REAL ESTATE BROKERAGE AND AGENCY

Real estate brokerage means a single instance of offering, attempting to conduct or

conducting services on behalf of another for compensation, or with the expectation of
receiving compensation, calculated to result in the transfer of an interest in real estate. Real
estate brokerage is one of the most indispensable and constructive area during property
transactions. It has nothing to sell except personal services. Its existence is due solely to the
fact that people need and must have expert assistance in acquiring and in disposing of real
property interests. Because of the moral and ethical responsibility, which the real estate
broker has to the public, he/she must be an educated man and have specialized knowledge in
the performance of his responsibilities.

AGENCY

Agency is simply the relationship between the principal seller or buyer and the real estate
professional. Real estate agents assist sellers (Seller’s Agent) in marketing their property and
selling it for the highest possible price under the best terms. There may be a signed agreement
or in many cases verbal agreement although an agent may not be legally entitled to his
commission unless the agreement is in writing. Real estate agents assist buyers (Buyer’s
Agent) by helping them purchase property for the lowest possible price under the best terms.
Without a signed agreement, agents may assist buyers in the acquisition of property but still
represent the seller and seller’s interests

As a client in a sole agency relationship, the agent is obligated to protect and promote your
interests but specifically your agent owes you the following duties:

 Undivided loyalty: Since the agent is out to protect your interests then he is supposed
to put your interests above his own or any other parties. This means that he has to
avoid conflict of interests and always protect your negotiation position at all times.

 Confidentiality: You as a client, are expected to disclose to the agent by providing all
necessary information regarding or relating to the transaction. The agent on his part
has a duty to keep your confidences and not to disclose them to any other person

Page 1 of 17
 without your permission. Any information that is carelessly disclosed could be used
by another party to your disadvantage. Remember that the duty of confidentiality
continues even after the agency relationship has ended.

 Full disclosure: It is the duty of the agent or his responsibility to give all information
to the client without deciding on his behalf which information is important. What the
agent may think or consider as not important to him may be important to the client
who is taking the final decision. The information therefore, should also be relevant to
the transaction in question because if the relevant information is not availed to the
client, it could influence him into making a decision that he later might regret thus
affecting the transaction. You as an agent could be liable for the damages or losses
incurred by the client. On the other hand, the client is also expected to reveal all the
relevant information including that information that is meant for the third party in the
transaction. Concealing some information makes the client legally liable for damages
incurred during the transaction process.

 Reasonable care and skill: Because ideally an agent is a trained professional with
skills and experience in handling transactions, he is expected to meet the required
standards of exercising reasonable care coupled with competence that any other agent
in his situation would exercise.

 Full accountability: Since the agent does work on behalf of the client, he is expected
to fully account for the money and property that is entrusted to him during the agency
relationship.

 Obedience: The agent owes the client the duty of following the client’s legal or lawful
instructions during the process of the transaction. To be clear on this, the instructions
should be reasonable and within the circumstances of the transaction. However the
agent has a right to refuse to honor or not to follow the instructions on the basis of
being in breach of the contract or the law (illegal). Based on these grounds, he has full
legal rights to terminate the agency relationship.

Page 2 of 17
It might also interest you to know that you as a client or party to the service agreement, owe
the agent responsibilities but obligations are specified or laid out in the written agreement and
include: Just as the agent owes a client a duty or responsibility the client is also expected to
reveal all the relevant information including that information that is meant for the third party
in the transaction. Concealing some information makes the client legally liable for damages
incurred during the transaction process.

There is also what is called Dual Agency. As the name suggests, an agent represents both the
seller and buyer of real estate, both the landlord and tenant, or when a company represents
both parties during a real estate purchase, sale or lease transaction. It is considered by many
to be illegal and a risky practice with possible conflicts of interest because it is impossible to
provide confidentiality and full disclosure to two clients at the same and that the agent
requires careful disclosure to both clients that his ability to represent them aggressively could
change. Take for example; if James (seller) approaches an agent with a property for sell at
UGX.200 million shillings and John (buyer) approaches the same agent wanting the same
property but willing to part with UGX.170mllion. James will want the agent to secure him a
deal of not less than UGX190 million yet the agent is aware that John’s last offer is UGX.170
million. So the agent will be torn apart between convincing James to accept UGX.170
million or let the deal flop. However, Dual agency can be done and the transactions can be
completed successfully. In this case, the agent must clarify to both the buyer and seller that
he/she will execute his/her duties with utmost good faith.

