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all right so let's go ahead and get started dealing with common pitfalls now our quote we're going to start with is from Jim Rohn wife and all its uniqueness would not be life without the negatives and the positives that is why is it important to be it is important to be a serious student of both today we're going to be studying the negatives most the time we don't do that most of the time we focus on what is it we need to do to build our business today is going to be what do we need to do to safeguard our business to protect us from losing it all in a legal complaint or something like that I'm going to start out with implied agency but before we go here I want to take you guys to the internet and what we're looking at here is a page out of you'll look at the top I don't know if you see that real estate Utah gov the division of real estate and Utah stands out what I call our quarterly walk of shame it's a newsletter it's got updates on the laws you know legal things all of that but then they also talked about licensing and disciplinary actions all right so I just got a warning that the computer computer audio may not be working very well if that's the case please let me know in fact let's do a quick audio check if you can hear me we click the webinar dashboard button and raise your hand okay seems to be working fine I'm not sure why that alert went off I'll go ahead and lower those hands anyways once a quarter we get a list of licensing and disciplinary actions most of them are pretty mundane it's things like people have applied for a real estate license that had a past criminal history that they fail to disclose something like that but I wanted to share one with you here it cost the guy $5,000 and 7 hours of additional seee and what happened he was a principal broker so this can happen to anybody the best of the best we've seen some of our agents in here some of our brokers have been here we all make mistakes from the time I really hope I don't show up in here someday but I could because of one moment of just being a little bit relaxed and so I'm I applaud you guys for taking the time out of your busy schedules to come here and remind yourself that there is a serious side to that well most of the business is serious there's some fun things there's some drudgery but there's also a very hard line that we can't cross and a lot of people do not everybody gets caught very few people do actually but when you do get caught it can be life-changing in this case the principal broker failed to inform his sales agents that his license had expired now in his license expires it affects all of their license licenses he didn't disclose depending an investigation and he acted to the principal broker when he was not licensed to do so because obviously his life had expired so $5,000 penalty 7 hours of continuing seee later on we'll see another agent who also acted without an active license and it only cost her $1,000 probably because wasn't a principal broker that had other agents depending on however they're all our real issues with this so let's jump back to our pitfalls I'm going to be providing to you real examples and it is public record by the way using people's real names and I'm only doing that because it is public record I'm not trying to shame anybody if anybody on here sees themselves or another name of somebody they know like I said it happens and we're going to use it here as a lesson to try to help everybody okay try to learn from other people's mistakes so we don't have to make them all ourselves agency by implication is defined as when an agent acts in the role of an agent whether a contract for agency exists or not and such an occasion the agent may also have full liability in the transaction I get questions like this every single week from my agents all right I just had one a couple of days ago somebody said hey I I've got somebody there a friend of mine I just need to help them out with some paperwork what does it cost to do that you know I mean they've already got the buyer there they just need some help with the paperwork well you have full liability that means as a company we have full liability so in that situation where you're just helping out a friend we have to charge the full transaction fee the $4.99 transactions being the $60 whatever we call that compliancy is what I've always called it so we got to collect 559 because our liability is the same for that as it is for a $300,000 client that you've got an exclusive right to sell agreement and all the paperwork and everything in other words you should treat that favor as it would be any other client because once you're in an inch you're in a mile that's how the division of real estate looks at it if you're helping somebody in any way shape or form you've created agency by implication even when a contract for agency does not exist in other words you have full liability even if you're just doing it as a favor I'm going to give you a quick example here and it seems harsh I'm going to be real blunt with you some of you might judge me poorly because of this my parents who I love very much I'm close to them to them I don't have bitter feelings at all and they don't have any towards me but when they retired from Las Vegas and wanted to move back to Utah they called me up and they you know they had been on line like everybody has they've been on line they've been looking at homes they'd seen some for sale by owners and they called me up and they said probably out of some sense of maternal duty hey son we'd like for you to represent us so I've been training on this for a long time and I've actually followed my training and I sat down with them I gave him my full Byers presentation so they could truly appreciate everything I was going to do for them and it raised a concern that was a good concern and I'm glad we talked about it they said well we do have several for sale by owners that we talk to and they've told us they would not like to deal with an agent and so in those cases will you step out and we'll just deal with those on our own and then if it's a case where there is an agent then you can come on board and help us and I tried to talk to them and help educate them a little bit but they're my parents and I'm their kid and I don't think they listened very well about some of the dangers of working on your own