Chapter 1 Sales to Broker

Illinois Proficiency Exam Prep Course Review :

Illinois Proficiency Exam Prep Course Review Salesperson to Broker 1 Copyright REEC 2011

Illinois Proficiency Exam :

Illinois Proficiency Exam Salesperson to Broker 2 Copyright REEC 2011 Outline Chapter 1 Laws and Regulations Chapter 2 Agency Chapter 3 Real Estate Transactions http:// www.idfpr.com/dpr/re/realest.asp

Chapter 1 Law and Regulations:

Chapter 1 Law and Regulations I. License Law (pages 2-4) II. Real Property Issues (pages 4-5) III. Property Disclosures (pages 5-7 IV. Risk Management issues (pages 7-10) Quiz (pages 11-20) Copyright REEC 2011 3

Slide 4:

Advertising - General ( includes print ads, flyers ,business cards , yellow pages etc.) Advertising MUST ALWAYS be supervised by and name of the and (if applicable.) with the written permission of Client. No or advertising. Advertising must be kept current and up to date. General Rule is no Advertising Copyright REEC 2011 4 Page 2 Company Franchise False Untruthful Managing Broker “Peggy”? Blind

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Advertising - General ( includes print ads, flyers ,business cards , yellow pages) Advertising must be removed in a timely fashion after agency agreement ends (e.g. closes, expires, terminates) unless permission is obtained from the owner to continue the advertising . No ads where no company or licensee mentioned. Can’t advertise another brokerage’s listings without the permission of the brokerage. Copyright REEC 2011 5 Page 2

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Advertising - Internet ( includes blogs, e mails, social media, etc ) Brokers ( company) Home page Brokerage name Brokerage location (City and State) City or location of any property advertised. Salesperson website, Brokerage name Brokerage location (City and State) Agents name . Copyright REEC 2011 6 Page 2-3

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Advertising - Internet ( includes blogs, e mails, social media, etc ) Property Information City or location of any property advertised Disclosure of out of state property Additional Must disclose to site visitors if their personal information will be shared or sold BEFORE collecting the information. Can’t frame ( hack) another firms listing onto your web site No deceptive or misleading URL’s, MetaTags, or keywords. . Copyright REEC 2011 7 Page 2-3

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Disclosure Requirements -Property Brokers and Agents Interest Must disclose IN WRITING any interest in a property being sold or purchased (or leased ) SIGN Rules Agent’s Property FSBO yard signs ( includes your company sign)must contain “Agent Owned” or “Broker Owned ”. No Company Numbers No “Agent Owned” on signs or in ads if the property is listed by a brokerage office. Broker Owner Property Can use his company sign if SOLE owner. Copyright REEC 2011 8 Page 3 Agent Owned

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Disclosure Requirements -Property Other Rules On Purchase sale lease for own account No Dual Agency Allowed Disclosure if the property is in a state where broker is not licensed . Copyright REEC 2011 9 Page 3

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Disclosure –For “Related” Companies Written disclosure to client or customers if the licensee refers them to a “related entity” whereby the agent or broker has more than a 1% interest. Examples: Where brokerage firm has “referral” ties to a Title, Mortgage, Appraisal, Home Warranty company . Copyright REEC 2011 10 Page 3

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Employment Agreements Who Needs Them? All LICENSEES must have an written Employment or IC Agreement Including:  The Managing Broker  Owning Broker ( unless sole proprietor without any licensees')  Brokers ( selling)  Licensed Sales Assistants Employment agreement should include Supervision Duties Compensation Timeframe of agreement Process for termination . Copyright REEC 2011 11 Page 3

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Employment Agreements Other Sponsoring brokers MAY NOT hold an individual licensee’s license hostage for non-payment of office fees. Upon termination of employment, the original license must be surrendered to the licensee within. Employment agreements should also address issues relating to team leaders and team members. (Managing Broker Responsible for ALL licensees) . Copyright REEC 2011 12 Page 4 TWO DAYS

