Real Estate Unit 2

dual agency

defined as representing both parties within the same real estate transaction. The broker has two clients in the same transaction.

loyalty

dictates that an agent must always place the principal's interests above those of all other persons, including the agent's own interests. The seller's agent, for example, must try to obtain the highest possible price, the buyer's agent to obtain the lowest. The agent must never take advantage of a chance to profit at the principal's expense.

law of agency

duties of agents to their clients and standards for dealing with their customers

general agent

empowered to represent the principal in all matters concerning one transaction. The general agent is granted authority to only transact a specific range of matters. As in the case of a universal agent, the general agent may bind the principal to any contract within the scope of the agent's authority. This type of authority also can be created by a power of attorney. A property manager is usually an example of a general agent, performing various duties on behalf of the property owner/principal. These duties consist of rent collection, bill paying, accounting/bookkeeping functions, and maintenance of the property. As you can see, the property manager acts on numerous levels for the principal. However, unlike with the universal agent who bears the broadest scope of authority to transact on all matters concerning all transactions, the scope of authority granted to a general agent is limited to that assignment only.

commission

fee for having successfully performed the service for which the broker was employed

universal agent

has the authority to represent the principal in all matters concerning all transactions that can be delegated. Universal agents can enter into any contract on behalf of the principal. However, under the New York State General Obligations law, the aforementioned may not occur without a prior written notarized power of attorney. They can act for the principal in the broadest scope and range of areas. This type of agency cannot happen without this written document known as a power of attorney. A guardian or an individual who looks after a mentally incompetent party is an example of a universal agent. That appointed party (appointed by the courts via a written decree that replaces the written power of attorney) tends to all the needs and cares of the noncompetent party

fraud

intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person.

agency coupled with an interest

is a relationship in which the agent has some interest in the property being sold. Such an agency cannot be revoked by the principal, nor can it be terminated on the principal's death. For example, a broker might supply the financing for a condominium development, provided the developer agrees to give the broker the exclusive right to sell the completed condo units. Because this agent has a special interest in the transaction, the developer may not revoke the listing agreement after the broker provides the financing.

brokerage

The business of bringing buyers and sellers or landlords and tenants together in the marketplace in order to conclude a real estate transaction

buyer's broker

The buyer becomes the principal, or the broker's client. In this case, the broker, as agent, is the buyer's broker and is strictly accountable to the buyer. The seller becomes the customer or the third party to the transaction.

obedience

The fiduciary relationship obligates the broker to obey the legal and reasonable instructions of the principal. This duty of obedience is not absolute, however. The broker may not obey any instructions that are unlawful or unethical. For example, the broker may not follow instructions to make the property unavailable to members of a minority group or to conceal a defect in the property, such as a leaking roof. Brokers who know or have reason to suspect that a client will ask them to do something unlawful or unethical should either refuse to accept the listing or terminate an existing listing.

express agency

The most common way of creating an agency relationship is through an express agreement, an agreement that is expressed in words, either spoken or written.

first substantive contract

The point at which a licensee exchanges or expresses information regarding a property to an interested party (other than information provided in advertising) The point at which an interested party begins to discuss or detail personal financial or other information concerning the party's interest or ability to conclude a transaction At the time these events occur, the licensee must disclose to a buyer, seller, landlord, or tenant (as the case may be) the nature of the licensee's relationship within the transaction.

special agent

is authorized to represent the principal in one specific transaction or business activity under detailed instructions. Under this agent category, the scope of authority granted the agent by the principal is extremely limited. For example, think of a principal and a real estate broker entering into a listing agreement (an employment agreement that engages a licensee). The role established for a real estate broker through the listing agreement is usually that of a special agent. If hired by a seller, the broker's duty is limited only to finding a ready, willing, and able buyer for the property. If hired by the buyer, the broker's duty is limited to finding a suitable property for the buyer. As a special agent, the broker is not authorized to bind the principal to any contract.

latent defects

is one that is not discoverable by ordinary, reasonable inspection; that is, it is simply not visible to the human eye without further inspection. Regardless of whether the agent represents the buyer or the seller, the broker likewise is responsible for disclosing known hidden defects to the buyer.

meeting of the minds

is said to have taken place when the parties are in agreement on price, down payment, financing method, and other essential terms.

market allocation

might occur when competing firms agree to split up an area and refrain from doing business in one another's territories

reasonable care

ncludes a licensee's obligation to exercise diligence on behalf of the client. Brokers must be knowledgeable about real property laws, land-use issues, financing, transfer of title, and the like.

tie-in arrangements

normally occurs when a selling party conditions the sale of an item. The condition might require the buyer (as a prerequisite to the purchase of that item) to purchase another unrelated item or the seller will refuse the sale of the original item to the buyer.

ready, willing and able buyer

one who is prepared to buy on the seller's terms, is financially capable, and is ready to take positive steps to complete the transaction.

