CALIFORNIA REAL ESTATE PRINCIPLES: CHAPTER 4: AGENCY AND ITS RESPONSIBILITIES: TERMS AND QUIZ.

d. Agency

When a seller grants the right to sell and the broker agrees to use diligence in obtaining a purchaser, this is called: a. attorney in fact b. power of attorney c. specific performance d. agency

a. 2 years

When inspecting a seller's home, the agent discovers several physical defects that the agent fails to disclose to the buyer. The buyer can file civil action against the agent for up to: a. 2 years b. 3 years c. 4 years d. 5 years

d. It may be misrepresentation if a reasonable person considers it "statement of fact."

Which of the following is most correct about "puffing?" a. It is legal and proper business tactics. b. It is usually unethical unless approved by the agent's broker c. It is only an "opinion of value" of a specific property as of a given date. d. It may be misrepresentation if a reasonable person considers it "statement of fact."

Agents must pay their own:

a. Federal income tax b. State income tax c. Social security d. Disability insurance e. Workman's compensation (unless broker pays) f. Federal unemployment insurance g. State unemployment insurance

Desk Cost

for a broker is the total operating expenses divided by the number of agents in the office

Procuring Cause

is defined as a series of unbroken events that lead to an acceptable agreement with the seller.

Multiple Listing Service (MLS)

- An association of real estate brokers and salespeople who mutually share listings and sales. 1. Subagents and Cooperating Brokers - A licensed broker or salesperson upon whom the powers of an agent have been conferred, not by the principal, but by the agent with the principal's authorization.

Easton vs. Strassburger

- Greatly extended the liabilities of brokers engaged in residential real estate sales. a. This court case established the need for agents to visually inspect the property for "red flags" and disclose the findings to their clients.

BROKER'S RESPONSIBILITIES - Trust Accounts (Other People's Money)

1. A broker accepting a money deposit (and instructions) is required to: a. give it to the principal; b. place it in a trust account; or c. give it to the escrow company. 2. Deposits other than the initial deposit (usually around $200) to start the account are never the personal property of the broker.

Listing Agreements

1. A contract to employ a broker, legally referred to as an agent, to do a certain thing for the owner/seller. 2. All real estate listings must be in writing in order to collect a commission.

A BROKERAGE MUST BE RUN LIKE A BUSINESS

1. A gross dollar is all the income that is received by the office before paying out commissions. 2. A company dollar is the dollar a broker receives after all salespersons' commissions have been paid.

Cooperating Brokers

1. A non-listing broker (subagent) who also works to sell the listed property. 2. Agreements between brokers and salespeople must be in writing.

Agent, Principal, and Third Party

1. Agent - One who acts for and with authority from another, called the principal. 2. Principal - A person who hires or employs an agent to work for him/her. 3. Third Party - The other person in a contractual negotiation, other than the principal and his/her agent. - OBSTENSIBLE or IMPLIED AUTHORITY

Responsibilities of Agency

1. Agent must inform principal of all facts pertaining to handling of the principal's property. 2. Agent may not gain any monetary interest in the property without the principal's prior consent. 3. Agent may not use principal's property to his or her own advantage.

Option Listing (Reserved by Broker)

1. An OPTION LISTING gives the listing broker the right to purchase the property. 2. A broker with an option listing MUST disclose to prospective buyers that he is acting as a principal, and present all offers to the seller.

BROKER'S RESPONSIBILITIES - Power of Attorney

1. An acknowledged, written authorization of one person to act for another. 2. General Power of Attorney - allows the person so authorized to perform any act the principal could perform. a. Attorney in Fact - under a "general" power of attorney, is an agent who may have the power to transact all of a principal's business. b. Special Power of Attorney

BROKER'S RESPONSIBILITIES - Disclosure of AIDS and Death

1. An occupant's death from AIDS or AIDS-related illness, or any other contagious disease, is a highly emotional issue. 2. By law, sellers, brokers, and landlords have no liability for failure to disclose a prior occupant's death or its cause after 3 years.

BROKER'S RESPONSIBILITIES - Written Broker-Associate Contracts

1. As required by the Real Estate Commissioner's Regulations, brokers must have a written contract with each licensed member of the sale's staff. 2. A copy of this contract must be retained by all parties for three years from the date of termination.

