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Broker of Record: What it is, How it Works

Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

What Is a Broker of Record?

In insurance, a broker of record is an agent designated by the policyholder to represent and manage a policyholder's insurance policy. A broker of record may receive copies of all communications to the policyholder and may receive all quotes, policies, and notices on behalf of the policyholder.

Key Takeaways

• A broker of record is an agent who is responsible for managing and representing a policyholder's insurance policy, often receiving a monthly commission from an insurance company for working as such.
• Communication and acting as a liaison for the policyholder are two aspects of this job.
• A broker of record letter is a legal document used to set the relationship between then broker, policyholder, and the insurance company.

How a Broker of Record Works

A broker of record can help an individual or company with, for example, handling the  health insurance policies of its employees. In return, the broker of record may earn a monthly commission from the health insurance company.

Broker of Record Letter

A broker of record letter is used to legally establish the relationship between broker, policyholder, and insurance company. A broker of record letter can be used to designate a broker of record for the first time or to replace an existing broker of record with a new one. If someone changes their broker of record, for example, a letter will be sent to identify the new broker of record.

A broker of record may also obtain and evaluate insurance quotes, policies, and recommend changes to existing policies.

Insurance companies require broker of record letters to identify whom the policyholder has selected to act on their behalf to communicate with the insurance carrier for negotiating rates, plan options, claim assistance, etc. In return, the broker of record generally receives commissions from the insurance company.

A broker of record letter should include specific information, including the name of the group plan and the selected broker, the effective date of the broker designation, and terms in which the broker of record designation can be terminated. Policyholders can also include specific directives regarding communication with the plan and other agencies/brokers.

Broker of Record Letter vs. Letter of Authorization

A letter of authorization is neither as comprehensive nor as powerful as a broker of record letter. It gives the broker the authority to obtain information on insurance contracts, rates, rating schedules surveys, reserves, retentions, policies, certificates, and other financial data. Such a letter may be written to be very specific, such as naming the insurance company from which the broker may obtain information. However, a letter of authorization usually won't include the authority to negotiate on behalf of a policyholder.

The Bottom Line

In summary, a broker of record letter can accomplish the following:

• Terminates the relationship between policyholder and broker.
• Suspends the current broker’s ability to negotiate on the policyholder’s behalf with the insurance company.
• Makes official the appointment of a new broker, giving that broker the sole authority to negotiate with an insurance company.
• Grants access to underwriting information or proposals currently under consideration.
• Allows for a transition period from one broker to another, expressed in a number of days, to allow full disclosure of the letter to all relevant parties. This should allow the former broker a chance to review the implications of the letter with the employer and its desire to change brokers.

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The Broker of Record Letter – The Do’s and Don’ts

The broker of record letter (BOR) in insurance is a tool  insurance agents and brokers utilize to assume the negotiation of your insurance account. Like any legal document, understanding the effects of the wording of the BOR can be challenging for the typical commercial insured.

The BOR letter establishes a legal relationship between your entity, the broker and the insurer or insurers currently providing your insurance coverage. If you’re establishing a new business or a new entity, for example, forming a subsidiary, your agent may ask for a BOR to notify insurers of the agent’s right to determine coverage options and negotiate on your behalf. If you’re moving your business to a new brokerage, the BOR tells the insurers that you are replacing your broker and that your new broker is your broker of record.

What Is the Purpose of the Broker of Record Letter?

The BOR letter accomplishes the following.

• Ends the current relationship between the policyholder and his or her current broker or agent for any carriers listed on the BOR
• Ends any negotiation on behalf of the policyholder by the current agent or broker
• Appoints the new broker and officially notifies that existing broker, through the carrier, of the new broker’s negotiation authority with all listed insurers
• Allows the new broker to access claims and underwriting information on behalf of the policyholder
• Provides a short transition period between brokerages or agencies so that all parties can discuss the transfer, allowing a smooth transition for the policyholder

Insurance agents are familiar with BOR arrangements and generally cooperate with the terms of the letter.

What are the Time Frames for Broker of Record Letters?

Broker of record letters generally occur prior to renewal. In today’s more challenging insurance market with higher rates and higher retentions, many agents want to begin the renewal process three-to-four months prior to renewal.

If you sign a BOR and later change your mind, you can rescind the BOR within a certain time frame. Often that time frame is short – ten days is customary.

Why Do Policyholders Change Brokers?

Policyholders change brokers for many reasons. It’s not a decision undertaken lightly by commercial policyholders, especially those policyholders who manage a large portfolio of commercial real estate properties.

Here are some reasons that a commercial real estate risk manager or commercial property owner may want to change to a new broker.

• Changes to your real estate portfolio
• Seasonal fluctuations that might impact your business income exposures should a loss arise at one of your operations at high season; for example, a resort in Florida hit by a hurricane in peak season
• Loss exposures that the insurer or agent can help you manage, such as a specific cyber risk threat that emerged in your industry
• Claims and their statuses, including reserve amounts
• Your current broker may not have an appointment with your newly preferred carrier. Or your current broker may have lost their appointment with your current carrier. When this occurs, you may not have a choice. You may need a new agent. Often, your current insurer can direct you to another agent, and that agent or broker will ask you to sign a BOR.
• You meet a new broker who can provide more services, such as loss prevention assistance or stronger negotiating expertise.
• Your business and your real estate portfolio have grown to the point where you need a broker, not an agent. Insurance agents represent the insurance companies. Brokers, on the other hand, represent you the policyholder.
• The increasingly competitive insurance market requires that you place your business with surplus lines insurers. In that case, you will need to work with a brokerage with an in-house surplus lines broker licensed to transact with surplus lines carriers.

If you decide to change your agent or broker, a broker of record letter ensures a smoother transition.

What to Watch for When Signing a Broker of Record Letter

Here are a few tips to consider when signing a BOR.

• Watch the wording in the BOR document. If you’re only allowing the new agent or broker to represent you on your property portfolio, don’t sign a BOR with wording that gives the agent or broker access to all your insurance companies or policies. The BOR officially terminates your relationship with your current broker for any companies you’ve authorized the new broker to approach. Your current broker can no longer negotiate on your behalf. Be sure you outline which carriers your new agent or broker can approach on your behalf if you want the new broker to handle only part of your insurance.
• Let your current agent know if you are working with another broker for competing quotes. Some agents who want to quote your renewal will ask for a BOR so they can approach “blocked” insurance markets, which are those markets already approached by your current agent. If you’re going to get competing quotes, let your current agent know. Getting competing quotes isn’t unusual. Also, a call from your current insurance companies telling your current agent that they have a BOR file won’t be a surprise.
• If an agent or broker wrote your account incorrectly, simply signing a BOR will not rectify insurance coverage errors. For example, if your current commercial policy fails to list one of your commercial properties, the BOR process will not fix that omission. Only a thorough review of your account by the new broker will correct any issues on your existing coverage. One danger signal is when the new broker simply renews your policy “as expiring” without doing a coverage review.

The BOR letter is a vital document in the insurance process. Read any BOR language carefully. If in doubt, ask for a more thorough explanation of what you are signing.

Never allow an agent or broker soliciting your business to pressure you into signing something you don’t understand or may later regret. Understand what services they promise that your current agent can’t offer. Often meeting with your current agent can resolve any issues you have with their service or your coverage.

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Business Insurance

What Is a Broker of Record Letter?

October 19, 2022

A broker of record letter (BOR) is one of the most important documents for your company’s economic well-being, but far too few business owners and leaders understand what it is and how it works. Also known as the agent of record letter or agency of record letter (AOR), an insurance broker of record letter may seem like an unimportant formality, but it’s an important document.

What is a BOR or AOR, and what does BOR and AOR mean in insurance? The easy answer is “the company that takes care of insurance for you.” Specifically, that means working with insurance companies to structure and obtain the right insurance coverage (along with providing other risk management strategies) and issuing insurance certificates as needed.

