Level 3 Law of Agency- study notes

Which of the following is TRUE of a relationship created between a buyer and an agent?

Agency can be expressly stated by the agent and buyer or implied by their actions. The existence of the agency relationship relies heavily on the intent of both the buyer and the agent. While a contract is not required, it is in the best interests of both the buyer and agent to have one.

How can buyer's agent fees be paid? All answer choices are correct A credit from seller to buyer upon closing Commission from the home sale proceeds Broken retainer fees

All answer choices are correct

A mutual agreement can be made: -All choices are correct. -by action -in writing -verbally

All choices are correct

Which of these forms satisfies the written property disclosure requirement? - All choices are correct. - TAR's Seller's Disclosure Notice - TREC's Seller's Disclosure Notice - seller's disclosure forms provided by brokerages and associations that contain all of the disclosures required by law

All choices are correct.

Comparative Market Analysis

An evaluation of similar, recently sold homes (called comparables) that are near a home intended to be bought or sold.

General Agency: Broker and Sales Agent

Brokers responsible for all actions by agents

Home iNsurance in Texas:

Coverage and exclusions may differ from one company to another.

agency dislosure

Everyone in the transaction is entitled to know who the agent is working for. the types of representation available to the buyer agent and broker duties and the responsibilities owed to the buyer if the agent or the broker has relatives that have any personal interest in the transaction if the broker or any of the broker's agents are acting on their own behalf

Universal Agency:

Ex: Son and Father, Universal agency in real estate is uncommon

A prospective buyer asking about the cultural makeup of a neighborhood would be considered a ___ question. \

problem. violation of fair housing laws, therefore, it's considered a problem question.

A subagent

represents the seller and does so with the consent and cooperation of the listing broker. (Which is why we are talking about it in this level.)

Seller's Disclosure Notice

required to disclose this fact and that they must fill out. completed in its entirety by the sellers of the home

After a contract is signed, an agent must deposit escrow funds no later than the close of the: - first Monday - third business day - second business day - second calendar day

second business day

seller disclsoure

unlawful for sellers to intentionally hide serious property defects honestly discloses and provides buyers with all the information about any defects, hazards, or conditions in the property

Agency coupled with an interest

when an agent is involved in a real estate transaction with a personal interest (either for themselves, a family member, or a business interest).

intermediary disclosure

whether the broker is representing them exclusively

In 2005, Texas made changes to policies regarding dual representation by:

allowing dual representation to only be offered by brokers via intermediary process

2. Permitted Disclosures

disclosures that are not required, but also not forbidden.

Open Listings

multiple real estate brokers (and the owners themselves) have the right to sell the property. A commission will be paid to whichever agent is the procuring cause of the sale. a lot of brokerages don't allow open listings.

Disclosure of Sex Offenders

not prohibited, it is just not required.

Ostensible Agency

occurs when a principal allows a license holder to act in such a way as to cause a third party to believe that license holder is the principal's agent.

Michael has given Desiree permission to show his home to prospective buyers. What is this an example of? - Agency by estoppel - Agency by ratification - Ostensible agency - Actual authority Correct - Actual authority

- Actual authority

Examples of written agency agreements

1. Agent and Seller — listing agreement 2. Agent and Buyer — buyer/tenant representation agreement 3. Agent and Landlord — property management agreement 4. Agent and Tenant — buyer/tenant representation agreement

The Real Estate License Act has two separate disclosure requirement:

1. License holders must disclose representation of agency upon the first contact 2. License holders must provide the Information About Brokerage Services (IABS) Notice upon "substantive" discussion

Seller Disclosures Category

1. Required Disclosures 2. Permitted Disclosures 3. Unlawful Disclosures

TRELA (Texas Real Estate License Act)

1. the first legislation that governed the real estate profession in Texas. 2. a law passed by the Texas Legislature to govern Texas real estate.

Exclusive Agency

1. the seller agrees to list their property with only one broker during the listing term. 2. the seller still has the right to sell the property themselves, without having to pay the broker a commission.

TRELA was passed

1939.

TREC was created

1949.

