Section 8: Creation and Termination of Agency in Texas

Termination by Action

-Louisa, a buyer represented by George, purchases a house. -Carla, a seller, and her listing agent, David, both agree to end the representation agreement when Carla learns that she is being laid off and decides to postpone her move.

Although Ophelia hasn't signed a buyer agency agreement with Randall, she continues to ask him to show her homes, and Randall does. What type of agency is this considered?

Agency by ratification

Let's say that a licensee is showing a house to a potential buyer on behalf of the seller but without an agency agreement in place, when the buyer slips and falls on a broken stair and later sues for damages. Would the seller or the agent be held liable?

Agency can be established by conduct. When the agent acts on behalf of the seller, the seller (the agent's client) can be held liable.

Although an agency relationship doesn't live on forever, there are some fiduciary duties that continue beyond the relationship. Which two of these duties live on after the agency relationship is over?

Confidentiality Accounting

Agency terminates by ______ when either the client or the agent files for bankruptcy.

Operation of law

If a client breaches a representation agreement, what may the client owe the agent after agency terminates?

Payment of the agent's commission

You were just given information that the buyer found some issues during the walk-through. You immediately phone your seller client and let her know. This is an example of ______.

Reasonable skill and care

Francis is the listing agent for a seller named Samantha. He's not comfortable with Samantha's plans to omit a material fact from the seller's disclosure, so Francis terminates agency by ______ the agreement with the client.

Renouncing

An agent owes a client certain fiduciary duties. Some duties are still owed after agency terminates. Identify the two duties of agency that continue after termination.

-Confidentiality -Accounting

Termination by Law

-While Carol's condo was on the market, the building caught fire and her unit was destroyed. -On his way back from his vacation, Henry, a broker, was in a severe car accident and is now in a coma.

Express agency exists when _______.

A written or oral agreement is in place

Leanne continues to show a property to prospective buyers even through her listing agreement with the seller has expired. The seller continues to allow her to do so and potential buyers assume Leanne is the seller's agent. What type of agency is this considered?

Agency by estoppel

Renunciation by Agent

Agent may decide to discontinue representation of the client to terminate agency.

Implied agency

An agency relationship that exists because you behave in a way that leads the consumer to believe that you are their agent

Russell, a sales agent, has a buyer representation agreement with Keiko. When the transaction closes, the seller pays Russell's commission. Who is Russell's client?

Keiko

Which one of the following is NOT an example of how agency terminates by operation of law?

Mutual agreement to terminate

Randall is a sales agent who has a buyer representation agreement with Olivia. After the transaction closes, the seller refuses to pay Randall's commission, and Olivia can't afford to pay the commission. In the end, Olivia's parents pay Randall's commission. Who is Randall's client?

Olivia

Which of the following statements best describes a listing that terminates by performance?

Roberto listed a property for Terrence. After two failed offers, the property made it to a successful closing.

We just mentioned that one way to avoid implied agency is to recognize what it is. What is another way to avoid an unwanted implied agency situation?

Secure an agency agreement in writing before performing any acts of an agent.

As a real estate agent, you'll be compensated for the services you provide your clients (well, assuming the transaction closes). But is it compensation that defines your relationship, or is it something else? Identify which of these determines the existence of an agency relationship.

Signed agency agreement

Implied agency is created through __________.

The actions of the parties

Alice listed a three-bedroom home for her client, but before she finds a buyer, the home burns to the ground. What happens to the agency agreement that Alice has with her client?

The agency agreement is terminated if the property is destroyed.

Agency may be legally terminated in which of the following ways?

The principal broker becomes incapacitated.

Agency by estoppel

This occurs when a party to the transaction allows someone to appear as their agent to a third party. -You've represented the Hendersons in the past on several transactions. You agree to meet with them to discuss the terms of a listing agreement on a property they are thinking of selling. Before the meeting, you have a chance to tell some prospective buyers about the property you know the Hendersons intend to sell. The buyers are very interested, and you write up their offer to take to the Hendersons, even though they haven't given you the direct authority to do so. The buyers assume you are the Hendersons' agent.

Mutual Agreement

When both the client and the agent agree, agency can be terminated.

Completion

When the goal of the agency agreement is met, agency terminates.

Expiration

When the representation agreement expires and the goal has not been met, agency terminates.

You represented Chloe a few years ago when she sold her home. Now she is a party to a transaction, and you are not representing her because she is a buyer who is making an offer on one of your listings. Do you owe Chloe the duty of confidentiality?

Yes, the duty of confidentiality survives the termination of your brokerage agreement.

How Time Terminates Agency

-Listing agreements in Texas must have a definite expiration date. -Once a listing expires, the agency agreement between the seller and the broker terminates.

Express agency

An agency relationship that is understood and agreed to by both parties

When the client or the agent dies, agency terminates by ______.

Operation of Law

Explaining Confidentiality

"If you tell me something, provided it's not a material fact that I am required to disclose, such as the presence of termites or the fact that the roof leaks, I have to keep it confidential. This duty survives the end of our working relationship. It lasts forever."

Which of these is NOT one of the ways in which an agency relationship may be terminated without penalty for either the agent or the principal?

