The three types of broker-salesperson agreements
QUESTION FROM EMAIL: Rltr. John, what can a salesperson sell and not sell?
ANSWER: It depends on the agreement he entered with his Broker. There are three types of agreements: (1) Employer-Employee Agreement aka EEA, (2) Freelance Independent Contractor Agreement aka FICA, and (3) Joint Supervision Agreement aka JSA.
The JSA is a unique, innovative, copyrighted tripartite agreement that can only be availed if the Salesperson, Broker, and Developer are members of Realter Society. In JSA, the Salesperson pays the Broker P3,000 for annual training, minimum of P12,000 annually for the supervision, plus registration fees in PRC and HLURB -- but the Salesperson gets 100% of the commission. In JSA, the Salesperson sells only and exclusively projects that are carried by the Developer or Bank who signs his JSA booklet. In JSA, the Salesperson has a list of 56 Prospective Buyers (approved by the Broker and Developer) at the beginning of the JSA, the Salesperson will work on his Customer list for the entire year workload, and is paid by the Developer with a PF for each formal Sales Presentation plus Commission. The Salesperson under this JSA scheme is paid a PF for sales presentation because he trained hard through the sales presentation training course of the Developer and becomes an expert on a single project or two -- he can make a sales presentation with all the proper gestures without looking at any script. If the US Military have Navy Seals, the Developer have JSA Salespersons -- the ultimate sales machine who is 100% loyal to the Developer. JSA is a copyrighted agreement and has a warranty against defects. A fourth party, the founder of Realter Society, is the warranty provider, the supreme administrator, dispute judge, consumer rights advocate, and troubleshooter of the JSA.
In FICA, the Salesperson pays the Broker P3,000 PF for annual training, minimum of P12,000 PF annually for the supervision, plus registration fees in PRC and HLURB -- and the Salesperson and Broker makes an internal agreement on the commission sharing scheme. The FICA allows the Salesperson to sell whatever he wants, provided he will facilitate and get the necessary accreditation with the Developer/Bank for the Broker and for himself. Under this scheme, it is up to the Salesperson to negotiate his own agreement with the Developer, Bank, and Broker. A salesperson who wants self-determination, independence, and freedom is advised to choose this scheme -- he can maintain his PRC/HLURB registration and sleep all year without working as long as he pays the supervision professional fee of the Broker. Nevertheless, a Salesperson under this scheme can also seize the opportunity of freedom to maximize the span of his wings, maximize the listings and accreditation, and achieve unlimited income. No Developer would pay Sales Presentation Professional Fee (PF) to a FICA Salesperson. Disputes under this category will be resolved by IPORESP and may escalate to National Labor and to PRC.
Salespersons under EEA are trained by the Broker for free and paid by the Broker with minimum wage and standard government mandated benefits. In the EEA, the Salesperson is limited only to selling properties that the Broker is accredited or authorized to sell, except properties that the Broker have signed a JSA with another Salesperson within the Broker firm. Under this scheme, it is up to the Broker and Salesperson to internally come up with an agreement that will determine who pays the training, supervision, reg fees in PRC and HLURB, and the commission sharing scheme. Aside from doing salesperson job, the salesperson under the EEA scheme works 8 hours a day, so he can be ordered around by the Broker to render multi-task work as secretary, receptionist, book-keeper, documenter, errand, handyman, motorbike driver, lease presenter, cleaner, and even as in-house masseur of the Broker firm. No Developer would pay Sales Presentation Professional Fee (PF) to a EEA Salesperson. Disputes will be resolved in IPORESP, National Labor, and PRC.
BROKER'S SALESPERSON PORTFOLIO
Each Broker can only have a maximum portfolio of 20 Salesperson under the current RA 9646. Not all Brokers and Salespersons are born alike and in the same circumstances - there are those who wants to be a great salesman, those who just wants an employment badge, and those who wants wages. Each Broker will have to consider all factors around him/her and make a business decision on how to allocate his/her 20 Salespersons across the three types of broker-salesperson agreements: (1) Employer-Employee Agreement aka EEA, (2) Freelance Independent Contractor Agreement aka FICA, and (3) Joint Supervision Agreement aka JSA. In terms of Broker's workload, the heaviest is EEA, medium is FICA, and lightest is JSA. There is no promise as to which type will render the highest earning for the Broker; but in terms of risks associated with cost of operating a Broker's office , the safest is the JSA and FICA.
DIRECT PAY AUTHORIZATION FORM (DPAF)
QUESTION: Sir John, RA 9646 Sec 31 says, "No salesperson shall be entitled to receive or demand a fee, commission or compensation of any kind from any person, other than the duly licensed real estate broker who has direct control and supervision over him, for any service rendered or work done by such salesperson in any real estate transaction." My question is, can Salespersons receive commission directly from Developers?
ANSWER: It depends on what type of broker-salesperson agreement is entered into. The important thing is, as long as the Broker must authorize the payment, then it is perfectly legal -- there can be a Direct Pay Authorization Form (DPAF) for that purpose.
DPAF would be an internal form in the Broker firm and the form will specify the following: (1) the citation of the Agency Agreement that is used as legal basis of the compensation, (2) how much should the Developer pay to the Salesperson and how much should be paid to the Broker if there is a sharing scheme, (3) when should the payment be made, (4) the bank account information to where the payment should be made, (5) indication as to the type of tax to be withheld at source to be applied to the Broker firm such as income tax, percentage tax, or VAT, and of course (5) name, license number, PTR#, TIN# and signature of the Broker and Salesperson. By the way, whenever the Developer/Seller pays commission to the Salesperson or Broker, it should always issue a Withholding Tax Certificate; and take note also that persons with income below the taxable income threshold are exempt from income tax.
In JSA, the Salesperson is engaged only to one Developer, and it's rather simple because the Direct Pay Authorization is already incorporated in the JSA.
In FICA, it is complicated because the Salesperson is independent and engaged with several Developer/Seller, hence the Salesperson must have the Broker sign the DPAF each time he expects payment.
In EEA, the Developer can only pay to the Broker firm and never directly to any on its Salesperson employees. The Broker must issue Official Receipt for the payment.
PDAF eliminates the need for Broker to issue Official Receipt. Direct pay from Developer/Seller to the Salesperson is good because it prevents double taxation -- we don't want the Salesperson's compensation unfairly reduced by a two-layer taxation. The principle is, if the Broker authorizes it, then that's the manner the Broker wants the commission paid. If anyone or the BIR would counter my opinion, IPORESP can always have the RA 9646 revised on a rush via urgent Legislative Agenda.
If there is anything else important that I forgot to include in this article, or if you experienced a real estate transaction that is anomalous, scam, fraudulent scheme that you want me to document and expose for others to be warned, or if you want to donate to the war chest of real estate consumer rights advocacy, please feel free to email me at JohnPetalcorin@Gmail.Com. If you want to comment about this article, there is a provision for this purpose that you can find below.
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