BROKER/AGENT ROLES AND RESPONSIBILIES

Since buying or selling real estate is at most times a complicated transaction, it is a very
important one people usually need to help of real estate broker or agent during such
transaction. Below are some of the roles and responsibilities of real estate brokers or agents
and why the seller or buyer of real estate may need their services.

 Real Estate brokers or agents have lots of knowledge about the real estate market of
the area they represent. The brokers know which neighborhoods will best fit clients’
budgets and needs and have a good idea about sales’ trends.
Page 3 of 17
  Sales agents and brokers also act as negotiators when it comes to price negotiations
between buyers and sellers in order to arrive at a comfortable price.

 They arrange for title search (which is a process of reviewing all recorded transactions
in the public record to figure out if any title defects exist that could affect the clear
transfer of ownership of the real estate).

 A broker will also arrange for meetings between buyers and sellers so that transaction
details can be discussed and agreed on before the new owners take possession of the
house or land.

 A broker can also help to arrange favorable financing from a financial institution for
the potential buyer. This sort of additional help often determines success of a closing
sale.

 They may also be involved in advertising of the properties for sale or lease through
several media (TVs, Radios, Internet, Billboards, and Social Media etc).

 They spend a large amount of time looking for and getting listings and getting
agreements from owners to place their properties for sale with the brokerage
company.

ORGANIZATION AND EQUIPMENT OF THE BROKER’S OFFICE

The overall size of the broker’s office is determined by the character and volume of activities
to be conducted in it. Among the controlling principles to be observed in planning the size
and the layout of the office, especially attention should be given to the following:

a) Adequate working space for all officers and all employees

b) Adequate space for furniture ,equipment and supplies with convenient access to all
items
c) Convenient and comfortable working conditions
d) Furniture and décor designed to inspire the pride of all office personnel and to
generate respect and confidence in clients and customers.

Page 4 of 17
In addition to the providing of adequate workspace for the various members and employees
of the firm, good management of operations is concerned with the layout of functions within
the office. Efficiency of operations is closely related to the flow of work from day to day and
from hour to hour.

The following are some of the components of a real estate broker’s office

The Reception Area

First impressions are important. An individual who steps in the broker’s office for the first
time is either favorably or unfavorably impressed by what he sees and hears. The reception he
gets and the atmosphere in which he receives it will condition his attitude positively or
negatively toward the firm. This first impression is likely to be vivid and be long
remembered. It may tend to arouse respect for and confidence in the firm or it may give rise
to doubts that are difficult to overcome. Ideally, the reception should be a separate room,
large enough to provide room for the receptionist’s desk and chair, a table on which to keep
copies of current newspapers and real estate related magazines, and beautiful waiting chairs.
The receptionist must be neatly and stylishly dressed, attractive in appearance, friendly, and
cheerful. Maps, especially aerial photographic maps of the local city or of sections of the
local city, also add much to the attractiveness of the reception area.

Conference and Closing Room

Many real estate deals involve several individuals and it is necessary to get them together to
discuss and agree upon some of the details of transaction. The closing of a real estate deal
usually requires the presence of several persons; say sellers, buyers and their spouses,
lawyers, company accountants among others. At times, it is difficult to hold such meetings in
the broker’s private office unless it is large enough to contain a conference table and chairs
for all in attendance. Therefore, Conference and closing rooms are alternatives to closing real
estate transactions.

Files

Neither the broker nor any other member of the staff can keep all of real estate transactions,
office matters accurately in mind, hence the need to file all the necessary documentation for
office use. Such will make it possible to quickly review real estate listings, activities and

Page 5 of 17
other office activities. Additionally, files can be made to be a rich depository of data that can
be used in brokerage deals.

