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Tag: Code of Ethics

  • Unlocking Success: Why Registering with the BIR is Non-Negotiable for New Real Estate Salespersons

    “The Practitioner shall secure all necessary licenses, permits and authority as may be required by law, ordinance or rules and regulations.”

    – Section 1 (b), Article III, PRBRES Resolution No. 39, Series of 2019

    By Realttorney®

    On the third week of January 2024, I will once again be part of a Real Estate Brokerage Seminar for Entry-Level Salespersons, sponsored by PREVAIL, Inc. We are always looking forward to such an event since it signifies that a lot of illegal practitioners (colorum) desire to become legitimate real estate service practitioners (RESPs).

    Photo by Sora Shimazaki on Pexels.com

    Now, if you are still not registered with the BIR then you must do so to be compliant with the National Internal Revenue Code of 1998, as amended. We also should follow the laws of the Philippines as mandated by the Code of Ethics and Responsibilities promulgated in PRBRES Resolution No. 39, Series of 2019. Hence, BIR registration is a must for all newly accredited real estate salespersons.

    I will quickly outline below, the steps to register with BIR as a self-employed individual (professional):

    STEP 1: Secure and fill up BIR Form 1901 – Application for Registration for Self-Employed and Mixed Income Individuals, Estates/Trusts.

    STEP 2: Submit the same with the following documentary requirements to the RDO having jurisdiction over the place where you hold office – it could be a home office or a commercial office space.

    Documentary Requirements:

    1. Birth certificate (Original and photocopy);
    2. Marriage certificate (Original and photocopy); and
    3. Birth certificate of children (Original and photocopy);

    Other documents for submission, if requested:

    1. Mayor’s Permit (Original and photocopy);
    2. Contract of Lease (if renting);
    3. Title/Tax Declaration & SPA/Affidavit of Consent if the location is not owned by the applicant (if not renting); and
    4. Sketch of location.

    STEP 3: Pay the Annual Registration Fee (P500.00) at the Authorized Agent Banks of the concerned RDO.

    STEP 4: Pay Documentary Stamp Tax (DST) [loose DST / BIR Form 2000 for DST on Contract of Lease, etc.). Present proofs of payment upon submission of the documentary requirements.

    STEP 5: Submit requirements for Authority to Print (ATP) and registration of books of accounts.

    Documentary Requirements:

    1. Accomplished BIR Form 1906;
    2. Job order from the printer;
    3. Final and clear sample of receipt and invoices (machine printed);
    4. Photocopy of Taxpayer Identification Number Card; and
    5. Photocopy of BIR Form 0605 (payment of registration fee).

    Book of Accounts:

    1. Cash Receipts;
    2. Cash Disbursement;
    3. Ledger;
    4. Journal;
    5. Subsidiary Sales Journal; and
    6. Subsidiary Purchase Journal [the last 2 are additional books for VAT Taxpayer].

    STEP 6: Attend the taxpayer’s initial briefing to be conducted by the RDO concerned for new registrants to apprise them of their rights and duties/responsibilities as taxpayers.

    STEP 7: Wait for the RDO to issue the Certificate of Registration (BIR Form 2303) together with the “Ask for Receipt” notice, Authority to Print, and Books of Accounts.

    A more comprehensive discussion of the steps enumerated above including the related revenue issuances promulgated by the BIR and codal references in the National Internal Revenue Code can be found on the BIR website (www.bir.gov.ph).

    A final reminder to all new salespersons and brokers reading this article. The tax code states that “all individuals engaged in trade or business shall accomplish and file the application on or before the commencement of business operation or from the day the first (1st) transaction occurred or within thirty (30) days from the application with the LGU for issuance of Mayor’s Permit/Professional Tax Receipt (PTR), whichever comes earlier.”

    I encourage newly accredited salespersons and newly licensed real estate brokers to register with the BIR as soon as possible. To reiterate, the Code of Ethics and Responsibility mandates all RESPs to register with the BIR. Finally, in 2005, Atty. Alexander L. Lacson published his book “12 Little Things Every Filipino Can Do To Help Our Country.”

    “PAY YOUR TAXES” is the 10th Little Thing he listed. I quote some portions of what he wrote in pages 75 – 80, which resonates the same message today as if it was written 19 years ago:

    “Of the many duties of a citizen under our Constitution, paying taxes is one of the most crucial. Because taxes are the lifeblood of our government, of our nation.

