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Weekly Membership Newsletter
June 6, 2017 • Stay Connected!
Access Member Services:  warealtor.org | Legal Hotline | Tech Helpline
          
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QUESTION:  I am listed as a Co-Owner in the XYZ Team LLC and work at ABC Realty. As part of our LLC agreement, I'm a 49% owner. The question I have relates to how I operate as a broker working with clients. I'm often involved in writing and negotiating the Purchase and Sale agreements or Listing Agreements. I put my name on the documents along with "Jane Doe" the other co-owner. But when it comes to being paid, I'm not paid commissions through ABC Realty. I am paid by the XYZ Team LLC. Also, there are times when I am involved in negotiating but, do not have my name on the contracts. What concerns if any, should I have about this arrangement? Any advice for Team structures with regard to sharing the responsibilities and what names are to go on the documents?


ANSWER: Broker and Jane Doe are business partners. As such, there is going to be an unavoidable sharing of liability. The business owners need to work with legal counsel to make sure that their LLC agreement is properly drafted to be protective of their collective and their individual assets. They need to work with their insurance broker and their firm's DB to be certain they are properly insured. The LLC owners must be familiar with MLS rules so they know that they are properly reporting listing and sales activity on their MLS. The LLC owners need to work with their firm's DB to be sure that proper documentation exists to allow for compensation to paid directly to the LLC, if that is the preference of all involved.
 
Compensation can be paid directly from escrow to the LLC if two things are true. First, the LLC must be wholly owned by licensed RE brokers (and spouses). There can be no owner in the LLC, other than the spouse of a broker/owner, who is not a licensed broker. Second, the firm (ABC Realty, in this case) must give written permission to escrow to pay compensation directly to the LLC. The LLC can then compensate its members consistently with the LLC Agreement.
 
When brokers choose to work together on a team, and particularly a team that forms an LLC or some other business entity, the brokers are choosing to tie themselves to the other team members for better and for worse. Joining forces means sharing resources. Team members can provide coverage for one another when a team members needs to be two places at once. Team members can specialize in particular areas knowing that another team member is specializing in something else. There can be a collective fund for compensating support staff and buying advertising, etc. But, with all of the reasons that support formation of a team, there is also the unavoidable connection of liability that flows from the actions of one team member to all the other team members.
 
Before forming or joining a team, brokers need to think critically about who the other team members are, what the documentation says that forms the business entity constituting the team, what agreement is entered between and among team members, what is the structure of the team, who holds what responsibilities and what are their qualifications to fulfill those responsibilities, what insurance protects the team's and team members' assets, etc. Forming or joining a team should not be a decision undertaken lightly. In many respects, associating with a team creates liability that the typical industry relationship is designed to avoid. Whereas brokers are typically independent contractors with their firm, meaning that one broker licensed to a firm will have no liability for the actions of another broker licensed to the firm, joining a team may create that shared liability with all other team members.
 
 

 

The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org . Please tell us your NRDS number when you e-mail the Hotline with your question.


 

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Confirmation Hearing for HUD Deputy Secretary
(Source:  HousingWire) Pam Patenaude, the current administration’s choice to serve as the deputy secretary of the Department of Housing and Urban Development, will appear before the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday for her confirmation hearing.  [Read more...]
 

 
 
 
Registration is Open!
Registration is now open for the annual Japan Trade Mission! REALTORS® from Washington state will travel to Kyoto, Tokyo, and other places to network with Japanese REALTORS®, exchange ideas, and experience Japan with escorted sight-seeing tours. Reservations are available on a first-come, first-serve basis.   [Download the Flyer]
 

 
 
Call for Action - Oppose the REET
Increasing a real estate tax rate that is already one of highest in the country, and is not a fair or stable revenue source, will hurt affordability for homeowners, businesses, and renters. Get more info and take action now...
 

 
 
Call for Action - Fix Hirst & the GMA
Both urban and rural areas of Washington are facing a housing crisis that only the Legislature can solve.  Help support two important pieces of housing legislation.  Get more info and take action now...
 