Most commercial insurance companies prefer to work through brokers or agents of record. That’s because they know the brokers understand coverage well and aren’t likely to investigate coverage for a company that wouldn’t be a good match. Because they need to maintain good relationships with brokers, insurance companies won’t allow multiple brokers to submit requests for the same company.

So What Exactly Is a Broker of Record Letter?

Because a BOR insurance letter is usually very short, it may appear to be a very simple document. On one level, it is. Essentially, an insurance BOR informs an insurance company that a particular broker is now managing the insurance coverage for your business and is replacing the broker who had previously been doing that for you.

However, this “simple” document may:

• end your working relationship with your current broker;
• prevent your current broker from working with the insurance company on your behalf;
• allow your new broker to handle conversations and negotiations with insurance companies on your behalf;
• give your new broker access to any proposals or documents that are already being considered; and
• provide a limited number of days in which your company can change its mind and return to the current broker.

It’s normal for your broker to develop a BOR based on its insurance broker of record letter template. You’ll sign the letter and return it to the new broker. Either you or your new broker can send it to your current insurance company. A template is included later in this post.

Things to Consider with an Insurance Broker of Record

It’s easy to think of business insurance as just another expense, but few things are as crucial to the continued health of your business as identifying and addressing potential risks. Whether it’s something like a fire, cyberattack, or unforeseen weather event, many types of risks could put you out of business temporarily or permanently.

That’s why choosing the right insurance BOR is so essential. It’s not just someone who buys insurance policies on your behalf. You need a BOR who acts as a partner to your business, addressing risk management issues beyond insurance policies. For example, an effective BOR may suggest loss prevention strategies such as employee cybersecurity training or a review of safety practices at your locations.

When Should You Sign a Broker of Record Letter?

There are several occasions when it may make sense to sign a BOR letter, whether you develop the letter on your own or use an agent’s broker of record letter template. One occasion is when your current broker provides poor service or is difficult to reach. Other reasons to consider issuing an AOR letter to a new broker include the following:

• You believe your current premiums are too high, and you think a fresh look at the marketplace may result in better rates.
• Your premiums don’t seem to reflect your excellent claim history and risk profile, and your current broker hasn’t taken the initiative to suggest alternative risk financing options.
• You would like to divide your coverage areas among multiple brokers (such as one for property and casualty areas and one for employee benefits), or you would like to consolidate coverages with one broker.
• Your current broker is just an order-taker who doesn’t share insight to address and improve your risk management concerns.

Since insurance companies will not accept requests for quotes for your business through multiple agents, you need to assign the power to represent you to your new broker.

There’s a common misconception that insurers will allow companies to change brokers only at renewal. The reality is that, in most cases, you can make a change anytime you want. If you’re unhappy with your current broker for any reason and want to switch, generally you can issue a BOR whether there are 30 days or 10 months before renewal. If your insurance policies are in force, they’ll continue to provide protection, and the insurer will start working with your new broker of record.

When Shouldn’t You Sign a Broker of Record Letter?

Because a BOR looks like a simple document, it’s easy to forget that it generally confers substantial authority to the broker. Unscrupulous brokers may encourage potential clients to sign a BOR letter so they can obtain quotes for coverage and fail to tell those potential clients that signing the letter can actually fire their current broker and give the new broker control over their insurance.

Have your attorney review the language if you’re unsure whether you should sign a BOR letter. The attorney will be able to explain the potential consequences of signing.

Is It Possible to Rescind a Broker of Record Letter?

Rescinding a broker of record letter is usually easy because a BOR in insurance typically includes a clause in which you can change your mind within five to 10 days. Sometimes a company will become frustrated with its current broker and decide it’s time for an agent of record change. When the original broker realizes they haven’t treated the company as well as they should have, they reach out and promise to do better. That leads the company to reconsider its decision, so they ask the original broker to issue what’s known as a countermanding or rescinding BOR to restore the insurance broker of record to the original agent.

Can I Have Multiple Agents Working on My Behalf?

It is possible to have multiple BOR relationships as long as your BOR letters specify precisely what areas of coverage each BOR is empowered to handle on your behalf. For example, you might have one BOR that handles all your employee benefits coverages and a separate AOR that takes care of property and casualty coverage.

What Happens When You Sign a Broker of Record Letter?

When you sign a BOR letter, the broker may immediately share that letter with the insurance companies with which you have policies. The insurance companies will then reach out to your current broker to let them know you’re making a change, and unless something happens within the five- or 10-day rescindment period, they’ll lose your business. Once that rescindment period ends, the new broker will generally take control of your insurance as directed in the BOR letter.

While there’s no requirement for companies to notify their current broker that they’re issuing a BOR letter, it is a business courtesy to do so. If you’ve maintained a good relationship with your current broker, they’ll appreciate being told of your plans. If you haven’t told your current broker that you want to switch agents, this may be the first they have heard about it, which may create an awkward situation. The current broker may request an opportunity to address your dissatisfaction and restore the working relationship.

Broker of Record Letter Template

What follows is a sample agency of record letter template. If you are asked to sign a BOR/AOR, the letter would be printed on your letterhead and signed by the company official who oversees insurance coverage:

Today’s date

Gigantic Insurance Ltd. 123 Financial Street Metropolis, NY 01234

Policy ID #NUMBER Policy Effective Date

This is formal notification that our company is appointing NAME OF BROKER, with offices at ADDRESS, to serve as our sole broker handling coverage provided by your insurance company, effective immediately.

NAME OF BROKER will replace PREVIOUS BROKER, and we ask you to share any information regarding our policies with them. NAME OF BROKER will handle our needs until we notify you otherwise in writing.

Sincerely, SIGNATURE OFFICIAL’S NAME OFFICIAL’S TITLE

Working with the Right Broker

Since founding our family-owned business over 85 years ago, Hylant has promised to make our clients our top priority. We offer many risk specialty services for your business insurance needs and a full suite of employee benefits services, including health and wellness.

We’re more than an insurance brokerage firm. We view risk holistically, so we’ll work closely with you to develop risk management strategies that align with your short- and long-term goals. Contact our team today to learn how we help organizations like yours reduce risks and protect your assets.

Related Reading: Smarter Strategies for Selecting Your Next Broker

The information above is intended for general informational purposes only. The information does not, and is not intended to, constitute legal advice. You should contact your attorney to obtain advice with respect to any particular legal matter.

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Broker of Record: What It Is and Real-Life Scenarios

Last updated 04/17/2024 by

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What is a broker of record, the key functions of a broker of record.

• Facilitating communication: Brokers of record serve as a bridge between the policyholder and the insurance company .

The significance of a broker of record letter

• Designating a broker of record for the first time.
• Replacing an existing broker of record with a new one.
• Identifying changes in the broker of record.

Responsibilities of a broker of record

• Evaluating insurance quotes: Brokers of record obtain and evaluate insurance quotes to ensure policyholders receive the best possible coverage.
• Policy recommendations: They recommend changes to existing policies to better suit the policyholder’s needs.
• Negotiating with insurance companies: Brokers of record act on behalf of policyholders when negotiating rates, plan options, and handling claims.
• Enhanced Policy Management: Broker of Record letters streamline the process of updating, amending, and managing insurance policies, ensuring they remain relevant and cost-effective.
• Improved Communication: These letters facilitate clear and efficient communication between policyholders and insurance providers, reducing misunderstandings and errors.
• Empowering Policyholders: Policyholders gain the ability to choose brokers who best meet their needs, promoting competition and better service.
• Policyholder Restrictions: The ability to change brokers may be subject to restrictions outlined in the Broker of Record letter, including notice periods and effective dates.
• Legal Complexity: Drafting and managing Broker of Record letters can involve legal complexities that require careful consideration and adherence to regulations.
• Not Universally Applicable: While common in various insurance sectors, Broker of Record letters may not be suitable for all types of insurance arrangements.

Broker of record letter vs. letter of authorization

Broker of record letter.

• Terminating relationships: It officially terminates the relationship between the policyholder and the current broker of record.
• Authority transfer: It grants the new broker the sole authority to negotiate with the insurance company on behalf of the policyholder.
• Access to information: It provides access to underwriting information and proposals under consideration.
• Transition period: It allows for a transition period from one broker to another, typically expressed in days, ensuring a smooth transfer of responsibilities.

