Posted by Nate(DC) on June 16, 2002 at 21:55:07:
See my post above for the answer
Broker Deals Secret From Brokerage House - Posted by Ben Williams
Posted by Ben Williams on June 16, 2002 at 13:39:26:
Here is the scenario: You are working as a broker associate and paying 50% of your commmission to your brokerage house. You are sick and tired of losing all that money and now you’ve come upon a big deal 32 unit apartment building worth several million dollars. This time you decide you are not going to share the commission with your brokerage. You are going to keep the deal a secret from your brokerage house. Can the the brokerage house find out about it? And if they find out about it, what can they do?
Re: In my state - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on June 17, 2002 at 15:30:50:
your little “senerio” would cost your real estate license, and most likely a state fine to boot. It would also generate a judgement against you for the full amount of the commission that you are tired of sharing with your broker.
The solution is as stated elswhere, to start your own brokerage; that is if you are qualified in your state.
Re: Broker Deals Secret From Brokerage House - Posted by Ronald * Starr(in No CA)
Posted by Ronald * Starr(in No CA) on June 17, 2002 at 01:20:12:
Ben Williams---------------
In this situation, I would suggest negotiation with the broker before taking the listing or making an offer for a buyer. Negotiate to pay less than 50% to your broker.
Good Investing********Ron Starr****************
Secret Brokerage Man - Posted by Nate(DC)
Posted by Nate(DC) on June 16, 2002 at 14:28:45:
Ben,
I am assuming this is not a hypothetical scenario, and that you, in fact, are the person in question.
If so, I am surprised that you as a real estate licensee are not familiar with the licensing laws of your own state. I am almost inclined not to help you on the grounds that if you don’t know your own licensing law, when you yourself are licensed under it, that you’re either lazy, stupid, or both. Nearly every state has its laws and regulations on the internet now, so if you’ve been licensed for a while and have forgotten all the stuff you learned in your prelicensing course, you could easily go look it up.
But don’t mind me. I’m a nice guy, so here I go anyway…
As long as your license is hung only with your brokerage house, you cannot receive compensation directly, only through them, so you would have to let them know about it and they would take their cut. If you had the seller cut a commission check directly to “Ben Williams” or to “Ben’s Secret Real Estate Company LLC” or to ANYONE other than your broker, you are in VIOLATION of the license law and subject to losing your license. It’s that simple.
Now, what to do about it?
Item #1: You call yourself a “broker associate”. You don’t say what state you are in, and this will make a difference. In many states (DC and MD among them) there are three license categories: “Salesperson” (aka Agent), “Associate Broker”, and “Broker”.
Now I know you are not a “Broker” because you have your license hung with someone else. You could be calling yourself a “broker associate” because you are an “Associate Broker”. Or you could be a Salesperson who uses the name “broker associate” as a marketing trick. Nothing wrong with that.
Or you could be in a state that only has two categories, Salesperson and Broker. In that case I’d assume you’re probably a Salesperson, unless the convention is for someone with a Broker license who is not the principal broker to be called a “broker associate”.
The difference here is that if you are in a three-category state and are an Associate Broker, or in a two-category state and are a Broker, you have already passed the brokerage exam and can go open your own brokerage any time you want. In fact, (at least in MD), you can continue to hang your Associate Broker license with the broker that currently has it, and concurrently hold a Broker license for your own shop.
So that might be one option, depending on how you are licensed.
Item #2: If you are in fact a Salesperson (in Virginia they still call it Salesman regardless of gender), you cannot do deals on your own, and you cannot open a brokerage house. Your license is valid ONLY to the extent that it is hung with someone who has a Broker’s license.
Now, if you have been working at this brokerage house for a while and are still paying 50% in commissions, I might advise you to shop around. Unless it is a situation where the broker is providing a lot of leads, paying most (if not all) of your advertising expenses, etc., you can probably do better. Most of the big brokerages in the DC area start you at 50% but move you up the ladder as you do more business. Or, if there is a flat-fee agency in your area such as ReMax or Realty Executives, you could take your license there. You pay a flat monthly fee regardless of the commissions you generate, and you keep the rest. If you did a high volume of business, or lots of high dollar deals, it could work out to be a good deal for you.
One final question is the ethical one. Did you find this lead because of your position with your current broker? If so, I’d hesitate to tell you it’s okay to move your license and go do the deal somewhere else, simply because it’s better for you.
Hope that helps,
NT
Re: Broker Deals Secret From Brokerage House - Posted by James Strange
Posted by James Strange on June 16, 2002 at 14:18:47:
Commissions are payable to the broker. A broker associate can not charge a commission.
If you are tired of splitting commissions with a broker then get a brokers license and setup shop.
Anything wrong with this ?? - Posted by Frank Chin
Posted by Frank Chin on June 17, 2002 at 18:34:41:
Hi Ed:
Lets say Ben found a property worth 2 million, and is tired of splitting a 120K commision with his broker.
Lets say he called me, an investor, and I figured if I paid Ben 90K, I save 30K on commisions, and Ben is ahead of the game with 90K.
Lets say Ben and I sign the Purchase contract as Principals, and I separately sign a partnership ageement with Ben that I’ll buy his interest out at 90K after the closing.
Ben is acting as a principal here. If his broker finds out, there’s no law that says Ben cannot engage in RE transactions as a principal if he discloses it on the Purchase documents.
Am I wrong??
Frank Chin
Re: Broker Deals Secret From Brokerage House - Posted by TeeSmith
Posted by TeeSmith on June 16, 2002 at 14:27:54:
But if he already has a broker’s license and is working as a broker associate then can’t he work a secret deal.
Re: Yes you are wrong. - Posted by Ed Copp (OH)
Posted by Ed Copp (OH) on June 17, 2002 at 20:22:33:
Now bear in mind that my comments are Ohio specific, that is where I am a broker.
Let’s say that Ben is associated with my office. As Ben posted I presume that he has a brokers license, and he has escrowed that license and taken out a sales associate license with my office. That is how it is done here. The law in my state is quite specific about Ben’s transactions. I as the broker MUST see and keep copies of all of Ben’s transactions, whether or not he pays any kind of a commission to my office. I must keep copies on file for three years from the time that any part of his transaction is completed.
So if Ben keeps a transaction secret from me he has violated state law, and is subject to the penalties of the law.
In Ohio the broker is the only one who can be paid a commission, and the only one who can pay Ben. So if someone pays Ben a commission, under the table; well he has violated written state law. There is also some wording in the law about undisclosed buyers and sellers. So if Ben is really the buyer, but he uses another person or entity as a “straw” buyer he has then also violated some laws.
Ben would be wise to have an agreement with his broker that would allow him to do this transaction for no or a very minimal fee. Most brokers today do have a written agreement with thier sales associates. So if Ben had a contract with Ed that said that he could do let’s say four transactions a year at a cost of $50 (office commission) each, this would be more prudent. $50 fee to cover the cost of maintaing his records for the required time, and Ben would be good to go.
It seems to me that if Ben is sharp enough to negotiate a 2 million dollar deal that he could probably talk to his brolker a little bit.
The other solution is for Ben to open his own office, if he meets the qualifications; and then he would be the broker. He could handle the commission any way he would like.
Re: Anything wrong with this ?? - Posted by David Krulac
Posted by David Krulac on June 17, 2002 at 19:26:58:
Frank,
-
I think Ben’s post was not as a principal.
-
Many independent contractor contracts between agent and broker specify that ALL transactions be brought through the brokerage, even when the agent is acting as a principal. There have been cases where an agent bought a home at an auction and had to pay the broker his cut as if the deal came through the brokerage.
David Krulac
Central Pennsylvania