Real Estate Brokerage (REALBROK)

BROKERAGE AS A PRACTICE OF PROFESSION

A BROKER may enter into:

1. Sale
2. Purchase
3. Exchange
4. Mortgage
5. Lease
6. Joint venture
7. other similar transactions on real estate or any interest therein. [Sec.3(g)(4), RA 9646]

A broker is an agent. His principal is the seller if he is the listing broker. At any rate, the
broker represents the seller and has the power to act within the bounds of his authority.
There is a contract of agency.

Agency is presumed to be for a compensation, unless there is proof to the contrary 1.

Agency may be oral, unless the law requires a specific form2.

Duties of a Broker to his Principal

1. The broker must be loyal to his principal. All relevant information within the
knowledge of the broker should be relayed to the principal. The broker should
advise the principal on anything that concerns the principal’s interest.
2. The broker acts as a fiduciary. The broker should never hold any interest not
beneficial to the principal. He is prohibited from buying for himself or for relatives
the seller’s property without its prior knowledge.
3. The broker must account for money deposits. In serving as an agency, the broker
should immediately remit and account for all money received in behalf of the
principal such as deposit or earnest money.
4. The broker must obey the instructions of his principal. The broker should never
deviate from the instruction of the principal most specially on the terms of payment.
If the seller requires a cash down payment, the broker should accept nothing but
cash from the buyer. If he accepts a check then he violates the instructions of the
principal.
5. The broker must act in person. A seller employs a broker based on his confidence
and reputation of the broker. He relies on the personal services of the broker; thus,
a broker should never delegate his important and major tasks to others, except in
1
Article 1875, Civil Code.

2
Article 1869, Civil Code

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 some cases, to his salespersons.
6. The broker must not have a personal interest in the property for which he acts as
broker without full disclosure to the principal.
7. The broker is prohibited from acting for both the buyer and the seller without full
disclosure. On some occasions that the broker needs to represent both the buyer
and the seller and collect a commission from both parties, there should be full
disclosure to both, and both should give their consent. Without which, the broker
violates his agency if he accepts commission from both parties.

Duties to the Prospect

1. It is the duty of the broker to do his work effectively to satisfy the needs of the
prospect and he shall not earn commission unless the prospect is fully satisfied.
2. Broker must not make any misrepresentations or false promises. If the broker states
that “I can sell this land for P500 per square meter more next year,” this is a false
promise.

Authority must be in writing; Special Power of Authority (SPA) is needed

When a sale of a piece of land or any interest therein is through an agent, the authority
of the latter shall be in writing; otherwise, the sale shall be void3.

In relation to real property dealing, SPA is necessary in the following cases:

1. To enter into any contract by which the ownership of an immovable is transmitted
or acquired either gratuitously or for a valuable consideration;
2. To lease any real property to another person for more than one year;
3. To create or convey real rights over immovable property
4. To accept or repudiate an inheritance.4

A special power to sell excludes the power to mortgage, and a special power to mortgage
does not include the power to sell.

It is a general rule in the law of agency that, in order to bind the principal by a mortgage
on real property executed by an agent, it must upon its face purport to be made, signed
and sealed in the name of the principal, otherwise, it will bind the agent only. It is not
enough merely that the agent was in fact authorized to make the mortgage, if he has not
acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage
the agent describes himself as acting by virtue of a power of attorney, if in fact the agent
has acted in his own name and has set his own hand and seal to the mortgage. This is
especially true where the agent himself is a party to the instrument. However clearly the
body of the mortgage may show and intend that it shall be the act of the principal, yet,
3
Article 1874, Civil Code

4
Article 1878, Civil Code

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unless in fact it is executed by the agent for and on behalf of his principal and as the act
and deed of the principal, it is not valid as to the principal5.

Obligations of the Principal

The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority6.

As for any obligation wherein the agent has exceeded his power, the principal is not bound
except when he ratifies it expressly or tacitly7.