Letter of authorization

Industry expert insights, the bottom line, frequently asked questions, what is the role of a broker of record, why is a broker of record letter important, what is the typical duration of a broker of record letter, can a policyholder change their broker of record multiple times, are broker of record letters used in all types of insurance, what should a policyholder consider when selecting a new broker of record, do broker of record letters impact policy premiums or costs, key takeaways.

• Brokers of record manage and represent policyholders’ insurance policies.
• The broker of record letter legally defines this relationship and outlines responsibilities.
• Broker of record letters play a pivotal role in the insurance industry, ensuring clear communication between all parties.

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Option Assignment Process

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One of the biggest fears that new options traders have is that they may get assigned. The option assignment process means that the option writer is obligated to deliver on the terms specified in a contract.

For example, if a put option is assigned, the options writer would need to buy the underlying security at the strike price dictated in the contract.

Likewise for a call option, the options write would need to sell the underlying security at the strike price dictated in the contract.

As an options trader you’re usually seeking to make a profit from directional bets or to hedge your portfolio.

You’re rarely, if ever, looking to actually buy or sell the underlying security so being assigned can sound like a scary prospect.

This article will explore the option assignment process so you can understand how it works and how you can prevent yourself getting stuck with buying or selling an underlying security.

When Assignment Occurs

Assignment occurs when an option holder exercises an option. Exercising an option simply means that the option holder executes the terms in the options contract.

So for example if you are holding a call option, you have the right, but not the obligation to buy the underlying security at the agreed strike price.

When you exercise the option, the option holder will need to sell the underlying security at the agreed strike price and for the agreed quantity.

If you’re dealing with European style options, you will know when expiration is possible because they can only be exercised on the expiration date itself.

For American style options, which is what most people trade, options can be exercised at any time before the expiration date.

This means that if you are an options writer of American style options, you could theoretically be asked at any time to comply with the terms of the contract.

Unfortunately, there is no knowing when an assignment will take place.

However, generally options are not exercised prior to expiration as it is usually much more profitable to sell the option instead.

It’s worth noting that this will only happen to you if you’re an options seller. Option buyers can never be assigned.

There are two key steps to assignment and to make it fair, the process of selecting who is assigned is random.

In the first step, the Options Clearing Corporation (OCC) will issue an exercise notice to a randomly selected Clearing Member who maintains an account with the OCC.

In the second step, the Clearing Member then assigns the exercise notice to an individual account.

When You Are Most At Risk

There are several situations that can dramatically increase the risk that you will be assigned:

Situation 1: Your option is In The Money (ITM)

When an option is ITM, an option holder would stand to profit if they exercised the option.

The deeper the option is ITM, the greater the profit for the option holder and therefore the higher risk they may exercise the option and you will be assigned.

Situation 2: The option has an upcoming dividend

An ITM call buyer can profit from exercising an option before its ex-dividend date if the extrinsic value of the call is less than the amount of the dividend.

Situation 3: There is no extrinsic value left

If there is no extrinsic value left, an option buyer could be tempted to exercise the option.

If there is extrinsic value, an option buyer would typically make a bigger profit by selling the option and buying/selling shares of the underlying asset.

How You Can Avoid The Risk Of Being Assigned

There are several steps you can take to avoid, or at the very least minimise, your risk of being assigned.

The first step to consider is avoiding selling any options that have an upcoming dividend.

Before selling any option, first check that the underlying security doesn’t have an upcoming dividend and if it does, consider waiting until after the dividend has occurred (i.e. the stock has gone ex-dividend).

If you do end up selling an option with an upcoming dividend, then the second step to protecting yourself is to close your position early as your risk begins to increase.

For example, if you are short an option with an extrinsic value less than the dividend amount and the ex-dividend of the underlying security is not too far away, close your position.

Otherwise you risk being assigned and being forced to pay the dividend as well!

To completely avoid early assignment risk, you could always sell only European style options which are cash settled at expiration. You can read more that here and here .

The final way to manage your risk is to close positions well before expiration date approaches.

As the time left to expiration decreases, so too does the extrinsic value. For option buyers, it means they could stand to benefit and so there is a risk they may exercise the option.

While this article deals with the process and risks behind being assigned, there will be times when this isn’t an issue for you.

Provided you have enough capital to meet the assignment, you may be fine with being assigned.

If this is the case, you would simply have a new stock position added which you could hold onto or immediately liquidate.

In the event that you don’t have enough capital, your broker will issue you with a margin call and the position should be automatically closed.

As the process of assignment can differ between brokers, its best you contact your broker to check the specific process they use when issuing assignments to individual accounts.

In general, provided you take a few key steps to mitigate your risks, particularly around dividend issuing securities, the chances of assignment are very low.

Trade safe!

Disclaimer: The information above is for  educational purposes only and should not be treated as investment advice . The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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Closed my Oct BB (a few moments ago) for 34% profit…that is the best of the 3 BBs I traded since Gav taught us the strategy…so, the next coffee or beer on me, Gav 🙂

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WTO / Letters and Emails / Appointment / Sample Agent Appointment Letters (Free Templates)

Sample Agent Appointment Letters (Free Templates)

If your business or company needs an agent, the best way to appoint one is by using an agent appointment letter. You need a proper letter template to prepare this letter. This is an official way to form a partnership with the agent and ensure that they formally accept to work with your company.

Ensure you appoint an agent who will benefit your company. They should be responsible for dealing with clients to ensure your business is running smoothly. As the hiring manager, you should focus on the roles of the agent in the company, observe an official format, and include all the required details when writing this letter.

An Agent Appointment Letter is a formal letter prepared and sent to an agent by a company or organization to offer a job position in the organization.

This letter is also known as the employment letter or the job offer letter. These letters are used as contracts to confirm the partnership between your company and the chosen agent. An agent can start working at your company once they have accepted the terms you have stipulated in the letter.

These letters include the details of the job, the salary to be expected, the position being offered, the start date for the work, and any other essential information. The letter usually follows a particular outline and format to include all the information necessary for the employer. You need to list all the job position requirements before making an offer to the agent.

Agent Appointment Letter Templates

Who is an Agent?

An agent is an employee you hire in your company or organization and task them with specific roles and responsibilities to improve workflow. You are meant to agree with your appointed agent for an official working partnership.

You can also describe an agent as an individual who is bestowed power by an organization or company to act on their behalf by handling specific tasks.  

This is why you need to prepare the letter and send it to the agent. An agent may include real estate agents, sales agents, travel agents, tax agents, and even booking agents. With this letter, you have a valid contract that binds you, as the employer, to the agent.

What is It Used for?

You need to prepare and send an appointment letter if you intend to work with an agent in your business. The letter is meant to make the agent appointment process official. It is also meant to provide a detailed description of the job to help the agent understand what is expected. The letter will help your appointed agent integrate into work efficiently and smoothly. Finally, an appointed letter guarantees that the agent is at your company to serve the interests of the business. This is because you can use the appointment letter as a binding contract.

Types of Agent Appointment Letter

Following are a few types of agent appointment letters:

Download: Microsoft Word (.docx)

Basic Contents of an Agent Appointment Letter

When preparing the letter, there is some basic information that you must include to make this letter a valid contract. When you use a template to prepare this letter, all the information required will be present for you to fill out.

Here are the primary contents you must include in the letter:

The first part of the letter is the header. The letter’s header must contain the date when the letter was written. Also, the agent’s official name and their complete address.  

14 th December 2021, Wilson Richard 345, Avenue Street

You should include a greeting section for the recipient of the letter. You can address the agent using a title and their official last name.

Dear Mr. Richard,

State the purpose of the letter

The next part of the letter provides details that explain the reasons you have for writing the letter. This should include mentioning that you wish to appoint them as an agent for your company or business.

This letter is meant to inform you that I wish to appoint you as a real estate agent in charge of my rental properties.

