hey future agents this is chapter 8 I'm Sean Kelly and welcome to my channel on everything real estate chapter 8 is about agency contracts and related practices and towards the end of the video we'll get into how you can calculate your Commission which is how you calculate how much you're going to get paid if you'd like to follow along with the rest of the North Carolina real estate exam prep go ahead and click that subscribe button down below there's also a 10% off link for courses for a pre-licensing continuing education and post education also down in the description below and let's learn about contracts so this is kind of a continuation from chapter 7 we will still be talking about agency here so let's get into the listing agreement first a listing agreement creates a special agency relationship so remember from chapter 7 there are universal agents which basically have unlimited power then there are general agents which have a limited power like property managers and then there are special agents which is us you know we're basically advisers we don't have much power so the listing agreement must be in writing it must also be signed by both parties it must have the licensees license number on it it also must have an expiration date or the date that the agreement ends and it also must have a non-discriminatory clause in it so we cannot discriminate our clients can't discriminate and that should already go without saying and an oral agreement is not a valid agreement there is no such thing as an oral agreement so a seller has options when it comes to listing agreements and we'll cover three we have the open listing they have the exclusive agency listing and then they have the exclusive right to sell listing which is the most common one so in an open listing a seller only pays the broker that brings the buyer in there could be multiple brokers working and bringing buyers in but only the one that actually is willing and able and closing on the contract buyer is the one that will get paid additionally the seller can also bring their own buyer and then not have to pay a commission to anyone this is rarely used then in an exclusive agency the seller is only working with one firm one real agent however the seller themselves can also find their own buyer and not have to pay a commission to that broker genuine so this is often done in a for sale by owner case where that owners trying to sell their own property but they wouldn't mind hiring out a firm to help them and then it's kind of off to the races of who finds a buyer at first then there's the exclusive right to sell listing which is the most common one and the one that you want to be in so this is basically where whoever goes and buys the house the agent that's represented on that is going to get the Commission paid for so a listing agreement has the following characteristics in general the agreement has the agency disclosure the parties involved the terms such as the beginning and the end date or the expiration date the property description the price and the terms and the firm compensation and other items alright let's briefly cover commissions now and then we'll come back to it much later on in this chapter so commissions are made by negotiating between the two parties now typically a firm will set their rate and it'll be listed in the MLS the seller is typically the one that pays the Commission and cooperates with the buying side to pay the Commission on the buying agent side so with all that all of the money really passes to your firm not to you as the agent as I discussed in Chapter seven the money the Commission passes through the firm and then the firm splits off your Commission split to you the agent an agent becomes entitled to that commission once they bring an offer and from a ready willing and able buyer so let's say your listing agent and you're two days away from closing right there's a buyer who has sent an offer you have accepted it you're right there next to the finish line in the seller your client just decides to get up and walk away and be done with it and keep their house you as an agent are still entitled to your commission after you put in all that work through this deal however the only way to really get that Commission if the seller isn't just going to willingly give it to you is to sue for or take them to court judge Judith shine this is Judge Judy and then the problem with this is that then it's kind of shady and you may lose some your reputation so you really have to ask yourself is it worth it right is it a million dollar house that you spent a year trying to sell and you have a huge Commission just being held back from you or is it a three hundred thousand dollar house where it's still a lot of money but is it worth your reputation moving forward if there's ever an opportunity for you to get extra money like bonuses and retainer fees and other things like that you will have to get permission from your client before submitting an offer sometimes companies like DR Horton the new home builders will offer agents an extra thousand dollars if they sell one of their new construction homes or if you sell two or three of their properties within the same neighborhood they'll start upping your commission so a vocab word to note here is procuring cause which just means that you helped a buyer or seller close on a property and then you are entitled to that commission to get paid you must have an active license have a written agreement and produce a ready willing and able buyer as stated before if a ready willing and able buyer comes to the table submits their offer it gets accepted and you become out a contract you as an agent are entitled to commission even if the seller decides to back out also another note is that all Commission's