with a for sale by owner who also doesn't know what they're doing and of course if you've been in the business long you realize it doesn't matter at all that they have prior experience in buying and selling homes this business can get nasty pretty quickly so I informed them that no I cannot help them in some cases and then bow out in other cases because if I'm acting as their agent in some cases I have agency and if they're doing a for sale by owner and they just say well Eric what do you think about this well I've been helping them on other things and let's say that for Sale By Owner goes south which odds are very high that it will with two people that don't know what they're doing and don't know how to prepare paperwork and don't have accurate paperwork odds are pretty high that there's going to be some problems there so let's say that that goes to court and they said well our agent told us this and that's exactly what's happened in the past and I've seen people charged again on that quarterly walk of shame I've seen people charged and their excuse was it was just a friend I was helping out I didn't have agency with them and yet they were still issued a fine and a penalty and so with my mom again who I love very much when she said this is the way we want to do it I said I can't work under those conditions it's either all or nothing for me because in the eyes of the law that's what it is and she said well we don't want to miss out on a couple of these and so we're going to go with nothing and I had a couple of my siblings call me up and they say are you serious this is mom and dad were talking about and I said yes I'm very serious because as much as I love mom and dad I have a wife and children that I'm responsible for that's who I've made a commitment to first hand to provide for and I put my ability to earn a living at risk when I do these favors for people and I had an agent call me last week and she saved my best friend just wanted me to help her with paperwork and I told her I couldn't do that but I just wanted to confirm and I said good for you you can't do that why would your best friend ask you to compromise your ability to earn a living that's not a best friend now my parents respected my decision my siblings most of which I've gotten into real estate over the years have learned hopefully to understand why I did that but none of them jumped in to help either so regardless agency by implication is a big deal and it happens to the best of us it happens very innocently where we're simply helping out a friend or a family member by providing forms maybe giving a little bit of advice here and there right because everybody likes to feel valued and so people call us and they ask us a little bit of advice my response is always you know what I would love to help you sounds like this situation could get very sticky here's the law here's how it works for me if I help you at all I have to help you all the way I'm going to have to get involved I'm going to have to make sure all your paperwork is done correctly and of course that's a good thing for you on but I'm going to be with you for the rest of the transaction right up till clothes because I can't just give little bits of advice and not have full liability so if I'm going to have full liability no matter what I do then I'm going to be involved fully and this is what I charge for that now the nice thing is with equity is that you can negotiate whatever you want so a lot of times I'll do that first flat thousand dollars because they've already got the buyer and I'm just stepping in if it's a really messy situation then I might charge more that is completely up to you on what you do but realize as a company we've got full liability so we have to charge that full fee all right another way that this comes up very innocently is we start without an agency agreement signed and so many agents are guilty of this and they have so many excuses that I poke lots of holes in when we talk about working with buyers so we've got a separate training where we talk about working with buyers if you haven't seen that you need to watch it because agents are guilty of this all the time and it comes up because people call off of one of our ads or off of one of our listings and they say hey I saw this home and I'd like to go see it can we say fantastic so we can show them that home and then we say you know what there's actually three or four more in this neighborhood that I can show you because we're trying to become more valuable to them so that they'll hire strike so we start showing them homes and I don't know agents have told me they feel like they need a test run so people can commit to them and again if you watch the buyer training we kind of debunk that myth anyways it happens a lot we're showing people homes inevitably as we're showing them homes we start giving them advice for talking about things forms paperwork how to do things and we're creating agency simply by our actions so one way to avoid this obviously if I've got a listing somebody calls on I've got a fiduciary duty to the seller I have to show that listing if I'm going to show any other listings then I have to draw a hard line and so I'll call people up I'll say great I've got that home love to show it to you if you'd like to see three or four others I can show you those as well so we'll meet up my listing I'll show them that home and I say you know if you'd like to see these others then I'm happy to show these to you I've got showing schedules for you here's the deal in this regard I would be acting as a buyer's agent now I know you don't know me I can take five minutes and show you really quickly what I do and by the way if you've watched my buyer training I will have a little one-page script for this kind of your elevator script for buyers agents and so I have that one page with me I'd give it to them you know here's what I do for my buyer clients and if you'd like to hire me as your agent then that's great otherwise we can sign an agency agreement just for these next four listings that I'm about to show you and sometimes people will sign it outright you know with the little five-minute script like you know what this looks great we'll just use you and they'll use me for all of them other people have said you know what I guess that's fair you know if we end up buying one of these homes that you're showing us today then