Unit 9: Real Estate Agency
reasonable skill and care
"A duty owed to a client by an agent, reasonable care requires the agent to act at the utmost professional level in serving the client. Ex. Jason showed reasonable skill and care when he recommended to his client that he have an HVAC specialist inspect the furnace; it looked old and in need of repair.
loyalty
(client before anything) an agent must place the interest of the principal (CLIENT) ABOVE ALL OTHERS including agent's own interest
obedience
(you have to do what your principal tells you to do) an agent must obey the lawful directions of the principal
OLD CAR
- Obedience - Loyalty - Disclosure - Confidentiality - Accountability - Reasonable Care
implied agreement
A contract under which the agreement of the parties is demonstrated by their acts and conduct.
Buyer's Agent
A real estate professional who is under contract to locate property for a buyer and represent the buyer's interests in a transaction.
fiduciary relationship
A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.
express agency
Agency relationship based on an expressed agreement, either written or oral.
universal agency
Agent is authorized to perform in place of the principal. Agent has unlimited ability to bind the principal
express agreement
An oral or written contract in which the parties state the contract's terms and express their intentions in words.
Implied Agency
Based on the actions of the parties that imply that they have mutually consented to an agency relationship, an implied agency relationship is formed.
agents owe customers DAH
Disclosure (material facts) Accounting Honesty
Facilitator/Transaction Broker
Provides services, not representation. not in all states and no fiduciary duties. nonagency relationship
agency
The fiduciary relationship between a principal and an agent wherein the agent is authorized/employs to represent the principal in certain transactions.
Law of Agency
The law that governs the relationship between a principal and his or her agent.
a special or general agent can become a ____ with written power of attorney from principal
a universal agent
accounting
accountable for any money or personal property entrusted to a agent
While neither the real estate professional nor the represented party may have consciously planned to create an agency relationship, they can create one unintentionally, inadvertently, or accidentally by their
actions
general agency
agent is authorized to perform a series of acts associated with the continued operation of a particular business
The sales associates of a real estate broker act as
agents (representatives) of the broker
loyalty: acts as
an advocate for the principal
confidentiality
an agent must keep the principal's confidential informative private. must keep (PRICE,TERMS, and MOTIVATION = PTM) confidential forever!!! even if they aren't your client anymore
An agency relationship may be created by
an oral or written agreement between the parties (express agency)
POA (power of attorney) appoints
attorney-in-fact
listing agreement (seller representation agreement)
authorizes the broker to find a buyer or a tenant for the owner's property. (in writing for court, some states oral ok)
special agency buyer brokerage firm to
buyer
An express agency relationship between a buyer and a broker is created by a
buyer representation agreement
If the agent represents the seller, which common law of agency fiduciary duty includes helping the seller arrive at an appropriate and realistic listing price, discovering and disclosing facts that affect the seller, and properly presenting, as allowed by law, the contracts and other documents that the seller signs. It also means making reasonable efforts to market the property, such as advertising and holding open houses, and helping the seller evaluate the terms and conditions of offers to purchase.
care
physical characteristics of the property being transferred and the type of financing being used are examples of which common law of agency an agent owes the principal duty?
care
to use that skill and knowledge on a principal's behalf is which common law of agency duty?
care
Under the common law of agency, an agent owes the principal the six duties of (COLD-AC)
care, obedience, loyalty, disclosure, accounting, and confidentiality
The ____ is the principal to whom the agent gives advice and counsel.
client
Agency relationships in real estate transactions are governed by three kinds of law
common law statutory law administrative law
Any written agency agreement (with seller or buyer) should state how the agent is to be
compensated
The real estate professional may also be denied what on the grounds that there is no written agreement as required by law?
compensation
The principal's primary duties are to
comply with the agency agreement and cooperate with the reasonable expectations of the agent that is, the principal must not hinder the agent and must deal with the agent in good faith. The principal also must compensate the agent according to the terms of the agency agreement.
Errors and Omissions (E&O) Insurance
cover liability for errors and negligence in the listing and selling activities of a real estate broker and often the broker's sales associates.
disclosure (to buyers)
disclose to the principal and all parties all known material facts about the property full disclosure to the principal of all knowledge about the transaction (including but not limited to material facts)
Depending on state law, information that must be discussed in a sales transaction could include the identity of prospective purchasers, which may include any relationships the purchasers might have with the agent (such as when a relative or associate of the agent is a purchaser); the purchaser's ability to complete the sale or offer a higher price; any interest or prospective interest the agent has in the buyer or the buyer's business (such as the broker's agreement to manage the property after it is purchased); and an incorrect market value of the property. this represents what common law of agency?
disclosure
The real estate agent is obligated to discover facts that a reasonable person would feel are important in choosing a course of action, regardless of whether those facts are favorable or unfavorable to the principal's position. which common law of agency fiduciary duty is this?
disclosure
what are these examples of 1. listing agent must share with the seller concerns about the buyer's ability to qualify for a loan. (seller could state they only make $1,000 a month after looking at $400,000 houses) 2. buyer's agent should share with the buyer concerns about the property's condition and recommend expert evaluation (there's water stains on the ceiling, might be roof problems, suggest they get it looked at)
disclosure
agent's duties to third parties (DAH) disclosure,
disclosure at first substantive contact (inform customers to not share confidential information with agent) the agent's fiduciary duties would require disclosure of that information to the their principal
agent's duties to third parties (DAH) disclosure, accounting, honesty must disclose material facts even if sold as is??