can be negotiated although many firms set their policies another opportunity to make money especially for new agents is through referrals referrals are just when you refer someone to another agent usually in an area that you yourself do not work in so for instance I'm originally from Austin Texas and so I have some friends and family back there and so once they start looking for a house I would hope that they would ask me so I can go and find them an agent once I referred them to a new agent I get about 25 percent of that commissions flutter just pretty nice I don't have to do any other work so just remember you can't work across straight lines so referrals are the way to go in those cases so back to the exclusive right to sell agreement there's extender Clause that protects you as in the agent this basically says that if you are a listing agent with a home owner and that relationship ends any names that you have acquired and worked to gain while you were in that agreement if one of those buyers comes back to the table and buys the actual property you are entitled to the compensation because that was your upfront work so it's important that you collect the names of potential buyers and you submit that to your client and so that way whenever it comes down to it your relationship ends you can still get compensated for bringing that willing ready willing and able buyer in North Carolina you must provide that list of names to the buyer right when the relationship ends that helps prove that the buyer was actually acquired by you let's talk about the MLS it's a beautiful tool that shows you all of the properties that are on the market and gives you a lot of detailed information about them when a property is listed on the MLS it is syndicated through all these other websites like Zillow and realtor.com and so on now what terminates a listing agreement we kind of cover this a little in Chapter seven so first the duties can be complete you have mutual agreement between the two parties the agreement has expired there was a breach in contract bankruptcy and then destruction of the property and if the client dies remember if you as an agent die it doesn't matter [Music] now for soliciting there are rules and regulations that you must know for this North Carolina real estate exam test exam tests exams house so do not solicit other agents clients understand that do not call laws no the junk facts laws and rules and the can-spam act the do not call and facts rule is a state and federal law you must check the do not call gov before making some of these soliciting some of these phone calls and you must check it every 31 days however you can call if you have had a business relationship with someone in the past 18 months you can call within three months of a customer enquiring about a property or giving you willingly information for instance I just ran a bunch of Facebook ads last week people fill out the phone number they fill out their email address I have three months now to contact that person and you can call a for sale by owner as long as you have a client who is actually interested in knowing more about that property ignoring these rules can result in an eleven thousand dollar fine per phone call and that's not a mistake eleven thousand dollars per phone call however this is not a do not knock rule you can go door knocking all you want if they do not call an act that you'll need to be very aware of is the Sherman Antitrust Act which there will be a test question on this targets price-fixing so you can't use terms like usual customary average things like that especially we're talking about commission rates so I can't call another agent say usually my rates are three percent this entices price-fixing now this is a great time to actually dive into advertising rules in general so anytime you plan on advertising you must get permission and approval from your broker in charge or your firm and if you'll notice in this YouTube channel that I'm doing here not once have I mentioned the firm I actually worked with I haven't advertised for them or have I advertised really as myself as an agent I haven't prompted or put out any of the houses that I have under Marquis or anything like that I could do it but I would need to go run those through my firm and get those approved for front yard signs you always need approval from the homeowner because you never know if they want to keep their home sales secret from their neighbors maybe they have some family there something like that you always need approval you must always refer your firm when you do run an ad and your firm will we usually have a standard logo or something that you can play somewhere and if you are a limited commercial broker you must mention and state that you are a quote limited commercial broker in your ad so you can purchase your own listing however you want back out as a listing agent in that deal you can't represent both yourself as now the buyer and also those selling your client that just completely wouldn't be fair at that point the seller can move on to a different agent within your firm or they can actually go to any firm now at that point regardless of whether there is a listing agreement or not so the rest of this chapter covers buyer agency but we went over most of that in Chapter seven and this whole series is meant to be short and sweet I'll just say you have a responsibility to disclose agency get the agreement signed and assist in the transaction then remember there are different types of agency there is single agency there's dual agency there is designated dual agency and then there is no agency refer to chapter 7 which I'll have a link to right up here in the corner if you need a recap their bloods head over to the fun section al figuring