we'll use you other people have said no we're not going to have an agent we're going to do this all on our own and if that happens then I say well then I'm sorry I can't show you in these other homes and the response is always the same it's are you serious you're the only agent that has demanded agency and I said well I am one of the best in this market so I'm not too surprised by that but I don't break the law and I don't put my livelihood of jeopardy so if you'd like to see these homes with one of the best agents I'm happy to work with you but if they don't guys walk away you got to realize that somebody that would number one wants you to put your license at risk once you explain to them kind of how it works and they want you to put your license at risk to do them a favor and their stranger by the way you don't know them you're hoping to get their business that's a little crazy but on a whole different level even if even if that part doesn't factor in there's a sense of fairness that is pretty basic if you show me this home sure I'll work with you that's a pretty basic sense of fairness and I can make an exclusive buyer broker agreement specific to one particular MLS thing I've got somebody that's typed in is that an AR policy or a state-based policy that's something that and by the way NIR is the National Association of Realtors which is we're talking code of ethics not law and here I'm talking law so n AR wouldn't come into it so is it it is there this concept of agency by implication in every state I believe the answer is yes if you're not certain then by all means talk to your broker and say do we have agency by implication in our state if so how does it work okay but that's my rule and I have had people not very often but I have had people that really don't give a crap about my requirements under the law they don't give a crap about any sense of fairness and I run from those people I don't care if there's a potential Commission being lost because those are the types of people that will commit loan fraud I mean they don't care about any but themselves and that's scary okay they'll do all sorts of things they'll be your your biggest nightmare clients and I simply don't work with them all right another situation that comes up and this is state specific okay and there is about a third of the states in the Union 14 or 15 I believe it is that has conflicts with this and that is assisting a seller with paperwork in an MLS entry only or a fee-for-service situation okay what this is let me see if I've got a slide on this on the next page not yet let me talk about this really quick I know I've got other issues or slides that do talk about all that okay in certain states Utah being one of them we actually have a law on the books that says there's a minimum level of service that a listing agent needs to perform for their clients all right they need to they need to provide paperwork they need to assist with negotiations and they need to be with them through the final process reviewing the closing documents etc okay so pretty simple criteria however there are companies in the free market that do a MLS entry only fee or a fee-for-service situation in other words I'll pay you $500 mr. agent let's call him agent Smith all paid agent Smith $500 if they'll just put my home on the MLS I don't want them to represent me I don't want them to provide me paperwork I don't want them to do anything else regardless of whether the law requires that or not I only want to pay for the marketing to get it on he MLS so Agent Smith charges me $500 he posted on the MLS he doesn't care if it sells or not he's got his money so he's on to the next one and that's their business model and even though it's not legal it's allowed and this is odd because why would something illegal still be allowed well it's because the Department of Justice which is federal and carries the biggest dick in town wrote a letter to all of the states and I actually got a copy of the letter from them when I called frustrated with some of these I spend a good long time on the phone with an attorney for I believe it's the MLS attorney and he said they can't enforce it they can't enforce their own lot because the Department of Department of Justice has written them saying you are inhibiting free trade if somebody comes up with a different business model then you have to allow them in our argument back is well we're protecting the sellers there's a minimum level of service that they need done to protect them and the DOJ s response was proof that they're being harmed you know how are you protecting them if you can't prove that they're being harmed and it's hard to prove that a sellers being harmed because most of times they don't know they've been taken advantage of because they don't understand the paperwork so anyways there are a lot of states that have laws against maybe a fee-for-service thing but they're hindered and whether they do it the other states it's just open you can do fee-for-service you can you know you can do whatever the problem that this creates is for the buyer's agents because we come into the picture and here's a seller that doesn't have the correct paperwork and we start providing them with forms and paperwork and helping them fill out the paperwork correctly and sure enough we're creating agency by implication now Utah last year to counter this we actually created a law that said specifically for this situation that I've outlined buyer's agents helping a seller in this regard do not create agency by implication if your state does not have a lot like that that protects you then one of the things that you can do and I'll cover this a little bit later but I'll just hand out it now one of the things that you can do and I'll still do it regardless of whether the lies there or not if I'm working with a fee-for-service seller like that I'll have them sign a for sale by owner Commission agreement the states clearly in there if I'm working with you then I don't have liability when I provide paperwork's or forms or advice because it's in my buyers best interest to make sure that this job is done correctly and I'm helping you only to that extent of making sure that the job is done correctly for my buyers benefit and that in no way creates an agency by implication model all right let's see some of the penalties $10,000 here for miss Wiley she failed to execute written