Location of the job posting

You need to mention the location of your company or business. The recipient of the letter should be aware of where they will be working if they choose to accept the job posting.

If you are interested in the job, please visit Building Together Company (indicate the name of your company or business) at Anywhere Avenue (indicate the full address of the company) on Monday next week.

Congratulatory statement

You should then thank them and congratulate them for securing that position as an agent. A congratulatory message is warm and welcoming, which may help to sway the recipient into accepting the offered job position.

If you accept the real estate agent position at my company, congratulations, and we will be delighted to meet and start working with you.

Job designation 

After the congratulatory statement, you should include the job designation by highlighting the kind of expertise they should have and the type of documents they need to provide.

For you to fit into this position and be effective in your work, you need to have a bachelor’s degree in marketing, have 3–5 years of experience, be an eloquent negotiator, and be persistent in your work.

The letter also needs to specify the job role of the agent. This may include contractual, permanent, or full-time. In addition, the letter should inform the agent of the status of their job position.

Since the company specializes in real estate, accepting the job position means that you will be working permanently.

Roles and responsibilities

It is also important to highlight all the roles and responsibilities that the agent will be required to handle in the letter. This way, the agent is already aware of their expectations. It will also make their transition process as an employee easier.

As a real estate agent, you will be required to help our clients sell or purchase our properties. Also, you will need to guide these clients through the rent and leasing process.

Reporting managers

Reporting heads refer to these people that the agent will be required to report to as they work at the company. The letter should make clear whether they will have direct control or whether they must answer to managers they must collaborate with.

You will be in charge of sorting our property matters to highlight which ones fit our clients’ needs best, depending on their information. You will report directly to the marketing department supervisor, who is responsible for assigning clients to each agent.

Annual compensation offered for the candidate

The annual compensation is the total amount of the salary to be paid to the agent and any other combined benefits. The letter should mention if the candidate has received any annual compensation and the exact amount they will be getting.

Apart from your salary, you are also entitled to receive a total of 6% of every sale you make as your annual compensation for the position of a real estate agent.

Expected joining date

You will also need to inform the agent when they must join the company. Again, the start date for work is essential, or the agent will not show up for work.

With all that in mind, accepting the job position means that you are expected to be at work on January 5, 2022.

Work timings

The letter should also contain information about the working hours that the agent is expected to observe. This may include the number of days in the week and the number of hours in the day.

As a real estate agent in our company, you are expected to work from Tuesday to Saturday for 7 hours per day. That is a total of 35 hours per week.

Work ethics

It would help to stipulate the agent’s work ethic to observe while working at your organization.

Work ethics include the values and moral character the recipient needs to uphold at the company.

Here at Building Together Company, you are expected to uphold teamwork, observe diligence, and always strive for excellence. Therefore, it is unethical to poach clients or promise them something we do not offer as a company.

Leave policy

The recipient should also be informed of the company’s policy regarding leave. For example, you can inform them of the number of days they will get for leave and the number of sick days they have annually.

Your real estate position guarantees you a leave period of 21 days on your annual leave. Apart from that, you also have sick days, which total 14 sick days.

The agent should also be informed about the kinds of benefits that come with their job position in the letter. This may include retirement packages, medical coverage, travel loans, bonuses, and pensions.

As a real estate agent at our company, you will be liable for medical coverage, a retirement package, and bonuses.

Details of remuneration

If the job position is contractual, you need to include the details of remuneration. The chosen agent should know the amount they are bound to receive after work or after offering their services.

Based on your job position, you will receive additional remuneration for working extra hours. Depending on the number of hours worked, 10% of your salary will be added to your payment as remuneration.

day list and leave details

It would be best to inform the agent about the holidays when they are allowed to leave work. The agent you have appointed must be aware of the company’s legal and approved holiday list.

You are allowed leave for the following holidays: Labor Day, Independence Day, Memorial Day, and New Year’s Day.

Probation period details

If the agent will be on probation once they join the company, you need to inform them in the letter. Ensure you provide them with all the probation period details, including how long they will be on probation, what they will be doing, and what will help them qualify.

Once you arrive at the company, you will be on probation for three months. During this period, you will be expected to utilize the company resources to excel in all your duties, diligently perform your tasks to your supervisor’s approval, and form good relations with your work colleagues for the benefit of the company.

Annual salary hike

You need to include the expected annual salary hike based on the agent’s roles and responsibilities. The letter should have the exact amount or percentage of the hike to avoid confusion or trouble.

On an annual basis, there will be a 15% salary hike based on your real estate agent position. This increment also depends on the kind of work and effort you will portray here at the company.

The agent should also be aware of their expertise and whether working at the company will require them to travel or not. That way, they will be fully prepared as they join your company since they already know what to expect.

You will be expected to travel from one property to another based on the instructions of your supervisor or the needs of your clients. Therefore, ensure you have proper documentation to make the travel process easier.

Exit procedure

There should also be a detailed explanation of the employee’s exit procedure in the letter. With this information, the agent will know precisely what they need to do if they want to leave the company.

If you want to leave the company, you will have to provide the HR department with a written notice, one month before you leave. Also, you will have to return all the company’s property, including badges and work outfits.

It would be best to thank the recipient at the end of the letter before signing off with your name, designation, company name, and address. This is a formal and appropriate way of ending the letter and ensuring it is valid.

Thank you very much, and we hope to see you soon if you decide to join our team here at Building Together Company.

Purity Goodness Hiring manager, Building Together Company, 296, Anywhere Avenue

It is best to use a template to ensure you have all the basic contents required in the letter. With a template, you can easily customize the template to suit your requirements and be assured of a valid contract.

[Company Letterhead]

[Agent’s Name]

[Agent’s Address]

[City, State, Zip Code]

Dear [Agent’s Name],

We are pleased to appoint you as our exclusive agent for [specific purpose, e.g., marketing and sales of our product line] in [geographical area or sector]. This letter outlines the terms of your appointment and the conditions under which you will operate.

Scope of Authority:

You are authorized to represent our company, [Company Name], to market and sell our products within the specified territory. You will act in the best interest of our company, maintaining the highest standards of integrity and professionalism.

This appointment is effective from [Start Date] and will continue until [End Date], subject to renewal based on mutual agreement.

Compensation:

You will receive a commission of [X%] on all direct sales you successfully conclude. Payment terms will be as per our standard policy, detailed in the attached schedule.

Terms and Conditions:

You agree to adhere to all company policies and guidelines, including but not limited to pricing, marketing strategies, and customer service standards.

You will provide monthly sales reports and market feedback to our sales department.

This appointment can be terminated by either party with [notice period, e.g., 30 days] written notice.

Your signature below indicates your acceptance of this appointment and all the terms herein. We look forward to a successful partnership.

[Your Name]

[Your Position]

[Company Name]

[Company Address]

Accepted by:

[Agent’s Signature]

Sample Agent Appointment Letter

Dear Mr. Clarkson,

Subject : Appointment as Exclusive Sales Agent

We are writing to formally appoint you as the Exclusive Sales Agent for Quantum Innovations Inc. for the promotion and sale of our cutting-edge software solutions within the Northwestern United States. Your extensive experience in technology sales and deep understanding of the market dynamics in this region have convinced us that you are the ideal candidate for this role.

As our Exclusive Sales Agent, you are authorized to:

• Represent Quantum Innovations Inc. in all sales-related activities within the specified territory.
• Negotiate and finalize sales contracts on behalf of Quantum Innovations Inc., adhering to our terms and pricing policies.
• Collect market intelligence and provide feedback on customer needs and competitive activities.

This appointment is effective from March 1, 20XX, and shall remain in effect until February 28, 20XX. This agreement may be renewed upon mutual consent of both parties, subject to a performance review three months prior to the expiration date.

You will be compensated with a base commission of 10% on gross sales revenue generated directly through your efforts. Additional incentives and bonuses will be discussed and awarded based on exceeding sales targets and exceptional performance.

You agree to uphold the highest standards of professionalism and integrity, ensuring that Quantum Innovations, Inc.’s reputation is maintained and enhanced.

