What to expect for the exam
Colorado Exam: Part 1
General Powers of the Real Estate CommissionPurpose of the Real Estate Commission is to protect the public in ALL real estate mattersConway-BogueDecisionBrokers may not charge a separate fee for preparing documentsBrokers are allowed to practice law in a limited capacityEstablishedRULE F:Allowed to fill out forms approved by the Real Estate CommissionIf an approved form is available a real estate firm may not draft their own versionLanguage of approved forms must be usedexactlyas writtenMay omit or strike-through sections that do not applyAll added information must be of a different size, color or fontDoes not apply to new home salesBuilders are not required to be real estate brokers
Colorado Exam: Part 1
InvestigationUpon the Commission’s own motionVerified written complaintFalse AdvertisingViolating the Colorado Consumer Protection ActFailure to properly handle and manage trust moniesFailure to keep documents for 4 yearsPaying commission to an unlicensed person for work requiring a licenseRequest written response from licenseeCommission may NOT subpoena records without cause (or prior to written response)
Colorado Exam: Part 1
Hearing and PenaltiesHearingsDismiss the complaintIssue a letter of admonishment (warning – lowest penalty)Or send to a hearing (State Court, Administrative Law Judge)PenaltiesFine not to exceed $2,500 per offenseCensure, suspend, permanent revocationCREC is the ONLY entity that can suspend or revoke a licenseMay NOT charge damages or impose jail sentencesMay refer to DA for criminal prosecution
Colorado Exam: Part 1
Audits and EthicsAuditsCommission can audit a Broker’s escrow account at any time without noticeVerify Broker has maintained records for 4 yearsVerify they have not comingled fundsVerify they have provided clients with appropriate closing statementsEthicsCREC has NO authority and will NOT investigate ethics violations, complaints or disputesCriminal matters handled in criminal courtsLicensees should disclose IMMEDIATELY that they are licensed if they have interest in a property or if they are a principal in the sale of a property.MUST DISCLOSE IN WRITING, IN ANY CONTRACT, THAT YOU ARE A LICENSED AGENT IN THE STATE OF COLORADO WHEN BUYING OR SELLING A PROPERTY(Test Yourself Pg. 6)
Colorado Exam: Part 1
Licensing in ColoradoTypes of LicensesBroker AssociateAnyone with less than two years experience must work under an employing brokerIndependent BrokerAt least 2 years experience, may work alone, may NOT hire or supervise other brokersEmploying BrokerMay employ other brokers and is responsible for supervisionMust have an office that is open to the publicNon-Resident BrokersMay collect commissionsMust keep all trust funds and accept legal action in Colorado
Colorado Exam: Part 1
License RulesRenewalEvery 3 years, expires at midnight on the anniversary dateContinuing Education24 Hours of CE qualifying classes every license cycle4 hour Annual Update Course EVERY YEARIf one is missed – 3 optionsTake and pass state portion of the exam24 hour Brokerage Administration (allowed only once during career)24 hour Broker Transition (allowed only once during career)May take state portion of the licensing exam to satisfy 24 hour requirement31 Day grace period to renew. On day 32 license becomes inactiveLicensees on inactive status (voluntary or involuntary) must complete CE RequirementsBusiness Brokerage– must be licensed if real property is involvedReal Estate Options– must be licensedReal Estate Securities– securities license required
Colorado Exam: Part 1
Licensing ExemptionsRegularly salaried employee who is an on-site managerMay NOT negotiate terms of leases)Regularly salaried employee of a new home builderAttorneyInactive licensee working for either of the first twoTransfer and Inactive LicensesIndividual licensees and their employing broker must notify CREC when changing firmsBrokerages changing physical locationsInactive licensees may NOT perform activities requiring a license or earn commissions – may perform unlicensed dutiesInactive brokers do not need Errors and Omissions Insurance (E&O)Professional liability insurance
Colorado Exam: Part 1