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Policy Manuals Every office, unless a sole proprietor with no other sponsored agents, must have a Policy Manual. Policy Manual should, without limitation, include such topics as : Agency Policy Harassment Confidentiality of Client Information Handling of Escrow Monies Fair Housing Compliance Advertising Agent Training and Supervision Handling of Risk Management Issues Brokerages may now require mandatory attendance at sales meetings and/or minimum production standards. Copyright REEC 2011 13 Page 4

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Types of Licenses Who Needs to be Licensed Anybody who performs a licensed activity for compensation offers to sell, buy, lease or manage real property for other. ( includes lead generation sites) In Illinois this includes Corporation. LLC Partnership ( they hold brokers licenses) Managing broker (new category starting May 1, 2011) Needed to manage a brokerage or property management firm. Starting 5-1-11, acting managing brokers licensed as brokers will have 90 days to transition to managing broker licensure. Must transition now or later licensee 2 of the last 3 years to sit for educational requirements. (165 hrs) Every general Partner in a partnership, Member in an LLC, and every Officer of a Corporation who actively participates in the brokerage must have a managing broker or broker license. Copyright REEC 2011 14 Page 4

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Types of Licenses Corporation. LLC Partnership ( they hold brokers licenses) Managing broker (new category starting May 1, 2011) Needed to manage a brokerage or property management firm. Starting 5-1-11, acting managing brokers licensed as brokers will have 90 days to transition to managing broker licensure. Must transition now or later licensee 2 of the last 3 years to sit for educational requirements. (165 hrs) Every general Partner in a partnership, Member in an LLC, and every Officer of a Corporation who actively participates in the brokerage must have a managing broker or broker license. non-licensed General Partner, Member, Owner, or Officer, must submit an Affidavit of Non-Participation. No salesperson, leasing agent or group of salespersons or leasing agents may own more than 49% of a real estate company. Copyright REEC 2011 15 Page 4

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Types of Licenses C. Broker License ( the “old” salespersons license) So all “selling” or non managing salespersons must transition by April 30, 2012. Salesperson License is eliminated by May 1, 2012 D. Leasing Agent remains unaffected by the transition (only residential Leasing) Copyright REEC 2011 16 Page 4

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Types of Licenses Who Does NOT Need to Be licensed Regular employees of the owners of the property Act defines these as someone who works at least 20 hours per week Attorney or person acting under a duly executed power of attorney . Receiver, trustee in bankruptcy, executer of an estate or guardian. Resident Apartment Manager – must reside on property AND be a regular employee. Government Officials, MLS railroads, public utilities, advertising mediums. Time share exchange companies Resident tenants may refer 3 prospective tenants per 12 months and receive the lesser of $1,500 or 1 month’s rent. Copyright REEC 2011 17 Extra

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Home Inspection Issue General Rules Licensee should always recommend an Illinois licensed Home Inspector Agents should not get involved with the Inspection or advise what should/shouldn't be repaired Referral fees from Home Inspectors are Copyright REEC 2011 18 Page 4 prohibited

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Zoning General Rules Always have zoning verified by zoning authorities. Don’t rely on listing information in the MLS. Always suggest to buyers that they check appropriate zoning with the appropriate zoning authorities. Non-Conforming Use may lose its zoning exemption on a sale Copyright REEC 2011 19 Page 5 “grandfathered” use

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Residential Property Disclosure Act. General Rules 1-4 Unit residential properties must have form completed and the “law” included. Sellers or their lawyer must fill out form ( never the agents). Some Exemptions Relocation Company Properties New construction Court appointed transfers Buyer gets from agent prior to signs an offer to rescind Have if the not get seller must pay Copyright REEC 2011 20 Page 5 3 days 1 yr

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AIDS/HIV General Rules Agents may disclose medical condition of occupants ( sellers or tenant) Agents are protected against suit because of non disclosure Disclosure may violate of occupants. Copyright REEC 2011 21 Page 6 Not Civil Rights

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Stigmatized properties General Rules Includes houses: with ghost, poltergeists, murder/ suicide sex offenders other factors not affecting “habitability. Agents' do not legally have to disclose the presence of those conditions Offices may have a policy on stigmatized properties. Web sites and other public forums are n confidential and agents cab direct clients and customers to these sites for more information Copyright REEC 2011 22 Page 6 3 days 1 yr