Extinguishment of Agency
1. By Revocation
2. By the Withdrawal of the agent
3. By the Death, civil interdiction, insanity or insolvency of the principal or of the
agent
4. By the Dissolution of the firm or corporation which entrusted or accepted the
agency
5. By the Accomplishment of the object or purpose of the agency
6. By the Expiration of the period for which the agency was constituted8

Keyword: E D W A R D

5
See FEBTC (now BPI) v. Spouses Cayetano, G.R. No. 179909, January 25, 2010.

6
Article 1910, Civil Code

7
Article 1910, Civil Code

8
Article 1919, Civil Code

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OVERVIEW OF THE BROKERAGE PROCESS

Securing of Demonstration
Prospecting Presentation Negotiation Closing
listing or tripping

1. LISTING

A legal contract between a property owner and a real estate broker where the
latter’s services, for a fee is availed of by the former in connection with the
sale, lease, or mortgage of a property. Among other things, it contains the description
of the property, specified period of agreement, rate of commission and other provisions
such as “holdover clause.”

• Information to Be Included in a Listing Agreement

1. The names and appropriate signatures of the parties to the contract.
2. A legal description of the real estate with at least street name included if
applicable
3. The selling price and financing terms acceptable to the seller.
4. A beginning and ending date of the listing agreement.
5. The nature of the listing agreement – exclusive or open
6. The agreement to pay a stated commission and its basis
7. Description of personal properties included in the sale such as home
appliances, if any.

• Steps for securing listing

1. Contracting owner-seller
2. Inspection of property for details necessary for selling (location, size,
improvement, utilities, etc.)

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 3. Determine reasonableness of seller’s asking price taking into consideration
the following:
a. Character of the neighborhood where the property is located
b. Favorable and unfavorable physical features of the property which may
affect its price
c. Market data on nearby or comparable properties as obtained from
registered sales, offerings in the Multiple Listing Service, advertisements,
etc.
4. Examination of titles and other documents as to liens, encumbrances,
restrictions and other information which may affect salability and value of
the property.
5. Formalizing of listing contract
6. Prepare selling presentation, which include among other things, plans,
pictures and maps.

• Sources of Listings
1. Acquired assets of commercial banks and government financial institutions
2. Advertisements
3. Multiple listings
4. Other brokers
5. Developers
6. Personal contacts
7. Social media (Facebook, twitter, Instagram, etc.)

• Types of Listing Agreements

A. As to EXCLUSIVENESS

1. Open Listing – the seller also lists the property with other and competing
brokers on the belief that this type of arrangement best serves his interest
and that listing with more brokers produces more prospects than does a
single listing. The owner also reserves the right to sell the property himself
without incurring liability for a commission

Disadvantages:
a. Owner may be subjected to commission claims by more than one broker.
b. Brokers are not willing to spend much time and effort on the property
because it can be sold anytime by other brokers.

2. Exclusive Agency – seller agrees to list the property to only one broker
during the listing period but retaining the right to sell his own property
without need to pay commission to the broker

3. Exclusive Right or Authority to Sell – the real estate broker is granted

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 an exclusive right to sell the property during the listing term or period and a
commission is paid even if the property is sold by the owner himself.

Advantage: Brokers are more willing to spend for advertising and sales
effort.

B. As to FEE

1. Net Listing – seller sets a minimum acceptable selling price. The broker
has to add his commission (over price) to the set net price as part of the
sales price.

2. Percentage Listing – the seller and broker agrees to a certain percentage

of the selling price as commission.

C. As to FUNCTION

1. Sales Agency – the objective of the agency is to find a buyer for the property
2. Purchase Agency – the objective is to find and buy a specified property.
3. Lease Agency – the objective is to lease the property of the principal or to
find a specified property that is for lease in behalf of the principal
4. Exchange Agency – The objective is to find a specified property in exchange
for the principal’s property.
5. Loan Agency – the objective is to find a lender and secure a loan for the
principal.

MULTIPLE LISTING

The system of combining all properties offered into a common list and made available
to all broker participants. It occurs when a group of brokers agreed to share their
Exclusive Right to Sell listing with each other, with the understanding that the
commission shall be shared in a pre-agreed manner, usually equal shares, between
the listing broker and the selling broker.

It is important that the seller shall be informed beforehand that the property shall be
included in a multiple listing and his conformity shall be in writing or should form part
of the listing agreement.

The advantage of multiple listing is that the property is better advertised to more
brokers at the soonest time possible.

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HOLDOVER CLAUSE

A provision in the listing agreement which stipulates that the broker is entitled to the
commission if the subject property, within a certain period after the lapse of the period
of authority, is ultimately sold to a prospective buyer that was registered by the broker
with the owner within the period of the authority.