Commission Rebates and Referral FeesMay NOT pay a referral fee to an unlicensed person (RESPA)May rebate a commissionReferral fees may only be paid to licensees with business officesOut of State BrokersMust have an office in the state where they are locatedMust agree to hold earnest money or escrow funds in a Colorado trust accountMust agree to be subject to Colorado courts
Colorado Exam: Part 1
Errors and Omissions InsuranceProtects Brokers against loss from oversights in filling out forms and conducting businessDoes not protect against fraudWho Must Carry?Every Active LicenseeIncludes the Employing BrokerAND any corporation or LLC doing business as a firm(Test Yourself Pg. 11)
Colorado Exam: Part 1
Brokerage Relationships in ColoradoAgencySingle Agency ONLY: agent only for one partyFiduciary responsibility, act in upmost good faith, loyalty and fidelityDual Agency is not legalShall not disclose price, terms or motivationCare, Obedience, Loyalty, Disclosure, Accounting, ConfidentialityTransaction BrokerDefault in ColoradoIf agency is not in writing you are a transaction broker (or non-agent)Facilitate the transactionNOT an advocate for either partyUse “reasonable skill and care”Must disclose material facts actually knownArm’s length
Colorado Exam: Part 1
Brokerage Duties – Regardless of Agency RelationshipExercise Reasonable Skill and CarePerform the terms of any written or oral agreementPresent all offers to and from the client in a timely mannerDisclose any adverse material facts actually known by BrokerAdvise client regarding the transaction and when to obtain expert adviceKeep the client fully informedShall not disclosePriceTermsMotivationMaterial information about the client UNLESS required by law or would be dishonest or fraudulent not toStigmatized property
Colorado Exam: Part 1
Additional Duties of an AgentPromote interests of the client with the upmost good faith, loyalty, and fidelitySeek a price and terms that are acceptable to the clientCouncil the client as to any material risks or benefits of the transaction actually known by Broker
Colorado Exam: Part 1
Designated BrokerThe broker that Buyer or Seller signs an agency agreement with“Designated” by the Employing Broker via office policy manualBuyer Listing or Seller Listing is owned by the officeEmploying Broker has no agency agreement with the clientIn-Company TransactionsBrokers do not exchange confidential information even if they are in the same office
Colorado Exam: Part 1
CustomersThird party who has not engaged a brokerFair and Honest DealingsDisclosure of all material factsDisclosureDisclose, disclose, discloseBroker has no duty to conduct an inspection of a property or verify accuracy of statements made UNLESS it’s obviousMay only disclose confidential information with written permission of the clientStigmatized PropertyNOT a material fact in CO – does not need to be disclosed
Colorado Exam: Part 1
Rule E-35:Disclosure of agency relationship is required at the first reasonable opportunityBefore acquiring any confidential informationBrokerage Disclosure to Buyer OR to SellerWhen an agency relationship already existsDisclosure to the other partyNot a contractDefinitions of Working RelationshipsNot a contract or a disclosureInformational purposes onlyDefines the working relationships between a buyer or seller and a broker in Colorado(Test Yourself Pg. 20)
Colorado Exam: Part 1
Requirements Governing ActivityTrade NamesName of your business – must be registered with CRECBrokers must do business using ONLY their registered trade nameBrokerage’s name as registered must appear on all advertisingBroker Associates’ info NOT required but allowedBrokerage AdministrationReasonable supervisionReceive, read, and sign an office policy manualAll Contracts reviewed by Employing BrokerHigh level of supervision for licensees with less than two years experienceAttend or be available to answer all questions for closingsWritten office policyMethod for designating brokersAllowed to delegate supervision
Colorado Exam: Part 1
Record KeepingMust be kept for4 years!Complete copies of all agreements and documents including HUD-1Personal AssistantsMay:Show propertyCreate marketing materialsDistribute materials regarding properties prepared by a licenseeMay NOT:negotiate terms or conditionsindependently draft or fill in contractsoffer opinions advice or interpretationsdistribute any information not prepared by a licensed broker