The filing equipment may include provisions for:

1. A listing file, with subdivisions

2. A prospect file
3. A map file, with subdivisions
4. An appraisal report file
5. A property brief file
6. A completed deal file
7. Bookkeeping files
8. “For Sale” signs file
9. “Sold” signs file
10. Cross-reference files
11. Stock files for forms of various kinds
12. Newspaper ads

Maps

Every broker’s office should have at all times a substantial supply of maps of various kinds.
Maps can be helpful to the broker in making economic surveys, in highest and best use
studies, in the analysis of the various types of real estate markets, in securing listings at
saleable prices, in presenting properties to prospective purchasers and lessees, and in many
other ways. They include country maps, district maps, zoning maps, aerial maps, street maps,
and estates maps among others.

Cameras

The alert broker will make extensive use of photographs. He should have photographs of
every property he lists for sale, every property he serves as manager, every property he
appraises, and every property on which he seeks to secure a mortgage loan. These
photographs, depending somewhat on the use to which they are to be put, may include front,
rear and side views of improvements; yards and landscaping; street views showing
neighboring properties; interiors; comparable properties that are factors in appraisals or in the

Page 6 of 17
making of sales. One or more high-grade cameras should be available for the taking of such
pictures. At least one member of the firm should be skilled in the use of the cameras, in the
development of the films, and in the printing of pictures.

Signs

There are at least three kinds of signs that the broker will find useful. One of these is the “For
Sale” sign. The sign should have the words “For Sale” in large letters; give the name and
address and phone number of the broker; and may be the words “shown only by
appointment”. If the broker has a special emblem or slogan to identify his firm, it should be
shown on the sign. An-other sign that has good publicity value is the “Sold” sign. This sign
should be placed on properties that the broker has sold and should be left on display for a
limited period of time. The “For sale” sign should be displayed with the prior consent of the
seller, and the “sold” sign should not be displayed without the consent of both seller and
buyer. “Vacancy” and “For Rent” signs are used by managers to let the public know that
the property as a whole or that one or more units in the property are available for rent.

The purpose of all these signs is to attract attention – favorable attention – suggest action, and
publicize the name of the broker. Each sign should bear the broker’s name, his address, his
phone number, and his emblem or slogan, if he has one. They should be clean, new looking,
legible, neat, and use appropriate colors. They should be checked from time tom time to be
sure that they are in place, have not been defaced, and still have an attractive appearance.

An adequate supply of signs should be maintained in the office and kept in a good condition.
To facilitate keeping track of them, they can be numbered and be checked out on requisitions.
A record should be kept of the names of the individuals to whom the signs are issued and the
addresses at which they are displayed. This can be the responsibility of the chief file clerk.

Library

An extremely valuable addition to the office equipment is a library of real estate literature
and reference material. It is good management and executive policy and a good investment to
build up a fairly complete real estate library in the broker’s office. Most alert members of the
firm will own and use personal libraries, but few of these individuals will be able to buy a

Page 7 of 17
complete stock of books or subscribe to all of the letter and bulletin services that are
available.

There are excellent books available on selling, advertising, financing, management,

construction, appraisals, real estate law, and other phases of the real estate business. In
addition, there are several letter and bulletin services that publish significant news items and
new ideas useful in developing deals and in managing brokerage operations. Such
publications cover cost trends, building and sales trends, tax information, general business
trends, and many other matters about which the broker and his staff should be constantly
aware.

Forms

It is difficult to operate a brokerage business without forms. Some of these can be standard
forms that are in general use in the area and that can be procured from a local office supply
agency, or that can be secured by mail from a source outside the local area. Other forms to fit
special needs and conform to the broker’s policies can be developed by him and be
reproduced by a local printer or in his own office by the mimeograph or other suitable
reproduction device. Such forms include, but are by no means limited to:

a) Abstract receipt
b) Closing statement for seller
c) Closing statement for buyer
d) Closing worksheet
e) Direct-mail record card
f) Escrow receipt
g) Expense analysis sheet
h) Listing contract
i) Listing expiration card
j) Listing inspection report
k) New neighbor card
l) New neighbor letter
m) Newspaper advertising record sheet
n) Advertising schedule form
o) Offer to purchase form
Page 8 of 17
 p) Prospect card
q) Sign location card
r) Telephone call slip
s) Management agreement form
t) Salesman’s report form
u) Contract for deed form
v) Report to owner forms
w) Requisition forms.