    “It is what we use to buy the basic textbooks for our millions of children in the country, or to build additional classrooms in public schools nationwide…

    “Taxes are what we use to buy the most basic of medicines, often generic and cheap, that our Department of Health officials distribute to 34 million Filipinos nationwide who live below the poverty line.

    “It is what we use to pay all our government employees nationwide – our soldiers, our policemen, our public school teachers, among many others.

    x     x     x

    “Viewed in this light, the taxes that you and I pay are actually not lost or wasted completely. A substantial portion of the taxes we pay is still put to good use. Because there are many public servants – not only a few or some – who still do their jobs properly. There are many of them, these honest and faithful ones, but maybe many of them are just in the rank and file, like you and me.

    “But they are there. Among the silent many who hold the center and keep our government from falling apart. They are the ones who keep our public institutions intact through storms and scandals, notwithstanding the misguided ambitions and corruption of some of their leaders.

    “It is for this reason that we should continue paying our taxes. The good ones in the government are still good reasons for us to continue paying our taxes properly. The challenge for us is just how to increase the number of these good ones in government.

    x     x     x

    “In 2003, P83 Billion was collected from individual income taxes. But 91% of this amount came from salaried workers from the government and private sector, people who have no choice since their income taxes are withheld mandatorily. Only P7 Billion of P83 Billion (or 9%) came from businessmen and professionals like doctors, lawyers, accountants, architects, and dentists, among others.

    x     x     x

    “Can you imagine if our businessmen and professionals pay more income taxes? Or if our government is able to collect 21% this year instead of the 14.1% last year because we all decided to pay 50% more taxes this year? This means that our government will have more funds to perform its duties and obligations to the public.

    x     x     x

    “But we have to pay our taxes properly. Because we all live in the same country. Because this government, whether we like it or not, is our government. Its cost is a burden we must all share. The task of building this nation is a task that we all must share. We all must contribute to building this kind of nation we dream of for ourselves. Each one of us has a role in it. Each one of us has a responsibility to it.”

    We sincerely hope that all newly accredited real estate salespersons will register themselves at the RDO nearest their place of residence. This is one of the keys to a successful career in the real estate service sector. There are no ifs or buts about this.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

  • 7 Steps to Start a Successful Real Estate Brokerage in the Philippines

    “If you want to succeed in real estate, be persistent, be passionate, and never give up.”

    –  Barbara Corcoran, American businesswoman, investor, and television personality

    By Realttorney®

    Are you are licensed real estate broker in the Philippines who is a project seller and wants to go into general brokerage to maximize all the opportunities that the real estate service sector has to offer?

    Are you a private practitioner who belongs to a branded brokerage house but is dying to establish your own real estate brokerage business?

    Finally, are you a graduating student of the Bachelor of Science in Real Estate Management in 2024 and are confident to pass the real estate brokerage examination in April 2024?

    Photo by energepic.com on Pexels.com

    Embarking on the journey to establish a real estate brokerage in the Philippines is a significant endeavor that requires meticulous planning, industry knowledge, and a commitment to ethical conduct. It is a huge endeavor, but rewarding nonetheless.

    These aspiring entrepreneurs in the real estate sector must navigate through various regulatory requirements, market dynamics, and operational challenges to carve a niche in this competitive landscape. This article outlines the essential steps to initiate and grow a successful real estate brokerage in the Philippines, focusing on practical insights and strategic considerations.

    Step 1. Acquire the Necessary Qualifications and Licenses

    All Real Estate Service Practitioners (RESPs) know this as gospel truth. No one can practice the real estate service profession without being licensed or accredited by the Professional Regulatory Board of Real Estate Service (PRBRES) according to the provisions of Rep. Act No. 9646 or the Real Estate Service Act. This means that if you are not yet licensed, then this article may not be for you to read.

    But if you are persistent and you really want to become a licensed real estate broker or an accredited real estate salesperson, then you have to acquire the necessary qualifications. To become an accredited real estate salesperson then you need to undergo a 12-hour real estate training seminar for new-entry salespersons.

    But, please remember that you need to have a minimum of 72 units of college subjects as a minimum qualification to get accredited by PRBRES. Now, if you want to be a real estate broker — because someone told you that the earning capacity is limitless — then you need to obtain a Bachelor’s degree in Real Estate Management under Section 14 (b) of Rep. Act No. 9646.