Colorado Exam: Part 1
Rule E-13: Sign CrossingA licensee shall not negotiate a sale, exchange, lease or listing contract of real property directly with an owner, for compensation, if owner has written, unexpired, exclusive contract with another licenseeSame for buyersLicensee may not initiate contactIf licensee is contacted by buyer or seller then may respondMay enter an agreement for a future exclusive right to become effective upon termination or expiration of existing agreement(Test Yourself Pg. 27)
Colorado Exam: Part 1
Trust AccountsSeparate Account to hold money belonging to othersEarnest Money, Security DepositsMust be in placepriorto accepting fundsOnly setup by Employing Broker or Independent BrokersRequired Trust AccountsSales Trust Account - $ related to sales transactions pending closingManagement Trust Account - $ in connection with property management servicesSecurity Deposit Trust Account – refundable security depositsAdvance Rental – rental $ collected in advance (vacation rentals)Owner’s Association - $ held on behalf of an associationMust have “Trust” or “Escrow” in the nameMust be a government insured institution – NOT a credit union
Colorado Exam: Part 1
Setting up Trust AccountsMust have “Trust” or “Escrow” in the nameMust be a government insured institution – NOT a credit unionMust be in the name of the Employing Broker OR CorporationOperation of Trust AccountsEmploying Broker is personally responsible for funds and supervision of the accountMust be able to withdraw funds without a co-signerBroker may use personal funds to maintain the operating cost of the accountMust NOT comingle operating funds
Colorado Exam: Part 1
Commingling and Conversion of FundsComingling: mixing of funds belonging to others with operating fundsConversion: using one person’s funds to pay anotherTrust Account DocumentationAccount Journal – Chronological RecordAccount Ledger – Separates funds by a single beneficiary (SS#, Tax ID)Broker Ledger – Shows Broker’s personal fundsSafeguardsFrequent ReconciliationSeparation of DutiesOutside AuditsRE Commissions Assistance
Colorado Exam: Part 1
Earnest MoneyMust be deposited within 3 business days of acceptance of the offer.May be deposited with a third party with permission of the partiesPromissory Notes for EMMust have a due date prior to closingListing Broker is responsible for presenting the note for collection from the buyerMust be “Good Funds” prior to closing
Colorado Exam: Part 1
Property Management Trust Accounts5 business days to deposit money received into a trust accountDeposits must be returned to tenants within 30 days unless lease states 60 daysTenant must receive an accounting for any reductionsBrokers managing their own properties must have separate account for each property.(Test Yourself Pg. 34)
Looking Ahead
Settlement Statements (Beginning pg. 57)Document fee in Colorado: $ 0.01 per $100 of property valuePrice paid to record a DeedDebits vs. CreditsBuyer owns the day of closing365 Day Year (Calendar Year) unless otherwise stated6 Column Worksheet, HUD -1Both Brokers are responsible for accuracy of closing statementsGood Funds at ClosingCashier’s check from a commercial bank, teller’s check (bank check), wire transfer, cashPersonal checks, business checks, money market checks, etc are NOT good funds2% Non-Resident Seller Income Tax WithholdingClosing entity must withhold either the seller’s net proceeds OR 2% of the selling price –whichever is lessPrinciple Residences are exempt
For Next Time
Pages 35 - 56: Colorado ContractsReview copies of the contracts as you readExclusive Right to Buy, Exclusive Right to SellBrokerage Disclosure to BuyerDisclosures: Lead Based Paint Disclosure, Source of Water Addendum, Seller’s Property Disclosure, Square Footage DisclosureContract to Buy and Sell (Residential)CounterproposalInspection Objection and Inspection ResolutionNotice to Terminate and Earnest Money ReleaseChange of StatusClosing InstructionsAmend / Extends (2 Types)Pages 57 – 66: Closing and SettlementPrepare the 6 column worksheet – blank version provided (make additional copies)Pages 67 – 74: Additional Topics
0
Embed
Upload