agency agreements filled obtain written informed consent required drifts at both parties so she's got limited agency here and was utilizing outdated listing agreements so not using updated forms fill desk execute fully written agreements agency agreements so she's basically working without agency $10,000 and 20 hours of cee mr. Barker principal broker $20,000 fine filled exercise active supervision over a license with him failed to maintain and safeguard documents and failed to obtain informed written consent in order to represent both principles in a transaction as a limited agent so these case are all working on agency by implication basically they're representing people without the paperwork signed so be very careful about this some of the penalties can be pretty stiff um written Agency sales agent stipulated order on January 19th miss Frye violated Utah law by assisting a buyer with purchase of property without first obtaining the required written agency and she made up her own form she wasn't familiar with the forms in her toolbox with the forms that the your State Association of Realtors in Utah a uar creates these forms for us so civil penalty of a thousand bucks it's a crappy way to spend your money so always find an agency agreement upfront especially with friends and family okay don't cheat your friends and family we've talked about this and working with buyers and in working with sellers friends and family are important they're your biggest source of referrals give them your highest level of service that means whether they they need a full presentation to hire you or not sit down and give them the full presentation let them know how your Rockstar listing agent how you're a rockstar buyer's agent give them the full presentation get them to sign an agency agreement with you upfront when dealing with the fee-for-service agent make sure you have a form signed by the seller disclosing agency so you could use it for Sale By Owner Commission agreement something like that and if you're going to be interacting with somebody else's client because technically they are a client of the other person this fee for service broker then ask that broker for permission just save an email as permission that you can interact directly with that client okay and that will protect you against any claims that are coming up later on all right let's talk limited agency because that was some of the issues that we saw their limited agency is where you're representing both parties and in some states that's legal in others it isn't and Utah it is legal you represent the buyer and the seller on the same transaction in this case she failed to have let's see having filled a provider client with a limited agency acknowledgment prior to submitting an offer on a property listed with another agent from her brokerage now this brings up an important concept which is getting bigger for us as we grow bigger if I make an offer to another agent in my brokerage then it's limited agency because we're both under the same broker even though I'm not representing both seller and buyer personally I'm representing one and somebody else from my brokerage is representing one however in Utah and some of the states where we're getting bigger Colorado California were growing quite a bit let's say that I write an offer for somebody in Troy's office okay or Steve's office well now we're two different branch brokers but we're all under the same principle broker which is me I'm the principal broker for the state of Utah so limited agency still applies even though we're not in the same office we're not even in the same County maybe that doesn't matter even if it's somebody all the way down in st. George and Nancy's office we're all under the same principal broker in Utah and we have to use the limited agency form so be aware of that if you're in a state where equity is growing a little bit and again talk to your broker and see if you have this limited agents and concept and if so how does it apply to you but that's how it applies to the folks in Utah is an offer with any brokerage within the state we're all under the same principle broker it's a limited agency applies and you do have to have those forms or you can get a decent fine all right our pitfall number two is miss handling honest money now anytime you mishandle other people's money it's one of the quickest ways to lose your licenses people that do big financial like tongzi schemes and stuff like that they frequently get more jail time than people that commit murder do we take this kind of stuff pretty serious with our legal system so let's talk about how to handle earnest money number one when do we collect the earnest money the answer is very simple what is your contract say all right then Utah our contract has two options we can either collect it with the offer itself or we can collect it within four days of acceptance what happens if we can't do that what if we check the box that says we're going to collect it within four days and our client goes out of town and we can't get it from them well we have an affirmative duty that means that we have to take the initiative here and alert the other party that we couldn't perform on that now that makes our contract voidable not necessarily void but it does say that we fail to perform on that part of the contract so if the other party wanted to cancel they could we've weakened our position there if the other party says oh you know it's okay when they get back get it in and just let us know if we do that and we move on then the contract is not void and we've passed that risk up but otherwise don't create weaknesses in your contracts collect the earnest money when you say you're going to collect it step number two where do we deposit it well again the answer is very simple what does the contract say now our practice here in Utah at least is we're going to hold the earnest money with the title company I don't know what other states practices are so we're going to hold the earnest money with the title company 99 times out of 100 we could hold it in our trust accounts if we have to but there's certain delays that happen with that that aren't ideal for us so we're going to hold it at the title company so that's why in Utah it's required on all our paperwork if we're holding it with the title company that we disclose that because the contract is written and says that