out your income hopefully you're a little excited about this part it's always interesting figuring out how much money you're gonna be potentially making so here's another little circle chart thing here which actually in these examples moving forward I'm personally not going to reference this because this actually makes it more confusing you have gross Commission on top with sales price and rate on the bottom when it comes to Commission the listing agent gets some and the buying agent get some this will be listed in the MLS or before an offer is made so let's say there is a commission of 6% 6% will typically be split 50/50 so let's get to some examples a property sells for $100,000 and the commission rate is 6% their listing and selling firm split is 50-50 then the selling firm splits 60% of the agent and keeps 40% so let's first answer what is the total Commission amount so let's break it down 6% of $100,000 is $6,000 that is the total Commission of mountains actually really easy then let's answer what is the agents Commission amount the selling agents Commission amounts so the listing firm gets $3,000 and the selling firm gets $3,000 because it's a 50/50 split right so a 60 percent commission from the firm leaves the agent with an $1,800 Commission the firm gets the other 1200 from the deal so just follow the split as each question is asked you have the split of the total Commission then you have the split within each firm all right example number 2 a house sells for $300,000 with a 7% Commission and there is a 50/50 split so the firm gives 70% to the agent and keeps 30% in this case what is the brokers Commission while 7% a $300,000 is $21,000 that is the total Commission that split 50/50 is $10,500 then 70% of the $10,500 is seventy seven thousand three hundred and fifty dollars that is the Commission amount it's really that simple now sometimes the seller will want to make a specific amount of money off the sale of a house this is a little ridiculous of a scenario because it really doesn't matter what a seller wants to make off of their house the house is only gonna sell what the market has that selling pork right a house is only gonna sell if it's priced right nobody's gonna come up and say well the seller wants to make $100,000 on this property okay I can do that it just doesn't make any sense but this is actually a real-world question where a seller will want to actually make a hundred thousand dollars of their property and so they'll ask you how much they need to sell the house for to cover closing costs and your agent costs and all these other things what you'll need to do is add that net amount that $100,000 to the closing cost then subtract the Commission rate from 100% so if you have a six percent commission rate you subtract that from a hundred percent which gives you that 94 percent then you divide step one by step two you know let's get to an example example one so let's say seller wants to net $100,000 on the sale of their home closing costs are two thousand dollars and the Commission is six percent so what sales price is required here for the seller to make to $100,000 well we have one hundred thousand plus two thousand to get one hundred and two thousand dollars then one hundred percent minus the six percent commission equals ninety four percent so one hundred and two thousand dollars divided by 94% will give us one hundred and eight thousand five hundred and ten dollars in 64 cents so this is how much we will need to sell the house for to cover all the closing costs and net $100,000 in example number two so a seller wants to net fifty thousand dollars and there is a 5% Commission and one thousand dollars in closing cost so we are at fifty thousand plus $1,000 to get fifty one thousand dollars so we need to sell the house for at least fifty one thousand dollars here just to cover the closing cost but now we need to know how much to cover the Commission so a hundred percent minus five percent equals 95 percent so $51,000 / 95 percent equals fifty three thousand six hundred and eighty four dollars in twenty one cents so that's how much they'll need to sell the property for it's in that fifty thousand dollars and by the way to type 95 percent into a calculator just in case II don't know is 0.95 so you do fifty thousand divided by 0.95 if there's not a percentage button on your calculator so there's one last type of math we'll need to cover here and really this one does come down to memorization unless you are really good at math you'll be asked things like if a house cost a hundred thousand dollars and was sold for a ten percent profit what was the sales price so in this scenario there was a profit so we'll add ten percent to a hundred percent to now get a hundred and ten percent with profit you add the percentage of profit to a hundred percent in this example you would then multiply a hundred thousand dollars by that 110 percent to get a hundred and ten thousand dollars sales price here are the rules for this type of profit and lost math if there is profit you add to a hundred percent ten percent profit would be represented as one hundred and ten percent if there is a loss you subtract from one hundred percent 10 percent loss would be shown as ninety percent and if you are looking for the sales price you multiply and if you're looking for the original cost you divide let's get to our first example here if a property cost eighty thousand dollars and sold for a twenty percent profit what was the sales price well we have a profit so we add twenty percent to a hundred percent to get 120 percent then we simply multiply the eighty thousand dollars by a hundred twenty percent to get ninety six thousand dollars pretty easy right so let's just look at this logically for a second take some