Saturday, December 19, 2009

Real Estate License Q&A Provided by Robert Shumake

Here is something I found on the State of Michigan's website about real estate licensing requirements.

Frequently Asked Questions - Legal Issues

Is a real estate license required to auction real property for others for a fee?
A real estate license is not required for individuals who hold auctions of real property. A person conducting an auction of real estate may promote, advertise and conduct it ("call the sale") to determine a selling price. The closing of the sale after the "pounding of the gavel" (to signify the close of the auction) must be handled by a licensed Michigan real estate broker or an attorney. Many various types of auctions are conducted and persons engaging in purchasing at auction are encouraged to read the materials thoroughly and understand the process before engaging in bidding. There may be local governmental regulations, e.g., county, city, township, that require an auctioneer to secure a permit or registration.

Also, in Michigan if a person wishes to call themselves a "registered auctioneer" and hold themselves out to the public as being registered that person must meet the requirements of Article 29 of the Occupational Code. Applications for registration as an auctioneer are processed through the Department of Energy, Labor and Economic Growth, Bureau of Commercial Services, Licensing Division, and additional information can be obtained at:

I' m setting up a broker website. Are there Internet advertising guidelines?

At the present time, the only advertising guidelines are the general ones at Rule 329. If you advertise, you must include the broker's name as licensed, and the broker's telephone number or street address. All advertising shall indicate affirmatively that the party advertising is a real estate broker, as well as not violate generally prohibited acts such as misrepresentation, fraud, deceit or dishonesty found in 339.604 of the Occupational Code

I would like to buy and sell businesses on the behalf of others. Is a license required for this?

Brokering - the sale of a business, business opportunity or goodwill of an existing business that includes an interest in real estate, for others for a fee, is included in the definition of real estate broker and real estate salesperson and would require a license. See the definitions in 339.2501 of the Occupational Code. You can also bring up the licensing requirements for both salespersons and brokers. A Michigan Supreme Court Opinion states that a real estate license is not required if the exchange of the business does not include an interest in real estate. Please see the opinion at

Do I have to have a license to do property management?

"Property Management" is defined by the Occupational Code to include " . . . the leasing or renting, or the offering to lease or rent, of real property of others for a fee, commission, compensation or other valuable consideration pursuant to a property management employment contract." It is an activity that requires a real estate broker's license. Salespersons can also perform property management but all activities would be in the name of and under the supervision of the salesperson's broker. No license is required if you own the property being managed, or are a direct employee acting on behalf of the property owner. Also, if your activities are limited to such areas as property upkeep or bookkeeping functions, and do not include leasing or renting of the property, you would not fit the definition of property management and would not be required to have a real estate license.

What are the licensing requirements to work as a salesperson for a residential builder?

A residential builder salesperson, or a residential maintenance and alteration (M&A) contractor salesperson is not the same as being a real estate salesperson. Those licenses are issued through the Residential Builder and Maintenance & Alteration Contractors Board. A licensed real estate salesperson does not sell for a residential builder or M&A contractor unless the builder or M&A contractor has listed the property with the real estate salesperson's real estate broker.

You can read about Residential Builder and Residential Maintenance & Alteration Contractor licensing by going to their website or by calling 517-373-8376.

As a licensed real estate salesperson, am I allowed to perform a "broker price opinion"?

Listed below is a quote from Article 26 of the Occupational Code. This article is specific to Real Estate Appraisers, and also has applications to real estate licensees:

Sec. 2601. As used in this article:
(a) "Appraisal" means an opinion, conclusion, or analysis relating to the value of real property but does not include any of the following:
(i) A market analysis performed by a person licensed under article 25 solely for the purpose of assisting a customer or potential customer in determining the potential sale, purchase, or listing price of real property or the rental rate of real property as long as a fee or any other valuable consideration is not charged for that analysis.
(ii) A market analysis of real property for a fee performed by a broker or associate broker licensed under article 25 which does not involve a federally related transaction if the market analysis is put in writing and it states in boldface print, "This is a market analysis, not an appraisal and was prepared by a licensed real estate broker or associate broker, not a licensed appraiser." Failure to do so results in the individual being subject to the penalties set forth in article 6.

A market analysis can be performed by real estate licensees, at no charge, as a regular part of their business to determine a sales price, a buyer's offering price or a rental fee. Brokers and Associate Brokers (but not Salespersons) can perform a price analysis for a fee as long as the required disclosure as shown in paragraph (ii) above is made.

If you have questions regarding Real Estate Appraiser licensing requirements, information is available at their licensing website.

What activities can my assistant, who is not a licensed real estate salesperson, perform?

The Department receives many telephone calls requesting information about real estate-related activities that an unlicensed individual may perform. The following guidelines are presented in an attempt to reduce a broker's exposure to potential risk in the utilization of unlicensed assistants. This information is modeled after an article by Thomas Kotzian JD, former Chairperson of the Michigan Board of Real Estate Brokers and Salespersons, educator and broker, and approved by Ann Millben, Licensing Administrator for Real Estate

Unlicensed Assistants MAY:
-assist licensees during an open house, performing the following functions as a "host" or "hostess"
-open the door and greet prospects as they arrive at the open house
-hand out prepared printed material
-have prospects sign a register (guest book) to record names, addresses and phone numbers for the listing
-accompany prospects through the home for security purposes (only the licensee should answer any questions pertaining to the material aspects of the house or its price and terms)
-perform strictly clerical tasks
-function as a courier in picking up or delivering documents on behalf of the employing licensee [Note: Keys should not be given to unlicensed persons for the purpose of showing a listed property. Brokers are responsible for the properties in their listing inventory and should only give a key to a licensee who is able to show proper I.D. (e.g., valid pocket card and driver's license with photo)]

