CHAPTER XVI THE BROKER AND THE AGENT By BLAKE SNYDER The Real Estate Broker. The term "real estate broker" applies to one who arranges sales, exchanges, or leases of real property, or who secures a loan on real estate pledged under a mortgage. In the large cities brokers specialize in the various branches of real estate and are known as sales brokers, leasing brokers or loan brokers. While strictly speaking a broker is usually the agent of the seller, his function is to handle the transaction so that both parties, seller and buyer, come to an agreement which results in a sale, exchange, lease or mortgage of the property satisfactory to both. He is a go-between and his object is, in the main, to reconcile the differences of opinion between the parties to the transaction. He can fairly assume that both parties are qualified to look after their own interests. How the Broker Operates.-The broker (or the brokerage department of a large firm) makes continuous effort to get from the owners the particulars in regard to property as soon as there is a desire to sell, exchange, lease, or negotiate a loan. These particulars are known as listings. The broker likewise makes an organized effort to attract the inquiries of those who are looking to buy, lease, exchange, or loan money on property. Thus the broker tries to have as many listings of properties and inquiries for properties as possible, so that he may be able to match the wants of the one group with the offerings of the other. What the Broker May Say.-A broker may tell a prospect anything about a property that he thinks is true. He may accept the statements of the owner and may not be held responsible for their truth, provided he can show that the information came to him from the owner. He should not, however, make statements that he knows are contrary to fact even though they are made to him by the owner, and he should not make an untruthful representation to the owner. A good habit to form is that of reducing all matters relating to a transaction to writing. This can be done by memoranda and confirming letters as the deal progresses. COMMISSIONS The commission which the broker is paid on the various transactions is usually determined by the custom in the community. The law does not fix it, but real estate men in every large community are organized as a real estate board or association, to adopt rules governing the amount of commission to be paid, the time at which it is due, and by whom it is to be paid. In a real estate transaction the seller usually pays the commission to the broker effecting the sale. The owner usually pays the commission to the broker who leases the property or obtains a mortgage on it. It may be said that so general is the custom in regard to paying these commissions that, where a normal sale or lease or mortgage is negotiated, the commission which is paid does not affect the price of terms. Where a sale may have some abnormal factors, such as an unusually low price, the question of the amount of commission and who is to pay it may become a part of the price negotiation and an agreement may have to be accepted which alters the usual practice, both buyer and seller paying part, or the buyer paying the entire amount. Unless there is an agreement, a broker should be recompensed by only one party. Attempts are often made in these situations to cut the amount of commission. This is seldom fair. An Earned Commission.-Before the broker can collect a commission he must earn it. In order to make it legally collectable he must have observed certain definite points: First: he must show that he was authorized and employed by the owner to make the transaction. Voluntary service rendered will not entitle a broker to collect a commission. Second: he must prove that an agreement, complete in all its essentials, was arrived at by the parties through his efforts. Third: A successful transaction should mean that the agreement was duly executed. There are many circumstances possible where a broker is entitled to a commission, or where an owner may be liable for a commission, where all these requirements are not fulfilled. Different laws affecting such transactions prevail in the various states and judicial decisions have further interpreted different points. It is safe to say, however, that in the majority of transactions, which are carried through as above stated, a commission is paid promptly; where there are disagreements a free discussion of the matter by the principals and the broker will usually bring a settlement either at the conference or by arbitration. Some men are brilliant at acquiring information, others at getting the people to agree orally, but the real accomplishment is to get the agreements written and signed. When an agreement has been arrived at, do not permit any delay in the preparation and, execution of the papers, for the transaction is not really closed until the agreement has been signed. The Real Estate Agent.-In contrast to the function of the broker the agent acts for only one of the parties in the transaction and has the responsibility of correctly advising and representing the interest of the party employing him as well as of making the deal. A confidential relationship is established closely akin to that between attorney and client. In any transaction the agent represents his employer only, and is often an attorney with many discretionary powers. Therefore the agreement between the two is necessarily formal, containing a statement of the duties to be performed and the recompense therefor. In large real estate offices, however, the functions of the real estate broker, and of the agent also, are now performed by the same organization. The administrative branch usually handles the agency matters and the incidental responsibilities, and the brokerage department carries on the active negotiations for both renting and selling. It can be stated with reasonable accuracy that the brokerage department maintains |