Real Estate License Issue . . . again - Posted by William Bronchick

Posted by Houserookie on August 25, 2002 at 23:45:30:

you are talking real estate, stocks, commodities, bicycles, autombobiles, or contracts.

Please dont even try to argue that options in real estate are different from other forms of options.

Stop being silly!

Austin

Real Estate License Issue . . . again - Posted by William Bronchick

Posted by William Bronchick on August 20, 2002 at 20:05:02:

I have my associate working on researching all 50 states law on the real estate broker license issue, specifically, whether you need a license to buy, sell, option, lease or otherwise deal in real estate on your own behalf as a principal.

This is what we have come up with so far…

AZ, AK, CA, TX, CT, NY, OH, PA, MN & FL all have similar licensing statutes. They define broker as one who, FOR ANOTHER, lists, sells, manages etc. There is no doubt that an investor can buy, sell, lease or option properties in these state. CO and NM statutes, while somewhat fuzzy, still permit investors to deal in lease/options.

So far, MS (Bennie Brown’s state) appears to have the only confusing statute. Read literally, the statute requires a license to buy or rent real estate, even to live in. Silly, you say, which is why I think the common law definition of “broker” would still apply: one who brings a buyer and seller together for a fee (MS law uses the “in comensation by fee or otherwise” language, which presumes an employment or agency-type relationship). We’ll see how the Bennie Brown thing unfolds, but I cannot imagine it was anything other than a fluke; I know many MS investors that have been heavily engaged in this business for 10 years or more without a hiccup.

I will post a complete state by state summary when we are finished.

In the meantime, understand that confusion will always arise when dealing with uneducated people. Once in a while, a real estate broker sees you advertising houses and may report the matter to the state licensing authorities. The real estate commission may even write you a letter, investigating the matter, but these things, handled properly, go away.

In a recent newsletter from the Colorado Real Estate Commission, the #1 Honcho wrote an article in which he bestowed upon us his vast ignorance by using “deed of trust” synonymously with “deed.” This is the sh** we investors must deal with from the “educated professionals” that work for the state,

Thanks Bill - Posted by JHyre in Ohio

Posted by JHyre in Ohio on August 21, 2002 at 12:47:41:

Keeps me from straying into areas of the law where I have not developed expertise. Thanks for all the effort.

John Hyre

Re: Real Estate License Issue . . . again - Posted by Russell (AR)

Posted by Russell (AR) on August 21, 2002 at 11:36:41:

Here is the Arkansas RE law snippet and the full law can be found at:

(12) “Principal broker” shall mean an individual, while acting for another for a fee, commission, or other consideration, or the expectation thereof, who:
(A) Sells, exchanges, purchases, rents, or leases real estate;
(B) Offers to sell, exchange, purchase, rent, or lease real estate;
© Negotiates, offers, attempts, or agrees to negotiate the sale, exchange, purchase, rent, or lease of real estate;
(D) Lists, offers, attempts, or agrees to list real estate for sale, lease, or exchange;
(E) Auctions, offers, attempts, or agrees to auction real estate, or participates in a real estate auction;
(F) Buys, sells, offers to buy or sell, or otherwise deals in options on real estate or improvements thereon;
(G) Collects, offers, attempts, or agrees to collect rent for the use of real estate;
(H) Advertises or holds himself out as being engaged in the business of buying, selling, exchanging, renting, or leasing real estate;
(I) Assists or directs in the procuring of prospects calculated to result in the sale, exchange, lease, or rent of real estate;
(J) Assists or directs in the negotiation of any transaction calculated or intended to result in the sale, exchange, lease, or rent of real estate;
(K) Engages in the business of charging an advance fee in connection with any contract whereby he or she undertakes to promote the sale or lease of real estate either through its listing in a publication issued for such purpose or for referral of information concerning such real estate to brokers, or both; or
(L) Performs any of the foregoing acts as an employee of or on behalf of the owner of, or any person who has an interest in, real estate;

In all fairness folks. - Posted by $Cash$ (NV)

Posted by $Cash$ (NV) on August 21, 2002 at 10:56:41:

Mr. Bronchick is the only person in a leadership capacity that did step forward boldly, in this great marathon posting debate or the “Bennie Brown & Bud(NM) Stories”.

