Unit 5
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Antitrust Laws
Federal and state laws (including the Sherman Antitrust Act and Illinois Antitrust Act) that prohibit monopolies, price-fixing, group boycotts, and other anti-competitive practices in the real estate industry.
Two brokerages agree to charge the same 6% commission rate on all listings in a market area. This constitutes illegal price-fixing under antitrust laws.
Broker
A licensed individual or entity authorized to bring together parties in real estate transactions and charge a fee. In Illinois, brokers must be sponsored by a managing broker or brokerage and operate under the Real Estate License Act of 2000.
A licensed broker in Illinois lists a home, markets it, negotiates offers, and earns a commission upon successful closing.
CAN-SPAM Act of 2003
Federal law regulating commercial email. Requires accurate subject lines, physical address of the sender, and an opt-out mechanism. Real estate professionals must comply when sending marketing emails.
A broker sends mass emails promoting new listings. The emails must include a clear unsubscribe link and the brokerage's physical address to comply with CAN-SPAM.
Commission
Compensation paid to a real estate broker for services, typically a percentage of the sales price or a flat fee, as agreed in the brokerage agreement. Paid at closing from proceeds.
The listing agreement specifies a 5.5% commission. At closing, the brokerage receives $16,500 on a $300,000 sale.
Cooperative Commission
The portion of the total commission offered by the listing broker to a buyer's broker who procures a ready, willing, and able buyer. Usually published in the MLS.
The listing broker offers 2.5% cooperative commission. The buyer's broker receives that share when their client purchases the property.
Designated Managing Broker
A managing broker specifically designated by a brokerage to supervise licensees and be responsible for compliance with Illinois license law for that office or company.
The brokerage designates one managing broker to oversee all agents in the Chicago office and ensure adherence to the Real Estate License Act.
Employee
A person who works for a broker or brokerage under an employer-employee relationship, subject to control over how work is performed. May be entitled to benefits and tax withholding unlike independent contractors.
A broker hires an assistant as a W-2 employee who works set hours and receives benefits, distinguishing them from independent contractor agents.
Errors and Omissions Insurance
Professional liability insurance that protects real estate licensees and brokerages against claims of negligence, errors, or omissions in the performance of their duties.
A buyer sues claiming the agent failed to disclose a known defect. The brokerage's E&O insurance covers legal defense costs and any settlement.
Fiduciary Standard
The highest legal duty of care, loyalty, obedience, disclosure, accounting, and reasonable skill owed by an agent to their client (principal).
A listing broker discovers a structural issue and immediately discloses it to the seller client per the fiduciary standard of disclosure.
Group Boycotting
An antitrust violation where competitors agree to refuse to deal with another competitor, supplier, or customer. Illegal in real estate.
Several brokerages agree not to show or sell properties listed by a new discount brokerage. This is illegal group boycotting.
Independent Contractor
A self-employed person who performs services for others under contract but maintains control over how the work is done. Most real estate agents are independent contractors, not employees.
A real estate agent signs an independent contractor agreement with a brokerage. The agent sets their own schedule and pays their own taxes.
Junk Fax Prevention Act of 2005
Federal law that prohibits sending unsolicited fax advertisements. Requires prior written permission or an established business relationship with an opt-out notice.
A broker cannot fax unsolicited listing flyers to businesses without prior consent or an existing relationship.
National Do Not Call Registry
A federal registry where consumers can register phone numbers to avoid telemarketing calls. Real estate professionals must check the registry before making cold calls.
Before calling potential sellers from a purchased lead list, the broker checks the National Do Not Call Registry and removes registered numbers.
Price-Fixing
An antitrust violation where competitors agree on the price of goods or services. In real estate, this includes agreeing on commission rates or fees.
Brokerage owners meet and agree that all will charge a minimum 6% commission. This illegal price-fixing can result in heavy fines and lawsuits.
Procuring Cause
The broker who is the primary or efficient cause of a buyer being ready, willing, and able to purchase a property. Entitled to the commission even if another broker closes the deal.
Broker A shows the property multiple times and writes the offer. Even though Broker B writes the final contract, Broker A may claim procuring cause.
Ready, Willing, and Able Buyer
A buyer who is financially qualified, prepared to enter a contract, and has the legal capacity to complete the purchase. The broker who produces such a buyer for a listed property may be entitled to commission.
A buyer with a pre-approval letter, earnest money ready, and no contingencies that would prevent closing is a ready, willing, and able buyer.
Regular Employee
An employee who works under the direct control and supervision of the employer regarding both the results and the methods of work. Distinguished from independent contractors in tax and liability matters.
An office manager who works set hours, uses brokerage equipment, and follows specific procedures is a regular employee.
Sponsoring Broker
The licensed broker or brokerage that employs or associates with a licensee and is responsible for their supervision and compliance under Illinois law.
New licensee Maria's sponsoring broker must review her contracts and ensure she follows all license law requirements.
Tie-In Agreement
An illegal antitrust practice where the sale or lease of one product is conditioned on the purchase of another unrelated product or service.
A developer requires buyers to use only their preferred lender and title company to purchase a new home. This may constitute an illegal tie-in agreement.