Delaney signed a buyer's representation agreement with Martha. After Delaney made an offer on a house, she changed her mind and terminated the agency agreement.

Which of the following describes a listing agreement termination by completion/performance?

Dean lists his property on August 1. After just a few showings, he accepts an offer on August 12. The closing takes place on September 22.

Katy's home that was listed for sale was destroyed by fire. Under which of these methods will her listing agreement terminate?

Force of law

When Does Agency Terminate?

-The client's goals were met during the term of the agency agreement (i.e., the sale is completed). -The specified term in the agency agreement expires. -The client and agent mutually agree to dissolve the relationship. -The property is destroyed for any reason, making the property unmarketable. -The client revokes the agreement with cause prior to the agreement's expiration date. -The agent renounces the agreement prior to the agreement's expiration date.

The Sanders family is selling their home. They've signed an agreement with James from Town Agency. The sale will pay 5% commission, to be split 50/50 with the buyer's agent, if there is one. You represent the Damons as a buyer's agent with City Realty. The Damons make an offer that the Sanderses happily accept. Shortly after closing, you'll receive your commission check from your broker. Which two of the following relationships represent agency?

-You and the Damons -James and the Sanderses

Revocation by Client

Client may revoke the authority of the agent to represent the client to terminate agency.

Joan is representing the buyer, Carlton, and Reggie is representing the sellers, Zeb and Teresa Martin. Carlton's Great Aunt Matilda has agreed to pay any portion of Joan's commission the sellers don't cover. Teresa's father, Teddy, has agreed to pay half of the sales commission that will be owed to the listing agent. Which of these statements is true?

Carlton and the Martins are the agents' principals in this transaction.

Christine listed her house with you. Tailleur represents the buyer, Rebecca, and the seller's mother, Freida, is paying your commission. Which of these factors determines how legal agency is determined in this situation?

Christine listed the property with you.

Years ago, you represented Maggie in the purchase of her first home. She purchased the property as a starter home that she'd planned to stay in for about five years. Five years later, and her house is on the market, but you're not the listing agent. You stumbled upon Maggie's listing while working for a new client looking to buy their first home. Your client loves Maggie's house and makes an offer a bit below list price, but confides to you that they could pay list price if needed. Do you owe it to Maggie to tell her that your clients can make a better offer?

No

Sheree's clients, the Binders, are selling their family home and want to move into a smaller house in an adjacent neighborhood. When the Binders notice a home for sale that belongs to the Ables, they are happy to see Sheree's name on the sign, and they ask Sheree to represent them as buyers of the Ables' home. Sheree tells them she cannot, because the Ables do not want her to act as an intermediary. What might happen?

Nothing. Sheree does not have to represent them as buyers.

Marcus listed his property with Home Sweet Home Realty and one of its listing agents, Ron Savage. About a month later, Ron filed for bankruptcy. Which of the following statements about this situation is true?

The agency agreement only terminates if the broker or the principal declares bankruptcy.

Jenson signed a seller agency agreement with Susan. Right before closing, a hurricane destroyed the property. What happened to Jenson and Susan's agreement?

The agreement terminates by force of law.

Candace and Phil Tolson listed their home for sale with Trent Richards, the broker for Richards Homes. Sadly, Trent became incapacitated due to a car accident. What's the status of the listing agreement?

The agreement terminates by operation of law.

Agency by ratification

This occurs when a party to the transaction accepts circumstances that created the agency after the fact. -You get a call from someone who wants to see your neighbor's property, but she can only see the property within the next hour, because she's heading out of town on business. You can't reach your neighbor, but he's given you permission to show the property when he's unavailable even though you do not have a listing agreement. After all of the proper disclosures are made, you show the property to the interested party, who wants to write a contract on the property right there. You show up at your neighbor's house two hours later with a completed contract: all your neighbor has to do is sign on the dotted line(s) and date it, and voila, it's a done deal. The seller accepts the offer and asks you to monitor the closing.

Rose's seller client had listed the property at $150,000, but Tim's offer was for $125,000. The seller is considering accepting Tim's offer, but Rose lets him know that she thinks Tim can afford the full price based on the money he made off the recent sale of his property. Did Rose breach her duty to Tim?

Yes. Rose broke the confidentiality that she stills owes to Tim, her former client.

Today, just a year later, the condo is back on the market with another listing agent. The Radcliffs are renewing their vows and have decided to celebrate their new commitment to one another with a new home. You're working exclusively with a buyer client who's also in love (with the condo, but not with the price). You reassure your buyer that there's room to negotiate. You tell him the property is paid off and the sellers are more concerned with selling fast than making a profit. Did you breach your duties to the Radcliffs?

Yes. You broke the sellers' confidentiality.

You drive over to the house and encounter a police officer leaving as you pull up. "What happened?" you ask the homeowner. "Well, the police say the thieves entered through an unlocked door in the back." You and the homeowner are thinking the same thing: Did you lock the door after the showing? No! You were so involved in the conversation that you forgot to lock the back patio door. The homeowner says, "I trusted you with my home. I'm holding you responsible for this." Who is actually responsible for the homeowner's damages and losses?

You. You were acting as the agent and failed to secure the client's property.