Monthly reports summarizing sales activities, market trends, and potential opportunities must be submitted by the 5th of each following month.

This appointment is exclusive to the Northwestern United States; you agree not to represent competing products or services within this territory.

Either party may terminate this agreement with a 30-day written notice, without prejudice to any rights or obligations accrued prior to termination.

Your acceptance of this appointment signifies your agreement to these terms and your commitment to achieving the sales targets established. We are confident in your abilities and look forward to a prosperous and mutually beneficial relationship.

Please sign below to acknowledge your acceptance of this appointment and return a signed copy to us by March 5, 20XX. Do not hesitate to contact us should you have any questions or require further clarification.

Warmest regards,

James de Ville

Quantum Innovations Inc.

Techville, Silicon State, 98765

Email: [email protected]

Phone: 00-555-12345

_________________________________

Mr. Henry Clarkson

Date: _______________

Key Takeaways

This letter effectively serves its purpose as a formal appointment of an Exclusive Sales Agent, offering a clear, professional, and comprehensive outline of the role, expectations, and terms of agreement. Here’s why it’s effective:

Clarity of Role and Territory: The letter specifies the role (Exclusive Sales Agent) and the territory (Northwestern United States), providing clear boundaries and scope of work.

Detailed Responsibilities and Authority: It enumerates the agent’s responsibilities, such as representing the company, negotiating and finalizing sales contracts, and collecting market intelligence. This clarity ensures both parties understand the expectations.

Duration and Renewal Process: The agreement’s effective dates and the renewal process are clearly stated, including the performance review clause, which adds a layer of accountability to the arrangement.

Compensation Structure: The letter outlines the compensation terms, including base commission and additional incentives, motivating the agent to excel in their role.

Professional Standards and Reporting Requirements: Expectations regarding professionalism, integrity, and monthly reporting are articulated, ensuring the agent’s alignment with the company’s values and operational needs.

Exclusivity and Non-Competition Clause: The exclusivity clause prevents conflict of interest and ensures the agent’s focus on promoting the company’s products within the specified territory.

Termination Conditions: By defining the conditions under which the agreement can be terminated, both parties have a clear understanding of the exit process, protecting their interests.

Acknowledgment and Acceptance: The request for the agent’s signature and return by a specific date formalizes the acceptance process, making the agreement legally binding.

The letter balances formality with warmth, indicating a professional yet positive anticipation of a mutually beneficial relationship. The clear layout, detailed terms, and explicit expectations pave the way for a transparent and successful partnership.

Final Remarks

A letter that a business or organization prepares to appoint a needed agent is called an agent appointment letter, sometimes referred to as an employment letter or a job offer letter. As an employer, you may appoint a sales agent, booking agent, or even a real estate agent to help out in your company. The best and most official way to do this is by sending them a letter. With this letter, you will have a contract that binds you and your employee. This way, you are guaranteed that the agent is working for your company’s benefit in exchange for a salary. Whether using a template or starting from scratch, remember that some essential contents must be included in the letter.

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How to Fire my Financial Advisor

Introduction.

Navigating the financial landscape is a crucial part of securing a prosperous future. Financial advisors play a key role in this journey, offering their expertise to help us make well-informed decisions. However, there may come a time when you need to terminate the services of your financial advisor due to various reasons - be it a change in financial strategy, dissatisfaction with the service, or a move to a different location. Whatever the reason, it's essential to end the professional relationship respectfully and legally.

This guide will walk you through the steps of writing a letter to terminate your financial advisor formally.

If you are new to AdvisorFinder

Welcome! If it's your first time on AdvisorFinder, you might want to have a look at the AdvisorFinder blog and the post titled, " How to Choose a Financial Advisor ".

Step 1: Review Your Agreement

Before drafting your termination letter, review the agreement you had with your financial advisor. Look for any clauses related to termination, notice period, and any other obligations you may have. The agreement you have with your advisor is unique to you, so please use your discretion.

Begin by locating the original agreement. It might be in paper format or a digital copy sent via email or available on the advisor's online portal.

‍ Understand Termination Clauses

Thoroughly read through the agreement, focusing on sections related to termination. There may be specified conditions under which either party can terminate the agreement.

‍ Notice Period

Check if there's a notice period required before termination. This period allows both parties to settle any outstanding issues.

Fees and Charges

Look for any clauses about termination fees or charges. Some advisors may have fees for early termination.

Data Retrieval

Check if there are provisions on how you will receive your financial data or records post-termination.

Legal Obligations

Identify any legal or other obligations you need to fulfill before termination to ensure a smooth transition.

Consult a Legal Professional

If there are aspects of the agreement that are unclear, it might be wise to consult with a legal professional to understand the implications of termination. There are online services such as Avvo, where you can find a lawyer specifically for the purpose of consumer protection .

Step 2: Gather Necessary Information

This should be very easy after the preparation in step 1 described above. Ensure you have all necessary information at hand, including your financial advisor's full name, title, company name, and address. It's also wise to have your account details and the date of agreement commencement. ‍

Advisor Identification

• Financial Advisor's Full Name
• Company/Firm Name
• Company Address
• Contact Information (Phone, Email)

Account Details

• Account Numbers
• Type of Accounts (e.g., retirement, investment, savings)
• Any other unique identifiers associated with your account

Agreement Details

• Date of Agreement Commencement
• Any relevant termination information / official notice (if applicable from Step 1)
• Any specific identification numbers or codes associated with the agreement

Documented Communication

Gather any relevant communication you have had with your advisor, especially if it pertains to issues that are prompting the termination.

Financial Records

Ensure you have copies of all financial records, reports, and statements provided by your advisor during the engagement.

New Advisor Information (if applicable)

• New Advisor's Full Name
• Company Name
• Transition instructions if you're moving to a new advisor

By organizing this information beforehand, you'll ensure a structured and straightforward termination process, demonstrating a professional approach to ending your financial advisor relationship.

These enhanced steps provide a structured and thorough approach to initiating the termination process, aligning with AdvisorFinder’s ethos of educated and respectful engagement within the financial advisory landscape.

Step 3: Write the Termination Letter

👉 click here to download a sample termination letter for your financial advisor

If you are writing this letter entirely on your own, continue reading this section.

For "official business" such as terminating a significant financial relationship, it is recommended that you should start this letter with a heading that includes these details, or equivalent: 

Your Name Your Address City, State, Zip ‍

Financial Advisor's Name Advisor's Company Name Address, City, State, Zip

Dear [Financial Advisor's Name], ‍

In this section, state your intent to terminate the financial advisory services. Be clear and concise, mentioning the effective date of termination.

Example: I am writing to formally terminate my agreement for financial advisory services with [Company Name], effective [Date]. This decision comes after careful consideration and analysis of my current financial situation and goals. ‍

Reason (Optional):

If you wish, you can provide a brief explanation for the termination, although it's not mandatory.

Example: The reason for this termination is a change in my financial strategy and goals. ‍

Account Instructions

Provide instructions for remaining funds or assets managed by the advisor.

Example: I request the closure of all my accounts and the transfer of any remaining funds to my bank account on file. ‍

Additional Instructions

Include any other instructions or requests related to documentation or final meetings.

Example: Please provide a written confirmation of this termination along with a statement of my account showing all transactions up to the termination date. ‍

Express gratitude for the service provided and sign off respectfully.

Example: Thank you for your services and assistance during our association. ‍

[Your Name]

Sample Termination Letter for Financial Advisor

We put together a very official looking sample template for this termination letter so you can edit it and use it as you need. You can download the word document below.

Download Sample Termination Letter

🗎 word document .docx file ⬇️ enter your email.

In case you can't download the file

Here's the text of what the letter says.

Dear [Advisor Name],

I am writing to formally terminate my agreement for financial advisory services with [Company Name], effective [Date]. This decision comes after careful consideration and analysis of my current financial situation and goals.

The reason for this termination is [insert reason here, optional]

I request that all my accounts are closed and the transfer of all remaining funds to my bank account on file.