    After graduating with a degree in Real Estate Management then you need to pass the licensure examination to be conducted by the PRBRES under the supervision of the Professional Regulation Commission (PRC). Familiarize yourself with Republic Act No. 9646 to ensure compliance with regulatory standards.

    Step 2. Develop a Comprehensive Business Plan

    What? Do I need to make a business plan? Yes, of course, if you want to succeed in your latest endeavor. Let me share with you a wonderful quote from Benjamin Franklin. He said, “By failing to plan, you are preparing to fail.” It is also similar to what Winston Churchill said: “He who fails to plan is planning to fail”.

    It does not need to be a complicated business plan. Keep it simple as far as practical. But you have to cover these three critical items that would become the foundation of your entire business plan.

    The first critical item is Market Analysis. Conduct thorough market research to identify target markets, assess competition, and analyze demand-supply dynamics. In my experience, I concentrate only on real estate transactions in the Metro Tagaytay area. I just want to specialize in a particular real estate market where I can operate comfortably. Or in a class of real estate that I can handle with ease, like farmland or raw land.

    The message here is don’t be a jack-of-all-trades and master of none. One cannot effectively service the entire real estate market in the Philippines, covering all 13 or 14 regions. You have to choose your niche, your area of expertise, where you can effectively operate.

    The second critical item is Financial Projections. Prepare detailed financial projections, including startup costs, operating expenses, and revenue forecasts. But, I don’t know how to do this? Do not despair. The greatest source of information regarding this matter is at your fingertips… and it is free. If you like to read, try Google Search. If you like to listen to instructions, try YouTube. Or, call a friend who has done this or has experience in making financial projections.

    The third critical item is Strategic Objectives. Define clear objectives for the incoming year or the current year. Create the mission and vision for your real estate brokerage. Then, outline the unique value proposition for the clients and stakeholders of the brokerage.

    Find a quiet place and time where you can do your planning without interruption from your kids, spouse, or co-workers. My suggestion is to wake up 30 minutes earlier than your usual time of waking up. Use that “extra” time you have to start planning.

    Step 3. Establish a Legal Entity and Compliance Framework

    As licensed real estate brokers, it is a given that we are already registered with the Bureau of Internal Revenue (BIR). As such, if you want to venture on your own, outside the structure of your current brokerage, then we are considered independent contractors. But remember that independent contractors are considered sole proprietors in their business endeavors.

    The critical and most important act for Step 3 is to determine your Business Structure. Decide on the most suitable legal structure for your brokerage, such as a sole proprietorship, partnership, or corporation. Know the tax deductions allowable for each kind of structure, as well as the monthly, quarterly, and annual regulatory compliance with the BIR.

    If the entity you chose is a partnership or a corporation, then you also have to know the different Legal Compliance requirements for your chosen business entity. Ensure adherence to regulatory requirements, including registration with the Securities and Exchange Commission (SEC) and compliance with local government rules and regulations.

    Can you set up a One-Person Corporation to conduct your real estate brokerage? In my opinion, the answer is YES. But it is a separate article where my views on it are fully discussed.

    Step 4. Build a Robust Network and Partnerships

    I have always said in all my lectures that the real estate service sector is a relationship-based endeavor. The more you grow your network, the longer and better your career will be. But, create a high-caliber network composed of licensed real estate service practitioners (RESPs), never with colorum or pseudo practitioners.

    Cultivate relationships with real estate developers, property owners, real estate investors, and other industry experts and stakeholders. Cultivating a relationship is quid pro quo. What value do you bring to the table? What value do you offer to the other party?

    Consider being a part of a Professional Association of your choice. Of course, Section 34, Rep. Act No. 9646 mandates that all real estate service practitioners duly registered with PRBRES shall automatically become members of the accredited and integrated professional organization (AIPO) of real estate service practitioners.

    But apart from joining the AIPO, you may still want to consider joining reputable real estate associations and organizations, such as the Real Estate Brokers Association of the Philippines (REBAP), to enhance credibility and access to resources. Eventually, these current real estate service organizations will transform themselves into specialty real estate organizations to create specialized RESPs.

    If you ask: What areas of specialization are being proposed by PRBRES? At this early stage, here are the three proposed areas: (1) General brokerage, Titling, and Documentation; (2) Residential Project Selling; and (3) Foreclosed Properties. PRBRES said that these are the initial areas that may or may not be expanded.