 
 
What to Know About Selling a Home With a Reverse Mortgage
(Source: Speaking of Real Estate) It’s difficult to understand how a reverse mortgage works and how selling a home with one differs from the standard procedure. The truth is that it’s very similar; the major difference is the way the lender manages the loan amount if it exceeds the home price. If you’re working with a client who has a reverse mortgage, here are four questions to help you better understand the process. Read more...
 

 
 
Finding Your Real Estate Niche
(Source: YPN Lounge) It can be difficult for both new agents and seasoned professionals to maintain a year-round stream of prospects from our online marketing efforts. This is especially true if we do not focus on a specific niche or market segment.  [Read more...]
 
 

 
Primary Mortgage Rates Survey
(updated every Thursday)

 

 

 
 
 

Date Class Location CE  
15-JuneProcuring CauseKennewick4.0More info...
21-June Agency Law 3.5 Olympia 3.5 More info...
21-June  Best of the Legal Hotline Olympia 4.0 More info...
27-July NAR Code of Ethics 3Olympia3.0More info...
10-Aug Increasing Your SEO & Online Traffic Spokane 4.0 More info...
10-Aug  Internet Correct:  Etiquette & Ethics in the Ethers Spokane 4.0 More info...

         

 

 
QUESTION from 6/28/2016:  Regarding Form 22E (FIRPTA Certificate), I’ve instructed my agents to include it on every transaction as the Statewide Forms Manual says every offer should have the 22E included. Many agents either don’t agree or don’t understand the purpose and strike the 22E from the transaction, often citing that their clients aren’t foreign so it’s not needed. Can you clarify if indeed it is needed or required when selling real property?
 
ANSWER:  Although quite circular in reasoning, listing broker's ultimate conclusion is correct. If seller is not a "non-citizen, non-resident of the United States" then Form 22E (FIRPTA Certificate) is not necessary. Of course, buyer and buyer broker cannot be assured of seller's status without the information provided on Form 22E. Since buyer (and potentially, buyer's broker by extension of liability) is liable for tax withholding if seller is a non-citizen, non-resident who fails to pay required tax at the time of sale, then it is up to buyer and buyer's broker to insure seller's status. For that reason, the practice of mandating inclusion of Form 22E has gripped the industry. Form 22E has been recently revised to allow seller to sign Form 22E at the time of mutual acceptance without including seller's social security number until later in the transaction and then, seller is required to provide it confidentially, to escrow. Accordingly, there is no harm that comes to a seller who signs Form 22E ... particularly, if as represented by listing broker, seller is not "foreign". As a result, the practice that emerges as the most sound practice for adoption by listing brokers, is to have seller complete a Form 22E at the time the listing is taken and for listing broker to post that Form 22E as an attached document to the listing. Note that seller is NOT required to include seller's social security number on Form 22E but rather, seller merely agrees to provide the social security number to escrow at a later date. Listing broker should insure that seller's social security number is NOT included on the Form 22E when listing broker uploads the form as an MLS attached document. Buyer brokers should print the attached Form 22E and include it as an addendum to any offer submitted by buyer. Buyer brokers who are involved in a transaction where listing broker fails to upload a seller-signed Form 22E and refuses to allow inclusion of Form 22E in an agreement, should press forward with diligence to explain the reasons for the form and the fact that seller risks nothing by inclusion of the form if, in fact, seller is not a "foreign person" as defined by the IRS code. Seller's refusal to include a Form 22E, in fact, may be construed by both buyer and escrow as indication that seller is, in fact, a foreign person as defined by the IRS. The ultimate issue of tax collection from non-citizen, non-resident sellers is an issue that affects very few transactions in our state. But, because the consequences of failing to properly address the situation are severe, in transactions where it is a factor, a solution is necessary. Because there is no way of knowing which transactions are among the few where this is a factor without seller verifying seller's status, the solution requires action by seller. The solution, as described in this answer, is simple and painless for sellers and resolves the problem for buyers and buyer brokers. As a result, industry members need to embrace this approach as a new protocol and incorporate the use of Form 22E in all transactions.

 
 
(You will need your NRDS# & password to access the Legal Hotline.)  The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org. Please tell us your NRDS number when e-mail the Hotline with your question.