real brokerage services encyclopedia.pptx3

21
Real Estate Brokerage Services Encyclopedia.

Upload: reddvise

Post on 12-Feb-2017

446 views

Category:

Education


2 download

TRANSCRIPT

Page 1: Real brokerage services encyclopedia.pptx3

Real Estate Brokerage Services Encyclopedia.

Page 2: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Real Brokerage Services Encyclopedia.

One of the most complex and significant financial events in peoples‟ lives is the purchase or sale of a home or investment property. Because of this complexity and significance, people typically seek the help of real estate brokers and sales agents when buying or selling real estate.

Page 3: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Besides making sales, agents must have properties to sell. Consequently, they spend a significant amount of time obtaining listings—agreements by owners to place properties for sale with the firm. When listing a property for sale, agents and brokers compare the listed property with similar properties that recently sold, in order to determine a competitive market price for the property. Once the property is sold, both the agent who sold it and the agent who obtained the listing receive a portion of the commission.

Page 4: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Personality Traits and Qualification Required to become an Agent

Any one can become a broker. It is easy for any one to enter the field as there are no specific qualifications needed for becoming a broker. This aspect makes it a highly competitive field. Personality traits are equally as important as one's academic background. Brokers look for applicants who possess a pleasant personality, are honest, and present a neat appearance. Maturity, good judgment, trustworthiness, and enthusiasm for the job are required in order to encourage prospective customers in this highly competitive field. Agents should be well organized, be detail oriented, and have a good memory for names, faces, and business particulars.

Page 5: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

An Agent’s Income

Commissions on sales are the main source of earnings of real estate agents and brokers. The rate of commission varies according to whatever the agent and broker agree on, the type of property, and its value. Commissions may be divided among several agents and brokers. When the property is sold, the broker or agent who obtained the listing usually shares the commission with the broker or agent who made the sale and with the firm that employs each of them. Let us see how much an agent is actually paid. The standard practice, or an unwritten rule, is 2% of the entire transaction amount. However, larger deals are more likely to be settled at less than 2%. Unfortunately, there is no definition of what constitutes a „large‟ deal.

Page 6: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Contract between a Broker and a ClientClient should be asked to discuss and sign a „contract‟ with the broker. This contract includes the terms of sale for the property, (such as the asking price), brokerage arrangements (such as what the broker will do for the client and how much will be paid to the broker), and the expiration date of the contract. It should be

made sure that the services and terms that are important are written into the contract. It should necessarily contain a clause that if a property is introduced by a broker to the client, even if the buyer

and seller get in a direct deal afterwards, will fetch commission to

the broker. This will safeguard the interests of the brokers‟ in case

either of the parties wants to by-pass the broker later on.

Page 7: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

3.2 Service Tax on Real Estate Agent Services

Section 65 (105)(v) of the Finance Act, 1994 includes the services provided or to be provided by a real estate agent in relation to real estate in the ambit of taxable services. These services are taxable from October 16, 1998. This section discusses these taxable services in relation to their scope and taxability. The general aspects of service tax discussed in a separate section of this book are applicable. First let us find out who is a real estate agent and real estate consultant and what conditions they need to fulfill to be taxed under the services ambit.

Page 8: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Definition of real estate:- Real estate can be defined to mean land with anything permanently affixed to land. According to the Compact Oxford Dictionary, „real estate‟ means real property and land.

Procedural Requirements Registration requirements :- A real estate agent liable to pay service tax is required to obtain registration in Form ST-1 (form is attached below) within 30 days of the date of commencement of such service. A real estate agent whose aggregate value of taxable service in a financial year exceeds rupees four lakhs is required to obtain registration in Form ST-1 prescribed within 30 days from the date on which aggregate value of taxable services in the financial year exceeds Rs 4 lakh.

Page 9: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

3.3 Real Estate Agent Agreements• An Agent's agreements can be for the following reasons:

1. When a prospective buyer approaches an agent with an intention of purchasing a property (Please check “agreement between a broker and a prospective purchaser” for the draft agreement). 2. When seller or owner of a property approaches the broker to sell his property (Please check “agreement for appointment of a broker sell a house” for the draft agreement). 3. When the builder of an apartment approaches a broker for selling the flats that are being constructed (Please check “agreement between a builder and a broker for selling the flats to be constructed” for the draft agreement).

Page 10: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

• Agreement for Appointment of a Broker for Selling a House THIS AGREEMENT made at ______ on this ______ day of ______ 2000 between A S/o. B resident of ______ hereinafter called the owner‟ (which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include his heirs, legal representatives, executors and administrators) of the ONE PART and C S/o D resident of ______ hereinafter called „the broker‟ (which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include his heirs, legal representatives, executors and administrators) of the OTHER PART.

