4.B. Brokerage Relationships in Florida
Relationships Options
- Transaction Broker - Single Agent - No Brokerage Relationship
Residential sale
- sale of improved residential properties of 4 or fewer units - sale of unimproved residential property intended for use as 4 or fewer units - sale agriculture property of 10 or fewer acres
11 Duties of Brokerage Relationship
1. Deal honestly and fairly 2. Disclosing all known facts that may materially 3. Accounting for all funds 4. Using skill, care and diligence 5. Presenting all offers and counter offers 6. Limited confidentiality Unless waived in writing 7. Additional duties mutually agreed to 8. Confidentiality 9. Obedience 10. Loyalty 11. Disclosure (Full)
7. Additional duties mutually agreed to
Broker must be careful to accept duties beyond the scope of limited representation
Material
Of, relating to, or consisting of physical matter Being of real importance or consequence Being an essential component Being relevant to a subject under consideration Being such as would affect or be taken into consideration by a reasonable person in acting or making a decision Examples of material disclosures would include the fact that other offers have been made (until the sale is closed), the buyer's financial situation, the relationship between an agent and participants of a transaction, and the commission split between a listing and selling agent.
4 types of Disclosures or Notices use to describe brokerage relationship:
- Single Agent Disclosure - Transaction Broker Disclosure - No Brokerage relationship - Transition to Transaction Broker Disclosure
Dual Agent
- a broker who represents both the buyer and the seller of a transaction in a FIDUCIARY capacity. - Real estate license law prohibits a broker to create a fiduciary relationship with both, buyer and seller at the same time.
Exceptions to Disclosure Requirements
1. Disclosure requirements do not apply when a licensee knows that the potential seller or buyer is represented by a single agent or a transaction broker; 2. When an owner is selling new residential units built by the owner and the circumstances or setting should reasonably inform the potential buyer that the owner's employee or single agent is acting on behalf of the owner, whether because of the location of the sales office or because of office signage or placards or identification badges worn by the owner's employee or single agent. 3. When a bona fide "open house" or model home showing that does not involve eliciting confidential information, the execution of a contractual offer or an agreement for representation, or negotiations concerning price, terms, or conditions of a potential sale 4. When unanticipated casual conversations between a licensee and a seller or buyer which do not involve eliciting confidential information, the execution of a contractual offer or agreement for representation, or negotiations concerning price, terms, or conditions of a potential sale; responding to general factual questions from a potential buyer or seller concerning properties that have been advertised for sale 5. Situations in which a licensee's communications with a potential buyer or seller are limited to providing general factual information, oral or written, about the qualifications, background, and services of the licensee or the licensee's brokerage firm; auctions; appraisals 6. Dispositions of any interest in business enterprises or business opportunities, except for property with four or fewer residential units.
3. Accounting for all funds
As either a buyer's or seller's agent, a real estate licensee is responsible for all the funds involved in the transaction. The broker receives funds related to a real estate transaction in trust or in escrow. - must keep records of all funds and transactions , which are subject to inspection by the DBPR. - is not entitle to any of this monies until the transaction is complete. - must be kept in a separate bank account segregated from a broker's own funds. - The broker can not access any of these monies until the transaction is complete, since the broker might have to return funds if the transaction doesn't go through.
Disclosure exemptions
Because only applies to Residential, they do NOT apply to: -nonresidential transactions -transaction broker relationship -rental or leasing (unless option to buy all or a portion) -auctions -appraisals -dispositions of any interest in business NOTE: disclosures do not need to be signed, only given to the person. But they cannot be spoken.