I feel confident that in Mr. Bronchicks summation he will resolve or at least address the “owner/principal/consumer” issue when addressing investing in various States.

$Cash$

Thanks Bill… - Posted by Houserookie

Posted by Houserookie on August 21, 2002 at 09:50:07:

for helping us to investigate a little deeper the licensing issue.

There’s obviously some “fuzzy” issues related that can effect investors.

It’s not as clear cut and simple as some might suggest.

Austin

Re: Real Estate License Issue . . . again - Posted by Bruce Lawson

Posted by Bruce Lawson on August 21, 2002 at 05:51:12:

Hi William,

I just finished my real estate pre requisite classes for a sales agent in ohio that will permit me to sit for the exam. For whaat I have been taught is that as long as the broker/agent discloses to the seller his/her motives for purchasing that house is for investment purposes that is legal. Disclosure is one of the fidicuary responsibilities to the principle when agency is established.

Sincerely,

Bruce Lawson

Michigan Real Estate License Issue “Law” - Posted by Adam King (MI)

Posted by Adam King (MI) on August 21, 2002 at 24:32:45:

William,
Here is the Michigan license law. I can buy any way I choose, as long as without a license I use a broker to sell. (If REI is my principle vocation)
Hope this helps,
Adam

Rule 319. (1) Licensure as a real estate broker is required of an owner of real estate who engages in the sale of real estate as a principal vocation, unless the owner engages the services of a real estate broker.Acts constituting a principal vocation include any of the following: (a) Engaging in more than 5 real estate sales in any 12-month period. (b) Holding one’s self out to the public as being principally engaged in the sale of real estate. © Devoting over 50% of one’s working time, or more than 15 hours per week in any 6-month period, to the sale of real estate. (2) A sale of real estate by a real estate salesperson, other than hisor her principal residence, shall be deemed to be done as a principa lvocation of the salesperson and the sale shall be through a licensed broker. (3) Sales of real estate owned by, or under option to, a broker or associate broker are subject to the provisions of the code and these rules. (4) In selling property owned by a licensee or in which a licensee hasany interest, the licensee shall reveal the facts of his or her ownershipor interest and his or her licensure to the purchaser, in writing, beforethe offer to purchase is signed. Satisfactory written proof of thisdisclosure shall be provided by the licensee upon request by the department.

Here is New York State’s - Posted by Howard-NYC

Posted by Howard-NYC on August 20, 2002 at 21:59:15:

Even though you did practice here and might have it…here is the link for New York.
http://www.dos.state.ny.us/lcns/re-law.html

A couple of other quirks that are really more FYI.

Mortgages: 1) to be a mortgage loan officer/originator you need to be listed with a Mortgage Brokers/Bankers “Statement of Responsiblity”. IOW, you don’t have to be licensed or take any tests. That means anyone can originate mortgage loans.

  1. You are allowed to invest ‘directly’ in up to approximately 6 mortgages, before the Banking department wants you to be licensed as a Broker/Banker.

Commercial Mortgages. You MUST (it’s in the RE laws, weird…I know!) possess a real estate salespersons or brokers license to lawfully earn a commission on originating commercial loans. AND, that is the reason I am licensed Real Estate Salesperson.

Re: Real Estate License Issue . . . again - Posted by JohnBoy

Posted by JohnBoy on August 20, 2002 at 21:32:12:

To help along in the process here are statutes for Illinois.

(225 ILCS 454/15-40)
(Section scheduled to be repealed on January 1, 2010)
Sec. 15-40. Compensation does not determine agency. Compensation
does not determine agency relationship. The payment or promise of
payment of compensation to a licensee is not determinative of whether an
agency relationship has been created between any licensee and a
consumer.
(Source: P.A. 91-245, eff. 12-31-99.)

(225 ILCS 454/1-10)
(Section scheduled to be repealed on January 1, 2010)
Sec. 1-10. Definitions. In this Act, unless the context otherwise
requires:

“Agency” means a relationship in which a real estate broker or
licensee, whether directly or through an affiliated licensee, represents
a consumer by the consumer’s consent, whether express or implied, in a
real property transaction.