Net Listing

1. Commission consists of that amount in excess of a specific predetermined price set by the seller. 2. Must be used with another listing 3. Seldom Used

BROKER'S RESPONSIBILITIES - Warranty of Authority

1. Express Warranty - a written listing exists between the seller and broker. 2. Implied Warranty - given to a broker if he or she merely shows the property with the seller's consent.

BROKERS' DUTIES, RIGHTS, AND RESPONSIBILITIES: TRUTHFUL RELATIONSHIPS (THIRD PARTIES)

1. Honesty - Disclose Material Facts 2. Reasonable Skill and Care 3. Fair Dealing 4. Good Faith

BROKERS' DUTIES, RIGHTS, AND RESPONSIBILITIES: FIDUCIARY RELATIONSHIP (PRINCIPALS)

1. Honesty - Disclose Material Facts 2. Utmost Care 3. Integrity - Accounting for Actions 4. Loyalty 5. Obey - Lawful Instructions 6. No Secret Profits

BROKER'S RESPONSIBILITIES - Salespeople May be Independent Contractors or Employees

1. Independent Contractor - sells final results rather than time. Physical conduct is not subject to the control of the broker (sets own hours).

Misrepresentation of a Material Fact: Three types:

1. Innocent Misrepresentation 2. Negligent Misrepresentation 3. Fraudulent Misrepresentation

Listing and Selling Agents

1. Listing Agent - obtains listing agreement to sell a particular property and must always represent at least the seller. 2. Selling Agent - negotiates the sale of a property. 3. Listing and Selling Agent (same person) - can represent both the buyer and seller as long as permission and consent has been obtained from both parties.

Open Listing (Unilateral, Non-Exclusive Contract)

1. Merely an authorization to sell a property. 2. May be given to any number of brokers. 3. Owner may find own buyer and pay no commission. 4. Usually no time limit. 5. Few brokers use this type of listing.

Exclusive Right To Sell Listing

1. Only the listing broker has the right to sell. a. Preferred by most brokers. b. Broker or salesperson entitled to a commission if property sold within listing period even if owner finds own buyer. c. Definite termination date required by law.

Exclusive Agency Listing

1. Only the listing broker is entitled to a commission a. Owner may still find buyer and pay no commission. b. Only one broker eligible to sell property. c. Definite termination date required by law.

There are 5 basic types of listings:

1. Open Listing 2. Exclusive Agency Listing 3. Exclusive Right to Sell Listing 4. Net Listing (rare) 5. Option Listing

In California, any person in real estate who is acting in return for compensation from others must have a Bureau of Real Estate (BRE) license to:

1. Sell or offer to sell. 2. Buy or offer to buy. 3. Solicit prospective buyers or sellers. 4. Negotiate the purchase, sale, loan, or exchange of business opportunities or real estate. 5. Negotiate leases and collect rents.

Sequence of filling in and signing the transfer disclosure statement form:

1. The Transfer Disclosure Statement form should be filled out and signed completely by the seller at the time of listing the property. Since the seller is the one most familiar with the property, he or she must be encouraged to be forthright and honest about all known defects. 2. The seller's agent makes a visual, diligent inspection of the property, fills out the Transfer Disclosure Statement, and signs at the same time the seller lists the property for sale. 3. The buyer should receive a copy of the Transfer Disclosure Statement and sign that he or she has received it before making a written offer. 4. The buyer's agent must also visually inspect the property, fill out the appropriate section of the statement, and sign it. 5. If the buyer fails to receive the Transfer Disclosure Statement form prior to signing the contractual offer (Deposit Receipt), he or she has the right to cancel, after receipt of the Transfer Disclosure Statement, for any reason (three days if delivered by hand or five days if mailed). A written notice of termination must be delivered to the seller or to the seller's broker.

TERMINATION OF AGENCY RELATIONSHIP: Reasons for Termination:

1. The expiration of the agency (listing) (usually the case). 2. Destruction of the property. 3. Death or incapacity of either the broker or seller. 4. Agreement by both the broker and seller. 5. Renouncement of listing agreement by the broker (may be subject to damages for breach of contract). 6. Revocation of listing agreement by the seller (may be liable for the commission). 7. Close of Escrow.