we're going to hold it with the brokerage trust account and if that's not happening then we need to spell out in an addendum what is happening we're going to hold this money with XYZ title company in accordance with state law all right so we have that language written in we have it on our checklist so that you can remember we have it actually written into some of our forms on dot loop on an addendum so we've got lots of reminders that this is how we do it this is another reminder for you now how do I do this because I talked with our state attorney that we use here and he loves this idea I don't like to handle the earnest money at all so I have as part of my standard practice a checklist one of the items on my checklist for a buyers as soon as we go under contract then we email that buyer say congratulations we're under contract we have to deliver $1,000 earnest money to XYZ title company within four days so by this day is when it needs to be turned in here's the addresses of the title company let us know which one you plan to drop this off and win and we'll alert them to be expecting it so I actually have my clients because we've got title companies all up and down velocity front it's much easier for my clients to get there than the one office location that I've got so I actually don't collect it at all on their way to work on their way to school whatever it is they're doing on their way to the grocery store they can drop off the earnest money very easily it's convenient for them and I give my officer called an advance and I say hey they're going to be dropping the money off at the Kaysville location what's your guys there no and so she called him when the money's dropped off they alert her she has saved on her computer my earnest money receipt for him so she fills that out and sends it over to me and we're done we've collected the earnest money as required by the contract I've got the receipt form signed by the party that actually received it I don't ever sign receipt and occasionally I'll have the other agent call me and say hey you need to sign the purchase contract saying you've received the money and I say no I don't because I never received the money I don't ever sign and say that I've received something when I haven't done so so what I will send you is the receipt signed by the title company which is what we have in the contract and they say I'm not sure that'll work has to talk to your broker or just fine and they do and it does and we all move on happily ever after and it's been more convenient for my client and certainly more convenient for me all right we've got another quick question here sure what state you're in Renee but here's the question isn't the earnest money given to the listing broker in Pennsylvania you'll have to talk to your Pennsylvania broker about this isn't your earnest money given to the listing broker when we are representing a buyer in Utah absolutely not we we don't give our earnest money to the other brokerage we would either hold it in our trust account if we're working with the buyer or like I said the way we do it nine times out of ten is we have it held by the title company so talk to your broker and make sure how you do it out there but that's how we do it and I know it's corporate policy if we can anywhere so somebody said do you fill out the earnest money field on the purchase contract well yeah I state that we're going to collect a thousand dollars earnest money and it's going to be in the form of a check delivered to whatever title company but I don't sign for receipt underneath that because I haven't received it so never never signed for something that didn't actually happen all right I hope that answered your question Renee on that so talk to your broker make sure you're handling earnest money correctly for your state the other one that happens is what if it bounces what if I get a call from the title company and they say hey we went to deposit this check and insufficient funds it did not clear again I have an affirmative obligation I'm going to call my client first I'm going to say hey our check bounced to have to notify the other party and they say wow man we just barely got paid we'll get the money in there we'll get a new check written so I have to call the other party and immediately tell them our check bounced we've already got a plan in place and we'll get it taken care of the only time I wouldn't have to make that call as if I was still well within my deadline so my client says you know what I get it taken care of right away and that was on day one and I've got four days to get it turned in then on day two or day three I'll check with my title company and see if the check cleared the new one did and if it cleared I'm fine I don't have to tell the other party but if I'm past my deadline and my earnest money hasn't cleared I've got an affirmative obligation to call the other broker and say hey this check didn't clear we do have a plan but again I've put the contract at risk and made it voidable for my clients or they have because they're honest money check didn't clear alright hopefully that is clear for everybody if what I've told you is different for your state again just use it as a dialogue with your broker which is always a good thing all right all right operating with an expired license I've already shown you a couple real-life examples of where this cost people money from our very latest newsletter the solution is very simple know how to check the expiration date on your license and stay current on your CTE classes alright how do you check the expiration date you simply go to your so I'm keeping an eye on our comments here okay we've got another comment from Pennsylvania that says in Pennsylvania we give our earnest money to the listing brokerage that is interesting I do appreciate you telling me that because it helps me understand some other states so some different rules out there I'm let's see here I think that's all of them all right so first of all know how in your state to manage your license know where to check to see if it's current and you thought we do everything online so you have to log into the real estate website we call it realms real estate license management system if you've never done it go do it in whatever state you're in make sure you know when your license expires as brokers we also alert all of our agents but inevitably I'll have three