Brokerage Relationship Disclosure Act
Brokerage Relationship Disclosure Act is to provide that: (1) Disclosed dual agency as an authorized form of representation by a real estate licensee in this state is expressly revoked; (2) Disclosure requirements for real estate licensees relating to authorized forms of brokerage representation are established; (3) Single agents may represent either a buyer or a seller, but not both, in a real estate transaction; and (4) Transaction brokers provide a limited form of non-fiduciary representation to a buyer, a seller, or both in a real estate transaction. It was created to inform and educate the public regarding the types of authorities (brokerage relationships) that can be granted to a broker and the duties brokers has with each relationship. NOTE: payment of commission or the promise of payment, is NOT what determines if a broker relationship exists. FREC is authorized to discipline licensees for failure to abide by any provision in FS 475.278
Record Keeping
Brokerages must retain for 5 years all - disclosure documents and Buyer Broker Agreements for all residential transactions that result in a written contract - non-residential designated sales associate disclosure - even verbal agreements - files of properties that failed to close - brokerage relationship disclosures - escrow documentation - other documents associated with the property - Schools must maintain their records for 1 years after the end of each class. - duties owed to principals and customers NOTE: they must be placed in the DEAD file (failed to close file)
Relationship Disclosure requirements
Disclosures apply to ALL real estate transactions, sometimes are found in Listing Agreements, Buyer Broker Agreements, etc - it has to be written if is residential - Duties must be fully disclosed - must be written - in a timely manner - Needs its own signature line. - Single agent, must be made before or at the time of making the agreement, or before showing a property. - No brokerage, must be made before showing a property. - even if the effect is adverse and might result in quashing the deal. - even if is discovered after a purchase contract is signed. Examples: - Loaning money to a buyer for a down payment or that the buyer is a relative. - fact that other offers have been made (until the sale is closed) - the buyer's financial situation - the relationship between an agent and participants of a transaction - the commission split between a listing and selling agent.
11. Full Disclosure
In a Single Agent relationship, the broker must always let the principal know about all matters that affect the value of a property or the transaction. - may be held liable for failing to communicate material information that they were aware of or should have known. - Even if revealing the information may cause the transaction to fail, - includes the financial condition of a buyer - the true worth of a property - any personal relationship between the agent and the buyer - any personal interested in buying the listed property. (in this case an agent needs to withdraw and disclosed information learned) if not, is fraud. "overage" "secret profit" "secret commission"
1. Deal Honestly and Fairly
Licensees owe their customer the duties of honesty and good faith. The customer should be able to count on the statements and representations made by the licensee in regard to the real estate transaction. This means that statements made by the licensee related to the transaction should be reliable and accurate. The customer should feel confident that her/she is getting the necessary information in a timely fashion. Example: Harry is a transaction broker who wants to gain a full 6% commission by selling his own listing to a buyer. But on Friday, Kim, an Agent for a Real Estate company, presents a firm offer. Harry already has schedule an open house for Sunday, so makes up an excuse to put the offer from Kim on hold until Monday. He hopes to get another offer on Sunday from his open house, which means he won't have to split the commission. This behavior is unethical and Illegal as specify on the brokerage relationship disclosure
6. Limited confidentiality Unless waived in writing - this goes only to Transaction Brokers.
Prevents disclosure of information that may impact a transaction. Broker must keep information confidential unless the client gives permission in written to reveal it. Broker cannot disclose that: - seller will take less than asking or list price; that buyer will pay more than written offer - the motivation behind of either party of selling or buying property - that a seller or buyer will agree to financing terms other than those offered - any other information requested by a party to remain confidential. Example: -is divorce or illness in the family.