BROKER'S RESPONSIBILITIES - CalBRE Notification

1. When a salesperson chooses to leave the employ of a broker, that broker must notify the CalBRE within 10 days. 2. When a salesperson transfers a license to a new broker, that broker must notify the CalBRE within 5 days of the new employment.

BROKER'S RESPONSIBILITIES - Agents Who Buy and Sell for Their Own Account

1. When transferring or selling his or her own property, the broker must: a. disclose the fact that he or she is a licensed real estate professional to all involved in the deal. b. state this fact in all written contracts. c. inform your own broker, most brokers have their own requirements.

Policy Manual

A written book of procedures explaining how a broker expects the agents working under him or her to conduct business and handle routine problems

REQUIRED AGENT DISCLOSURES—SUMMARY (1 to 4 Unit Residential Sales)

A. Visual Inspection B. Disclosure of Agency Relationship C. Disclosure of the Negotiability of Real Estate Commissions D. No Disclosure Required for Manner/Occurrence of Death; Affliction of Occupant with AIDS

BROKER'S RESPONSIBILITIES - Torts by An Agent

Any civil injury or wrong committed on a person or his property.

Third Party

Any party to a transaction other than the principal with whom you have an agency relationship

Open Listing

Authorization from a property owner giving a real estate agent the non-exclusive right to secure a purchaser. Other brokers, or the owners themselves, may also solicit a purchaser.

Pop Ups

Paid advertisements that appear suddenly on a computer screen.

d. Paul is entitled to a full commission and Bill is entitled to a full commission as well

Seller Skinner signed a 90-day exclusive right to sell listing with Broker Bill. Two weeks later, Skinner canceled the listing with Bill and gave and open listing to Broker Carl and another open listing to Broker Paul. Three weeks later, Paul presented an offer to Skinner that the seller accepted. Which of the following is most correct? a. Broker Bill only is entitled to a full commission b. A full commission will be divided equally between Bill, Carl, and Paul c. Broker Paul only is entitled to a full commission d. Paul is entitled to a full commission and Bill is entitled to a full commission as well

d. Broker Baker is the procuring cause of the sale and is entitled to a full commission

Seller signed a 90-day exclusive right to sell listing with Broker Able. When the listing expired, Seller gave an open listing to Broker Baker and Broker Charlie. Three weeks later, Broker Baker presented an offer to the seller which he accepted. Which of the following is most correct? a. Broker Able only is entitled to a full commission b. A full commission will be divided equally between Able, Baker, and Charlie c. Broker Charlie is entitled to a full commission d. Broker Baker is the procuring cause of the sale and is entitled to a full commission

a. written agreement

The best way to establish an agency relationship is through: a. written agreement b. oral agreement c. estoppel d. consideration

BROKER'S RESPONSIBILITIES - Transaction File

The file or folder (all documents) kept for three years by the broker for each real estate transaction in which the broker or his or her salespeople participated.

Principal

The person(s) who employs a real estate agent, usually through a listing agreement

Fiduciary Relationship

The relationship between the agent and the principal that requires the highest level of trust and good faith

Agency

The relationship between the principal and the principal's agent that 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

Commission

1. A COMMISSION in real estate is a fee paid, usually as a percentage of the selling price, to a broker/agent as compensation for his/her services. 2. The broker must provide a buyer who is ready, willing, and able to buy. 3. The commission rate is entirely negotiable (usually 3% to 10%). 4. A commission can be earned even if the seller backs out. 5. If there are several brokers or salespeople trying to sell the same property, the agent who is the procuring cause of the sale earns the commission. *If more than one broker or salesperson is involved, each gets a percentage which is spelled out in the listing agreement*

Listing Agreement Copies

1. Give copy when signed 2. Couples who are considered "one legal person" receive one copy

BROKER'S RESPONSIBILITIES - Misrepresentation of a Material Fact

1. Misrepresentation - an untrue statement made by a broker to influence the outcome of a sale. 2. "Puffing" is a statement of opinion (not fact) that exaggerates a property's benefits.