“Broker” means an individual, partnership, limited liability
company, corporation, or registered limited liability partnership other
than a real estate salesperson or leasing agent who for another and for
compensation, or with the intention or expectation of receiving
compensation, either directly or indirectly:
(1) Sells, exchanges, purchases, rents, or leases real estate.
(2) Offers to sell, exchange, purchase, rent, or lease real
estate.
(3) Negotiates, offers, attempts, or agrees to negotiate the
sale, exchange, purchase, rental, or leasing of real estate.
(4) Lists, offers, attempts, or agrees to list real estate for
sale, lease, or exchange.
(5) Buys, sells, offers to buy or sell, or otherwise deals in
options on real estate or improvements thereon.
(6) Supervises the collection, offer, attempt, or agreement to
collect rent for the use of real estate.
(7) Advertises or represents himself or herself as being
engaged in the business of buying, selling, exchanging, renting, or
leasing real estate.
(8) Assists or directs in procuring or referring of prospects,
intended to result in the sale, exchange, lease, or rental of real
estate.
(9) Assists or directs in the negotiation of any transaction
intended to result in the sale, exchange, lease, or rental of real
estate.
(10) Opens real estate to the public for marketing purposes.
(11) Sells, leases, or offers for sale or lease real estate at
auction.

“Salesperson” means any individual, other than a real estate broker
or leasing agent, who is employed by a real estate broker or is
associated by written agreement with a real estate broker as an
independent contractor and participates in any activity described in the
definition of “broker” under this Section.

“Ministerial acts” means those acts that a licensee may perform for
a consumer that are informative or clerical in nature and do not rise to
the level of active representation on behalf of a consumer.

(225 ILCS 454/5-20)
(Section scheduled to be repealed on January 1, 2010)
Sec. 5-20. Exemptions from broker, salesperson, or leasing agent
license requirement. The requirement for holding a license under this
Article 5 shall not apply to:
(1) Any person, partnership, or corporation that as owner or lessor
performs any of the acts described in the definition of “broker” under
Section 1-10 of this Act with reference to property owned or leased by
it, or to the regular employees thereof with respect to the property so
owned or leased, where such acts are performed in the regular course of
or as an incident to the management, sale, or other disposition of such
property and the investment therein, provided that such regular
employees do not perform any of the acts described in the definition of
"broker" under Section 1-10 of this Act in connection with a vocation of
selling or leasing any real estate or the improvements thereon not so
owned or leased.
(2) An attorney in fact acting under a duly executed and recorded
power of attorney to convey real estate from the owner or lessor or the
services rendered by an attorney at law in the performance of the
attorney’s duty as an attorney at law.
(3) Any person acting as receiver, trustee in bankruptcy,
administrator, executor, or guardian or while acting under a court order
or under the authority of a will or testamentary trust.
(4) Any person acting as a resident manager for the owner or any
employee acting as the resident manager for a broker managing an
apartment building, duplex, or apartment complex, when the resident
manager resides on the premises, the premises is his or her primary
residence, and the resident manager is engaged in the leasing of the
property of which he or she is the resident manager.
(5) Any officer or employee of a federal agency in the conduct of
official duties.
(6) Any officer or employee of the State government or any
political subdivision thereof performing official duties.
(7) Any multiple listing service or other information exchange that
is engaged in the collection and dissemination of information concerning
real estate available for sale, purchase, lease, or exchange along with
which no other licensed activities are provided.
(8) Railroads and other public utilities regulated by the State of
Illinois, or the officers or full time employees thereof, unless the
performance of any licensed activities is in connection with the sale,
purchase, lease, or other disposition of real estate or investment
therein not needing the approval of the appropriate State regulatory
authority.
(9) Any medium of advertising in the routine course of selling or
publishing advertising along with which no other licensed activities are
provided.
(10) Any resident lessee of a residential dwelling unit who refers
for compensation to the owner of the dwelling unit, or to the owner’s
agent, prospective lessees of dwelling units in the same building or
complex as the resident lessee’s unit, but only if the resident lessee
(i) refers no more than 3 prospective lessees in any 12-month period,
(ii) receives compensation of no more than $1,000 or the equivalent of
one month’s rent, whichever is less, in any 12-month period, and (iii)
limits his or her activities to referring prospective lessees to the
owner, or the owner’s agent, and does not show a residential dwelling
unit to a prospective lessee, discuss terms or conditions of leasing a
dwelling unit with a prospective lessee, or otherwise participate in the
negotiation of the leasing of a dwelling unit.
(11) An exchange company registered under the Real Estate Timeshare
Act of 1999 and the regular employees of that registered exchange
company but only when conducting an exchange program as defined in that
Act.
(12) An existing timeshare owner who, for compensation, refers
prospective purchasers, but only if the existing timeshare owner (i)
refers no more than 20 prospective purchasers in any calendar year, (ii)
receives no more than $1,000, or its equivalent, for referrals in any
calendar year and (iii) limits his or her activities to referring
prospective purchasers of timeshare interests to the developer or the
developer’s employees or agents, and does not show, discuss terms or
conditions of purchase or otherwise participate in negotiations with
regard to timeshare interests.
(13) Any person who is licensed without examination under Section
10-25 of the Auction License Act is exempt from holding a broker’s or
salesperson’s license under this Act for the limited purpose of selling
or leasing real estate at auction, so long as:
(A) that person has made application for said exemption
by July 1, 2000;
(B) that person verifies to OBRE that he or she has sold
real estate at auction for a period of 5 years prior to
licensure as an auctioneer;
© the person has had no lapse in his or her license as
an auctioneer; and
(D) the license issued under the Auction License Act has
not been disciplined for violation of those provisions of
Article 20 of the Auction License Act dealing with or related
to the sale or lease of real estate at auction.
(14) A hotel operator who is registered with the Illinois
Department of Revenue and pays taxes under the Hotel Operators’
Occupation Tax Act and rents a room or rooms in a hotel as defined in
the Hotel Operators’ Occupation Tax Act for a period of not more than 30
consecutive days and not more than 60 days in a calendar year.
(Source: P.A. 91-245, eff. 12-31-99; 91-585, eff. 1-1-00; 91-603, eff.
1-1-00; 92-16, eff. 6-28-01; 92-217, eff. 8-2-01.)