All forms should be given an identifying number. A list of all available forms should be
reproduction and placed in the hands of all members of the firm. They can be disbursed upon
requisition by the chief file clerk or the librarian.

The Office Manual

It is good management policy, even in small offices, to develop and adopt an office manual.

Office Personnel

The real estate broker has nothing to sell except personal services. Although his/her services
are personal in character, he/she can rarely work alone, hence having a special team that is
intelligent, competent, and loyal. Therefore, the broker’s office should include several
departments with qualified personnel to execute the tasks. The team may include
accountants, receptionist, sales agents, cleaners, personal assistants among others. It is
essential that the new employee must be properly oriented and instructed in the duties to be
performed as per the office policy or manual. Also training of all staff or office personnel is
key in improving work efficiency.

ESTABLISHING A REAL ESTATE BROKERAGE FIRM

a) Name and Address

b) Vision

c) Mission Statement

d) Objectives

Page 9 of 17
 e) Company Values

LISTING CONTRACTS

A listing contract is an agreement between the owner of real property and a real estate broker
or a brokerage firm that requires a broker to attempt to sell the property. If the broker is
successful in finding a buyer, the agreement requires the owner to pay the broker a fee or
commission, which is always calculated of the selling price. For instance (a commission of
5% of the selling price of UGX.200,000,000). On the other hand, if the broker is
unsuccessful in selling the property, the agreement lapses after a specific time and neither
party has any further obligations.

TYPES OF LISTING CONTRACTS

OPEN LISTINGS

The open listing is a contract between a property owner and a broker that gives the broker the
right to market the property. The distinguishing characteristic of the open listing is its lack
of exclusivity. The property owner is not precluded or prohibited from listing the property
with other brokers. Only the broker who gets the buyer is entitled to a commission. If
the owner sells the property him/her self, none of the brokers will be owed a commission.

The property owners are not willing to tie up the property with one broker. The reason is that
a single brokerage firm may not operate in a wide enough geographical area or have
sufficient expertise. So the owner may list the property with several firms in order to obtain a
wider market. This is done because;

a) There is a good chance of selling the property quickly since the property is listed by
many agents

b) The property owner can also sell his/her own property hence saving the commission.

Page 10 of 17
The disadvantages with an open listing are;

a) It’s considered For Sale by Owner, hence the owner also incurs marketing costs and
time.

b) The owner has to negotiate the price him/herself. So, if the owner has no experience
in this, it will be difficult during the transactions

EXCLUSIVE AGENCY LISTING

This type of listing contract requires the sellers to pay a commission to the broker if the
property is sold. The property owners however, retain the right to sell the property without
incurring liability for a commission.

This type of listing is used infrequently since the owner can sell the property and avoid
paying a commission. This listing provides far less protection to the brokers, thus they are
usually less willing to spend time and efforts to market properties listed under the exclusive
agency arrangement.

The advantages of this listing include;

a) Property owners can still sell their own property without paying commission.

b) Property owners only have one contact agent.

The disadvantages of exclusive agency listing are;

a) This listing provides far less protection to the brokers, thus they are usually less
willing to spend time and efforts to market properties listed under the exclusive
agency arrangement.

b) Agents may still insist on an upfront fee or a reduced commission in the property is
sold without their help.

EXCLUSIVE RIGHT OF SALE LISTING

For this contact, the sellers list their property with one broker and agree to pay that broker a
commission if the property is sold within a specific time. Thus the broker will be owed a

Page 11 of 17
commission if any other broker even the owner sells the property during the contract period.
With the exclusive right of sale contract, brokers are more willing to commit their firms to
engage in thorough marketing programs for properties and to spend whatever time is
necessary to sell them. E.g. advertising in public media, (TVs, radio, newspaper), prepare
brochures and photographs etc.

The advantages of exclusive right of sale listing include;

a) There is maximum exposure of the property to the right buyers

b) The agent gives much attention to advertise and promote the property
c) Provides accurate information and accountability
d) The Multiple Listing Service (MLS) accepts only exclusive right of sale listings.
e) It builds a good relationship between the principal and agent.

