RealEstateU Ch 2

Ways an agent is compensated:

(1) Flat Fee or (2) Percentage of transaction price

Principal Duties to the Agent

-cooperate with the agent and not get in the agent's way. -commit to pay the agent compensation for a transaction -act to defend the agent in case the agent is sued while acting on behalf of the principal (indemnification)

Reasons for Termination of Agency Relationship

1.Agency terms failed 2.The purpose of the agency was completed 3.By Law

Differences between Independent Contractors and Employees

1.Instructions and training 2.Set work hours 3.Job location 4.Work specific order 5.Work expenses 6.Work tools

Salesperson Fiduciary Duties

1.Loyalty 2.Disclosure (does not include school zone, traffic flow, or ease of transportation, reasons why the seller is selling) 3.Obedience

Independent Contractor

1.Taxes on commissions are paid in arrears 2.No set working hours 3.No specific job location 4.Can be employed with another company or employer 5.Agent must cover his/her own expenses 6.Broker cannot control the agent's work activities 7.Either party can terminate the relationship at anytime

Brian, a property owner, recently accepted an offer from an interested buyer. Brian's attorney recommended that he NOT fill out the Property Disclosure Form. If Brian takes his attorney's advice, how much money will he have to pay at the closing in the form of a credit...?

500

Compensation percentage in New York

6% of sales price Ex: Listing Broker (3%) -Listing Agent (1.5%) -Sales Agent (1.5%) Purchasing Broker (3%)

According to NYS law, how long is a broker allowed to take an extended leave of absence from his/her brokerage office...?

A broker is not allowed to take an extended leave of absence

Broker's Agent

A broker's agent is an agent that cooperates or is engaged by a listing agent or a buyer's agent (but does not work for the same firm as the listing agent or buyer's agent) to assist the listing agent or buyer's agent in locating a property to sell or buy, respectively, for the listing agent's seller or the buyer agent's buyer.

Tie-in Arrangement

A contract where one transaction depends upon another.

Tenant's Agent

A licensed real estate agent who acts on behalf of a tenant in a commercial property transaction.

Landlord's Agent

A person who has oral or written authority, either express or implied, to act for or on behalf of a landlord.

Fiduciary

A person who on behalf of or for the benefit of another transacts business or handles money or property not the person's own; such relationship implies great confidence and trust.

Cooperating Agent

A real estate agent who sells a property. The selling agent may be (1) the sub-agent or listing agent of the seller; (2) a buyer's agent; or (3) a dual agent. Also called a selling agent or participating agent.

Undisclosed Dual Agency

A relationship in which the real estate agent is found to be the agent of both the buyer and seller in a transaction, but without the knowledge and informed consent of both parties. Undisclosed Dual Agency is illegal in all states.

Single Agent

A salesperson or brokerage serve as an agent for the buyer or the seller, but not both.

Vicarious Liability

A situation in which one party is held partly responsible for the unlawful actions of a third party.

Records an agent should have:

Agent 1. Disclosure Form 2.Affidavit Buyer's Agent 1.Disclosure Form 2.Affidavit 3.Property Showings 4.Prospective properties 5.Correspondence 6.Offers and negotiations 7.The financial documents and application file 8.Contract of sale (deadlines) Seller's Agent 1.Potential purchasers 2.Disclosure forms 3.Purchaser's budget 4.Correspondence

Expressed Agency

An actual agency created by written or oral agreement between the principal and the agent.

Agency by Ratification

An agency relationship which is created after the fact when the Principal agrees to be bound by the actions of the agent who was acting without authority.

Confidentiality

An agent is obligated to safeguard his/her principal's lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. -The duty of confidentiality precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must, sell a property below the listed price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more than what has been offered for a property. The duty of confidentiality does not include an obligation by a broker who represents a seller to withhold know material facts about the condition of the seller's property from the buyer, or to misrepresent the property's condition. To do so constitutes misrepresentation and may impose liability on both the broker and/or the seller. -the agent must keep the information shared with him/her by the Principal confidential even though the relationship has terminated. ex: Your client is going through a divorce and must quickly sell their house. This fiduciary duty requires that this information remain private, as it may affect a buyer's offer price

Sub-agent

An agent of a person already acting as an agent of a principal.