or four agents that we're 15 days from the end of the month and they're still not renewed and the problem with that is that gutsy e-classes haven't been maintained up to date now first of all this gets expensive because when you're buying see credits online they charge it for it and it can get pricey pretty quick if you stay current I mean that the local board offices offer seee I bring NCE to my office almost every if you're staying involved then you've got plenty of opportunities to get all of your CD credits in so so stay involved with that next be aware that if you're cramming your CD classes into at the last day that they have to be reported to the Division of real estate in order for them to count and the division is said if it's not done within two weeks you know we reserve two weeks to get it done sometimes little gets done quicker than that but that means if you got it done on the last day your license could actually lapse for 14 days now understand from a brokers perspective if your license lapses we can't pay you so if you have pending Commission's we can't cut a check we can hold on to the funds for a while and let you get your license renewed and then pay you we're not going to confiscate your money but we can't issue you Commission checks and I have to take away all of your clients so if you're working with sellers I have to inactivate your listings or move them over to another agent you can't have active sellers you can't go out and show homes with buyers you have to cease and desist all your activities as an agent which is number what humiliating if you have to go to your clients and say my license lapse and you're going to be under another agent for a while that's really weird so just stay on top of this I've got another comment here that I want to read through really quick so let me expand this out here all right the process is so different from Pennsylvania way of doing business there will need to be some additional training in companies okay and escrow account our title companies do not usually hold the money in any way it's listing broker worlds escrow ok so again for Pennsylvania it looks like I'm getting the same story for everybody just talk with your brokers and make sure I know that there's different ways of doing things I know I can't address all of these pitfalls that are so different in every state I'm aware of those shortcomings but I want to provide the training so that even if I can't address the pitfalls for your state specifically that I at least raised the issue so that you're aware of it so you can have a discussion with your broker so again I apologize for some of the different specifics but the intent is the same make sure that you're aware of the rules in your state and make sure that you do it correctly because if you do break the rules the penalties can be kind of severe all right wrap up today we're going to talk about a bunch of different money problems all right first of all working with builders most the time working with builders is great builders know that realtors can be their best friend and most of them treat us pretty well there are a few out there that don't play by those same rules however okay so I've got beware of builders and sheep's clothing here's the problem of a lot of agents don't understand how we get paid our buyer agent Commission when we're the buyer or when we're representing the buyer we get paid for example if it's an MLS listing then on the MLS listing we've got an agreement to be a part of the MLS that says that if we offer a buyer agent Commission on there then we have to pay that Commission and if for some reason our brokerage failed to pay that commission then their entire brokerage would get kicked off the MLS subsequently and effectively shutting them down so if you broadcast it over the MLS that you're going to pay a 3% buyer agent commission then you're pretty well protected that it's going to be paid however the problem arises when we're working with builders or in sometimes when we're working with different MLS's that aren't the same one as us that we don't have any commission agreement there now I know in other states again like Colorado there's a whole bunch of different MLS's in Utah we're lucky that we've got like I think three different MLS systems for the whole state but in Colorado you'll have a lot more than that in one city okay it's a totally different ballgame so some of you are very well prepared for this and it's a standard matter of practice for you that you get a commission agreement signed on all your stuff in Utah and some other places be aware that just because a builder advertises a home doesn't mean you're guaranteed a commission on it so if I'm working with a builder and I had one I'll give you a real-life example I worked sat down with the Builder and their model home was on the MLS but all of the other homes in the subdivision weren't so I had no guarantee of commission so we're filling out the paperwork and I noticed they didn't have a commission agreement form which most builders do and I said hey I'm going to need a commission agreement form from you and he turns to page 2 of our purchase contract and says oh right here we've got you as representing the buyers we know you're representing them I said that's all fine and dandy but it doesn't say that you're going to pay me for that and thus we have agents that have gone through the entire process represented their client very well and not been paid a commission at the end because they just assumed they would get paid if there's not something in writing saying you're going to get paid you're not going to get paid and that comes as a horrible shock to somebody when they've just worked for five or six months and they don't get anything so how do we protect ourselves from this if you're working with a builder get an agency agreement signed if you're working with a listing that's not in your MLS then get an agency agreement signed by that brokerage so that you get your commission we do have something in writing if you're working inside the same MLS and that's actually in writing per the terms of belonging to that MLS so it's not something that you're getting every single time but just be aware that if a builder says oh don't worry we know you're being represented or that you're representing the buyers then worry ok we don't this isn't the business of taking people's