Real Estate Florida: Unit 4

True or False: The designated sales associate disclosure notice includes the duties of a single agent.

The statement is true. The disclosure notice includes special language regarding confidential information and also includes duties of a single agent.

Limited Representation

A broker who provides representation to a buyer, a seller or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent.

nonrepresentation

A broker working in a nonrepresentation capacity with a seller can enter into a listing agreement with the seller and be paid compensation.

agent

A person who accepts the authority (and the responsibilities, duties, and obligations associated with that authority) is called the agent. An agent is the person entrusted with another's business. An agent is authorized to represent and act for the principal.

principal

A person who delegates authority to another is called the principal

Transaction Broker

A transaction broker is a broker who provides limited representation to a buyer, a seller, or both in a real estate transaction, but who does not represent either party in a fiduciary capacity or as a single agent.

No brokerage relationship

An arrangement in which the broker does not represent either the buyer or the seller but in which the broker instead works to facilitate the transaction.

customer

Chapter 475 defines customer as a member of the public who is or may be a buyer or a seller of real property and may or may not be represented by a real estate licensee in an authorized brokerage relationship

Dual Agency

Dual agency occurs when a brokerage firm represents as a fiduciary both the buyer and the seller in the same real estate transaction.

single agent

Florida license law defines a single agent as a broker who represents, as a fiduciary, either the buyer or the seller, but not both, in the same transaction.

designated sales associates

In a nonresidential real estate transaction where the buyer and seller each have assets of $1 million or more, the broker at the request of the buyer and the seller may designate two sales associates to act as single agents for the buyer and the seller in the same transaction. The two sales associates in such an arrangement are called designated sales associates. Note that in a residential transaction this is an illegal dual agency.

caveat emptor

Latin term meaning "let the buyer beware"

at arm's length

People dealing at arm's length conduct negotiations on their own behalf without trusting the other's fairness or integrity and without being subject to the other's control or influence.

Residential sale transactions

Residential sale transactions are defined as: improved residential property of four or fewer units; unimproved residential property zoned for four or fewer units; and agricultural property of 10 or fewer acres.

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Confidentiality

Single Agent

Fiduciary

The agency relationship creates a fiduciary relationship with the principal. A fiduciary acts in a position of trust and confidence for another. The fiduciary owes complete allegiance to the principal.

Which brokerage relationship duty applies to all three types of brokerage relationships?

The answer is accounting for all funds. Loyalty and confidentiality are single agent duties. The duty to use skill, care, and diligence is a duty of transaction broker and single agent relationships. Accounting for all funds applies to no brokerage, transaction broker, and single agent relationships.

Which type of transaction requires that the parties to the transaction receive brokerage relationship disclosures?

The answer is agricultural property of 10 or fewer acres. Agricultural property that consists of 10 or fewer acres is considered a residential sale under Florida license law.

Which brokerage relationship duty applies only to a transaction broker relationship?

The answer is exercise limited confidentiality. Full disclosure is a single agent duty. Dealing honestly and fairly and accounting for all funds apply to all three disclosure relationships. Exercising limited confidentiality is a brokerage relationship duty unique to transaction broker relationships.

Which brokerage relationship duty applies only to a single agent relationship?

The answer is full disclosure. Four duties apply only to single agent relationships: confidentiality; obedience; loyalty; and full disclosure.

On Sunday at an open house, a sales associate receives two offers on a home listed for $300,000. One offer is for $250,000 cash at closing. The second offer is for $295,000 contingent upon the buyer securing a mortgage for 90% of the sale price. What action should the sales associate take?

The answer is present both offers, explaining the details of each contract to the seller. Unless a party has previously directed the licensee otherwise in writing, the licensee must present all offers and counteroffers in a timely manner.

The brokerage relationship disclosure requirements in Chapter 475 apply to which transaction?

The answer is sale of three vacant lots zoned for single-family use. Brokerage relationship disclosure requirements apply to residential transactions. A residential sale is defined as the sale of improved residential property of four or fewer units, the sale of unimproved residential property intended for use as four or fewer units, and the sale of agricultural property of 10 or fewer acres.

Is a broker required to retain the brokerage relationship disclosure documents, and if so, for how long, if a written nonresidential transaction that used designated sales associates fails to close?

The answer is the broker must retain the disclosure documents for five years even if a nonresidential transaction that used designated sales associates fails to close. Brokers must retain brokerage relationship disclosure documents for five years for all nonresidential transactions that use designated sales associates that result in a written contract to purchase and sell real property. This requirement includes files of properties that may have failed to close.

In commercial real estate transactions that meet specific criteria, a real estate brokerage may use one sales associate to work as a single agent of the buyer and another sales associate to act as a single agent of the seller. Which criteria must be met?