In most cases, broker compensation, as a percentage of home price, falls somewhere between:

5 - 7%

Typically, brokerages pay their agents _________ of the commission left after they receive their percentage of the commission. 60-90% 80-90% 40-60% 30-40%

60-90%

According to The Residential Real Estate Brokerage Industry, ______ of buyers who dealt with a cooperating broker were under the (false) impression that "their" broker was representing them in a sales transaction. 50% 99% 10% 71%

71%

Who can make real estate disclosures through verbal statements?

Both the seller and the agent can make real estate disclosures through verbal statements.

What is NOT one of the ways buyer agency can be created? Apparent or ostensible authority Ratification Actual authority Dependent authority

Dependent authority

If for any reason, the seller breaches the listing agreement, the commission is also considered earned.

EARNED

Broker Bob is a subagent working with a buyer. Who does Bob represent?

If Broker Bob is operating as a subagent, that means he is a cooperating broker working for the listing broker as a subagent for the seller. He is working FOR the seller and WITH the buyer.

What did Senate Bill 489 do?

Introduce intermediary practice as an option

Exclusive Right-to-Sell Listing: So Exclusive

It prohibits the seller from listing the property with another agent AND states that the seller must pay the listing agent commission even if the seller finds the buyer.

Negligent Misrepresentation

License holder fails to disclose a known material fact.

Innocent Misrepresentation:

License holder makes a statement they believe is true, but is actually false.

Fraudulent Misrepresentation

License holder purposefully attempts to prevent a buyer from finding out about a material fact.

fiduciary duties acronym

OLD CAR Obedience (if legal) Loyalty (100%) Disclosure (full) Confidentiality (forever) Accounting (forever) Reasonable care

Fiduciary Duties

Obedience Loyalty Disclosure Confidentiality Accountability Reasonable Care

Which of the following statements about pre-qualification and pre-approval is TRUE?

Pre-qualification involves figuring out appropriate home prices for the buyer, and pre-approval involves determining if a buyer is credit-worthy.

Special Agency: Brokers and Clients

Special agency = limited agency/Non-Binding 1. Since special agency relationships are limited, special agents are unable to make decisions that may bind or obligate their principles.

TREC is a government agency created by the Texas Legislature to enforce TRELA.

TREC's main function is to enforce TRELA and NOT to regulate the real estate industry.

A buyer can compensate their agent by requiring them to get compensation from the seller first, and if unsuccessful, the agent can request that the buyer pays the commission.

TRUE

If a buyer makes an offer that meets all parameters (such as the listing price), and the seller rejects your offer, your commission is now payable.

TRUE

Allow oral listings, so a broker could potentially represent a seller in a real estate transaction without having any type of listing agreement.

Texas

Which form does NOT need to be signed to fulfill statutory requirements?

The IABS

According to Section A2, which of the following is NOT a reason that a buyer might be considered an "excluded prospect?" - Buyer had direct communication or negotiations with the owner - The seller has listed the individual by name as an "excluded prospect" - The broker has listed the individual by name as an "excluded prospect" - Buyer was procured through the owner's side efforts (social media, for example)

The broker has listed the individual by name as an "excluded prospect"

Which of the following is NOT true if the a buyer representation agreement contains a termination clause?

The buyer CANNOT orally terminate the buyer representation agreement. Continue

What is the purpose of the MUD Disclosure?

To disclose whether or not the property is in a Municipal Utility District

Listing Agreements - Section 4: Term- The "term" is the span of time for which this contract will be enforced.

Write the starting date as the day the sellers sign the listing agreement. (This keeps you and your broker fully covered.)

1.

agency relationships are created on the broker level.

Agency by Estoppel

agency that is imposed by law when it is determined that ostensible agency existed.

Full Disclosure

discloses any knowledge that the agent has that might affect the buyer's decision to purchase includes things about the property, the surrounding area, things that may have stigmatized the property, personal things about the seller

without a signed, written agreement

if the seller refuses to pay a commission based solely upon an oral agreement, the broker could not pursue court action against the seller to collect the commission.

AIDS, HIV-related illness, or an HIV infection,

is a protected class. Disclosure of protected classes is not permitted.