    Step 5. Invest in Marketing and Branding

    What makes you different from all the other real estate brokers and salespersons working in your area of operation? What sets you apart from the others? Why would a seller or a buyer contact you for assistance in their real estate transaction?

    At this stage of your planning process, you need to embrace the wisdom of having a Brand Identity. Another critical component of your business plan should include developing a compelling brand identity. This includes creating a logo, website, and marketing materials that resonate with your target audience.

    How much Digital Presence do you need? Leverage online platforms, social media, and digital marketing strategies to enhance visibility and attract potential clients. Wow!! Are there a lot of things to consider? Yes, that is why planning on how to best use these strategies and implement them well is paramount.

    These are part of your marketing plan, which is a part of your overall business plan. Why is this a critical part of the plan? It is so because to put these into action, you will spend a little or more than a little financial resource. Hence, you need a plan to know how much to allocate per month to execute these important marketing tools at your disposal.

    Why do all these? As a licensed real estate broker or accredited real estate salesperson, you are considered a professional. And what sets you apart from the colorum or pseudo-practitioners who continue to dominate the market? Aside from your license or accreditation, it is a well-crafted business plan composed of the items we have so far discussed.

    Step 6. Implement Effective Operational Systems

    Now that you have your marketing strategies all planned out, you need to consider what technology you will use to streamline and automate your day-to-day operations. You have to determine how to systematize and manage your listings, site visits or orientations, client follow-ups, and transaction facilitation. There are a number and advanced real estate software and technology solutions that you (as a professional) can adopt. But, of course, this has a cost. So it is important to list this as a necessary cost of your operations.

    Team Development: Have you considered creating your own team? Recruit and train your own team of accredited real estate salespersons, ensuring alignment with your brokerage’s values and customer service standards.

    Make a handbook that will explicitly outline the mission and vision of your brokerage, the values of your organization, and the standard of service that will be experienced by your clients and/or customers.

    In the alternative, have you considered forming a super-team with other RESPs? I know of a super-team, who are members of our organization, which decided to form a corporation to synergize their efforts and resources — financial and manpower — that make their earning opportunities and capacities more efficient.

    If two brains are better than one, then probably five brains are far superior to one, correct? So, consider this carefully. It does not hurt if you find like-minded professionals who are aligned with your goals and values. This creates leverage that benefits the entire group in the end.

    Step 7. Prioritize Ethical Conduct and Professionalism

    The final step is to remind yourself that money is not the end-all and be-all of our profession. In a previous article, I argued that INTEGRITY is the most important personal quality a licensed real estate broker needs to be successful in the real estate service sector.

    Hence, it is the same thing when you want to start your own real estate brokerage. Keep your eye on our Code of Ethics. All RESPs should uphold the highest standards of ethical conduct, adhering to the Code of Ethics for Real Estate Service Practitioners to build trust and credibility. This is non-negotiable. Our long-term success is dependent on the reputation we build as a real estate service professional.

    Client-Centric Approach: We should keep in mind the needs of our clients before our own. Of course, there are exceptions to the rule, like difficult or obnoxious clients. But we should always prioritize client satisfaction, transparency, and integrity in all interactions, so we can foster long-term relationships and secure referrals for future opportunities.

    Conclusion

    Embarking on the entrepreneurial journey to establish a real estate brokerage in the Philippines requires a strategic approach, an unwavering commitment to ethical conduct, and a deep understanding of the industry landscape. By following these essential steps and continuously adapting to market trends and regulatory changes, aspiring real estate brokers can lay a solid foundation for success, driving growth, and making a meaningful impact in the dynamic Philippine real estate market.

    By adhering to the principles of integrity, professionalism, and client-centric service, real estate brokerages can navigate challenges, capitalize on opportunities, and build a reputation as trusted advisors and industry leaders.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

  • Mastering the Balancing Act: A Guide to Part-Time Real Estate Brokerage Success in the Philippines

    “The effort to work a small deal versus the bigger one is about the same. Focus your mindset on fewer, bigger, and better deals.”

    – Atty. Ernesto C. Perez II, CTEPTM Real Estate Attorney & Licensed Real Estate Broker

    By Realttorney®

    I was an attorney first then a licensed real estate broker second. In terms of the practice in real estate service, I am more well-versed in the documentation side of the real estate transaction. My wife, who is also a licensed real estate broker, is the one who has experienced closing real estate sales transactions.

