’s because unhappy parties to a transaction, usually buyers who’ve
discovered a problem with the house after purchase, don’t feel satisfied
until they’ve sought damages. Many times, all the person really wants to
do is be heard.

 Despite your odds of success, prevention is key because defending
yourself, even in cases you ultimately win, costs time and money
and can lead to increases in your errors & omissions insurance
premiums.
 What’s more, to avoid the costs and uncertainty of a trial, E&O
insurers even prefer to settle lawsuits your associates are likely to
win.
 But settlement can negatively affect your professional reputation
and even attract more lawsuits.
 Consider four top risk-management issues that attorneys suggest
you advise your associates about:
 Multiple Representation
 Seller disclosure
 Loan and investment fraud
 Unauthorized practice of law

Multiple Representation
 Dual Agency – Informed Consent
 A big portion of misrepresentation claims come out of multiple representation
transactions.
 Problems tend to arise when sales associates, acting as the listing agent, attract a
buyer and propose to represent the buyer in addition to the seller.
 Even assuming appropriate disclosures are made, if buyers discover something
wrong with the house after purchase, they’re more likely to file a complaint than if
they had separate representation.
 That’s because they’re more likely to question whether they were represented
adequately.
 Although multiple representation is allowed, written disclosures to both parties are
required.
 TIP: Associates should limit multiple representation to instances in which they have
an established relationship with both parties rather than with just one of them.

Seller Disclosure
 Having sellers disclose the condition of their property on a standardized form, a
requirement in Nevada and some 30 other states, can give sales associates a false
sense of security.
 Buyers tend to rely on the disclosures as an affirmative representation of the actual
condition of the property, yet, they’re to verify conditions on their own with the
help of professionals, such as a home inspector.
 Even with that disclaimer, unhappy buyers are filing claims alleging the listing agent
and even the buyer’s agent, in some cases, should have known the seller disclosure
was inaccurate.
 In court, judges often rule in favor of the buyers.
 If the condition is discovered, you’re liable.
 The seller disclosure form isn’t stopping disgruntled claims.
 NAR supports the use of seller disclosure forms as a tool for associates to help
reduce, but not necessarily eliminate, their liability.
 TIP: Make sure your associates tell buyers upfront that the form reflects property
condition only to the best of the seller’s knowledge. The disclosures aren’t to be
relied on solely. Hire an inspector.

Loan and Investment Fraud
 Your associates can get caught up in such fraud unwittingly if they’re not
careful about when it’s okay, and when it isn’t okay, to meet certain demands
by vendors or other parties to a transaction.
 Your associates should be wary if a mortgage broker asks them to rewrite a
purchase agreement to mischaracterize the nature of a purchase to obtain
more favorable loan terms than they otherwise could attain.
 If your associate writes up the purchase agreement as a residential purchase
knowing the deal is being mischaracterized by the mortgage broker or loan
officer, your associate could be found to have committed loan fraud.
 The same concerns about mischaracterization apply if associates help investors
who ask to be listed as owner-occupants in the loan documents.

 TIP: Anytime you’re asked to mischaracterize the nature of the purchase, that
should be a red flag to you that you risk committing fraud and should refuse to do
so. Associates should get as much in writing as possible—that the buyer intends
to occupy the property, for example. If the buyer doesn’t intend to occupy and
won’t say that in writing, then you don’t want to work with the person. Typically
you don’t find out about loan fraud until after the owner defaults and people
start reviewing files. If you have everything in writing, you’re protected.

Unauthorized Practice of Law
 Alert your associates to be cautious of requests by the buyer or seller to
append unique language to a standard purchase agreement.
 Any time your associates find themselves putting pen to a blank piece of
paper, rather than just filling in blanks or checking boxes in a contract, that
should be a red flag they could be engaging in the unauthorized practice of
law.
 TIP: If there’s no legal language in your company’s collection of standard
forms referencing what the buyer or seller wants in the contract, the most
prudent course of action is for the associate to advise the buyer or seller
to hire a lawyer to draft such language.

Start Your Exit Strategy from Day One
 Think about and plan for your inevitable retirement early.
 Planning from the beginning for building value in your business is
extremely important to your future plan to exit the business.
 Don’t wait until the last couple of years before retirement to think
about how much the business is worth.
 it's too late
 too much value will be lost to poor planning

End-of-course Quiz
 You are now ready to take the end of course quiz.

CE Class
CE.595900-RE (Classroom)
3 Hours Broker Management

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