If a listing agreement does NOT state an end date, ______ .

it is illegal

Murder Disclosure

murder disclosure is required.

Net Listing

the seller sets a minimum price — broker's commission is any amount over the minimum price.

An example of a good question is, "Does the agent represent both buyers and sellers?"

true. It's a good idea for the buyer to know whether the agent represents both buyers and sellers, as well as the buyer-to-seller ratio of the agent's clients.

Agency by ratification

when a license holder acts without authorization on behalf of a principal and the principal accepts those actions after the fact, thus affirming the actions taken and creating retroactive agency.

On a listing sheet, what would a field stating "BC: 3" mean? - that the brokerage representing the buyer will receive 3% of the commission - that any subagent to the seller's broker will receive 3% commission - that the brokerage representing the seller will receive 3% of the commission - that the brokerage representing the buyer and the brokerage representing the seller will split 3% commission

"BC: 3" means the buyer's broker will get 3% commission once the sale closes.

What is a "material fact"? - A fact about the matter of which things are composed. - A fact about Madonna's 1984 hit "Material Girl." - A fact that could possibly persuade a buyer or seller to change their decision if they knew about it. - Any fact that is told to a license holder by a customer or client.

- A fact that could possibly persuade a buyer or seller to change their decision if they knew about it.

When does TRELA require that an IABS Notice be given? - At closing - After a buyer's offer is accepted - At first contact with a party - After substantive communication about a specific, real property.

- After substantive communication about a specific, real property.

According to TRELA, license holders MUST advise buyers that they should: - Obtain warranty information for all major appliances from the seller - Seek pre-qualification from at least three different lenders - Have a lead-based paint inspection performed, regardless of what year the home was constructed - Have the abstract examined by an attorney

- Have the abstract examined by an attorney

Which of the following is NOT included in sections D, E, F, and H: - Holding the broker responsible for outstanding financial obligations - Confirmation that the seller is not aware of any outstanding liens against the property - Confirmation that there are no other contracts in place - Making sure that the mortgage is up to date

- Holding the broker responsible for outstanding financial obligations

Third parties in a transaction are entitled to:

- Honesty - Fairness - Full disclosure of the condition of the property

What are two things customers expect from their sales agents? - Honesty and obedience - Honesty and fairness - Honesty and fiduciary responsibility - Fairness and obedience

- Honesty and fairness

Should You Represent Them?

- Is the buyer ready and qualified to buy? - What is the buyer's price range? - What amount of work will be involved or needed for the agent to perform the needed services for the buyer? - How much can the customer afford to spend? - Is the agent paid a flat fee, a-la-carte, within a fee structure, or by commission?

Which of the following is an example of an exclusive agency listing? - Seller Sally agrees to give Broker Bob as commission any amount that is over her $200,000 minimum price. - Seller Sally agrees to give any broker who is the procuring cause of a sale 3% commission. - Seller Sally agrees to give Broker Bob 3% as commission unless her neighbor Sam purchases — She'll only owe him 1% then. - Seller Sally agrees to give Broker Bob 3% as commission no matter what.

- Seller Sally agrees to give Broker Bob 3% as commission unless her neighbor Sam purchases — She'll only owe him 1% then.

Why do active listings matter? - They are your competition for buyers. - They are homes that will soon go on sale. - They are a good indicator of market value. - Most active listings sell for a lot more than the offered sales prices.

- They are your competition for buyers.

Agency by estoppel is created to

- To hold the agent accountable to the principal for their actions - To hold the principal accountable to a third party for the actions of the agent

Who does a listing agreement create an agency relationship between? - an agent and their broker - a buyer and a seller - a broker and a buyer - a seller and a broker

- a seller and a broker

According to Texas law, license holders must advise all parties to: - have the abstract examined by a lawyer and to obtain a title insurance policy. - consult their lender for all legal advice. - have the home painted with a fresh coat of paint before moving in. - have the abstract examined by the title company.

- have the abstract examined by a lawyer and to obtain a title insurance policy.