    It is safe to say that my wife and I are part-time real estate brokers. Why? Because real estate brokerage is not our main source of income. Unlike the hundreds of licensed real estate brokers who actively practice the profession as their bread-and-butter income source. They are the backbone of this industry. Kudos to them.

    Photo by Thirdman on Pexels.com

    And, in the dynamic landscape of the Philippine real estate industry, the role of a licensed real estate broker is pivotal. However, many licensed professionals find themselves constrained by the commitments of a full-time job in another field.

    Balancing two professions is undeniably challenging but not insurmountable. This article aims to provide insightful pointers on how a licensed real estate broker can successfully work part-time in the Philippines, especially when juggling a full-time role in another profession.

    Before delving into strategies, it’s imperative to address the regulatory framework governing real estate brokerage in the Philippines. If one wishes to be a part-time real estate broker in the Philippines, he or she should have an unexpired license. Hence, if your license is expired, then you cannot legally practice your part-time profession.

    Even as a part-time real estate broker, adherence to ethical standards and regulatory compliance should never be compromised. Maintaining a deep understanding of the Real Estate Service Act (RESA) of 2009 and Resolution No. 39, Series of 2019 (Code of Ethics) ensures that brokers operate within legal parameters, thereby safeguarding their reputation and their level of professionalism.

    Here are 5 important insights that will guide a part-time real estate broker to be successful in his or her second or third chosen profession.

    Time Management and Prioritization

    Effective time management is the linchpin of part-time real estate brokerage if success is the goal. Given that you have a full-time commitment to another profession, delineating clear boundaries and allocating specific hours for real estate activities is essential.

    1. Set Clear Boundaries: Designate certain days or hours exclusively for real estate tasks. One or two days a week would be ideal. And, two to three hours a week could provide enough spark to keep your interest in this profession.

    2. Leverage Technology: Utilize scheduling tools (Google or Apple Calendar), and communication platforms to streamline and automate your processes. Create systems that will assist you in getting your tasks done at the least amount of time necessary. There are various productivity and note-taking web applications to help you plan and organize your activities under a single platform.

    3. Delegate When Necessary: Consider hiring or partnering with assistants for tasks that don’t require your direct involvement. If you have a personal assistant, who works with you on your full-time profession then it is best that you inform him or her of the “extra” work that he or she will perform for you as a licensed real estate broker. The best practice is if you close a transaction then your assistant gets rewarded for the valuable assistance extended to you.

    Niche Specialization

    One of the most effective strategies for part-time brokers is to specialize in a particular niche within the real estate market. The Professional Regulatory Board for Real Estate Service (PRBRES) has announced that they are encouraging all licensed real estate brokers to specialize in three major areas.

    First, is General Brokerage, Titling, and Documentation. Second, is Residential Project Selling. And lastly, Foreclosed Properties. Despite these three areas of specialization, there are still several niches that you can focus your attention on. These could range from residential properties in specific locations to commercial real estate or even niche markets like farm lot developments and agricultural real estate, industrial development projects, or memorial lot projects.

    Never be a jack of all trades and be a master of none. Pick a niche to specialize in. Specializing allows you to:

    1. Build Expertise: Deep dive into market trends, pricing strategies, and client preferences within your chosen niche. Your expertise will allow you to do fewer, better but bigger valued deals. Be the go-to broker in your chosen field of specialization.

    2. Network Efficiently: Focus your networking efforts on industry events, seminars, and groups relevant to your specialization. It makes sense to focus your time and energy on a particular segment of the real estate industry. If you focus enough time and effort on a particular segment then you will be recognized as a thought leader for that chosen segment of yours.

    3. Maximize ROI: With targeted marketing and a specialized client base, you can achieve higher returns on your time and investment. If you will not be able to focus 100% on real estate, then if you do work on a deal make it worth your while.

    Collaborative and Synergistic Partnerships

    Collaboration can be a game-changer for part-time real estate brokers. By forging strategic partnerships with full-time brokers or real estate agencies, you can tap into their resources, listings, and client base. Just make sure that the partnership you are entering into is synergistic for both parties involved. It must be the right fit.

    This can be done through the following:

    1. Referral Agreements: Establish referral agreements where you can refer clients to other brokers in exchange for a commission split or a referral fee. There is no hard-and-fast rule about this. Just make sure that when you request for a commission split then you will contribute more effort to the transaction than just merely referring a prospective buyer or seller outside your chosen niche.

