Unit 16: Agency in Real Estate

6 Common-law Fiduciary Duties

(1)Care (2)Obedience (3)Accounting (4)Loyalty (5)Disclosure (6)Confidentiality Agent owes the principal these things in a fiduciary relationship.

Listing Agreement

A contract between an owner (as principal) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission.

Latent Defects

A hidden structural defect that is not discovered by ordinary inspection and that threatens the property's soundness or the safety of its inhabitants. Sellers and licensees have a duty to inspect for and disclose latent defects.

Universal Agent

A person empowered to do anything the principal could do personally. Generally not a real estate agent

Customer

A person who is a consumer of real estate services, who is not a client of the real estate licensee. A customer receives customer-level services rather than client-level services, which means the customer is not being represented by the licensee as the principal in an agency relationship. Entitled to fairness and honesty.

Consumer

A person who is the recipient of any real estate service, as defined by Pennsylvania's licensing law. This person may receive client or customer services, depending on the nature of the relationship established with the real estate broker.

Confidentiality

Agent may not disclose the principals financial condition, willingness to accept a lower offer or pay a higher price, urgency to sell, or anything that might affect the principals bargaining position. Anything a real estate agent learns about a client must remain confidential forever.

Dual Agency

Agent represents two principals in the same transaction. Require equal loyalty to both principals. This practice is illegal in some states. In those states where permitted, all parties must consent to the arrangement, preferably in writing.

Express Agency

An agency relationship based on a formal agreement between the parties.

Agency Coupled with an Interest

An agency relationship in which the agent is given an estate or interest in the subject of the agency (the property).

Subagency

An agency relationship in which the broker-agent appoints other brokers as subagents to help perform client-based functions on behalf of the principal. The subagent assumes the same fiduciary responsibilities as the agent. In Pennsylvania, the principal must authorize the broker to engage subagents.

Implied Agency

An agency that arises by conduct or inference from other acts or circumstances, often creating an agency relationship when none was intended.

Gratuitous Agency

An agency that exists when no fee is involved.

Nonagent

An intermediary assists one or both parties with the transaction without representing either party's interests. also known as a facilitator, transaction broker, transaction coordinator, and contract broker.

Conversion

Commingling client monies with personal or general business funds is strictly illegal.

Law of Agency

Defines the rights and duties of the principal and the agent wherein the agent is authorized to represent the principal in certain transactions.

An agency relationship is one whereby the licensees in the employ of the broker act in a fiduciary capacity for a consumer, with the express authority of the broker.

False

An agent's duty of confidentiality exists during the term of the agency relationship but is extinguished upon the expiration of that relationship.

False

In Pennsylvania, a broker may NOT represent both the seller and the buyer in the same transaction.

False

Responsibility for compensation is determined by regulations promulgated by the real estate commissioners.

False

The State Real Estate Commission's regulations permit a licensee to market the lease of real estate but not solicit prospective buyers without the written authority of the seller.

False

Under the duty of obedience, an agent must NOT show the seller's property to any protected class without the permission of the seller.

False

Care

For an agent to use their skills and knowledge on the principals behalf while transacting business. The agent should know all facts pertinent to the principal's affairs.

Subagent

Is the agent of an agent. a person that an agent has delegated authority to, so that the subagent can assist in carrying out the principals orders.

The broker provided the seed money for developing a property and is now acting as the listing agent. In this situation, the developer

MAY NOT REVOKE THE LISTING AGREEMENT.

Special Agent

One who is authorized by a principal to perform a specified single act on behalf of a principal. Usually a real estate broker. Also known as a limited agent.

General Agent

One who is authorized by a principal to represent the principal in a range of matters. Most real estate salespersons are general agents of their broker.

Loyalty

Requires that the agent place the principal's interest above those of all others, including the agent's own self-interest.

Accounting

The agent must be able to report the status of all funds received from or on behalf of the principal.

Single Agency

The agent represents only one party in any single transaction. The broker may practice exclusive single agency or may represent sellers and buyers, but never both in a transaction.

Disclosure

The agents duty to inform the principal of all facts or information that might affect the principal's position in a transaction.

Obedience

The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal's instructions in accordance with the contract.

Agency

The relationship between a real estate licensee (agent) and the parties represented by the agent in a real estate transaction

Compensation

The source of compensation does not determine agency.

A transactional broker is NOT an agent of either party.

True

An agent is permitted to offer advice and counsel as a guide for future action or conduct and has fiduciary obligations to the client.

True

An agent will be liable for any losses that the principal suffers as a result of the agent's exceeding the authority assigned in the contract.

True

Subagency arises from the theory under common law that other agents can act on the principal's behalf if the agent of a principal authorizes it.

True

Transaction Licensee

a nonagent who provides only customer-level service for either or both the buyer/tenant and seller/landlord in the transaction.

Consumer Notice

disclosure summary required for the purchase or sale of residential or commercial real estate or for the lease of residential or commercial real estate when the licensee is working on behalf of the tenant.

Buyer Agency Agreement

it stipulates the activities and responsibilities the buyer expects from the broker in finding the appropriate property for purchase or rent.

Fiduciary Relationship

one in which the agent is placed in the position of special trust and confidence to the principal

Errors and Omissions Insurance (E&O)

policies that cover liability for errors and negligence in the listing and selling activities of a real estate licensee.

Designated Agency

process that accommodates an in-house sale in which two different affiliated licensees are involved. The broker designates one licensee to represent the seller and one licensee to represent the buyer. The broker is still a dual agent.

Principal

the individual who hires the agent and delegates to that agent the responsibility of representing the principal's interests. (i.e. the buyer or the seller)

Agent

the individual who is authorized and consents to represent the interest of another. (act on behalf of another)

Client

the principal to whom the agent gives advice and counsel.