Real Estate Brokerage

The act or practice whereby a natural or

juridical person
On behalf of a principal
For and in expectation of commission or
fee
Negotiates the sale, purchase, exchange,
lease, loan (mortgage) of real estate

Brokerage Scope
Sales agency engage to look for a buyer
Purchase agency authority to look for a
property
Exchange agency negotiate exchange of
properties between two or more owners
Lease agency procure tenants for rental
properties
Loan agency procure loan secured by
real estate

Elements of Agency
Consent mutual consent of both parties
Object legal implementation of purpose
of agency
Agent acts on behalf of Principal
Agent acts within Scope of authority

Brokerage Steps

Secure listing
Procure prospects
Presentation/briefing
Demonstration/tripping
Negotiation and Closing

Listing
The authority given by the seller/buyer,
lessor/lessee, owner, borrower for the
broker
to negotiate the sale, purchase, lease,
exchange, mortgage of real estate
For a certain period of time, at a certain
price and terms, for a stipulated rate of
commission

Listing, Kinds
As to form
Oral
Written

As to exclusiveness
Open/Non-exclusive, First
Come First Serve
Exclusive Agency Contract:
broker not entitled to
commission if principal
closed the transaction
Exclusive Right to Sell:
broker entitled to
commission even if
principal closed the deal

As to Function of Broker
SPELL

As to Basis of
Commission
Percentage Listing
Net listing (Selling Price =
Net to Owner + Expenses
of Sale)

Listing Contract, Contents

Name, address, signature of principal and
broker
Description of property
Period of Authority
Basis of compensation
Price and Terms
Hold over clause

Listing, sources

Personal contacts
Referrals
Membership in clubs and association
Fellow real estate practitioners
Banks and Financing institutions
Advertisements
Internet
Properties with for sale sign

Listing, Factors to consider

Price quotation of owner seller is within fair market
value
Title free from any condition or annotation
Person giving authority owner or duly authorized rep
Verification whether property or portion will be affected by
expropriation
Info on whether arrangements have been made for
moving out of tenants
Property must be outside 244 areas for priority
development covered by urban land reform
In case of agricultural land, verification if disposition is
valid under agrarian reform law

Prospect, Procuring
Prospect - person
who is need, can
afford to buy
Suspect no need,
can afford or has
need cant afford
Future prospect
willingness to afford

3 reasons why people

invest
Occupancy
Investment
Speculation

Qualifying factors
Need
Capacity to pay
Legal aspect

Presentation or briefing
The orderly
written/oral
explanation of facts
and figures
That make a given
property attractive to
a prospective buyer

Scope
Property identification
Advantages and
benefits
For Income and
investment properties
Presentation through
computer, video
Computation
Financing

Demonstration/Tripping
The process of showing
the property and pointing
its physical qualities and
other benefits/advantages
to arouse desire to
possess or own it.
No tripping, no closing

Preparation
Prepare checklist of
attributes
Anticipate objections
Organize selling points
Appointment with
prospect
Notice to owner
Selection of ideal route to
create favorable
impression of
neighborhood

Negotiation

The process of reconciling the

opposing view of the parties to a
transaction as to price and terms
Items covered
Price and Terms
Expenses of execution and
registration of sale
Date of delivery of property
Pro rating of insurance
premiums and utilities
Pro rating of income or rental
from property
Items included or excluded
from sale

Common Difficulties
Hesitancy of prospect to
express objection
Presence of supposed
advisors of the prospect
Failure or inability to analyze
prospects profitability
Prejudice on either or both
seller and buyer because of
differences in religion,
beliefs, superstition

Closing
The process when
through the mediation of
the broker, the minds of
parties meet

General Steps
Persuading the prospect to
submit a written offer to
purchase preferably with
earnest money
Securing acceptance of the
offer to purchase or
assisting seller in preparing
a counter offer
Preparing drafts to
agreements for
consideration of the parties
Arrangement of
appointment between the
parties for contract signing
and payment

Earnest Money
The amount accompanying an offer to
purchase to manifest the good faith or
genuine desire of the buyer to purchase
the property
Sometimes called reservation money

Escrow
Agreement wherein the
consideration of a
contract or portion thereof
is entrusted to a third
party known as escrow
agent, who is authorized
to release payment upon
fulfillment or performance
of some act or condition

Application of Escrow
When the property is
occupied with squatters
and the seller assumes the
responsibility to eject them
When the seller is given
time to vacate the premises
and escrow is provided to
insure delivery within the
stipulated period
When title to the property
has certain annotations
that the seller assumes to
effect the cancellation of.

Option Contract
Contract between seller and buyer
wherein seller, for a consideration known
as option money, binds himself to reserve
the property for the buyer to purchase
within a stipulated period of time at
specified price.

Option Money
The consideration of an
option contract without
which the option is not
binding.
Option money is separate
and distinct from the
price.

Reason for option

Buyer does not have
sufficient cash or still has to
arrange the financing
Buyers money is tied up
with the money market or
time deposit and the buyer
does not want to withdraw
the placement before
maturity because of the
interest income
Buyer still has to check the
title and other papers
concerning the property

Commission (Brokers Fee)

Rate
Purchase, Sale or Loan (5% of price/
loan)
Exchange (5% of fair market value)
Lease (1 month rental for every year
or 2 years of contract)
No legal rate on commission
Requisites to be entitled commission.
Broker must be:
Duly authorized
Procure a ready, will, able buyer
The procuring cause. Must be
instrumental in effecting the meeting
of minds.
Close the transaction during the
period of authority
Close at the price and terms
authorized.

Hold over clause

Entitles the broker to
commission even if sale
was closed after the
period of authority,
provided he registered in
writing the name of the
buyer during the period
of the authority
When Commission is Due
Entitlement to the
commission upon
consummation (not
perfection) of the
contract

Listing vs. Option

Listing

Option

Generally a contract
between Seller and
Broker

Contract between Seller

and Buyer

Refers to Authority to
Sell

Refers to Reservation to
Buy

Earnest Money vs. Option Money

Earnest Money

Option Money

Sum accompanying an
offer to purchase

Consideration of an
Option Contract

Forms part of the price

in case of sale

Distinct from the price

Sales Agency vs. Purchase Agency

Sales Agency

Purchase Agency

Authority given by the

seller

Authority given by the

buyer

Seller pays the

commission

Buyer pays commission

Project Selling vs. Gen Brokerage

Item

Proj Selling
In house Agents

Accredited Brokers

General Brokerage
Not, any real estate
property

Seller

Developer

Developer

Salary/Allowance

With

None

Sales Quota

With

None

EmployeeEmployer Rel

None, acts like

employee

None, free agent

Office Facilities

Free

Own office

Contract of
Agency

Tied

None, can sell other

properties

Work

Sell, get
reservation, DP/Full

Sell, get reservation,

DP/Full payment

Documentation
Registration

Done by developer

Done by developer

Does it for buyer and

seller

Commission

Upon full DP

Higher than in-house

Upon full payment

Own office

Monthly Amortization Factor

MAF = Si/S-1
S= (1+i)n
i=interest per period
n=number of paying period

Discount Factor

Discount Factor = S-1/Si

S=(1+i)n
i=interest per period
n=number of paying period

Monthly Amortization
Monthly amortization = Loan Value x MAF