    2. Team Up for Listings: Partner with other brokers to co-list properties, thereby expanding your reach without overextending yourself. We suggest that the real properties that will be co-listed belong to the category of your chosen niche but outside your area of operation. As a part-time real estate broker it is best to concentrate on a specific area of operation or concern like the CALABARZON area, or different regions in the Philippines.

    3. Shared Resources: Utilize shared office spaces, administrative support, and marketing resources to enhance your part-time operations. This is how you create leverage in your part-time profession. But be smart about this. Study sharing resources assiduously. If not, this can be a drain on your financial resources.

    Continuous Learning and Professional Development

    The real estate landscape is ever-evolving, influenced by economic factors, regulatory changes, and technological advancements. As a part-time real estate broker, investing in continuous learning is non-negotiable. Moreover, our Code of Ethics requires us to be life-long learners.

    As part-timers, you should commit to the following:

    1. Attend Seminars and Workshops: Stay abreast of industry trends, legal updates, and best practices by attending PRC-accredited continuing professional development (CPD) seminars.

    2. Engage in Online Courses: Leverage online platforms offering courses on real estate brokerage, property valuation, and market analysis, even though they are not accredited CPD seminars. There are a few experts in real estate who are not accredited by the PRC to teach real estate topics. But this should not stop you from enrolling in said courses to increase your knowledge base.

    3. Join Professional Organizations: Become a member of reputable real estate organizations like the Real Estate Brokers Association of the Philippines (REBAP) to access resources, networking opportunities, and mentorship programs of some chapters like the REBAP Metro Tagaytay Chapter.

    Marketing and Branding

    Finally, building a robust personal brand is crucial for part-time brokers to establish credibility and attract clients. But this matter goes hand in hand with effective time management and prioritization of activities.

    The part-time real estate broker must first and foremost have a simple marking plan to set clear goals on how to deploy various marketing strategies available with the help of the latest technology like ChatGPT. Effective marketing strategies include:

    1. Content Marketing: The part-time real estate broker can share insights, market analyses, and tips through his or her blogs, videos, or podcasts. Think about creating a YouTube channel even as a part-timer. This could be a potent avenue for engagement and establishing yourself as a niche player in your segment.

    2. Social Media Presence: Maintain an active presence on professional platforms like LinkedIn, Facebook, Instagram and/or TikTok. For starters, post once a week on all these social media applications. Then when you get a hang of things, you may want to increase the frequency of your posts from 2 to 5 posts three or four times a week. Finally, when your time allows it, you may want to create ads in each social media application to reach more potential clients within your niche.

    3. Client Testimonials: Showcase testimonials from satisfied clients to build trust and credibility. Even as a part-time real estate broker, this strategy will work because it gives social validation on what type of professional you are to work with and the level of service you provide.

    In conclusion, navigating the realm of part-time real estate brokerage in the Philippines necessitates a strategic approach encompassing time management skills, niche specialization, collaborative partnerships, continuous learning, and effective marketing. By implementing these pointers, licensed real estate brokers can not only successfully balance a part-time brokerage role with a full-time profession but also thrive in the competitive Philippine real estate landscape.

    Tell me, what is your full-time profession? And is this article a valuable resource for you in the upcoming year? Let us have a conversation.

    ——-

    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.

  • The Most Important Document You Need Before Selling Any Real Estate

    Documents create a paper reality we call proof.

    – Mason Cooley, American literary academic and aphorist

    By Realttorney®

    This is an article that was first published last April 22, 2015, before I lost my domain name in April 2020 at the start of the pandemic. But now it is back. And I am slowly uploading the various articles that were previously published and updating them. The updates are in green font.

    Last January 2015, I got a text message from two colleagues about a similar concern. Both of them were having a problem with the exclusive authority to sell extended to them by their respective owner-sellers.

    MHS was upset that a licensed broker refused to acknowledge her exclusive authority to sell signed by the owner of the property. The buyer of MHS got outbid by a higher purchase price of the buyer of this broker. The other broker said that there was nothing in the law that would dictate how they would share the commission.

    Meanwhile, VB mentioned that she has exclusive authority to sell a property signed by the owner. But she asks what is the arrangement if the owner himself finds a buyer for the property? Her authority does not contain any provision on such an instance.

    The problems of MHS and VB are quite the norm concerning the exclusive authority to sell. However, most licensed real estate brokers in the Philippines overlook or forget to undertake certain steps to protect themselves from unscrupulous owner-sellers and unethical brokers.