Page 11: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

• Agreement between Builder and a Broker

For Selling the Flats to be Constructed THIS AGREEMENT made at ______ on this ______ day of ______2000, between ABC Construction Co. Ltd., a company incorporated under the Companies Act, 1956 and having its registered office at ______ hereinafter called „the Builder‟ (which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include its successors and assigns) of the ONE PART; and Shri XYZ son of Late Shari ______ resident of ______ hereinafter called „the Broker‟ (which expression shall, unless it be repugnant to the context or meaning thereof, be deemed to mean and include his heirs, legal representatives, executors and administrators) of the OTHER PART

Page 12: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

• NOW THIS AGREEMENT WITNESSES AS FOLLOWS: 1. The builder appoints the broker for selling the flats being constructed by him, more particularly described in the Schedule hereunder written at the price and on the terms and conditions laid down in Annexure 1 to this agreement 2. The broker will be entitled to the commission at the rate of 5 percent on the cost of the flats booked by him. 3. The builder hereby represents and warrants that he is having clear and marketable title to the flats, free from any encumbrance, charge, lien, mortgage or attachment. The builder also represents and warrants that the material used in the flats is of best quality.

Page 13: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

3.4 Accounting for Brokerage

• Brokerage commissions In consideration of the brokerage successfully finding a satisfactory buyer for the property, a broker anticipates receiving a fee for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the real estate for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller. Commissions are usually negotiable between seller and broker. The commission could also be paid as flat fee or some combination of flat fee and percentage, particularly in the case of lower-priced properties.

Page 14: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Accounting method When an agent does earn a commission, it often comes several

months after he has expended his time and money with no guarantee of closing the sale. Realtors drill a lot of dry wells. The brokers can account for the commission and other charges using Accounting Standard 9—Revenue Recognition which states In a transaction involving the rendering of services, performanceshould be measured either under the completed service contract method or under the proportionate completion method, whichever relates the revenue to the work accomplished. Such performance should be regarded as being achieved when no significant uncertainty exists regarding the amount of the consideration that will be derived from rendering the service.

Page 15: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Under the Income Tax Act, the following are the three main modes of collecting taxes: 1. Payment by deduction of tax at source. 2. Direct payment of tax: (a) Advance payment of tax, (b) Payment as a result of self-assessment under Section 140A, (c) Payment as a result of regular assessment under Section 143 or Section 144, (d) Payment in any other special manner. 3. Collection of Income Tax. Payment by deduction of tax at source or by advance payment of tax are mentioned under Section 190. The levy of tax by direct payment is provided by Section 191 only when the tax is not deductible at source and where the tax has not in fact been deducted at source in accordance with the provisions of the Act.

3.5 TDS on Brokerage

Page 16: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

TDS on Commission or Brokerage—New Section 194H The Finance Act, 2001 inserted a new Section 194H from 1 June 2001. Under this section, the person responsible (not being an individual or a HUF) for paying any income by way of commission or brokerage for services rendered (not being professional

services) or any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing (not being securities), shall deduct income-tax thereon

at the rate of ten pen cent. However, no such deduction will be

made where the amount of payment or the aggregate amount of payments, in a financial year, does not exceed two thousand five hundred rupees.

Page 17: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

The Government's efforts to improve tax collections through tax deduction at source (TDS) are increasing by the day, and the scope for TDS expanding by the year. There's good reason for that: TDS is the best medium of collecting tax without much of a hassle, since the responsibility to deduct tax is not on the government, but on citizen-payers. What's more, the government doesn't even have to pay any remuneration to these „involuntary volunteers‟ who deduct tax at source. It is, therefore, not surprising that the tax department accords a lot of importance to TDS as a source of generating revenue and to administering the TDS provisions more vigorously.

Page 18: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

TDS provisions

The provisions under which specified individuals and HUFs are liable to deduct tax at source are: Section 194H. For commission or brokerage (apart from brokerage on securities) in excess of Rs 2,500 per person per year at 5.25 per cent. The rates that have been specified are the prescribed rates of income tax for TDS and include surcharge at the rate of 5 per cent. In addition, the specified individuals and HUFs are obligated to deduct tax under Section 192 in respect of salaries paid to employees and payments to Non-residents under Section 195. Importantly, the specified individuals and HUFs are liable in the case of payments to sub-contractors only where they are contractors themselves.

Page 19: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

TDS obligations TAN number. Every person who is liable to deduct tax at source (educators) will have to get a TAN Number by making an application using Form 49B within the prescribed time, failing which there is a penalty. Tax deduction: The detector has to deduct tax at source in accordance with the specified provisions at the prescribed rates at the time of credit of the sums of money liable for deduction or at the time of payment of these sums, whichever is earlier. Tax payment: The detector has to pay the tax that has been deducted during a month by the 7th of the following month. Failure to pay TDS by the due date will attract interest at 1.25 per cent per month for the period of delay.

Page 20: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Forms of TDS With the simplification reforms in TDS Returns, there is only one form i.e., Form No. 26Q that needs to be submitted quarterly for all the incomes be it, interest income, commission, rental income or technical fees or payments to sub-contractors.

Taxpayer’s privilegeA person whose income/receipts are subject to TDS can apply to the TDS Officer and get a certificate for lower deduction of tax at source in case of salaries, interest on securities, dividend, interest other than „interest on securities‟, insurance commission, commission or brokerage, rent, income from units, payment of compensation on acquisition of a capital asset, and payments to non-residents. The application has to be made in the prescribed form in response to which the „Certificate of lower TDS‟ will be issued by the TDS Officer.

Page 21: Real brokerage services encyclopedia.pptx3

Trainings by Vidya Bhagwat

Thank You