Federal Trade Comission

overseeing business practices, the ability to declare that certain trade practices were deemed unfair, and enforcing compliance with the Sherman and Clayton Acts.

self-dealing

broker lists property, then decides to buy it and collect the agreed-on commission. This is called self-dealing. At that point, those brokers represent themselves but continue to act as the sellers' agents as well. Agents in this position are advised to give up the listing, collect no commission, and just represent themselves as buyers.

accountability

brokers must immediately deposit all funds entrusted to them in special accounts with titles that must include the words trust or escrow. It is illegal for brokers to commingle (mix) such monies with business operating funds or personal funds or to retain any interest such monies earn.

Sherman Act

Prohibit price fixing,

informed consent

...

multiple listing service

...

price-fixing

...

seller's agent

...

subagent

...

power of attorney

A guardian or an individual who looks after a mentally incompetent party is an example of a universal agent. That appointed party (appointed by the courts via a written decree that replaces the written power of attorney) tends to all the needs and cares of the noncompetent party

listing agreement

A written agreement that creates an express agency relationship between a seller and a real estate broker is called a listing agreement. Think of the listing agreement as you would an "employment contract." A listing agreement employs and authorizes the broker to find a buyer or a tenant for the owner's property.

confidentiality

An agent may not disclose any confidential information learned from or about the principal. A broker may not maintain confidentiality, however, if the information is something the broker is obligated to disclose because of the duty to deal honestly with a customer.

commercial transaction

Any transaction involving the sale or rental of a building that contains greater than four units

undivided loyalty

As is the case in any situation in which the parties demand loyalty and partiality, it is rarely possible for the broker to offer undivided loyalty to two or more principals in the same transaction. Thus, real estate license laws prohibit a broker from representing and/or collecting compensation from both parties to a transaction without their prior knowledge and written consent.

fiduciary duties

Care Confidentiality Loyalty Obedience Accounting Disclosure

estoppel

Estoppel can be defined as accepting the benefits of the previously unauthorized act. This occurs when an individual does not stop another from performing services on her behalf even though the agents had no prior authority.

disclosure

It is the broker's duty to pass on to the principal all facts or information the broker obtains that might affect the principal's decisions. AKA duty of notice

Clayton Act

Its purpose was to supplement the Sherman Act (which lacked the teeth for enforcement); the act itself covered the same general purpose of the Sherman Act.

ratification

Ratification can be defined as an after-the-fact or retroactive acceptance of the relationship or previous agreement that may not have existed before. Ratification occurs when one party continues to accept what was bargained for after the parties realize that a mistake or misrepresentation occurred. For example, B is purchasing furniture from A, who has made representations as to the condition of the furniture. B pays for and takes control of the furniture but feels that the condition was not as represented. Instead of returning immediately to A and demanding return of his money, B uses the furniture. Therefore, B has ratified the agreement.

puffing

Statements that exaggerate a property's benefits

implied agency

This occurs when both the principal and the agent act as if an agency exists, even though they have not expressly entered into an agreement. Providing services that are accepted by the principal can create an implied agency relationship. For instance, brokers advise a seller on a fair listing price, give helpful hints on how the seller can make the house more marketable, show the property to several buyers, and continually refer to themselves as the seller's agent. The seller sets the listing price according to the broker's advice, makes the recommended repairs to the house, and agrees to numerous showings. In this case, there may be an implied agency relationship.

undisclosed dual agency

This relationship occurs when an agent acts in the best interests of one party to a transaction while legally representing the other party.

attorney-in-fact

Usually, the broker is not given the right to sign contracts, although in exceptional cases, the broker may be appointed as attorney-in-fact under a separately granted power of attorney. (One need not be an attorney to be appointed an attorney-in-fact.)

group boycott

a conspiracy to boycott that firm and drive it out of business. Licensees must learn which topics must be avoided when engaging in conversation with agents from other companies.

client

a term that may be used to describe the principal

agent

an individual who is employed or authorized (and consents) to transact business on behalf of another, usually for a fee. In the real estate business, the broker firm acts as the agent of the seller, buyer, landlord, or tenant.

residential transaction

any transaction involving the sale or rental of a building that contains four or fewer units intended for dwelling purposes.

procuring cause of sale

produce a ready, willing, and able buyer; or bring about a meeting of the minds. If several brokers disagree as to which one brought about a sale, the one with the best claim to be the procuring cause is that broker who brought the parties into agreement, as evidenced by the sales contract.

fiduciary relationship

relationship of the highest form of trust and confidence. (Other types of fiduciaries include trustees, executors, guardians, managing agents, banks, and attorneys.) If the principal cannot count on the agent to act in the principal's best interest, the agency relationship is meaningless.

fiduciary

term describing the role that the agent takes on when the agency relationship is created, a relationship based on the highest form of trust and confidence. The agent is empowered (within the limitations of the agency appointment) to transact business on behalf of the principal

cooperating agent

the broker from another company who finds the buyer may be acting as a subagent of the seller, an agent for the listing broker (broker's agent), or an agent for the buyer.

agency

the fiduciary relationship that is created between the principal and the agent

principal

the individual who hires and delegates to the agent the responsibility of representing the principal's interests

customer

the third party with whom the agent deals on behalf of the agent's principal. The customer is owed "fair and honest dealing" by an agent transacting business on behalf of a principal, but the relationship between the agent and the customer is not a fiduciary one

misrepresentation

violate the broker's obligation of honest dealing

restraint of trade

when competing firms agree to act together