    A dutiful real estate broker should always execute a Listing Agreement with the owner-seller before exerting any efforts to market and sell the property. This is the most important document that needs to be secured first and foremost. Numerous licensed real estate brokers forget this very important piece of document that governs the relationship between the licensed real estate broker and the owner-seller.

    I have overlooked this document several times in the past in my eagerness to market, advertise, and put up for sale a particular piece of property. Most often, this happens when the owner-seller is a good friend or a close client of mine.

    But I would say now that no matter what your relationship is with the owner-seller, the number one order of the day for all licensed real estate brokers is to draft a Listing Agreement and have it signed by the owner-seller. This becomes especially important when the owner-seller is a stranger to the broker.

    A Listing Agreement is a binding legal document executed by and between the owner-seller and the licensed real estate broker that governs the relations of the parties regarding the marketing and sale, lease, or mortgage of a property and the professional fees due to the latter when there has been a successful consummation of the transaction.

    It is a contract whereby there is a meeting of the minds between the owner-seller and the real estate broker, and the former binds himself or herself to pay the agreed-upon professional fee while the latter renders the service enumerated in the agreement itself.

    There are several types of Listing Agreements as to exclusivity. The first is open listing or non-exclusive. This type is where the seller lists the property to several or many brokers. This type also allows the owner the right to sell the property himself without paying any professional fees to brokers who have already exerted efforts to market the property and find buyers for it.

    The second is an exclusive agency where the owner-seller agrees to list the property to only one broker during the listing period but reserves the right to sell his/her own property without the obligation to pay a professional fee to the said exclusive broker. During the initial meeting with the owner, the real estate broker must be able to determine if the owner-seller is unwilling to give up the right to sell the property by himself or herself.

    If this is the case, then my advice would be not to take on the task of marketing and selling the real property. Oftentimes, owner-sellers who are unwilling to let the real estate broker perform the services he or she enumerated on the exclusive agency are a control freak. As such, this translates into misunderstandings between seller and broker regarding compensation. 

    Finally, we have the exclusive listing (or exclusive authority to sell) which is the agreement that grants a particular real estate broker the right to sell the property during the listing period and payment of the professional fee is absolutely due to the broker in all instances when the property is sold, even if by the owner himself.

    Unfortunately, there are owner-sellers out there who do not honor their agreements with their licensed real estate brokers. On the other end of the spectrum, you have licensed brokers who likewise do not honor the terms of the exclusive authority to sell, like in the case of MHS.

    Here is a practical and ethical tip. As a buyer’s broker, you should inquire from the seller’s broker what type of agreement he or she has with the owner-seller. And please, ask for a copy for your study and reference. Thereafter, respect the agreement because that is the legal and ethical thing to do. [See Section 2, Article II and Section 4 (a), Article III, Code of Ethics and Responsibilities for Real Estate Service Practitioners – PRBRES Resolution No. 39, Series of 2019]

    But, oftentimes, the owner-seller and the rival brokers take a chance to disregard the exclusive listing simply because the said agreement was not properly explained by the exclusive selling broker to the owner-seller. Hence, real estate broker must be able to fully explain to their clients what type of agreement and the various nuances behind each.

    In the past, I have been approached by a lot of licensed real estate brokers asking if they can sue the owner-seller for reneging on the obligation of the exclusive authority to sell. My advice is always to dissuade that colleague from filing a case against the owner-seller because most often the listing agreement is not airtight or there is no agreement to begin with.

    The Supreme Court has promulgated several cases where exclusive listing agreements and simple contracts have been upheld and owner-sellers have been directed to pay the outstanding professional fees due to the real estate broker.

    But that would be another article for the future. I am also writing a book entitled “The Law & Jurisprudence on Compensation in Real Estate Brokerage in the Philippines” which will be published in the second quarter of 2024. It gives the history of how real estate brokerage began in the 1900s under the American colonization period, what laws regulated the practice from the 1900s to the present, and the right to compensation of licensed real estate brokers. Let me know if you desire to have a copy of the book. Leave a comment. Thank you.

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    Atty. Jojo is a real estate attorney, an estate planning attorney, a licensed real estate broker, and a PRC-accredited Lecturer/ Speaker for Training Programs in Real Estate. He is committed to helping new and veteran real estate service practitioners be well-informed of the latest laws, rules, regulations, and information relevant to the real estate service sector.