The disadvantages of exclusive right of sale listing include;

a) It may take some time to get a suitable buyer of the property

b) It is much more expensive to run due to the costs in marketing the property

c) Property owners cannot sell their properties

d) Property owners stay with the same agent until the expiry of the agreement. This can
be frustrating when the property owner is not satisfied with the agent’s performance.

REAL ESTATE COMMISSION

A Real Estate Commission is a percentage of a property's purchase price that is paid to

real estate brokers and agents that facilitated the purchase and sale or lease of a property.

The listing agent (or seller’s agent) and the buyer’s agent and their respective brokers
usually split the total real estate commission after the home or land sale. Homeowners are
typically responsible for paying the real estate commission rate with the money earned
from the property sale, which is often factored into the home’s listing price. In the United
States of America (USA), the commission percentage varies from 5% - 6%. In Uganda,
the commission varies from agent to agent.

WHEN IS THE BROKER ENTITLED TO A COMMISSION

Page 12 of 17
 a) Normally, the broker is entitled to a commission upon the finding a specific buyer
who is ready, willing and able to purchase the property at the price and terms
specified in the listing contract.

b) If the seller refuses to sell upon being presented with an offer meeting the original
terms and conditions, or cannot deliver the property for any reasons due to his or her
fault, the broker is entitled to a full commission, and has grounds for suit.

c) If both the buyer and seller sign a contract but then agree to cancel it, the broker still
is entitled to a commission.

d) If the contract is contingent (dependent on something that may or may not occur)
upon any other condition, then the broker generally is not entitled to a commission
until the condition has been fulfilled.

TERMINATION OF A LISTING CONTRACT

The listing contract terminates under three circumstances. When;

a) The specific period expires,

b) The property is sold,
c) One of the parties abrogates (cancels) the terms of contracts.

The first two are clear while abrogation is difficult to prove. For abrogation; On the owner’s
part, the most clear-cut abrogation would be their unwillingness to sign a sale contact with a
ready, willing and able buyer. This may result into legal action against the owner by both the
buyer and broker. The owner may be legally compelled to pay the broker commission since
the broker has fulfilled his/her part of the contract. In cases where the owners abrogate the
terms of a contract by refusing to show the property or by otherwise discouraging prospective
buyers, the broker usually refuses to make further efforts to sell the property.

The broker may abrogate the terms of the contract by failing to market the property
effectively. The broker may not advertise successfully/sufficiently or make enough efforts to
market the property.

Page 13 of 17
CLOSING A REAL ESTATE SALE

THE SELLING PROCESS

Prospecting: This looks at getting potential buyers/clients for the properties on sale. This is
through several marketing ways like advertising through media, billboards, and promotions
among others.

Preparation: Preparation for the approach involves making decisions concerning effective
ways to make a favorable first impression during the initial contact to secure the prospects
attention and developing interests in the offering.

 Have clear objectives

 Imagine a football game without goal posts! We all know for football to be
enjoyable there must be goal posts and goals

 Sales is much like that as the goals help you to measure your success and
motivate your self

Find out what the market /customers needs, Find an appropriate time and place to talk to your
customer, Identify likely opportunities or obstacles. Make sure you keep time for your
appointment, State the purpose for your call and explain how the prospect would benefit from
that meeting; confirm the appointment with a brief note, e-mail, call etc.

Presentation: Wear the success look. Walk into ones office when you are down and
expecting so much from him is foolhardy. If you expect success you should look it. A super
sales person first brightens up before he ventures into anybody’s territory. Make your
Page 14 of 17
opening remarks by planning in advance what to say. Start with your organization or
someone who seconded you. Politely identify yourself and the company you represent, Show
respect for the prospects time by telling him how long the meeting will take.

Problem Solving: There is no sales person who ever existed without a rejection Objections
are a natural reflex by which a customer wants to make sure he /she has the right offering or
competent sales person in front of him. All objections contain valuable information. Take
rejections as your motivator, equally important, remember that for every rejection, at least
you have made an initial contact.

Tips on handling objection, listen and answer after the prospect has finished talking, do not
appear to be annoyed, keep calm, assess real problem of the customer when answering, agree
with and satisfy customers self esteem, be flexible, do not answer quickly, give clear answers
to the questions (do not be vague), raise counter objections when necessary.