Please provide written confirmation that you have received this letter of termination along with a statement of my account showing all transactions up to the termination date.

Thank you for your services and assistance during ___________________.

Jane “Client” Doe

Step 4: Send the Letter

Once you've written the letter the way you want it, go ahead and fire it off. We know it's tough, but you have to just do it. Ensure you send the letter well in advance of your intended termination date. It's advisable to send it via certified mail to have a record of the communication.

Step 5: Find a better financial advisor

The decision to terminate a financial advisor isn't taken lightly. It often stems from a realization that your financial journey requires a change, whether due to evolving financial goals, a lack of satisfaction with current services, or the desire for a more specialized or innovative advisory approach. Whatever your reason, the termination of your current advisor is just the beginning.

When you're ready, a crucial next step is to find a better-suited financial advisor to ensure you remain on track toward your goals. This is where AdvisorFinder comes in. Here's your step-by-step guide to finding a financial advisor on AdvisorFinder .

Understanding Your Needs

Before diving into the search, take some time to reflect on what you expect from your new financial advisor. Your financial goals, the level of communication you desire, and the type of advisory services you require are essential considerations. Understanding your needs will empower you to make informed decisions while exploring AdvisorFinder's vast network of financial experts.

Navigating AdvisorFinder

AdvisorFinder has been meticulously designed to simplify your search for a new financial advisor. Here's how to navigate through it:

1. Easy-to-Use Search Bar

Enter key terms related to your financial goals, and AdvisorFinder will present a list of advisors suited to your needs.

2. Filter Your Search

Utilize the filtering options to narrow down your search based on location, expertise, and other criteria that matter to you.

3. Explore Advisor Profiles

Every advisor on AdvisorFinder has a detailed profile showcasing their services, experiences, and client reviews. This transparency helps you gain a better understanding of what each advisor brings to the table. ‍

Engage with Potential Advisors

1. schedule consultations.

Once you have shortlisted potential advisors, schedule consultations to discuss your financial situation and goals. This interaction will give you a feel of the advisor's approach and whether it aligns with your expectations. Each advisor has a "Schedule a Call" button on their profile. ‍

2. Ask the Right Questions

Prepare a list of questions to ask during your consultations. These could range from their experience and expertise to their communication style and fee structure.

Finalizing Your Choice

Once you have met with your chosen advisors and made an informed decision, it's time to formalize the advisory relationship. Ensure you understand the terms of engagement, fees, and the process moving forward.

Transitioning to a new financial advisor is a significant step towards realigning your financial journey with your current goals and expectations. AdvisorFinder is not just a platform; it's a bridge connecting you to a community of reputable financial advisors ready to guide you towards financial success. By following this guide, you are not only taking control of your financial destiny but also ensuring that your next advisory relationship is built on a foundation of informed trust and aligned objectives. We hope you don't have to use this sample termination letter again!

If you have any questions or still need help, we are here to offer you support in your search for a financial advisor. For questions related to this article please ask us via the live chatbot. ‍

For questions related to using AdvisorFinder, please contact our support . ‍

If you are looking for a financial advisor, visit the AdvisorFinder marketplace

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Engagement Letters - Doing it Right

Real Estate Appraiser Independence , Real Estate Appraisers

Editor’s Note: Appraiser Phil Spool shows how an effective engagement letter puts you in control of an assignment.

Doing it Right: Engagement Letters

by Phil Spool, ASA

Now that many of you are searching for new non-lender clients in the aftermath of the mortgage crisis and HVCC (Home Valuation Code of Conduct), it is advisable not to lose sight of good business practices; one of the best is ensuring that you have a good engagement letter in place.

Appraisal management companies (AMCs) and most lender clients require their own engagement letters but for non-lender clients, an effective engagement letter allows you to control the assignment rather than the client.

Would you quote an appraisal fee without first finding out what type of property it is: single family residence, duplex, commercial property or vacant land? Or without determining who it is for and why is it needed? Will you be required to testify in court? Where is it located and when is the report due? All of these questions are very important and need to be answered before you can quote a fee and the answers need to be in writing. Quoting a fee is one thing, how you are going to get paid is another. This is why an engagement letter is necessary.

Why do you need an engagement letter? To answer this question, one must generally understand the purpose of an engagement letter. In essence, an engagement letter is a legal document that defines the engagement between you and your client. This letter should state the terms and conditions of the engagement, address the scope of the assignment and the terms of your compensation. In a nutshell, you want your client to be in agreement about what is planned and expected in your appraisal report and how and when you are going to get paid.

While each engagement letter may vary depending on the complexity or level of service you are providing, the following are some of the more important provisions needed in your engagement letter. The first four discussed are indicated in Standards Rule 1 and Standards Rule 2 in the Uniform Standards of Professional Appraisal Practice (USPAP).

Type of report to be prepared (SR 2-2). Find out what your client needs in terms of the depth of your report. Perhaps the client is only interested in buying or selling the property and is the only intended user of the report. In that situation, perhaps only a Restricted Use appraisal report is needed. If the client wants a residential appraisal report and wants it on one of the forms, then it will be considered a Summary Appraisal Report. Remember, if the intended use is not for a mortgage transaction and a Fannie Mae form is used, you cannot use the current 1004 or 1073 form because the intended use is already stated, which is for a mortgage finance transaction. Some clients need more detail in the report, perhaps for litigation purposes. In this situation, a Self-Contained appraisal report might be in order. Remember, your fee might be based on the time you spend not only on your research but also in preparing your report. So if you are preparing a Self-Contained appraisal report, you should consider a higher fee than if you are preparing a Summary or a Restricted Use appraisal report.

Address of subject property, brief description of the property, intended user(s), intended use and type of value [SR 1-2 (a), (b) and (c)]. The subject should be adequately described so that the client truly understands what you intend to appraise. This might require the inclusion of a brief description of the property and legal description of the property if it contains multiple parcels with one value. For example, if you are requested to appraise an apartment building, you should consider stating the number of buildings with their addresses and total number of units. If you are requested to appraise a single family residence, perhaps just the address might be sufficient. Also note that the engagement letter may not be the forum for a request of an itemized list of documents you need. You can state: “Attached is a list of documents needed for the completion of the appraisal report. Any delay in receiving the requested items might delay the delivery of the report.”

Indicating the name of your client is a must. If there are other intended users, they should also be listed. The same applies to including the intended use in the engagement letter. Remember, the intended use is not the same as the purpose of the appraisal. Typically, the purpose of the appraisal is the type of value. You might want to consider attaching the definition of whatever type of value is to be determined. Most appraisals determine market value. However, your client may request a value in use or an insurable value.

State the property interest to be valued [SR 1-2 (e) (ii)]. If you are appraising a single family residence or an individual condominium unit, then more than likely you will be appraising the “fee simple” interest of the property. If you are appraising a commercial property with a long-term tenant or a multiple tenant building with long term leases, then more than likely you will be appraising the “leased fee interest.” State in your engagement letter that you are appraising the “fee simple” interest or “leased fee” interest so that there is no misunderstanding if you will be utilizing market rent (for fee simple value) or contract rent (for leased fee value). This may be further expanded in your brief description of the Scope of Work.

Identify any extraordinary assumptions and/or hypothetical conditions. An extraordinary assumption is an assumption if found to be false, could alter the appraiser’s opinions or conclusions. A hypothetical condition is something which is contrary to what exists but is supposed for the purpose of analysis. So if you are doing an appraisal that might require an extraordinary assumption or hypothetical condition, state it. For example, if you are appraising a proposed improvement, such as a proposed house, then you will have the hypothetical condition assuming that the improvements will be completed. If you are appraising a property with a retrospective market value, you will probably have the extraordinary assumption that the condition of the property as of the effective date of appraisal was the same as the date of visit.

Briefly describe your scope of work. This is very important. You should determine the scope of work or scope of assignment in relation to your client’s understanding and expectations. State the approaches you will use to arrive at your opinion of value. Be brief but give enough information so that when the appraisal report is completed and sent to the client, the client is not surprised by something you did not do. An example would be to exclude an approach to value that could be considered appropriate but the utilization of another approach or approaches would be sufficient to arrive at a credible assignment result.