disclosure required for properties being sold "AS IS"
scope of an agent's authority salesperson or broker associate to ____? ex: salesperson may sign listings on behalf of the brokerage firm
employing broker
An agency relationship between a real estate seller and a broker is generally created by a written
employment contract (commonly called a listing agreement)
Indicate the type of agency agreement created by each example. Buyer signs representation agreement
express agency
Indicate the type of agency agreement created by each example. seller signs listing agreement
express agency
true or false The fundamentals of general agency law have changed dramatically over the past two hundred years.
false
A real estate professional can represent a client as an agent, but in addition to the parties' assumptions and expectations, the real estate professional acts as a ____ and is subject to a wide range of legal and ethical requirements designed to protect the seller, the buyer, and the transaction itself.
fiduciary
The agent is entrusted with certain confidential information and has ___ responsibilities to the principal.
fiduciary
agent's duties in third parties what is the H in DAH
honesty and fair dealing agents must not lie to customer or misrepresent infomation
Indicate the type of agency agreement created by each example. Broker shows homes and makes offer for buyer
implied agency
Indicate the type of agency agreement created by each example. Buyer asks to see other homes at open house
implied agency
employment agreement of broker and sales associate must be
in writing
The agent must be particularly sensitive to any possible conflicts of interest. Because the agent may not act out of self-interest, the negotiation of a sales contract must be conducted without regard to how much the agent will earn in commission. which common law of agency fiduciary duties does this represent?
loyalty
agent puts the client interest first and this is called
loyalty
a real estate professional can represent a client as an agent meaning?
one who acts or has the power to act for another
Agent/Fiduciary (fid: trust or confidential)
one who is employed to represent a principal
third party
party to a transaction who is not a party to the particular contract. (a consumer)
agent's authority comes from a legal form called
power of attorney (POA)
In a real estate transaction in which an agency relationship is established, the ___ is the buyer or the seller or the landlord or the tenant.
principal
The ___is the principal in dealings with sales associates.
principal
agent legally replaces the?
principal
common law of agency specifies fiduciary duties to ___?
principal (OLD CAR) obedience loyalty disclosure confidentiality accountability reasonable car
scope of an agent's authority property manager to ___?
property owner
Remember, a real estate sales associate can only receive compensation from the
sales associate's employing broker
special agency listing brokerage firm to
seller
The scope of an agent's authority example of special agency pyramid
seller >>>>>special agency <<<<<buyer broker>>>>>special agency<<<<<<broker received by=sales person
scope of an agent's authority created by written contract pyramid for general agency
seller>>broker & salesperson>>general agency buyer>>>broker & salesperson <<<<general agency
can accept/reject offers and
sign for principal
nonagent (facilitator, intermediary, transactional broker, transaction coordinator, or contract broker)
someone who works with a buyer and a seller (or a landlord and a tenant), assisting one or both parties with the transaction without representing either party's interests.
The agent works for the principal and with the customer. what does this mean?
that the agent supports and defends the principal's interests, not the customer's.
In a real estate transaction, a firm's broker will be the ____ and may share this responsibility with the sales associates who work for the firm.
the agent
special agency
the agent is authorized to perform a particular without the ability to bind the principal contractually
gratuitious agency relationship
the agent is not compensated by the principal
If a principal asks an agent to participate in an illegal or unethical act in selling a property, unlawful (ex: conceal a property defect or refuse to show property to member of a protected class: catholics/blacks)
the agent should decline the listing
A buyer's agent could instead be paid directly by the whom?, which is common in commercial
the buyer
Buyer Representation Agreement (similar to listing agreement)
the buyer representation agreement stipulates the activities and responsibilities the buyer expects from the broker in finding the appropriate property for purchase or rent.
principal
the individual who employs the agent and delegates to that agent the responsibility of representing the his/her principal's interests.
statutory law
the laws enacted by the legislature
the agent has a limited ability to bind ___?
the principal
The relationship between the principal and agent must be consensual meaning what?
the principal delegates authority, and the agent consents to act. The parties must agree to form the relationship.
client
the principal in a real estate transaction for whom a real estate broker acts as agent; when a broker represents someone in a relationship other than an agency.
The agency agreement between a broker and client usually authorizes the broker to act on
the principal's behalf
Fiduciary
the relationship in which the agent is held in a position of special trust and confidence by the principal.
administrative law
the rules and regulations created by real estate commissions and departments, as authorized by the legislature.
common law
the rules established by tradition and court decisions
the compensation for a cooperating broker will be paid by the seller's broker out of the commission paid by
the seller
customer
the third party or nonrepresented consumer who is not a principal but for whom some level of service may be provided and who is entitled to fairness and honesty; may be represented by a separate agent.
faciliator is the same as a ?
transaction broker
principal is the one who employes but may no be the person to pay the agent. true or false?
true
true or false Nonagents are often subject to specific statutory responsibilities. A broker may be considered a nonagent when dealing with a customer (someone other than the person the broker represents).
true
true or false If an agency relationship can be shown to have been intended, legal responsibilities may be imposed on the real estate professional even in the absence of a written agency agreement.
true
true or false In a real estate transaction, the source of compensation does not determine agency. An agent does not necessarily represent the person who pays the agent's commission.
true
true or false In traditional common law, the relationship in which the agent is held in a position of special trust and confidence by the principal is one of a fiduciary.
true
true or false: A representative who does not make a reasonable effort to properly represent the interests of the principal may be found negligent by a court of law. The representative is liable to the principal for any loss resulting from the representative's negligence or carelessness.
true
scope of an agent's authority is created by
written contract
an agent may only release confidential information is if???
written permission from the principal
Can a sales associate to represent a buyer as the buyer's designated agent, even when the sales associate's firm also represents the seller in the transaction?
yes