Do You Need to Update Your Affiliation Agreement?

broker affiliation agreement contractWhen was the last time you reviewed your affiliation agreement with your brokerage? When was the last time that office policies and procedures were reviewed or updated?

Every day in real estate practicing agents encounter issues in the business of real estate that should have been addressed in agreements and policies, but unfortunately many do not. Does your agreement or office policies address all of these hot topics and issues?

Here’s a checklist.

Vehicle insurance coverage

Many real estate licensees do not realize that their private vehicle insurance coverage may not be adequate when the vehicle is utilized for work purposes in real estate. Many policies exclude vehicles that are being used for work-related purposes. Because real estate professionals often have clients in their vehicles when practicing real estate and showing properties, it is critical that we are attentive to protect our liability and our families. Have a discussion with your insurance agent about whether you need a rider on your policy or whether you need an umbrella policy to cover these situations. Many brokerage affiliation agreements now require the agents to provide proof of this coverage. Those that don’t probably should.

Requirements for dealing with properties you own

Today licensees may be more likely to face civil liability or regulatory disciplinary actions regarding their own properties than representing a client. Most regulatory agencies require licensees to meet certain disclosure requirements in regard to the properties they own. What are your brokerage’s requirements when dealing with your own properties? Are you allowed to sell your own home outside of the brokerage? If so, you probably cannot place the property in MLS without a written listing agreement with the brokerage. What fees will you pay? How does the brokerage plan on keeping any rentals you may own and manage separately from the brokerage? Are the transactions in which an agent has an ownership interest excluded from the E&O coverage or not? All of these situations are forcing brokerages to adopt rules and policies regarding a licensee’s own properties.

FREE GUIDE: Download our free Real Estate Income Guide so you can start earning more this year.

Team guidelines and policies

Throughout the United States, we are seeing an absolute explosion in the creation of real estate teams. Many brokerages and agreements do not address the team issue at all and it has become a source of much regulatory enforcement. The specific licensure and broker supervision rules in your state often dictate whether or not the team can operate independently of the brokerage, whether or not the team can be an entity, whether or not the team must be in the same location, what name the team may be used and how the team is supervised, practices agency and advertises are all issues. These items should be addressed in affiliation agreements and office policies.

Termination policies

In classes, we get questions all of the time regarding whether or not a licensee is entitled to commissions on transactions that were in progress at the firm when they left the firm, were terminated or allowed their license to expire. Most state’s regulatory agencies allow payment if the activity that generated the income occurred while the licensee was still affiliated or active at the time the commission was earned. Whether or not the licensee will be paid is often a matter of the licensee’s contract with the firm. It is astounding how many agreements and office policies do not address this issue.

Referral Guidelines

We live in a world of consumer mobility. A lot of licensees make referrals to other areas and states. How are referral commissions handled under your affiliation agreement and office policy? Can you make the referral to any other company or are there restrictions? Are the fee split and compensation the same for referrals as it is on typical transactions? A lot of affiliation agreements do not clarify these issues leading to confusion and disagreements later. How referrals and the compensation for them are handled should be addressed by specific office policies.

Unlicensed Assistants

More and more agents are using unlicensed assistants. The use of such assistants can become incredibly complex regarding employment laws and licensing laws. In what tasks can the assistants engage? Can they be supervised and hired by individual licensees or must the broker hire and supervise them? Are the classification and hiring of assistants legal and proper under IRS and employment laws? Brokerage affiliation agreements and office policies should set guidelines to make certain that the use of such individuals is legal and compliant with rules and regulations.

As the profession continues to become more complex and challenging both brokers and agents will find that the detail required in affiliation agreements and office policies will also become more complex and challenging. If any of the issues mentioned in this blog post are not fully outlined and discussed in such documents, it may be time to ask more questions and update your agreements.

Len Elder leads instructor development workshops across the country and has earned one of the top certifications in the industry, Distinguished Real Estate Instructor (DREI) with the Real Estate Educators Association. Hei s currently the Senior Instructor at Superior School of Real Estate and is nationally recognized for conducting instructor development workshops for 20 different states. Learn more about Len in this Instructor Spotlight.

real estate agent income guide

Each year more than 100,000 professionals advance their career with McKissock Learning.

Hear what they have to say.

See More Reviews