The answer is the broker must serve as a neutral party and not give guidance or representation to the buyer and the seller. The buyer and the seller may request, in certain commercial real estate transactions, that two sales associates be designated, with one to act as a single agent for the buyer and the other to act as a single agent of the seller. The broker serves as a neutral party helping to facilitate the process without giving guidance or representation to the parties in the transaction.

Which statement is unique to the transaction broker relationship?

The answer is the customer is not responsible for the acts of the licensee. The duty of obedience is unique to the single agent relationship. In all three brokerage relationships, when dealing in residential real estate, the licensee must disclose all known facts that materially affect the value of the real property. The licensee is not required to give written notification of the brokerage relationship duties in a transaction broker relationship. The buyer or the seller is not required to sign the disclosure unless transitioning from one brokerage relationship to another.

Which information must be disclosed to a prospective buyer regarding a particular property?

The answer is the property is located in a flood zone area that requires flood insurance coverage. Licensees have a duty to disclose to buyers all known facts—such as defects—that materially affect the value of a residential property. Material defects have to do with the property; it does not concern information about previous occupants.

In Florida, which type of brokerage relationship is presumed?

The answer is transaction broker. Under Florida law, it is presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established.

Which action does NOT terminate a single agent brokerage relationship with the seller?

The answer is withdrawal of an offer to purchase. The brokerage relationship exists between the brokerage company and the seller. Therefore, withdrawal of an offer to purchase does not terminate the single agent relationship entered into with the seller.

True or False: A general agent is authorized by the principal to handle a specific business transaction.

The statement is false. A general agent is authorized by the principal to perform acts associated with the continued operations of a certain business of the principal.

True or False: An agency relationship between a principal and a broker may be terminated by the principal for any reason.

The statement is false. A principal is not free to revoke an agency relationship in all circumstances. The principal may revoke an agency if the agent breaches one or more of the fiduciary duties. Several other events could terminate an agency relationship, such as the fulfillment of the agency's purpose, mutual agreement to terminate the agency, or bankruptcy of the principal.

True or False: A single agent relationship may be changed to a transaction broker relationship at any time during the relationship between the agent and the principal, provided the agent first obtains the principal's verbal consent to the change in relationship.

The statement is false. A single agent relationship may be changed to a transaction broker relationship at any time during the relationship between the agent and principal, provided the agent first obtains the principal's written consent to the change in relationship.

True or False: Confidential information learned during the course of the single agency cannot be divulged by the broker until the transaction has concluded and the agent-principal relationship has ended.

The statement is false. Confidential information learned during the course of the single agency cannot be divulged before or after the transaction has concluded and the agent-principal relationship has ended.

True or False: The transaction broker relationship includes the duty of obedience.

The statement is false. Obedience is a single agent duty.

True or False: Residential sales are defined as the sale of improved residential property of two or fewer units, the sale of unimproved residential property intended for use as two or fewer units, or the sale of agricultural property of five or fewer acres.

The statement is false. Residential sales are defined as the sale of improved residential property of four (not two) or fewer units, the sale of unimproved residential property intended for use as four (not two) or fewer units, or the sale of agricultural property of 10 (not 5) or fewer acres.

True or False: The appropriate type of brokerage relationship is determined by the customer.

The statement is false. The appropriate type of brokerage relationship is determined by the broker.

True or False: The broker serves as an advisor to the buyer and the seller in certain nonresidential transactions.

The statement is false. The broker serves as an advisor to each designated sales associate—not to the buyer or the seller.

True or False: Bankruptcy of a prospective buyer may terminate a buyer broker relationship.

The statement is true. A brokerage relationship between a principal (or a customer) and a broker may be terminated because of bankruptcy of the customer.

True or False: A single agent is defined as a broker who represents, as a fiduciary, the buyer or the seller but NOT both in the same transaction.

The statement is true. A single agent is a broker who represents, as a fiduciary, the buyer or the seller but not both in the same transaction.

True or False: Administrative law consists of rules and regulations created by the FREC to govern real estate practice in Florida.

The statement is true. Administrative law is a body of law created by administrative agencies in the form of rules, regulations, orders, and decisions.

True or False: Real estate brokers are required to retain buyer brokerage agreements for a period of five years.

The statement is true. Brokers must retain brokerage relationship disclosure documents and buyer broker agreements for five years for all residential transactions that result in a written contract to purchase and sell real property and all nonresidential transactions that use designated sales associates.

True or False: Designated sales associates may only be used for certain nonresidential transactions.

The statement is true. In a nonresidential real estate transaction where the buyer and the seller each have assets of $1 million or more, the broker at the request of the buyer and the seller may designate two sales associates to act as single agents for the buyer and the seller in the same transaction.

True or False: The seller, in a single agent relationship, is the principal.

The statement is true. In a single agent relationship with the seller, the seller is the principal and the broker is the agent of the principal.