Mr. “B” - Posted by $Cash$ (NV)

Posted by $Cash$ (NV) on August 20, 2002 at 21:06:06:

Mr. Bronchick,

I commend you for your efforts. As a leader in this industry you are the only one with enough baii’s to stand up and tell the truth. You are getting the job done to help all of us, whether we do lease/options. Sub 2’s or other forms of creative investing.

Maybe it took just a little “friendly” persuasion, however isn’t that what being a great leader is all about answering for what you do?

Sincerely,

$Cash$

Re: Real Estate License Issue . . . again - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on August 20, 2002 at 20:52:18:

William Bronchick--------------

Thank you for your public-spirited efforts to help us understand the laws and the problem that Bennie Brown ran into.

Good Investing, Good Educating, and Good PostingRon Starr*******

Thank you Thank you!! (nt) - Posted by Bud_NM

Posted by Bud_NM on August 20, 2002 at 20:17:43:

nt

Thank you for the confirmation - Posted by John

Posted by John on August 21, 2002 at 08:49:53:

Thank you JohnBoy for the post and confirming what others have said regarding the L/O debate. Compensation has little bearing (unless you want to include the word indirectly) on the case; it is the Agency definition that does. And I quote from your post above:

“Agency” means a relationship in which a real estate broker or licensee, whether directly or through an affiliated licensee, represents a consumer by the consumer’s consent, whether express or implied, in a real property transaction.

This brings us back to the question of ownership (as a consumer or principal) of the property and when that ownership transfers. If my name as an investor is on the deed I am the owner/principal/consumer and selling for myself, period. If another persons name (my seller) is still on the deed then they are the owner/principal/consumer. If I have not exercised my option to purchase the property in a L/O purchase, then the property remains in the sellers name until I do so, and they remain on the deed as the owner/principal/consumer until that option is exercised.