Buyer Agent

An agent who represents the buyer of real property.

Seller's Agent

An agent who represents the seller of real property.

Seller's agent

An agent who represents the seller of real property.

Special Agent

An agent with limited authority to act on behalf of the principal, such as created by a listing.

General Agent

An agent with the full authority over one property of the principal, such as a property manager.

Loyalty

An agent's duty to place the client's interest above those of all others, including the agent's own self-interest. ex: You have a client who is looking for a 2 bedroom rental apartment in a desirable neighborhood. You find an apartment that matches your client's criteria but the apartment is listed well below market value. Although you personally may want the apartment for yourself, this fiduciary duty requires that you present the apartment to your client first

Group Boycott

An agreement between members of a trade to exclude other members from fair participation in the trade.

Market Allocation

An agreement between members of a trade to refrain from competition in specific market areas.

Informed Consent

An agreement to do something or to allow something to happen only after all the relevant facts are disclosed.

Designated Sales Agent

Appointing one or more individual agents in a firm to represent only the interests of the seller and one or more different individual agents in the firm to represent only the interests of the buyer when a firm has an "in-house" dual agency situation.

Price Fixing

Conspiring to establish fixed fees or prices for services or products.

When agents from the same brokerage firm represent both the buyer and the seller, what type of agency is created...?

Dual Agency

A person who is hired to provide services to a company on a regular basis in exchange for compensation and who does not provide these services as part of an independent business is known as a/an...?

Employee

Breach of Loyalty

Ex: Have multiple clients bid against each other in order to raise the price (and your commission)

When two brokers agree to the MLS' cooperative arrangement, what type of agency is created...?

Expressed Agency

The legal duty of a fiduciary to act in the best interests of the beneficiary is known as...?

Fiduciary Duty

If a broker engages in anti-trust actions or agreements, what will they most likely be in breach of...?

Fiduciary duties to their client

Implied Agency

Form of agency that occurs when the words and actions of the parties indicate that there is an agency relationship.

John, a real estate broker, is referring his client to David, a mortgage broker, as a means to help his client obtain financing on a property. In return, David is offering to give John a referral fee. Before John can accept the referral fee, what must be provided to the client...?

Full disclosure of the referral fee

Abby, a real estate agent, is working to rent an apartment on behalf of her client. Mark, a real estate agent who works for the same broker as Abby, has a client who is interested in renting the apartment. Before the apartment can be shown, what must be provided by the landlord and prospective tenant...?

Informed Consent

Two agents are attempting to create a dual agency with permission from both the buyer and seller. According to New York State law, what must be given in-writing...?

Informed consent from all parties

Justin, a real estate salesperson with City Brokerage, recently met a client who is looking to purchase a condo in Manhattan. Since Justin specializes in Brooklyn rentals, he decides to refer the client to a colleague of his at City Brokerage and instead receive a referral fee. If Justin's client closes a deal with the other salesperson, who ultimately pays Justin his referral fee...?

Justin's sponsoring broker

Antitrust Liability

Laws that protect trade and commerce from unlawful restraints and unfair business practices.

John, a real estate broker, and Chris, a property owner, have entered into an agency relationship. The scope of their agency relationship is defined in what document...?

Listing Agreement

According to which fiduciary duty is an agent prohibited from not showing a lower offer to the seller in an effort to obtain a higher commission...?

Loyalty

Misrepresentation

Making an intentionally false statement to induce someone to contract.

As a special agent in a transaction, a real estate salesperson cannot do which of the following on behalf of the owner...?

Negotiate the terms of the contract

Agent

One who undertakes to transact some business or to manage some affair for another by authority of the latter.

