5 Steps to Starting a Real Estate Business

5 Steps to Starting a Real Estate Business

In a previous post, we examined 10 steps to starting a business.

In this post, we will be focusing on 5 additional steps that are necessary to the starting of a real estate business.

The information contained in this article is intended for general reference only. In any instance where there is a discrepancy between this article and the language in the Act or Rules, the Act or Rules govern.

 

The real estate business in Illinois is regulated by the Illinois Department of Financial and Professional Regulation (IDFPR) and a license is required to engage in what the Department defines as licensed activities. 

 

Step 1 – Determine the type or types of licenses required

 

A person needs a real estate license if they provide assistance which is in any way intended to result in the sale or lease of real estate. The definition of the word “broker” under the Act provides 11 examples of the type of assistance that require a real estate license.

 

In general, a license is required when the assistance is provided for another and for compensation.

 

IDFPR issues three kinds of “business entity” licenses: real estate broker corporation, partnership licenses and limited liability company licenses.   Note that the business must be properly registered with the Illinois Secretary of State before an application for licensing is filed with the IDFPR. The procedures for filing an application for business entity licenses are found in Section 5-15 of the Act and in 1450.140 of the Rule.

 

Management:  Any officer of a broker corporation, manager of a limited liability company, and general partner of a partnership, who are involved in any way with the brokerage activities of the business, must have a broker or managing broker license.

 

A managing broker may also operate a real estate business as a sole proprietor. A sole proprietor business does not require a license from the IDFPR. However, a sole proprietor broker must maintain an “office” and must comply with all other applicable provisions of the Act and Rules.

 

The main office and any branch offices of a corporation, partnership or LLC, must be licensed.

 

The main office of a sole proprietor does not need a license, but any branch office must be licensed.

 

Step 2 – Determine or Appoint a Managing Broker

·         Every real estate office must have a managing broker of record.

·         The managing broker does not need to be an owner of the business.

·         The managing broker is responsible for the supervision of all licensed activities performed by the office.

 

Step 3 – Prepare the Contracts and Agreements Required for the Operation of the Business

·         If corporation, LLC or partnership, required employment agreements

·         If corporation, LLC or partnership, written policy

·         Required written disclosures and legal forms

 

Step 4 – Office Set Up

·         Every brokerage business must have an office, or place of doing business.

·         The license of every sponsored licensee must be available in the office.

·         Each office must have a “sign”.

·         The sign must include the name of the sponsoring broker.

·         Registration for an assumed business name is required any time that a real estate business is marketed to the public under a name that is IN ANY WAY different than the name appearing on the sponsoring brokers license.

·         The sign must be outside the office and must be of a size and nature that will be reasonably readable by the public. (A listing on a building directory meets this requirement)

·         Consumers and clients must be welcome in the office.

·         The managing broker must maintain all required records at the office. See Rule 1450.755 for recordkeeping requirements.

·         Other businesses may be operated out of the same office location. However, the real estate business must be physically separated from the other businesses.

·         Establish escrow account if the brokerage firm will hold earnest money or other monies belonging to others.

 

Step 5 – Open the Office.

·         Implement Business and Marketing Plan

·         Hire and Train Employees

·         Operate in an ethical and legal manner  

 

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