Real Estate Principles Chapter 10

Fiduciary

A person in a position of trust and confidence, as between principal and broker; broker as a fiduciary owes certain loyalty which cannot be breached under the rules of agency.

Applied Agency

Agency that exists as a result of actions of the parties.

Broker/Agent Relationship

An agency relationship also exists between the sponsoring broker and the sales associate

Express Agency

An agency relationship created by oral or written agreement between principal and the agent.

Dual Agency

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

Single Agent

An agent who works only for the buyer or the seller.

Agent

One who acts for and with authority from another called the principal.

Client

Prior to signing a listing agreement, a party in a real estate transaction who will employ an agent.

Ostensible Authority (apparent authority)

That authority which a third person reasonably believes an agent possesses because of the acts or omissions of the principal.

Fiduciary Duty

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.

Universal Agent

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

Principal

The employer of an agent; one of the main parties in a real estate transaction, such as a buyer, borrower, seller, or lessor.

Dual Agency

When a Broker is representing both parties to a transaction. This is unethical unless both parties agree to it. Advantages: - helps expedite the transaction - ease of communication - broker earns higher net commission(doesn't have to split commission) Disadvantages: - increases risk of violating broker's fiduciary duties - increases risk of conflict of interest - increases broker's reliability

broker/ principal/ customer relationship

When a broker finds a buyer for the principal's property, the buyer is considered the customer.

Non-Exclusive Listing (Open Listing)

a listing given to one or more brokers in which the broker procuring a sale is entitled to the commission but imposes no commission obligation on the owner when the owner sells the property.

Respondent Superior

A common-law doctrine that makes an employer liable for the actions of an employee when the actions take place within the scope of employment.

Broker & Principal Relationship

A homeowner known as the principal hires a broker to sell their house. The broker and principal are bound by a listing contract.

Exclusive Agency Agreement

A listing given to only one broker (exclusive) who is entitled to the commission if the broker or any agent of the listing broker effects a sale but imposes no commission obligation on the owner who sells the property to a person who was not interested in the property by efforts of the listing broker or an agent of the listing broker.

Exclusive Agreement (Exclusive Right to Sell Listing Agreement)

A listing given to only one broker who is entitled to the commission if anyone sells the property during the term of the listing contract.

Net Listing

A listing which provides that the agent may retain as compensation for agent's services all sums received over and above a net price to the owner.

Gross Rent Multiplier (GRM)

A number which, times the gross income of a property, produces an estimate of value of the property.

Real Estate Broker

A person employed for a fee by another to carry on any of the activities listed in the license law definition of a broker.

Independent Contractor

A person who acts for another but who sells final results and whose methods of achieving those results are not subject to the control of another.

Section 1031 Exchange

A section of the U.S. Internal Revenue Service Code that allows investors to defer capital gains taxes on any exchange of like-kind properties for business or investment purposes.

Real Estate Broker

An agent authorized under state real estate licensing laws to operate independently in a real estate brokerage business

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.

Listing Contract

An employment agreement between an owner and broker defining the duties and rights of both parties. A contract in which a property owner employs a real estate broker to market the property described in the contract.

Real Estate Salesperson

An individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker. Never directly employed by the principal.

Fiduciary duties owed by an agent

C.are O.bediance A.ccounting L.oyalty D.isclosure

Sherman Anti-Trust Act

Federal legislation including imposition of civil and punitive damages for anti-trust activities.

Independent Contractor

The real estate salesperson serves as an independent contractor under his/her sponsoring broker. Workers who hold non-employee status under the law.

Agency

The relationship between a principal and the principal's agent which arises out of contract wherein the agent is employed by the principal to do certain acts dealing with a third party.

Agency

The relationship between principal and the principal's agent which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.