Requirements to be entitled to a commission

1. The broker must be the procuring cause of the sale.
2. The broker must hold a valid license as REB or accredited as a Salesperson.
3. The broker must prove employment/engagement.
4. The broker must meet the purpose of the agency – to find a willing and qualified
buyer who is agreeable to the terms of the seller.

2. PROSPECTING

There’s a lot of money to be made in real estate. But only if you have enough leads in
your pipeline. Many people rely on realtors to buy or sell their home. In fact, according
to the 2019 Profile of Home Buyers and Sellers from the National Association of
Realtors, 89% of all home purchases in 2019 were completed through a broker or
realtor.

Even more impressive, 68% of buyers only interviewed a single real estate agent
before signing them up to help with their search. And 90% of them would use the
same realtor again for future real estate endeavors. If you can capture new leads and
convert them into clients, there’s a good chance they will become a long-term
customer for your agency.

Real estate prospecting takes a great deal of creative effort and discipline. Besides
standard operating procedures, like networking and door knocking, you must also get
inventive when generating leads into your funnel.

Creative social media campaigns, getting involved in your community and content
marketing are a few ways you can improve your real estate prospecting game for
better results. We’ll discuss those in more detail later on.

But first, to get real estate leads for new agents and seasoned experts, you have to
have a solid prospecting plan.9

9
https://www.pipedrive.com/en/blog/real-estate-prospecting

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3. PRESENTATION TO THE BUYER

The broker should thoroughly interview the buyer to determine what he wants or
needs, his capacity to pay, and current situation. As a broker, he should show his
expertise and his skills as consultant.

Buyers, through the skill of a broker, should be able to convey the needs as to property
area they are interested in. Their current situation such as children, requirement for
playground, etc.

In presenting the property to the buyer, the broker should be ready to discuss the
following:
1. Description of property. It is better to have a map, artist perspective, pictures
(professionally taken) etc.
2. Location
3. Neighborhood
4. Lot plan
5. Vicinity map
6. Copies of the Transfer Certificates of Title (TCT), condominium certificates of
title, tax declaration and other special circumstances like easement,
encumbrance, if any, among other things.

The broker should do his research and plan for the presentation with the client. Things
that the broker should prepare for:
a. Property details
b. Identification of the property such as location, street, house number, address,
lot and/or block number, title number

Before travel or tripping is made specific information about the buyer’s needs, subject
property and possible documentary requirements should come handy with the broker.
The internet is a handy tool nowadays to present property to buyers. Put up virtual
tour although the most common presentation is still the old school actual property
presentation.

A broker is in business; thus, all its aspects need to be efficient. Time is the broker’s
biggest asset, so he must schedule group showings for the most efficient use of his
time. Time of day, traffic patterns, and other logistical concerns should enter into the
plan.

The broker should be ready to answer the following questions:

1. Financing such as in-house, bank or HDMF
2. Down payment

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 3. Monthly amortization
4. Loan values in accordance with income or collateral
5. Expenses of sale and which ones will be on the account of the buyer and the
seller
6. Documents (TCTs, Deeds, Tax Declarations, receipts of payment of updated
real estate taxes, etc)
7. Income stream opportunity for those looking at it as investment 8. Personal
insight on location and accessibility such as public transportation, proximity to
public road, utilities and amenities 9. Neighborhood
10. Security
11. Zoning classification, photographs of property, plan, map, etc.

4. PROPERTY SHOWING OR TRIPPING

It also known as “demonstration.” It involves the actual showing to the interested

buyers of the subject property.

In a project development, this is organized to be held on a certain date and time. The
person in charge arranges for vehicle that will take prospective buyers to the site

A broker should have a firm grasp of the buyer’s requirements. He should make sure
that the particular property that the prospective buyers are interested in are still
available in the market and at the price initially made known to them. Otherwise, it
will put the broker in embarrassing situation and his credibility may be tainted.