Which of the following is considered a principal in an agency relationship...? Pt. 2

Owner

Referral Fee

Payments made by an agent or broker to other parties as quid pro quo for referring customers. -may be paid only with the informed consent of the client. -must be disclosed to the Principal

Dual Agency

Representing both principals (seller and buyer) to a transaction. -Both the seller and the buyer must give their consent in writing for the creating of the Dual Agency.

According to NYS law, a broker is not allowed to do which of the following...?

Take an extended leave of absence from his/her brokerage office

Which of the following is considered a principal in an agency relationship...?

Tenant

Jason is a real estate agent who is seeking to rent an apartment on behalf of his client. Jason's colleague, David, works for the same broker and has a client who is interested in renting the apartment. What document should Jason and David have their clients review and sign-off on prior to entering a dual agency relationship...?

The Disclosure Form

In addition to the agent signing the independent contractor agreement, what else is required before the agreement can be finalized...?

The agreement must be notarized

Reasonable Care

The degree of caution and concern for the safety of himself/herself and others an ordinarily prudent and rational person would use in the circumstances. This is a subjective test of determining if a person is negligent, meaning he/she did not exercise reasonable care. examples: -be aware of the buyer's qualifications -building assessments -pending or impending litigations -Do not place multiple contracts on multiple properties at one time ex:Your expertise as a salesperson lies in residential rentals. According to this fiduciary duty, you may have to pass on a deal if a client comes to you looking to lease a new 50,000 sq.ft. office space

Principal

The employer of an agent or broker; the broker's or agent's client.

Undivided Loyalty

The fiduciary duty that prohibits the agent from advancing any interests adverse to the principal's interest or conducting the principal's business in such a way as to benefit a customer, a sub-agent, the agent or any other party to the detriment of the principal's interest unless required by statute, regulation or common law - e.g., disclosing material facts and defects of a property.

Obedience

The fiduciary relationship obligates the agent to act in good faith at all times, obeying the client's instructions in accordance with the contract. ex: Your client demands that you list her property below market value as she wants to sell the property quickly. Although you can earn a higher commission if the property were sold at market value, this fiduciary duty requires you to follow through with your client's listing price

Fiduciary Duties

The legal duty of a fiduciary to act in the best interests of the beneficiary. One common duty includes confidentiality. -fiduciary responsibilities of the agent to a Principal stop when the transaction is finalized.

Client

The one by whom a broker is employed.

Estoppel

The principle which prevents a person from asserting something contrary to what is implied by a previous action or statement of that person.

Disclosure

The release of relevant information about a property that may influence the final sale, especially if it represents defects or problems.

Compensation

The remuneration received by the salesperson for acting on behalf of the Principal.

Accountability

The salesperson must safeguard any money or property held on behalf of the client. To be responsible. ex: A mortgage broker offers to give you a referral fee if you refer your buyer to them to obtain a mortgage. This fiduciary duty requires that you disclose the referral fee to the buyer as there can be no hidden profits in the deal

According to the Exclusive Right to Sell Agreement, who is liable for any damage, theft or loss attributed to a lockbox...?

The seller

If a real estate agent representing the buyer enters into a dual agency arrangement, to whom does he/she become a sub-agent...?

The seller

Advance Consent to Dual Agency

The seller or buyer agrees to dual agency before it occurs by indicating the same on the agency disclosure form.

Maggie, a real estate broker representing a buyer, tells her client that they must use her mortgage broker to obtain a mortgage, otherwise, she won't show the best deals on the market. What has Maggie introduced to her client...?

Tie-in Arrangement

Real Estate Property Law 175.7

agents can receive referral commission for referring services.

MLS (Multiple Listing Service)

creates a dual agency where the buyer's agent becomes a sub agent of both the seller and the buyer.

Disclosure Form

informs the client about the Dual Agency and details the risks and benefits involved in the transaction. -document meant to protect the client -must be signed at the first substantive meeting.

Single agency broker

represents either the buyer or seller in a transaction but never both.

Section 442-c of NY Real Property Law

the broker may be liable for the agent's (salesperson) acts.