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170 Principles of Real Estate Practice 13The Brokerage BusinessFunction and Organization The Broker-Salesperson Relationship Operating a Real Estate Brokerage Business Brokerage Syndications and Securities Brokerage FUNCTION AND ORGANIZATION The core activity of brokerage Who may legally broker real estate? Types of brokerage organization Trade organizations The core activity of brokerage Effecting a transaction. The core activity of real estate brokerage is the business of procuring a buyer, seller, tenant, or property on behalf of a client for the purpose of completing a transaction. If successful, the broker receives a commission according to the provisions of a listing agreement. A broker's compensation for effecting a transaction is usually a negotiated percentage of the purchase price.Broker cooperation. In most cases, transactions require the assistance of a cooperating broker from another brokerage company acting as a subagent. Most listing agreements provide for brokerage cooperation in the multiple listing clause. A transaction involving a cooperating subagent is called co-brokerage. In a co-brokered transaction, the listing broker splits the commission with the "co-broker," typically on a 50-50 basis. A broker may cooperate with other brokers on either side of a transaction, either assisting a listing agent to locate a buyer or tenant, or assisting a buyer or tenant representative in locating a seller or landlord.In the most common form of broker cooperation, an outside broker locates a buyer for the listing broker's seller. In such cases, the listing broker shares the commission with the cooperating "selling" broker on a pre-determined basis. Multiple listing service (MLS). The second prevalent form of broker cooperation is the multiple listing service, or MLS. A multiple listing service is an organization of brokers who have agreed to cooperate with member brokers in marketing listings. Members of the service also agree to enter all exclusive listings into the listing distribution network so that every member is promptly informed of new listings as they come on the market. The listing agreement used by members of a multiple listing service discloses relevant procedures and policies so that all principal parties to the agreement are aware of the pooling of the listing. A broker who works on a transaction listed in
Chapter 13 The Brokerage Business 171 the MLS has all the duties and responsibilities inherent in the laws of agency as the client's fiduciary agent. The listing agreement sets forth specific duties. Critical brokerage skills. To generate business, as well as achieve the transactional objectives of clients, a broker must be proficient in four skill areas:obtaining a client listing marketing a listing facilitating the closing of a transaction managing market information A client hires a broker by executing a listing agreement. Once hired, the broker or agent implements a marketing plan to procure the other principal party for the transaction. The broker then plays an important role in pre-closing activities to