of the math out of here so if you spent $80,000 on a property and you made a 20% profit on that that means that your sales price was higher than $80,000 profit means that you made more money than what you spent on that item profit is how much money you make on something after cost has been taken out so let's do another if a property sold for $100,000 at a 6% loss what did it originally cost now we have a loss so we subtract 6% from a hundred percent to get 94 percent then we justified 94 percent from $100,000 to get one hundred and six thousand three hundred and eighty two dollars again now logically speaking we have a loss and we are looking for the original cost therefore the answer has to be higher than $100,000 if you forget how to do most of these math problems on the test if you take a step back and think about each one of them logically you will you should be able to narrow them down to two answers on the test and then if you had to guess you at least have a 50/50 chance of getting it right now I'm telling you shoot for gold try to understand these but again logically thinking about these you can usually narrow down your answer oh hi we made it for the finish line let's do our quick recap of agency contracts so the listing agreement in North Carolina must be in writing must be signed by all the partings parties must include the licensees license number and must have a begin and end date or expiration date oh and it also must have a non-discriminatory provision in it again never discriminate simple the different types of listing agreements are open listing where the seller only pays the broker who brings a ready willing and able buyer an exclusive agency listing where a seller only works with one firm but if the seller brings in their own buyer then they won't have to pay commission to anybody and then the exclusive right to sell listing which means that who comes and buys the property that one agent is going to get the Commission no matter what and this is the most common way to do it Commission's can come in the form of a percentage a retainer fee and hourly wage and other ways the money is typically paid from the seller to both the listing agents firm in the buying agents verb and then the firm then splits off the Commission checks to the agents you are entitled to a commission if you have an active license have a written agreement and procure a ready willing and able buyer all Commission's are negotiable if the mls states adds two and a half percent for the buying side you can negotiate that you actually want three percent and put that in your contract although you can't work outside of your state lines so you can't work outside of north carolina unless you have a license in another state you can still refer your clients to other agents outside of your state and earn a referral fee and then again a listing agreement can be terminated if the duties are complete there is a mutual agreement between the two parties there is a breach and contract bankruptcy destruction of the property or the client themselves died again not if the agent dies do not call numbers on the Do Not Call list so check do not call gov before making a phone calls every 31 days unless you have had a business relationship with that person in the past 18 months or that person has enquired or provided given their information to you in the last three months violating this is an eleven thousand dollar fine per phone call the Sherman Antitrust Act covers price-fixing if you plan on advertising you must use your firm or brokerage name in the ad and if you're trying to buy a property that you are the listing agent for you must step out of the process as the agent and then you can go and buy that property it's not fair that you'd be able to be the listing agent and representing yourself as the buyer when splitting your commission understand that the Commission comes from the seller and goes to your firm usually in a 50/50 split and then the firm splits off a commission check to you whatever split your firm does 60 the 90% is a typical firm split ratio so the numbers I see a lot are 5 percent commissions the six percent commissions and again I should be using words like normal usual customary because that's an anti Sherman trust Act law no price-fixing but those are the numbers I see you can look at the MLS and they're just calm they're just numbers on there those are just random numbers let me say that and then there's usually a 50/50 split with those between the listing firm and the buying firm and so that six-person we be vac divided down to three percent for one firm three percent for the others and then per firm they're the splits can be anywhere from like sixty to ninety percent where the firm will give the agent 60 to 90 and then keep the remaining amount well it's been fun chapter eight is done we will have basic contract law up next in Chapter nine I know I had a little bit of an introduction in my very first introduction video in this series but I do want to mention that I do have a second channel that's been growing like crazy if you are interested in remodeling projects or DIY projects like this LED floating shelf here and really this whole office remodel go ahead and check it out I'll post a link right up here in the corner it's been growing like crazy like I said so I'm pretty excited about it just wanted to mention it in case you are interested thank you so much for watching seriously I know this can be a little bit of a drag but just know that once you pass this exam you have passed the hardest real estate exam in the entire nation it's something to be proud of have a great rest of your day stay positive both in the classroom and out there in the real world and I'll see you on the next chapter [Music] [Music] you