Agency Disclosure Law

1. The Real Estate Agency Relationship Disclosure Act became law in 1988. 2. The law (Civil Code) requires each agent with whom you have more than a casual relationship to provide you with (and fully explain) a Disclosure Regarding Real Estate Agency Relationships Form. 3. Both the listing broker and the selling broker must declare in writing, as soon as is possible, whom they represent: a. the seller/owner (seller's agency), b. the buyer (buyer's agency), or c. both the seller and buyer (dual agency). - This requires the consent of all parties involved in the transaction. 4. The only requirement is that the listing broker must at least represent the seller. 5. This law applies to all residential sales of from one to four units

REALTOR domain

A domain suffix available only to REALTORS

Agency Disclosure Form

A form presented to the principal(s) in a transaction stating exactly who the agent is working for: the buyer, the seller, or both

Transfer Disclosure Statement

A form that notifies buyers of any physical defects to a property and requires the seller and the agent to list any evidence of defects of which they are aware

Exclusive Agency Listing

A listing agreement employing a broker as the sole agent for the seller of real property, under the terms of which the broker is entitled to a commission unless the homeowner sells the property.

Exclusive Right to Sell Listing

A listing agreement employing a broker to act as an agent for the seller of real property. Under the terms of this agreement, the broker is entitled to a commission if the property is sold during the duration of the listing by the broker or by the owner without an agent

Net Listing

A listing that provides for the agent to retain, as compensation for his or her services, all sums received over and above a net price to the owner.

Subagent

A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent authorized by the principal

Independent Contractor

A person who acts for another, selling final results and using his or her own judgment to achieve those results

c. the broker who employs him/her as a salesperson

A salesperson's listings are the property of: a. the salesperson b. the salesperson and his/her heirs c. the broker who employs him/her as a salesperson d. the MLS

Automated Valuation Model (AVM)

A service that can provide real estate property valuations using mathematical modeling combined with a database

QR Code

A type of barcode that consists of black modules (square dots) arranged in a square grid on a white background, which can be read by an imaging device (such as a camera) and processed until the image can be appropriately interpreted

Dual Agency

An agency relationship in which the agent acts concurrently for both of the principals (buyer and seller), with their consent, in a transaction

Secret Profit

An agent's making of additional money in a real estate transaction without disclosing it to the principal and third party

Multiple Listing Service (MLS)

An association of real estate agents that provides a pooling of listings and the sharing of commissions

BROKER'S RESPONSIBILITIES - Secret Profit

An illegal payment to a broker or salesperson which violates the fiduciary relationship.

b. $200

How much of a broker's personal funds can be kept in his or her trust account without being guilty of commingling? a. $100 b. $200 c. $400 d. As much as he/she wants

Real Estate Transfer Disclosure Statement

Identifies items of value attached to the structure or land and states whether these items are operational.

Innocent Misrepresentation

Making false statements about a property, without realizing it

Negligent Misrepresentation

Making false statements regarding a property that could have been checked out or verified

General Attorney in Fact

One who is authorized to perform many acts for another under a power of attorney

Employee

One who works directly for another person is told what to do and is controlled in how they do it

Special Attorney in Fact

Someone authorized to represent a principal in a specific task, such as selling a property

Ratification

The approval of an act performed on behalf of a person without previous authorization, such as the approval by a principal of a previously unauthorized act of an agent

c. are automatically canceled and the new broker would need to re-list the properties.

The broker in a large real estate office dies. All listings: a. usually belong to the subagents according to the terms of the broker/associate b. are continued during probate, unless the subagent moves to another firm c. are automatically canceled and the new broker would need to re-list the properties d. may be canceled unilaterally by each principal with 24 hours written notice.

d. the duty of honesty and fair dealing

The broker, as agent of the seller, owes the buyer: a. only a duty to disclose any item that relates directly to the sales price of the property b. the same fiduciary obligations he or she owes to the seller c. only the duty to answer questions honestly d. the duty of honesty and fair dealing

Commingling

The mixing of funds held in trust with personal funds

Estoppel

The theory of law that states a person cannot suddenly assert a legal right when that person has neglected to assert it previously. For example: If someone claims to be your agent and you know about it and don't stop that person, you can't later claim that person was not acting on your behalf

Conversion

The unlawful taking and use of another's property placed in your trust, as an agent, by that person