With all that said, because I am not the owner until the option is exercised and I try to sell this property, I am representing that seller and have formed an Agency relationship and subject to the statutes you mentioned in your post. Until the name on the deed changes, you are only representing a owner/principal/consumer (not yourself) in a real property transaction and if not licensed to do so? Brokering w/o a License.

Also, just for your information, my IQ is well above 40.

John

“who for another and for compensation” - Posted by William Bronchick

Posted by William Bronchick on August 20, 2002 at 21:41:59:

“who for another and for compensation” rings loud over and over in almost every state we find. For another also means the opposite is true, to wit: “not for one’s own behalf.”

Trouble is, some states just say “for compensation”; was that an oversight of the legislature? Are we to presume compensation involves an employment relationship? Or, does the legislature of MS want a legislative microscope to shove up the rectum of every would-be investor?

Re: Thank you for the confirmation - Posted by CH

Posted by CH on August 21, 2002 at 21:11:04:

JohnBoy is RIGHT on target.

A broker?s fiduciary responsibility is to get the highest price for a seller. When you buy an option to purchase as a potential buyer, you are trying to buy at the lowest price possible. Hence, the option holder can only be representing his own interest. NO broker license needed. Simple as 2 + 2.

Re: Thank you for the confirmation - Posted by JohnBoy

Posted by JohnBoy on August 21, 2002 at 21:07:29:

Read this again!

““Agency” means a relationship in which a real estate broker or licensee, whether directly or through an affiliated licensee, represents a consumer by the consumer’s consent, whether express or implied, in a real property transaction.”

This statute pertains specifically to a REAL ESTATE BROKER or LICENSEE. I am NOT a broker or a licensee!

Go back and read the definition of BROKER. It is one who FOR ANOTHER! I am not doing anything FOR ANOTHER. Only for MYSELF!

Re: Thank you for the confirmation - Posted by JohnBoy

Posted by JohnBoy on August 21, 2002 at 20:48:07:

No! I am NOT in any way shape or form representing the SELLER that I will be buying the property from. My buyer will NOT be buying from my seller. My buyer will be buying from ME AFTER I OWN IT! Just because I advertise it for sale prior to my actual owning it does not mean I am representing the seller.

I have a legal interest in the property due to my contract I have with the seller that gives me the right to buy the property. It doesn’t give me the right to sell the property FOR the seller. Only the right for ME to buy it from the seller. So there is no agency relationship between me and the seller or me and my buyer. In fact, my seller and my buyer have absolutely NOTHING to do with each other what so ever! I am NOT doing anything FOR ANOTHER. Only for MYSELF as a principle.

Get that IQ a tune up!

Re: Thank you for the confirmation - Posted by Houserookie

Posted by Houserookie on August 21, 2002 at 09:44:08:

Your IQ reads quite well.

I concur.

Re: - Posted by JohnBoy

Posted by JohnBoy on August 20, 2002 at 22:27:38:

I don’t even see where “for compensation” would matter. As an investor the seller I am buying, leasing or optioning from is not paying ME any compensation.

Law.com’s legal dictionary says:

compensation
n. 1) payment for work performed, by salary, wages, commission or otherwise. It can include giving goods rather than money. 2) the amount received to “make one whole” (or at least better) after an injury or loss, particularly that paid by an insurance company either of the party causing the damage or by one’s own insurer.

I’m not being paid for any work performed. No salary. No wages. No commissions. No or otherwise. I am not getting paid any goods rather than money. I am not being paid anything to make one whole for any injury or loss. I am not being paid for any damages caused.

I am BUYING and SELLING property. MY property. I buy from the seller. I then sell to my buyer!

I see nothing that says anything about me having to be licensed just to advertise a property that I am going to be selling as the legal owner of the property or that I must first be the legal owner before I can advertise it to line up a buyer prior to my owning it first!

So the question is, what was meant by the meaning of “for compensation”? According the legal definition above it appears to me that “for compensation” means getting PAID for doing something for another or getting paid for causing something to another in the way of damages.

So in my opinion all this stuff over options creating agency relationships or requiring to be licensed is bogus!