A seller's agent might be able to help a third party buyer with ___ . - inspecting a home - recommendations - selling their home - obtaining financing

- obtaining financing

If the seller does not provide the buyer with a completed Seller's Disclosure Notice before signing the contract, the buyer has a legal right to: - sue the seller for damages - receive a price reduction on the home - have their closing costs paid by the seller - terminate the contract within seven days of receiving the notice

- terminate the contract within seven days of receiving the notice

A listing agreement is a contract establishing an agency relationship between: - the broker and the seller -the broker and the sales agent -the sales agent and the seller -the seller and the buyer

- the broker and the seller

To a license holder, which of the following statements are true? -All customers are third parties. -All third parties are customers. -All parties to a transaction are third parties. -All parties to a transaction are customers.

-All customers are third parties.

As defined in the Texas Real Estate License Act, what is a subagent?

A license holder who represents a principal through cooperation with the principal's broker. -many listing brokers do not want to collaborate with subagents as well. -brokers who do not want their sponsored agents acting as subagents;

not required to inquire about, disclose or release information relating to whether:

AIDS, HIV-related illness, or an HIV infection, natural causes, suicide, or accident unrelated to the condition of the property.

Which of the following IS a major reason why many listing brokers prefer to collaborate with buyer's agents more than subagents?

In a seller subagency, the subagent is working under the listing broker, and hence, the listing broker is liable for the actions of the subagent, a license holder whom the listing broker has not personally supervised or trained. Continue

Historically, when presented with a lawsuit where the evidence is just the agent's word against the consumer, whom have the courts overwhelmingly sided with? - The agent - Equally the consumer and the agent - Cases of this nature are usually thrown out for lack of evidence. - The consumer

In court, a judge or jury will almost always side with a non-professional over the professional when it comes to one person's word against the other's. This is why it is so important for agents to have a paper trail of their work. Continue

Broker B agreed to take an exclusive agency agreement with a seller. Three weeks after Broker B entered the property into MLS and began a marketing program, the seller sold the property himself to a neighbor. Does Broker B get paid a commission or get reimbursed for his expenses?

Neither, unless there was an outside agreement. The seller maintained the right to sell and pay no one a commission with an exclusive agency listing.

Legally, can a buyer's agent disclose information about their client's new baby?

No, a buyer's agent has a fiduciary duty of confidentiality. Continue

The listing agreement usually creates an agency relationship between: - The buyer and the seller - The broker and the buyer - The broker and the seller - The broker and the salesperson

The broker and the seller

Who or what determines the commission earned by a listing broker?

The listing broker and seller

Who determines the brokerage fee charged by a listing broker?

The principal and the broker

The protection period in a buyer's representation agreement protects _____ if the buyer later purchases a property that was introduced to them by the agent during the term of the agreement.

The protection period in a buyer's representation agreement protects the buyer agent's commission

Dual / limited agency

This type of agency is illegal in Texas.

Ed, a potential buyer, has offered $15,000 over the listing price, and Sonia is putting in another offer. The seller's agent tells Sonia that Ed has offered a certain amount over the list price. Is this legal?

Yes, it is not illegal for a seller's agent to disclose such information about other potential buyers' offers. Continue

protection period

a period of time after the buyer's representation term ends in which the agent can still get compensation for their role in a transaction. This protects you in the event that you and your client part ways, and then they suddenly decide to put in an offer on that home you showed them.

A substantive dialogue is one wherein the agent and buyer discuss ____.

a specific property. It is a requirement of The Real Estate License Act that the buyer receive the IABS from the agent on the first substantive conversation. Continue

A geographic region in which similar homes compete for buyers is known as a _______.

market area

At the first substantive communication with a party, an agent may just refer the party to their business website for the IABS Notice. TRUE FALSE

false

A broker who enters into a Listing Agreement with a seller is considered a: principal fiduciary trustee client

fiduciary

Universal Agency: The Most Broad Type of Agency

gives agents the power to act on behalf of their principal and make decisions on behalf of the principal. - agent has the actual power to sign legal documents on behalf of their principal.

death on a property from natural causes, suicide, or accident unrelated to the property

it is not prohibited.