State the agreed compensation amount for your appraisal assignment other than depositions and/or court testimony. It is very important that you and your client are in agreement with the terms of your compensation. Be sure to include your fee for the assignment, retainer and when the balance is due. Indicate who is responsible for payment and that they understand they are financially responsible for the payment. Also, indicate that a fee for court testimony is separate from the appraisal fee. You might want to consider including a late fee charge if payment is not received in the agreed amount of time.

State your requirements for a deposition and/or court testimony, including fee structure. Even if your client tells you that your appraisal report will not be used for any litigation purposes, don’t take a chance. Include in your engagement letter something similar or the same statement that the Fannie Mae form 1004 states in No. 4 of the Statement of Assumptions and Limiting Conditions: “The appraiser will not give testimony or appear in court because he or she made an appraisal of the property in question, unless specific arrangements to do so have been made beforehand, or as otherwise required by law.”

If you are taking on this assignment with the full knowledge of a possible testimony in a deposition and/or court, then state your fee terms, including travel time, preparation work time and fee when arriving at the deposition or court. You might request a flat hourly rate, referred to as “portal to portal” or structure your rates in various categories, such as travel time to and from the deposition and/or court, telephone calls, preparation (review of your work product prior to a deposition and/or court testimony) and fee once you arrive at the venue (attorney’s office for a deposition or court for the trial). Regardless of who deposes you or calls you to testify, state in your engagement letter that the engaging party is ultimately responsible for payment.

State the anticipated delivery date of the appraisal report and the method of delivery. Include the delivery date of the appraisal report and how the appraisal report is to be delivered, such as via regular mail or by email.

Your signature and that of the client at the bottom of the engagement letter. Make sure you have space at the bottom of your engagement letter for your signature and date. Print the client’s name and indicate that the client has to sign above the printed name and that they date the engagement letter when they sign it.

An additional clause to be considered is: “This appraiser is bound by current Uniform Standards of Professional Appraisal Practice (USPAP) guidelines.” This would cover many of the items mentioned above as well as any potential misunderstandings with the client, especially regarding the reporting of a predetermined result, a direction in assignment results, the amount of a value opinion and the occurrence of a subsequent event directly related to the appraiser’s opinion and specific to the assignment’s purpose, all of which are stated in the Management portion of the Ethics Rule in USPAP.

Also, the 2010-2011 USPAP added a new item in the Ethics Rule requiring the appraiser to disclose, prior to accepting an assignment, any services regarding the subject property performed by the appraiser within the prior three years, as an appraiser or in any other capacity. Therefore, if you have not performed any services on the property you intend to appraise, include the following statement or something similar: “I have not performed any services regarding the subject property within the prior three years, as an appraiser or in any other capacity.” If you have performed some form of service on the subject property, then disclose it.

In conclusion, I suggest that you confer with an attorney in drafting an engagement letter you feel comfortable with. My article reflects my opinion what you, the appraiser, should consider when contracting with your client.

About the Author Philip G. Spool, ASA, is a State-Certified General Real Estate Appraiser in Florida, appraising since 1973. Formerly the Chief Appraiser of Flagler Federal Savings and Loan Association, he has been self-employed for the past 18 years. In addition to appraising, he is an instructor with Miami Dade College, teaching appraisal courses and continuing education. He is Vice President and Chairman of real estate programs with the Greater Miami Chapter of the American Society of Appraisers. He can be reached at [email protected] .

Tags: Appraiser Independence , Appraisers , Engagement Letter , Reporting , Scope of Work , Standards of Practice , Success , USPAP , volume 24

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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

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Broker Commission Agreement Template

Used 5,413 times

Broker Commission Agreement Template will help form a document between large entities like an administration body and a dealer and use a flat, rate, or split fee model.

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Created by:

​ [Broker.FirstName] [Broker.LastName] ​ [Broker.Company] ​

Prepared for:

​ [Tenant.FirstName] [Tenant.LastName]

Representation of the [Tenant.State] and its respective agencies

This real estate agent and/or broker commission agreement, hereinafter referred to as the “Agreement,” is entered into as of this (day) day of (month) , (year) , also known as the “Effective Date” by and between:

​ [Tenant.FirstName] [Tenant.LastName] / [Tenant.Company] ), hereinafter known as the “Tenant,” at the address [Tenant.StreetAddress] , [Tenant.City] , [Tenant.PostalCode] , hereinafter known as the “Property” and ( [Broker.FirstName] [Broker.LastName] / [Broker.Company] , hereinafter known as the “Broker,” and The State of [Owner.State] , hereinafter known as the “Owner,” and collectively known as the “Parties.”

In this Agreement, the following provisions are true and correct:

A. The Owner has legal title and/or rights to the property or land located at the Property, located in (county name) County, [Owner.State] on which tract is an (office building/project, home building/project, apartment building/project) , which may also be referred to as (name of project), but will still be further described as the “Property.”

Appraisers Parcel Number (if applicable):

B. The Broker has presented the Property space needs of the Tenant to the Owner and will render services in connection with the (purchase or leasing) of Property space to the Tenant.

C. Should a (Purchase or Lease) , herein so-called, be consummate, the Owner agrees to pay The State of [Owner.State] a commission in consideration for the services rendered and to be rendered in consummating a (Purchase or Lease) according to the terms and conditions set form in the Agreement.

D. The Owner acknowledges, understands, and agrees that the Broker is serving as the (sole or non-exclusive) representative of the Tenants’ personal or company interests. Similarly, the Owner acknowledges, understands, and agrees that the applicable fee structures and commission rates outlined below have been mutually agreed upon by the Owner, Tenant, and Broker and have been included within the Owner’s proposal for (Purchase or Lease).

NOW, THEREFORE, in accordance with the mutual promises outlined in the Agreement and state laws and for other valuable consideration, the receipt and sufficiency of which the Parties acknowledge, the parties agree to the following terms:

1. AGREEMENT TO COMPENSATE COMMISSION

The owner agrees to pay a commission to the Tenant equal to (written percentage “five percent”) (#)% of the total (Sale or Gross Rentals) to be paid to the Owner (as a one-time Purchase payment or over the term of the Lease).

(For Lease Agreements: If the Lease term runs at a period greater than (#) years, Owner will pay (#)% over the length of the Lease, which shall be paid to the Owner for the period exceeding the (#) month of Gross Rental payments. Should the Tenant or Owner request an expansion, the commission rate shall be equal to (written percentage “five percent”) (#)% of the additional Gross Rental payments added to or above the total Gross Rental payments of the original Lease agreement, if the Tenant and the Broker are involved. Should the Tenant or Owner request a renewal, this shall be at a rate of (written percentage “five percent”) (#)% of the Total Gross Rental payments.)

2. COMMISSION PAYMENT

The commission payment shall be due and payable to the Tenant in (cash, credit, check) in (number of payments) at the time the Agreement is signed with the balance on the earlier to occur on:

The first day the Tenant occupies, either fully or partially, the space of the Property; or,

The commencement of the Agreement’s terms.

If the Tenant or Owner wishes to expand the Property or the Agreement is renewed, the commission for the renewal or expansion will be due and payable to the Tenant in full at the time a renewal or expansion notice covering the renewal or expansion is executed by the Owner and the Tenant, if the Tenant and Broker are involved. The Tenant agrees to compensate the Broker said commission amount based on the amount outlined in a separate Broker’s document between the Tenant and Broker.

3. SUCCESSORS AND ASSIGNS

The right to receive and the obligation to pay any of the commission described in the Agreement shall transfer to their respective successors, assigns, and/or heirs of the Owner or Broker. In the event of a sale or an assignment of the Property, which includes the Tenant's Property, the Owner agrees to secure it from the assignee or purchaser under a new commission agreement, under which the new assignee or owner assumes payment to the Tenant of all commissions payable.