True or False: The transaction broker relationship requires that the licensee exercise limited confidentiality, including not divulging the sellers' motivation for selling their property.

The statement is true. Limited confidentiality prevents the disclosure of the seller's motivation to sell the property.

True or False: Brokers must account for all funds entrusted to them with regard to a real estate transaction.

The statement is true. Such holdings are considered trust funds or escrow funds and must be kept separate from the broker's funds.

True or False: A real estate brokerage company has entered into a single agent buyer broker relationship with the buyer. In order to show this buyer property that is listed with the same brokerage company, both the seller and the buyer must transition to a transaction broker relationship before the buyer can be shown the seller's property.

The statement is true. The broker may not be a single agent of the buyer and a single agent of the seller in the same transaction. Because the seller and the buyer have each entered into single agent relationships with the brokerage firm, they must both give written consent to transition to transaction broker relationships.

True or False: The duty to account for all funds is a duty in a no brokerage (nonrepresentation) relationship.

The statement is true. The duty to account for all funds is a no brokerage relationship duty. In fact, the duty to account for all funds is a duty in all three brokerage relationships.

True or False: The duty to disclose all known facts that materially affect the value of residential real property that are not readily observable to the buyer is a duty of all three types of brokerage relationships.

The statement is true. The duty to disclose all known facts that materially affect the value of residential real property that are not readily observable to the buyer is a single agent duty, a transaction broker duty, and a no brokerage relationship duty.

True or False: Nonrepresentation is one of three types of brokerage relationship options.

The statement is true. There are three brokerage relationship options. They are: nonrepresentation (no brokerage relationship), single agency, and transaction broker.

True or False: Licensees must fulfill the duties of a transaction broker when that form of representation is selected.

The statement is true. There is no requirement to give a written disclosure when working in a transaction brokerage capacity. However, licensees must fulfill the duties of a transaction broker when that form of representation is selected.

consent to transition

To gain the principal's written consent to a change in relationship, the buyer or the seller (or both) must sign the consent to transition to transaction broker notice set forth in Chapter 475.

An _____ is the person entrusted with another's business.

agent

People who deal _______ conduct negotiations on their own behalf without trusting the other's fairness or integrity.

at arm's length

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Account for all funds

both

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Deal honestly and fairly

both

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Disclose facts affecting value

both

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Present all offers

both

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Use skill, care, and diligence

both

For each brokerage relationship, indicate whether the brokerage firm works with a customer or principal. No brokerage relationship

customer

For each brokerage relationship, indicate whether the brokerage firm works with a customer or principal. Transaction broker

customer

Transaction brokers do not represent either buyer or seller in a ____ capacity.

fiduciary

administrative law

is a body of law created by administrative agencies in the form of rules, regulations, orders, and decisions. Florida Statute 475 empowers the Florida Real Estate Commission to govern real estate practice in Florida.

special agent

is authorized by the principal (broker or owner-developer) to handle a specific business transaction or to perform a specific act.

general agent

is authorized by the principal to perform acts associated with the continued operations of a particular job or a certain business of the principal. A general agent may represent the principal in a broad range of matters related to a particular business.

common law

is law based on usage, general acceptance, and custom. It is judge-made law manifested in decrees and judgments of the courts (case law). Common law originated in England and was later incorporated into the U.S. legal system. Under English common law, servants owed absolute loyalty to their masters. This absolute loyalty is one of the fundamental principles of the agency relationship. Agency law derives from common law.

statutory law

is written statutes enacted by a legislature. Chapters 455 and 475 are two Florida statutes enacted by the Florida Legislature pertaining to license law

A transaction broker provides ______ representation to a buyer, a seller, or both.

limited

Transaction brokers exercise _______ confidentiality.

limited

Indicate with a checkmark which transactions are considered residential real estate transactions under Chapter 475. Auction of real property

not a residential transaction

Indicate with a checkmark which transactions are considered residential real estate transactions under Chapter 475. Rental of residential property

not a residential transaction

A person who delegates authority to another is called the ____.

principal

Indicate with a checkmark which transactions are considered residential real estate transactions under Chapter 475. 3-unit residential property

residential transaction

Indicate with a checkmark which transactions are considered residential real estate transactions under Chapter 475. 7 acres agricultural property

residential transaction

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Disclosure (full)

single agent

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Loyalty and Obedience

single agent

For each brokerage relationship, indicate whether the brokerage firm works with a customer or principal. Single agent

single agent

Laws created by the Florida Legislature are called _____.

statutory law

In Florida, it is presumed that licensees are operating as ____

transaction brokers.

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Limited confidentiality

transactional broker

Determine whether each of the following duties applies to a transaction broker relationship, single agent relationship, or both. Perform additional duties

transactional broker

Common law is sometimes called ____.

unwritten law