work if it worked that way then when we're negotiating for the fridge and they say don't worry we'll give you the fridge we say oh great we don't need to write anything in the contract then of course that would be silly but yet when it comes to our commission sometimes we're buffaloed and are tricked a little bit there okay next when in doubt write it out and this applies to almost everything I have lot of agents come in say what should I do in this situation and it's kind of a weird unique deal we just said spell it out you know I just had a house sell it was a bigger house about 6000 square feet it was going to take the sellers a long time to move and they had been burned before they didn't want to sell the home and then have it fall apart the day before closing and so they said we want seven days to move well it's very simple we specify that very clearly you know sellers to turn over possession within seven days of settlement if there's ever a question write it out in detail how are you going to get paid if there's a question write it out put it in the contract okay on this next one three percent buyer agent Commission versus Commission to be split 50/50 who wins I'm going to show you the next slide here this is actually one of our agents a good agent and on a short sell quite often in the agent remarks they'll say something like this this is a short sell if seller's lender as a condition of approving the sell requires a reduction in the total Commission agreed to by a seller in the listing agreement any such reduction she'll be divided 50/50 between seller and the buyers broker all right pretty standard language boilerplate a lot of people use it it doesn't work legally all right in the words and they're cheesy but these are the direct words from the the MLS attorney he said what the BAC giveth the remarks cannot take it away all right like I said it was cheesy but if my BAC says 3% and somebody tries to give me two and a half percent later on because they say that the lender didn't pay a full six that's their problem not mine so if you're a short sell agent listing stuff then you could type in here 2.5 percent to 3 percent because then you've padded it for yourself there could be there is a chance that you may not get paid now for my oops what they do there so you have to change it in the the buyer agent Commission to have specified 2.5 to 3 percent all right so that's that one who wins whatever you say is the BAC is the BAC and you have to pay that alright what's the problem with getting paid directly by a client so let's say that I'm working with a client and this again came up just last week with one of my agents all of these are very very common let's say that I'm working with a client and could be any number of scenarios but in this scenario I'm going to choose the home did not sell ok but I worked hard on it they know I worked hard they're impressed with me I did a great job but the home did not sell and they say you know what we want to treat you right we don't feel like it's fair that you walk away with nothing because it's not your fault this didn't sell those buyers were crazy they walked away whatever we want to give you $1,000 for your time can I take it the answer is yes but it has to be in a specific way number one they can't write me a check directly ever okay I have to get paid through my brokerage so they have to write the check to equity real estate and this isn't company policy this is state law so they're going to have to write a check to the brokerage and the brokerage is going to take out a small fee they're not going to take out the full 499 transaction fee because there's no transaction here that they have to manage however they do have to cover some payroll costs so they're going to take out a hundred fifty dollar processing fee and I'll get the remaining eight hundred fifty dollars to keep for myself so I can get paid directly by a client for services if the money goes through the brokerage and then understands that we have a few cost of payroll just for processing it that we're going to take a small chunk for okay all right the next one is referral fees how much is too much does the form matter let's talk about referral fees to other agents industry standard is 25% you can negotiate whatever you want quite often I'll get 30% the times I've negotiated for my agents and gotten a 50% referral fee in working with another agent okay so you can negotiate whatever you want in working with an agent what about if it's a referral from a client so John Smith one of my longtime clients refers me to his sister Nancy Smith and he tells Nancy you need to call Eric Lee he's an amazing agent he'll do a great job for you and so Nancy calls me up and says my good friend are my brother John said that you do a great job and we'd like you to list our house what can I do for John to take care of him for sending me a referral now this will be specific state-by-state so again open up a dialogue with your broker and find out exactly what the rule is for your state in Utah we can give a gift valued up to a hundred and fifty dollars or a referral all right now I highly recommend when I say does the forum of the gift matter I believe yes I don't want to give cash because there is a different law talking about illegal sharing of commissions in other words I can't pay my Commission's to an unlicensed individual or give them a portion of it because they're unlicensed so if I wait for this deal to close when I've got the cash and then I go to John and say John here's 150 bucks cash thank you for the referral I could be within my legal rights by giving them the gift but I could be breaking the law because I've illegally shared my Commission with John so what I'm going to do is I'm going to avoid the whole cash thing I'm give them a gift card I'm going to give them a nice gift I'm and give them something that says John I really appreciate you for doing this but whatever that something is it's not going to be cashed so it's not directly tied to the closing it's just tight to the gift does that make sense or tight to the referral by the way you can not cannot market this at least in Utah it has to be an unsolicited gift which is by the way I think the stupidest law in the books if I can legally give my client a gift for a referral then why can't I solicit that why can't I advertise or promote that but you can and we had