Terminating a brokerage relationship
Single or Transaction Brokerage is terminated when the objectives have been accomplished according to the terms of the contract and notice is given to the party. NOTE: Principal/Customer can REVOKE if any duties are breached by broker. Reasons for terminating a relationship can also be: -FULFILLMENT of the relationship purpose (finding a ready, wiling and able buyer) -mutual agreement to terminate the relationship -EXPIRATION of the terms (if no terms, courts ruled "reasonable time" is good) -Broker RENOUNCES to principal or customer by giving notice. -If Principal/Customer REVOKES prior to the termination date of the contract, by given notice, they may be liable for damages like advertising expenses -death of a seller's broker or the seller before finding a buyer -Death of the buyer's broker or buyer before finding a property for the buyer. -destruction of the property -condemnation by eminent domain -bankruptcy of the principal or the customer
2. Disclosing all known facts that may materially
The Seller and broker are obligated to disclosed facts that may affect the value of the property to the buyer. However, Florida Law mandates that certain items of information are not considered Material and do not have to be disclosed: a. Past or present personal medical information like the fact that an occupant may have been infected with HIV. b. The fact that a homicide, suicide, or death may haves occurred on the property. Examples: - knowledge of termites damage or leaks in the roof - cracks in the tile floor under the carpet - seller has disclose that the government is planning a toxic waste cleanup
9. Obedience
The agent is obligated to perform any instructions by the principal (whether seller or buyer) that are legal, or else withdraw from the relationship. An exception is when the principal order is illegal. - If the instructions will harm the principal, broker needs to inform the principal along with his opinion. - If principal does not changes his mind on any instructions, broker can either carry them or withdraw - brokers can not violate the law Example: - Principal ask agent to show the house only to hispanics, that is illegal and the agent is not bound to follow his instructions. - If a buyer wants to purchase a condominium that has pending litigation, the agent must inform the buyer of the litigation, If the buyer still wants to go thru with the purchase the agent can either withdraw or perform
4. Using skill, care and diligence
The broker must have experience, ability and knowledge. A broker who does poor work is liable for damages that could of happen to the customer and may be disciplined by the FREC - no mistakes in the contract and all deadlines are adhered to - must keep informed of current zoning and other developments that may affect the value of a property. Example: Michael is an agent who agrees to list a house in an area in which he is not familiar with the market. He did not take the time to research the fair market value of other similar properties in the area. Consequently, Michael listed the home below the market price and could now be considered negligent. If the seller desired, he could legally go after Michael for damages.
8. Confidentiality
The broker must keep confidential information and he/she must not reveal that information to any third party without the principal's permission, even after the agent/principal relationship has ended. Certain information is privileged and may not be revealed without the client's consent. Example: - Broker may not tell a buyer that a seller is forced to sell because of poor health or loss of job. - Confidentiality arrangement between doctors and their patients and attorneys and their clients. - As an agent you would be prohibited from revealing personal information about a client's marital problems, financial problems or need to sell a property. - Disclose a price that a principal has indicated as acceptable for a sale.
Cooperating Broker
When a principal hires a broker to sell a property, the broker may work with another broker to full fill the scope of his agency
Customer
a member of the public who is or may be a buyer or seller of real property and may or may not be represented by a real estate licensee in an authorized brokerage relationship
Fiduciary
is created when a broker accepts to be a single agent of the seller or the buyer, but not both. The fiduciary duties pick up where the common law duties left off. You will notice that for the most part, the duties are the same, with the exception of confidentiality. Under the common law duties, confidentiality tends to get lumped in with disclosure. EX: attorneys and clients, executors or administrators and legatees or heirs, trustees and beneficiaries, corporate directors or officers and stockholders, receivers or trustees in bankruptcy and creditors, guardians and wards, and confidential advisors and those advised
5. Presenting all offers and counter offers
must present all offers and counteroffers - in a timely manner - whether the offers are worthy or not in the opinion of the licensee - whether the offers are writing or verbal, unless otherwise specified in written. - even if a valid contract exist Florida Association of Realtors (FAR) listing agreement, the licensee can ask the principal's authorization to withhold verbal offers or to withhold offers after the principal signs a contract with a buyer
Designated Sales Associates
real state licensees designated by their broker, at the request of the customers, to represent the buyer and the seller as single agents - Buyer and seller must sign disclosures stating their assets meet the required assets, and requesting for the broker use designated Associates for representation. - Disclosure requirements are the same - NONresidential transaction. -The buyer and seller must have assets of 1 million or more - Broker serves as a neutral party, NO guidances or representation
10. Loyalty
requires the broker to always place the principal's interests above his or her own and above those other persons with whom the broker deals. - broker may not profit, or create profit for anyone else at the principal's expenses. - must get the most favorable price and terms for the principal - acting on behalf of the principal - not acting for parties with adverse interest in the same transaction - never hide the identity of anyone to induce the principal to sell or buy - broker must disclosing to the principal if the agent is interested in the property - if a broker has a personal reason for wanting the sale of a certain property. This might happen if the broker is a property manager of a building or if he has a personal connection to the owner of the property.