Tips:
1. The broker should know the location to avoid getting lost. Buyers expect the
broker to know the area since he is viewed as the expert on the property that
he offers to sell.
2. He should have all the necessary documents, floor plans, survey plans, maps,
photographs, titles, records, elevation, topography, traffic situation, best route
to get there, accessibility to public transport, among others.
3. It is suggested that at this stage, it is better for the broker to act as a consultant
than as a seller. This way he would be on a mindset to help the prospective
buyers which the latter badly need.
4. The broker should consider basic security measures such as having a bit of
background about the persons interested in the property. He needs to have a
record of their personal information like name, address, contract number,
reasons for interest in the property, among other things.
5. He should perform the tripping during daytime only as much as possible for
safety reasons.

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 6. He should never leave the prospective buyer unattended in the property.
7. He should not bring personal effects that might attract unwanted attention like
expensive jewelry, excessive amounts of cash and other personal items. It is
worth to realize that some of these individuals are probably not known to the
broker that much.
8. The broker must anticipate objections and have ready answer for them.
9. He should coordinate with owner on the date and time the interested buyers
will be brought to the property.

5. NEGOTIATION PROCESS
• involves the back-and-forth efforts of both parties to arrive at the perceived
mutually acceptable and beneficial terms for each one.
• Parties negotiate on the price, terms, down payment, conditions (evictions of
squatters, etc.) expenses for tax and execution, delivery of property, insurance
premiums, utilities, among others.
• At this stage, other concerns may arise such as potential income of the property,
appreciation value, improvement, inclusions such as furniture, fixtures, etc.

6. SEALING THE DEAL/CLOSING

• It could involve several stages like persuasion, acceptance, drafting of
agreements and contract signing and payment.
• In some cases, earnest money is also given.
• Whenever earnest money is given in a contract of sale, it shall be considered as
part of the price and as proof of the perfection of the contract. Article 1482 of
the Civil Code mentions contract of sale and not contract to sell.
• If the earnest money is given in a contract to sell, then it is not considered part
of the purchase price.

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RELATED BROKERAGE CONCEPTS:

1. Earnest Money vs. Option Money

Earnest money Option money

Part of the purchase price Money given as a distinct consideration
for an option contract
Given only when there is already a sale Applies to a sale not yet perfected
The buyer is bound to pay the balance When the would-be buyer gives option
money, he is not required to buy, but
may even forfeit it depending on the
terms of the option.

2. Project Selling

• Involves in-house agents and/or accredited brokers

• The in-house agents receive no salary or allowance. They are given sales quota
although in the absence of an employer-employee relationship. As industry
practice, they are given free office facilities and are bound by a contract of
agency.
• The work of in-house agents is to sell, secure reservation, down payment or the
full payment. Violation of the agency contract may amount to forfeiture of
commission receivables depending on the parties’ stipulations.
• Usually, agent’s commission is paid upon payment in full of the entire down
payment or what is known as “paid-up sale.”
• The broker in the in-house arrangement receives no salary as well or allowance
from the developer. He enjoys a higher commission of at least 5% as compared
to in-house agents. If the exclusive brokerage is made, commission could be as
high as 10%.
• The broker in a project selling maintains no employer-employee relationship
although an employment arrangement may be made by the parties in
accordance with RESA. The broker may be allowed to sell the projects of other
developers. The documentation and registration processes are responsibilities
of the developer in the arrangement

3. Escrow

• A written instrument which by its terms imports a legal obligation and which is
deposited by the grantor, promisor, or obligor, or his agent with a stranger or
third party, to be kept by the depositary until the performance of a condition
or the happening of a certain event, and then to be delivered over to the

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 grantee, promise or oblige.
• Escrow service is an important part of closing the real estate deal. It eliminates
certain tasks from the broker. Although not a mandatory requirement in
Philippine real estate setting, it may be resorted to for brokers who want to
eliminate extra work.
• An escrow is a neutral or a third party engaged to assure the transaction will
close within the manner and time expected by the broker and/or the parties.
• With the escrow concept, things like receiving payments, signing of deeds,
processing of documents for loans, mortgage etc. may be passed to another
party. Also, ensuring that there is clean title, delivery of proof of copy thereof,
etc., may be the responsibility of an escrow party.

4. General Brokerage

• In this setup, the brokers have more experience that the in-house agents of
developers considering varied situations they have been through as they cover
almost every aspect of the sale.
• In general brokerage, the broker can engage in a selling or leasing activity. He
can get commission ranging from 3% to 5% under a percentage listing
arrangement which is given upon full payment of the price.
• The general broker maintains his own office and he does the entire
documentation and registration for the buyer and seller.

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