a lot of people first of the year Facebook was blowing up with people saying hey refer me and I'll give you this much and and what they could do was legal they just couldn't say it okay it has to be unsolicited so the minute you put it out there and start soliciting referrals you've broken the law again so some weird stuff out there on the books make sure you know what the rules are in the earth state next what if I wouldn't want to give my client a gift okay so Nancy Smith is a dream client she's a let's say she's buying a home and so we go through and I want to give her a really nice gift I mean something really nice I'm going to give her a six hundred seven hundred dollar gift okay can I do that it's well over 100 $50 referral limit but remember now I'm talking about something completely different I'm talking about giving my client a gift and Realtors have been doing this for years they screw up on the contract and they forget to mention that the refrigerator is included in the sell even though the clients told them to do that and they realize they made the mistake and so they buy their clients a fridge that's a closing gift okay is it legal to do that the answer is yes but again there's some rules that need to be followed in order to make that gift legal now in Utah we have a gift letter and we've actually gotten the law copied and pasted into that gift letter and it says three criteria have to be met number one you have to your principal broker has to be aware and okay with the gift which if you're using the gift letter and it's turned in with your packet then you've met with that obligation number two the lender has to be okay with the gift so again no cash because there's no lender out there that's going to be okay with you saying I'm going to give my clients $500 cash at the end of this transaction okay no underwriter ever will allow you to do that so can I give my clients a $500 TV sure they don't care about that but you can't give them cash and run that by your liquor if you're not sure but I don't know any lenders that are going to allow you to give your client cash after closing at least buyers anyway sellers they don't care okay so the lender has to know about it and be okay with it and then lastly the party paying the commission so again if I'm working with the buyer the seller of the listing brokerage is paying my commission so I have to let them know and I do that again by simply sending them a copy of this form so all right I've got an older question here I need to address it took a little while to type out but this is going back to that short sale condition so let me read it in your statement about the short sale commission being subject to bank approval if the Commission is 6% 3% to listing agent 3% to a buyer's agent who pays the half percent if the bank only offers the five percent split 50-50 between agents if you haven't made any other comments then that comes and it's not a half a percent if you advertise a three percent buyer agent Commission and the bank only paid five percent that means the listing agent would only get two percent okay now most of the time a buyer's agent takes their two and a half and goes their way but if they raised a stink about it then legally they can enforce that three percent buyer agent commission that you advertised that means you would take a full one percent loss and only make two percent for that so again if you are advertising as a short sell agent then specifying your buyer agent Commission that it's going to be two and a half to three percent commission and then you'd get two and a half and the other agent would get two and a half if the bank decided to shortchange and only pay five percent hopefully that answered that question on there okay um all right so that covers all the money problems here using the gift letter if you're giving your client a gift in any form and a lot of people they give their client you know a let's say I saw somebody a different agent I was waiting for a closing the other day at the title company and somebody came in and they had a welcome floor mat okay what about that gift well the Y doesn't specify if the gift is valued over a certain amount that you have to use this gift letter or that you have to comply with these rules the wise just simply if you're giving your client a gift then you have to comply with these rules so even if it's a very simple gift technically you should be using the gift letter and again very few people do that but I don't want to be the guy that discovers that I'm breaking belong getting in trouble for it all right really quickly let's talk about advertising in this case mr. booth got charged with $500 civil penalty for advertising the sellable property without having the brokerage name on the sign let's talk about where you need your brokerage name when you're marketing everywhere okay you've got to have it on your website and it doesn't magic matter that you're the the mr. booth team okay let's say that that is the name of your team mr. booth team and so you've got a website that has mr. booth team really big at the at the top of it way down at the bottom it says equity real estate that's fine okay and you talk the lies that the brokerage name has to be 50% the size of your largest print so if mr. booth team is huge at the top half of that size needs to be equity real estate down the bottom it needs to be on your signs it needs to be on your flyers it needs to be on your business cards it needs to be on if you buy a truck and wrap a truck it's got to be on there it's got to be on your billboards whatever you're going to do you need to have truth in advertising basically you're not mr. booth is not his own company he needs to stipulate that he's licensed with a brokerage okay I thank you for taking your time we're about a minute short of our hour I know that this is a this is probably training because everything I cover varies from state to state I tried to bring up common concerns and again I appreciate the folks from Pennsylvania who informed me that rules there are a little bit different and that's great if your rules are different that's fine just make sure you know what those rules are again thanks for joining me and we will see you all online next week hopefully and again if you've got questions or you like to revisit this go and subscribe to my youtube channel thanks you guys and have a great week