Contracts and agreements: Real estate
Who owns contracts and agreements
The real estate firm owns all listings, transactions, management agreements, and other brokerage service contracts.
Requirements
Delivery of documents
Brokers and managing brokers are required to deliver, fax, or email all transaction records and brokerage service contracts to their firm's designated broker, or delegated managing broker, within 2 business days of mutual acceptance. Commonly, these documents include:
- Listings
- Representation agreements
- Purchase and sale agreements
- Option agreements
- Leases
- Property management agreements
Contract reviews
- If a brokerage service contract is written by a broker or managing broker who became licensed for the first time after June 30, 2010, the firm's designated broker or delegated managing broker must review it within 5 business days of mutual acceptance. They must also maintain documented proof of the review at the firm's record location and make it available for our review in the case of an audit.
- If a brokerage service contract is written by a broker or managing broker who was licensed before July 1, 2010, or has been licensed for more than 2 years, no review is required. However, the firm may wish to adopt a business model that includes a review of all brokerage service contracts.
Recordkeeping
You must keep transaction documents and brokerage service contracts for at least 3 years. In addition to mutually-accepted contracts, the records should include receipts, closing statements, and material correspondence. All records must be available to the auditor at your license location upon request.
Payment agreements
Advance fees
If you have an agreement with a client to pay an advance fee (for example, to cover advertising costs), all advance fee checks must be made out to the firm to which you're licensed. You can't personally retain funds that come directly from a client or customer for any brokerage services.
- Your firm must deposit and hold the funds in their trust account, and the funds can't be used by anyone not entitled to use them.
- The designated broker must determine if and when you have earned a fee according to the terms of a brokerage service contract, and then pay you accordingly.
Reimbursements
The real estate licensing law doesn't prohibit agreements with clients for direct reimbursement of expenses required in a purchase and sale agreement. However, you should follow the policies of your firm and ask your designated broker for guidance before making this type of agreement. Also make sure your firm's transaction file includes paperwork explaining the payment and reimbursement for audit purposes.
