Law of Agency

What is Agency?

-Agency relationship exists when one person the agent, acts for or on behalf of the other person the principal, also known as the client. - It is a fiduciary relationship meaning the relationship is based on trust. - Agent must always remain loyal to the client.

When an agent and potential party enter into a ____________ discussion of a real estate transaction, the party must be provided with a TREC-prescribed agency information form.First contact / orally or written

"orally only" substantive conversation

License holders have TWO levels of responsibility

1. Public Responsibility - Duties to customers (third parties) in a transaction. - Honesty - Disclosure of material facts - Handle all funds with care - Be responsible for Written or Oral statements 2. Fiduciary Responsibility - Duties to a client - Put the interest of the client first - Give full disclosure to the client (advice and opinions in addition to disclosing all pertinent facts both material and other) - Exhibit trust and honesty - Exercise good business judgement - Be loyal to the principal - Be competent

TREC was established

1949

Client

A broker works for a client. And has a fiduciary duty to represent the best interest of a client.

Customer

A broker works with a client. When dealing with a customer a broker has duties of disclosure, honesty, fairness, competency.

Buyer becomes a client

A buyer becomes a client by entering into a buyer representation agreement

Subagent

A license holder NOT associated with the seller's broker, but who is representing the seller through a cooperative agreement, often through membership in a Multiple Listing Service (MLS), with the sellers broker.

CRIP = Duties of the principal to the agent

C- Compensation - agent should be paid R - Reimbursement - by principal for expenses incurred on behalf of principal. I - Indemnification - Principal will protect the agent if they suffer any loss bc the agent relied on information received from the principal P - Performance - Principal is to perform as promised in agreement

What form must an agent provide to a potential client at the first substantive discussion of a real estate transaction?

IABS

Agency relationship

In writing to create agency relationships

Most desirable method of creating an agency relationship with a buyer, seller, landlord or tenant?

Is to do it in WRITING. Oral agency agreements are valid in Texas, they are generally not enforceable.

ostensible

Me - when one leads others to believe they are an agent

The commission can deny licensure to an applicant based on the applicant's ________.

Moral character

Three excpeptions to presenting the IABS

Open house, a lease for one year or less, client being represented by another agent

In real estate, an example of a general agent would be a(n) _____________.

Property manager

Which of the following is grounds for suspension or revocation of license by TREC?

Splitting a commission with a person other than a license holder

Seller become a buyer

The seller becomes a client by entering into a listing agreement with the broker.

Which does not apply to the definition of advertising?

a license holder info to client

Elements of a listing agreement are essential?

agreement to pay a stated commission usually a percent of the sale price

A termination date on a listing must be

definate

Ostensible Agency

exists when actions lead another person to assume that one is an agent.

TAR buyer representation agreement authorize

intermediary, loyalty, establish market area , ALL ABOVE

An agency relationship exists when one person, the _________ acts for, or on the behalf of another person, the _________.

Agent, principal

Broker obligated to treat ____ fairly?

All Above

OLDCAR = our fiduciary duties responsibilities

O - Obedience L - Loyalty D - Disclosure C - Confidentiality A - Accounting R- Reasonable Care

The duty of _______ requires an agent follow all of the lawful instructions of the client.

Obedience

Three Classifications for Agency

Universal Agency: - Has a broad range of authority to act for the principal. - The relationship has a lot of responsibility - power to act for principal in all transactions - Rarely used in a real brokerage - Created with a power of attorney General Agency: - Has the right to represent the principal in a particular type of transaction - Broker/ Agent/ Property Manager/ Owner Special Agency - Most limited - Broker can not sign on their bealf