Unlicensed Assistants MAY NOT:
-independently show or demonstrate property to prospective buyers
-make cold calls by telephone or in person to potential listers, purchasers, tenants or landlords
-answer any questions on title insurance, financing or closings
-independently hold open houses for brokers, or staff booths in home shows or fairs
-solicit business through telephone prospecting
-give additional information not included in prepared written promotional material that has been distributed to the public (e.g., newspaper ads, flyers, brochures)
-represent themselves as an agent for a real estate broker or the owner/seller of property
-have their name printed on business cards or stationery that would imply they are an agent for the real estate broker
-conduct telephone solicitation calls. If John Doe, an unlicensed assistant, calls and indicates he represents ABC Realty, one is led to believe the purpose of the call is to engage in real estate activities. The definition of broker and salesperson in the Code includes one who "lists or attempts to list". Therefore, a call by an unlicensed assistant identifying him or herself as a "representative" of a real estate company is an attempt to list even if specific terms are not discussed at that time.
-Perform any of the acts for which a license is required under Michigan Real Estate License Law. (MCL 339.2501 et seq.)

Licensees who violate state license law by allowing unlicensed assistants to practice real estate on their behalf subject themselves to one or more of the following penalties:

Placement of a limitation on the license
Suspension of license
Denial of license renewal
Revocation of license
A civil fine not to exceed $10,000 per offense
Restitution. (MCL 339.602)
Brokers and managers must also be aware of their liability in allowing licensees to employ unlicensed assistants. Factors such as worker's compensation laws, agency law, income tax reporting and withholding requirements, sexual harassment, employment discrimination and a myriad of state and federal employment statutes must be carefully reviewed when allowing licensees to hire unlicensed assistants.

Brokers are responsible for the acts of their licensed salespersons and associate brokers and "shall not contract with an individual who is licensed to the broker so as to lose the authority to supervise the licensee." (MCL 339.22325) It is therefore the broker's responsibility to supervise all personnel acting under the scope of the broker's authority.

Brokers are advised to consider these issues when writing independent contracts with their salespersons and associate brokers. An attorney who is knowledgeable of employment discrimination and related employment laws should be consulted prior to drafting any independent contract section on this subject. Good research and preparation will avoid many of the problems addressed in this article.

I'm going to have a booth at an upcoming home show being held in my city. I want to ask attendees to drop a card in a fishbowl that I will draw from at the conclusion of the show. Can I give away a television to the winner?

Section 2511(2) of the Occupational Code (MCL 339.2511) allows licensees to hold a game promotion to generally promote their business. There can be no valuable consideration accepted for participating so you cannot "sell" tickets to be eligible to win. Also the promotion cannot be tied to a specific property or properties. Obviously, the licensee must actually award the prize that is promised. Section 2511(2) states that the promotion must comply with section 750.372a of the Michigan penal code.

Can citizens or licensees call the Department requesting legal assistance or interpretations concerning real estate or real property matters?

Real estate licensing unit staff receives many telephone calls from licensees and the public requesting legal advice on real estate matters. The licensing unit does not have in-house legal counsel, nor can legal advise be provided to either licensees or the public. Circumstances that involve the license law and/or rules' statutory provisions or regulations can be discussed. Staff is often asked if an experience someone has with a licensee is in accordance with the statute. Callers are always encouraged to file a complaint if the caller feels that the licensees' actions have resulted in causing them harm. However, staff cannot determine ultimate legal conclusions or give any direction in areas outside the scope of the Occupational Code and Administrative Rules.

Broker's trust account books and records can become a large storage problem. Does the Department see any violation if these records are maintained in a medium other than paper? How long must the trust account records be kept?

Rule 313(3), effective 9-1-03, requires that "all trust or escrow account records shall be maintained for a period of not less than 3 years from the date of inception of the records."

Further, the Code and Rules are silent regarding scanning of those files on to a hard drive, backed up by CD, for future reference, or being stored on microfilm or some other method. Audit Supervisor, Tim Teague, recently confirmed that as long as the records are kept for three years in a manner that can be retrieved, that is acceptable. He further clarified that as long as the scanned images contain all the information that is required (See Rule Section 2512 and Rule 313(4) for a detailed description) the fact that the records are scanned rather than hard-copy or paper makes no difference and would be found acceptable.

Licensees who have questions regarding interpretation of contracts, rental agreements, commission disputes and closings are advised to consult with their employing broker. If legal advice is needed, they should consult an attorney for appropriate action.

Can a lender set up a contest for real estate licensees where the one who provides the lender with the most business wins a trip to Hawaii ?

No. Under RESPA, the trip itself, and even the opportunity to win the trip, would be a thing of value given in exchange for the referral of business.

Can a mortgage banker and a real estate broker advertise their services together, for example, on the same brochure or newspaper advertisement?

Nothing in RESPA prevents joint advertising. However, if one party is paying less than a pro-rata share for the brochure or advertisement, there could be a RESPA violation.

Can a lender give a real estate agent note p ads with the lender's name on it?

Yes. Such note pads with the lender's name on it would be allowable as normal promotional items. However, it the lender gives the real estate agent's name on it for the agent to use to market clients for its real estate business, then the note pads could be a thing of value given for referral of loan business, because it defrays a marketing expense that the real estate agent would otherwise incur.

How should I report a violation of RESPA?

You should send a written complaint describing the practice that you believe violates RESPA. The complaint should include the names, addresses and phone number of the alleged violators. It is preferred that you include your name and phone number in case an investigator wishes to ask further questions. You may request confidentiality. Send the complaint to:

U.S. Department of HUD
Office of RESPA and Interstate Land Sales
451 7th Street SW, Room 9154
Washington DC 20410


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