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Material Defects General Rules Those defects that materially affect value or habitability ( health and saftey ) Latent defetcs are and if known must be disclosesd by the agent. Copyright REEC 2011 23 Page 6 Hidden always

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Environmental Disclosures Lead Based paint 1-4 Unit residential properties must have form completed and the “law” included. Sellers or their lawyer must fill out form ( never the agents). Copyright REEC 2011 24 Page 7 3 days 1 yr

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Environmental Disclosures Lead-Based Paint Act (HUD) Sale of Lease of all residential properties ( even apartments) buit prior to . Discloure Form is complted by Sellers Landlord Agenst ( Initial) Lead Bsed Paint Pamplwt given to To Buyer To Teanants Copyright REEC 2011 25 Page 7 1978

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Environmental Disclosures Radon Awareness Act Only to Sale of 1-4 Unit residential properties and sellers complete . Must also provide a pamphlet Signed by Sellers Buyers Agents Exemptions same as Real Property Disclosure Except for is Dwellings IS NOT Copyright REEC 2011 26 Page 7 New Construction 3 rd Floor and up

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Risk Management Fair Housing Licenses may not discriminate nor ASSIST others in discrimnating . Federal Classes Race, Color, Religion, Sex Handicap, Familial Status and National Origin State ( Illinois Human Rights Act) adds: military status, age, marital status, sexual orientation, protection orders Local ( City County) Check local ordinances their may be protected classes. Copyright REEC 2011 27 Page 8 More

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Fair Housing Exemptions ( very rare) 1 to 4 Unit Owner/selling or renting ( if they will live in dwelling i.e. 4 flat). Copyright REEC 2011 28 Page 8 Handicap Rules Physical and Mental Handicap Covered Handicap Renter can make reasonable changes (can’t up the rent) Service animals Must be allowed No Exemptions If the owner Advertises or Uses a Broker /Agent Blockbusting Illegal ploy to break up neighborhood with threats of racial “change” . Steering Illegal Channeling buyers to or away form certain “ethnic” neighborhoods

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Risk Management Anti Trust Price Fixing ( anytime competitors agree to price i.e. commission rates. Group Boycott Brokers Boycott to force them to support non competitors. Like a discount broker Territorial Allocations You take the North Side of Town I ill take the south side Tying Arrangements Offer a special commission rate if you agree to buy title insurance from company too. Copyright REEC 2011 29 Page 8

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Risk Management Marketing Restrictions CAN-SPAM Act Sender must provide an accurate email address Sender must provide an ______________ and may not charge. Sender must provide a valid physical address. Sender may not provide false or misleading information and must indicate that the email is an advertisement. There can be no __________ subject lines. Federal Classes Race, Color, Religion, Sex Handicap, Familial Status and National Oregon . Copyright REEC 2011 30 Page 9 More

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Risk Management Marketing Restrictions Do Not Call Illegal to call from a list, must have a relationship If consumer makes first call . __ may call them back No FSBO or Expired calls unless you are setting a buyer appointment. Companies must keep and internal do Not Cal list. Cold calling should be covered in your __________ . Copyright REEC 2011 31 Page 9 18 Months 90 days P&P Manual

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Risk Management Marketing Restrictions FACT Act Cant fax unless business relationship and permission Even so if its an Ad then receiver must get an “opt out” process Junk FAX Act Fair and Accurate Credit Transactions Act Must keep all credit information confidential Cannot share with any one unless client agrees Copyright REEC 2011 32 Page 9

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Risk Management Marketing Restrictions Referral to experts (e.g., appraisal, inspection, financial) Clients should always be referred to the appropriate expert. Licensees should not give Legal advice. Tax advice. Financial advice. Advice regarding environmental or testing issues. On short sales , Clients should be advised to seek the advice of a tax attorney or an account regarding the tax consequences of a short sale. Unauthorized practice of law According to Quinlan & Tyson , licensees may only fill in the blanks on _____________ _ _ contracts. Licensees may not draft riders, write in contingencies, or write anywhere on the contract other than in the provided places . Only the parties to the contract or their attorneys may do that. Copyright REEC 2011 33 Page 10 Pre Printed