Ch 7: Brokerage Relationships: Law & Practice

Who must complete all renovations performed for profit in homes or child-occupied facilities built before 1978?

A North Carolina-certified renovation firm.

What is exclusive buyer agency?

A broker works only as a buyer's agent.

Exclusive Buyer Agency

A company chooses to work only with buyers. They only represent buyers and do not list properties for sale

A property management contract creates an agency relationship between which two parties?

A landlord and a broker

Designated Agent

A licensee authorized by a broker to act as the agent for a specific principal in a particular transaction, typically used in a dual agency situation

Facilitator

A non-agency relationship in which a broker helps both the buyer and the seller but represents neither. Facilitator relationships are not permitted under North Carolina real estate law

Dual Agency

An agency relationship in which the agent acts concurrently for both of the principals in a transaction

Which of the following is a conflict of interest?

An agent attempts to represent both the buyer and the seller in the same transaction.

What is a subagent?

An agent's agent

First substantial contact

Any contact where the broker and the buyer or seller begin to act as if an agency relationship exists.

What must the agent keep confidential under the duty of confidentiality?

Any information about the principal that could weaken the deal.

What type of authority does not give actual authority?

Apparent authority.

What must an agency do if it does not wish to cooperate with other agencies to sell a listed property?

Get the seller's permission

When must the Residential Property and Owners' Association Disclosure Statement be given to the buyer?

No later than at the time the buyer makes an offer on the property.

When does the Residential Property Disclosure Act require sellers to complete the two disclosure forms?

No later than the time that the buyer makes an offer or executes an option to purchase.

How many agents does a consumer who signs with an independent agent typically have?

One

Which of the following is not a liability or consequence of an agent's breach of duties?

Punitive fees

What should the agent do if a buyer asks about sex offenders?

Refer them to the state's sex offender registry

Where can you download a copy of the "Working With Real Estate Agents" brochure?

The North Carolina Real Estate Commission website

What authorized the Department of Housing and Urban Development and the Environmental Protection Agency to develop rules to address the lead-based paint problem?

The Residential Lead-Based Paint Hazard Reduction Act of 1992.

How is express authority usually granted?

Through a contract

To whom is the broker required to disclose material facts?

To all parties

To whom must dual agency be disclosed?

To all parties

When does apparent authority exist?

When no authority has been granted to the agent but the principal acts as if it has been granted.

When does the issue of dual agency arise?

When the same company represents both the buyer and the seller.

Which of the following is not exempt from requiring a North Carolina-certified renovation firm?

Window replacement

What should you do if the consumer refuses to sign the flap of the brochure?

Write "refused to sign" and try to get the consumer to initial it.

Implied Authority

an agent's authority to do things not specifically authorized in order to carry out express authority

Express Authority

the authority of an agent, stated in the document or agreement creating the agency

Sub-agent

A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent's principal

Which of the following can dissolve an agency relationship? A. Bankruptcy. B. Marriage. C. The principal loses his or her job. D. The buyer and seller can't agree on a price.

A. Bankruptcy

Single Agency

Agency relationship in which the agent represents only one party to a transaction

Single Agent

An agent who works only for the buyer or the seller

General Agent

An agent with full authority over one property of the principal, such as a property manager

Special Agent

An agent with limited authority to act on behalf of the principal, such as created by a listing contract

Which of the following circumstances ends the agency relationship? A Getting an offer on the house. B Full performance of the contract. C Showing the house to a buyer. D Sending a counteroffer to the buyer.

B Full performance of the contract.

When must the lead paint disclosures be made?

Before a buyer or renter becomes obligated under contract to buy or rent target housing.

Which statement most accurately describes the role of a subagent? A The subagent represents the principal directly. B The subagent makes sure that the third party is treated fairly. C The agent authorizes the subagent to represent the interests of the principal. D The subagent must protect the interests of the agent above all else.

C The agent authorizes the subagent to represent the interests of the principal.

Which of the following is an agent required to disclose? A The previous occupant was seriously ill or died while occupying the property. B A sex offender lives nearby. C A former occupant had AIDS. D The neighbor's fence is encroaching on the property.

D The neighbor's fence is encroaching on the property.

Why is the requirement to disclose all material facts to the principal a problem in a dual agency relationship?

Disclosing facts about a principal could help one principal while harming the other.

What must the agent do with any money received from the principal?

Keep accounting of it

The principal terminates the agency relationship but does not tell any third parties that the relationship has been terminated. What kind of authority exists?

Lingering apparent authority

What are facts about the property called?

Material facts

The 6 fiduciary duties owed by an agent are

Obedience, loyalty, disclosure of information, confidentiality, accountability, reasonable care, skill and diligence.

A real estate salesperson operates as a ...........agent.

Special

An agent says he will have a cleaning service clean the property when the principal is not present, and there is nothing in his contract giving him that authority. What kind of authority does he have?

The agent has no authority

What must the agent try to get for the principal?

The best possible deal

What is agency?