4. TENANT REPRESENTATION

In this Agreement, the Broker (will or will not) represent a Landlord in the (Purchase or Lease) transaction. The Broker will represent (Tenant, Owner, or Tenant and Owner) in said transaction.

5. OWNER DISCLOSURE

The Owner agrees to disclose information regarding the Property to the Tenant and Broker. This includes but is not limited to mechanical, soil, and structural conditions and whether there is or are not any PCB transformers, asbestos, and other toxic materials on the premises.

6. REPRESENTATION AND WARRANTIES

The Parties agree to disclose that they are authorized to enter this Agreement. The obligations and performances of either party may not violate the rights of a third party or any other agreement made between said party and any other organization, business, person, law, or governmental regulation.

7. ENTIRE AGREEMENT

This Agreement contains the entire agreement and comprehension among the Parties at this point with respect to the subject matter in this regard, and supersedes all prior agreements, conditions, understanding, inducements, whether expressed or implied, verbal or written, of any nature concerning the subject matter in this regard. This agreement shall be valid and binding unless another one is made in writing and signed by all parties. This Agreement is binding, and benefits, the successors, assigns, and/or heirs of the Parties.

SIGNATURE AND DATE: The Parties agree to the terms and conditions outlined in this Agreement, shown by their signatures below:

​ [Tenant.FirstName] [Tenant.LastName] ​

​ [Tenant.Company] ​

​ [Broker.FirstName] [Broker.LastName] ​

​ [Broker.Company] ​

​ [Owner.FirstName] [Owner.LastName] ​

​ [Owner.Company] ​

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Learn About Notice of Assignment for Invoice Factoring

In a  factoring  relationship, you agree to assign your selected receivables to the factoring company. By advancing your  cash  against your invoices, the factor has purchased the right to collect amounts due from your customers. The Notice of Assignment is a critical part of your factoring paperwork as it reflects the change in invoice ownership.

What is a Notice of Assignment?

The Notice of Assignment is a simple letter the factoring company sends to your customers whose invoices you are factoring. In writing, the notice informs your customers that the accounts receivable is assigned, and future payments should be made payable to the factoring company. The notice will also include a remittance address so your customer can change their payment information.

The Notice of Assignment legally explains to your customers that any payments they make to you instead of the factor will not satisfy their obligation. The factoring company may hold your customers liable for misdirected amounts. This may occur if your customers choose to ignore the notice or fail to update payment information.

Many factors will require your customers to sign and return a copy of the notice to acknowledge receipt. This is not always required, though. Instead, the Notice of Assignment may include language that considers your customer’s continued use of your services to constitute an agreement to the notice. In addition, the factor may only revoke a Notice of Assignment if they send a signed and notarized release notification to your customers. They will do so if you choose not to factor that account any longer or you end your factoring relationship. In either case, the account must have no outstanding balance.

What Programs Don’t Use a Notice of Assignment?

Financing programs that do not use a notice of assignment include non-notification factoring and sales ledger financing.

Non-notification factoring is similar to regular factoring, but with a few key differences. Instead of sending a conventional Notice of Assignment to customers, the factoring company informs them of a new payment address using the company’s regular letterhead. This allows the customer to still send payments to the new address without being aware that it belongs to the factor. To qualify for non-notification factoring, companies typically need to have monthly revenues of at least $300,000, a track record of over a year, reliable financial reports, and no serious financial difficulties.

Sales ledger financing operates like a line of credit based on outstanding receivables. Companies can access up to 90% of their outstanding receivables at any given time without the need to submit a factoring schedule of accounts for each transaction. Although the finance company still handles payments, the customer does not receive a Notice of Assignment. Instead, they receive a letter indicating a change in the payment address. Sales ledger financing offers greater flexibility compared to non-notification factoring, with daily rates allowing for better cost control. The qualification requirements for sales ledger financing usually include monthly revenues of at least $300,000, a track record of 1-2 years, reliable financial reports, good receivables management systems, and no serious financial difficulties.

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Why do Factoring Companies Notify Your Customers?

The Notice of Assignment is a vital form of protection for a factoring company. It protects the factor in case the  business owner  (the factor’s client) receives the payment instead of the factoring company.

In a best-case scenario, the notice serves to inform every party in a factoring transaction of their rights and responsibilities. It also gives your customer the appropriate address to make account payments, allowing your factoring relationship to continue smoothly.

In a worst-case scenario, a factor can recover unpaid amounts from your customer should they continuously pay over notice or not pay at all. A Notice of Assignment is evidence in any legal proceeding — from a demand letter for payment to a full-fledged lawsuit — that asserts the factor’s standing and rights to payment.

What Will Your Customers Think?

Customers may have concerns or questions when they receive a letter regarding the use of invoice factoring. It’s understandable that they may be unsure or unfamiliar with this financing tool. As a business owner, it’s important to address these concerns and communicate with your customers effectively.

First and foremost, it’s essential to acknowledge that invoice factoring is a common practice utilized by many small and midsize companies to finance their operations and facilitate growth. Chances are, your customers are already aware of this financing method and how it works.

When discussing invoice factoring with your customers, emphasize the benefits it provides to them. By using factoring, you can offer them extended payment terms, such as 30- to 60-day terms, while still ensuring excellent service. This enables your customers to utilize their available cash resources more effectively. Without factoring, providing extended payment terms might be challenging, especially for businesses experiencing growth.

It’s crucial to assure your customers that little is changing in terms of the services and support your company provides. Reassure them that they will still have the same level of communication and engagement with you and your employees as before. Highlight that despite factoring being implemented, your commitment to their satisfaction remains unchanged.

Address the misconception that factoring indicates financial trouble within your company. Remind your customers that factoring is a versatile tool used to achieve various goals and objectives, just like other forms of financing such as loans or lines of credit. Factoring simply serves to smooth out your cash flow and support your business’s overall financial stability and growth.

Overall, open communication with your customers is key. Provide them with transparency and reassurance, explaining the benefits of factoring and emphasizing that it is a common and established financing practice. By effectively addressing their concerns, you can foster trust and maintain strong relationships with your valued customers.

Why a Notice of Assignment Matters To You

You will receive a copy of the Notice of Assignment that the factor sends to your customers. While the notice is to inform your customers, it also has an important implication for you as well.

As your  factoring agreement  explains, payments your company receives from your customers over notice are payable to the factoring company. Even in the smoothest transition, you may receive payments sent before receipt of the notice or released before your customers’ updated their payment system. There will likely be a provision explaining the procedure for sending misdirected payments to the factor in these cases. Misdirected payments are usually sent by overnight check or via bank transfer.

However, you may be responsible for additional penalties and fees if your customers continue to pay over notice, and you deposit those payments into your account. In addition, you may end up owing more, depending on fee structure, due to the extra time it takes for the factor to receive payment. Some factors include a misdirected payment fee in the  factoring agreement  that you will have to pay if you fail to return misdirected payments to the factor. Therefore, fees may be higher if you are responsible for the misdirection.

As with any legal document, be sure to be fully aware of the language used within the Notice of Assignment. Be mindful of your customers’ responsiveness to the notice. Take action immediately if you realize that any of your customers are not sending their payments on time. This transparency solidifies your factoring relationship, builds trust with your factor, and protects your interests.

What if the Payment is for an Invoice I Didn’t Factor?

When you assign your customers’ receivables to your factoring company, you agree to direct all payments to the factor, even for invoices that you did not factor. This eliminates complications for all parties and ensures that the factoring company receives every payment they should. Without an all-inclusive assignment, your customers would receive a notification every single time you factor an invoice. They would have to retain two addresses on file, increasing the likelihood of misdirected payments.

Your factoring company will have a straightforward procedure in place to address non-factored payments. This may include applying those payments to open invoices and sending you the difference or the total amount in a regularly scheduled reserve release. Stay prepared by asking your factor about their policies surrounding non-factored payments.

Factor Finders can help you find the right factoring company  for your  invoice factoring  needs.  Contact us  to learn more about our factoring services for every industry and to get started today.

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