Please Give Me a Sale: You must be sensitive to opportunities to close the sale. There may
be objections but objections should be seen as positive signs that your customer is thinking
about and responding to what you have proposed. Buying signals may include. How about a
price reduction/discount? How will the purchase be financed? These are gestures that indicate
they are in agreement with you (verbal and non verbal indications)

Pen to Paper: This is when a buyer and seller sign contracts/agreement during the property
transfers. It is always advisable for a broker to be a witness in this transfer.

Post Sales: This includes building a relationship with the property buyers after the sale to
find out whether they are comfortably enjoying the property as well as future property
updates.

THE MULTIPLE LISTING SERVICE (MLS)

Access to the MLS is one of the most important services that real estate brokers traditionally
have offered. 1983 traces the evolution of the exchange of home information by brokers,
from the weekly in-person “exchanges” of the Nineteenth Century to the formation of the
modern MLS. The MLS has evolved still further since 1983, reflecting the rapid pace of

Page 15 of 17
technological developments during this period. The following two sections describe the
present-day MLS and discuss its importance to home sellers, buyers, and brokers.

Description of the MLS

The MLS is a local or regional joint venture of real estate brokers, typically operated by a
local group of cooperating brokers who pool and disseminate information on homes available
for sale in their particular geographic areas. The MLS combines its members’ home listings
information into a database, usually in electronic form. The MLS then makes these data
available to all brokers who are members of the MLS. By listing information on a home in
the MLS, a broker can market it to a large set of potential buyers. MLSs are the primary
source of home listings information because they contain real time information on virtually
every home listed for sale in a given area. An MLS is a cooperative venture between real
estate brokers in which brokers share information on their listings with other competing
brokers along with an offer to compensate them in the event they sell the listing.

a) The MLS provides sellers with the advantage of listing with one brokerage firm but
having exposure to all buyers working with other brokers in the community.

b) It benefits buyers because they only need to work with one broker but have access to
the properties listed by all of the other brokers who participate in the MLS.

c) It is a business to business cooperative created by real estate professionals to enable

them to share information relating to properties they list for sale, and to research and
present property-related information to their clients seeking to buy real estate
properties.

d) Members search and filter homes based on detailed criteria, including property and
neighborhood information, offers made on the home, prior sales history, and days on
the market. In addition to the database of currently available homes,

e) An MLS maintains a database of homes sold through the MLS. Brokers can use this
database to provide their clients with information on sales of comparable homes so
that the clients can more accurately value their homes or determine the amount to bid
on a home.

Page 16 of 17
 f) The MLS also operates an arbitration mechanism to resolve compensation disputes
between listing and cooperating brokers. For example, if a cooperating broker secures
a buyer for a transaction and can establish through arbitration that he or she was the
“procuring cause” of the sale, then the listing broker is liable for the cooperative
compensation.

g) Buyers also benefit from the MLS because they can go to a single source (that is, a
single broker) for information regarding the vast majority of homes for sale within a
given area, instead of visiting multiple brokerages to obtain such information.

h) Access to the largest number of potentially appropriate homes for sale allows buyers
to maximize their chances of finding a home that most closely matches their desired
characteristics.

i) MLSs are so important to the operation of real estate markets that, as a practical
matter, any broker who wishes to compete effectively in a market must participate in
the local MLS.

j) As a result, the use of an MLS can substantially reduce transaction costs. The
efficiencies associated with use of an MLS in the real estate industry are well
documented in the real estate, legal, and economic literature and in court decisions.

According to NAR’s 2006 survey of home buyers and sellers, 88 percent of sellers reported
that their home was listed in the MLS.

In Uganda, we have real estate database where many real estate agents and brokers list their
properties (land and buildings for sale or lease). They include:

a) Real Estate Database (RED) https://www.realestatedatabase.net/

b) Association of Real Estate Agents Uganda (AREA-Uganda) MLS

https://www.areauganda.org/Area/Content.aspx?SelectedPageCode=4004

c) Lamudi Uganda https://lamudi.co.ug/

Page 17 of 17