The relationship between a principal and his or her agent.

What are the two types of misrepresentation and omission?

Willful and negligent

If you are the broker of a listing but also hold an ownership interest in the property

You cannot represent the buyer if the listing is residential. You can only represent yourself as the seller. If the property is commercial, you may represent the buyer if your interest is less than 25% and is fully disclosed to and agreed to by the buyer.

Special Agent

one authorized by the principal to execute specific acts (most common form of agency)

General Agent

one who is authorized to execute the principal's business of a particular kind, or all the principal's business at a particular place, if not all of one kind (ex: property mgmt collecting rent, filling vacancy, etc.)

Lingering Apparent Authority

when a principal terminates his relationship with the agent but fails to inform third parties of this change

If a broker represents both the seller and buyer, they operate as a ................agent

Dual

Where can a broker obtain the required disclosure forms?

From the North Carolina Real Estate Commission.

North Carolina Unfair or Deceptive Practices Act

Prohibits unfair or deceptive acts in commerce, including the sale or rental of real estate. Ex: inducement, giving a misleading opinion, using misleading advertising, failure to disclose a material fact, and misrepresentation

Which brochure must be given to all buyers and renters of target housing?

Protect Your Family from Lead in Your Home.

What is the intention of the North Carolina lead-based paint hazard management program?

Protect children under the age of 6 from exposure to lead-based paint.

What are the three stigmatized or psychological disclosures you are NOT required to disclose as material facts about a property?

Serious illness or death within the home, registered sex offenders in or near the home, paranormal activity (unless the seller specifically asks about this)

How is the commission handled when there is a buyer's agent and a seller's agent from different brokerages?

The commission is typically split between the two brokerages.

What is the basis on which the real estate license law and the commission rules rest?

The law of agency

To whom must material facts be disclosed?

To all parties, including third parties.

Which of the following is not an agent's duty to the principal?

To ensure that the property sells.

Caveat emptor means

let the buyer beware

Duty of loyalty

A fiduciary duty owed by an agent not to act adversely to the interests of the principal

What is the difference between a subagent and an agent?

An agent is authorized by a principal to represent them; a subagent is authorized by an agent to represent the principal the agent represents.

Seven ways an agency relationship can be terminated

Dissolved upon full performance of the contract, agency agreement expires, dissolved upon agreement between both parties, dissolved when one party breaches agreement, dissolved when one or both parties die, dissolved when property is destroyed, or due to operation of law (ex. bankruptcy)

Material facts

Facts about the property itself, facts that relate to the property, facts regarding a principal's ability to complete the transaction, and facts that are known to be of special importance

A property manager operates as a ..............agent.

General

In most cases, what will the broker lose if he has violated an agency duty to the principal?

His/her commission

When must owners of residential property with four dwelling units or less provide a copy of the Mineral and Oil and Gas Rights Disclosure?

Prior to or at the same time as receiving an offer on the property.

Duty to protect

Protect confidential information, to act in good faith, and to disclose any facts that might influence the principal's decisions

Which of the following is not considered unfair or deceptive?

Refusing to disclose confidential information about a principal.

Law of Agency

Requires material facts to be disclosed to all parties, including third parties

Dougie owns a 16-unit rental building and goes into a real estate brokerage that has been recommended to him. He speaks to the broker, Tara, and explains what services he would like from the brokerage. He wants someone who will choose new tenants, set the rental rates based on market value and relevant laws, and sign all the leases on his behalf, as well as hiring anyone needed to conduct maintenance and repairs. Basically, Dougie is moving to Florida, and he doesn't want to have to worry about the rental property anymore. Which response of Tara's makes the most sense:

Tara will happily provide that service as her office offers property management. In that capacity, she will be a general agent to Dougie for that property, she will bill him a set fee for this service every month.

What happens if a buyer does not want a buyer's agent?

The agent must represent the seller while showing properties to the buyer.

Universal Agent

The agent who has complete authority over any activity of the principal; for example, power of attorney

Apparent Authority

The authority an agent is believed by third parties to have because of the behavior of the principal.

Exclusive Seller Agency

The broker acts as the seller's agent only in the listing and sales of properties. This means that the company offers only seller's agency, not buyer's agency

Which of the following is an example of a fiduciary relationship?

The executor of a will to the will's beneficiaries.

In the case of a rental property, whose interests does the seller's agent represent?

The landlord

Virginia signs a listing agreement with ABC Realty, which has three agents: Tom, Harry, and Ed. What are Tom, Harry, and Ed to Virginia?

Tom, Harry and Ed are all subagents

Selena is a licensed real estate broker. Her mother is moving into a nursing home. Her mother asks Selena to deal with the house she owns. The mother doesn't want to have to make any decisions regarding the house. She wants Selena to decide whether it makes more sense to sell or rent the home, to hire movers, sell or dispose of any left furniture and choose how best to invest any profits from a sale or rental. What type of agent is Selena when she is representing her mother in carrying out these duties?

Universal

The principal has the duties of

compensation and good faith