CE Shop National Exam Prep: General Principles of Agency

Define *Consumer*

someone who uses or purchases a product or service

5 Basic Ways Agency Agreements Can Be Terminated

*1* Expiration *2* Completion *3* by force or law *4*through destruction of the property or death of the principal *5* mutual agreement

When does a *Power of Attorney* terminate?

*1* the principal dies *2* the principal revokes the Power of Attorney *3* a court determines that the principal is totally or partially incapacitated and does not specifically provide that the Power of Attorney is to remain in force *4* the purpose of the Power of Attorney is completed *5* the term of the Power of Attorney expires

*Disclosure when acting as Principal or other Conflict of Interest* *A)* Licensees are required to disclose ____________________ to ensure that relevant parties understand whom the licensee represents *B)* Licensees must disclose their ____________________________ when buying or selling property for themselves *C)* If a licensee has an ownership interest in a given property or has a family or organizational connection to the property owner, this should be ______________ to all parties in the transaction.

*A)* Licensees are required to disclose *agency relationships* to ensure that relevant parties understand whom the licensee represents *B)* Licensees must disclose their *professional status* when buying or selling property for themselves *C)* If a licensee has an ownership interest in a given property or has a family or organizational connection to the property owner, this should be *disclosed* to all parties in the transaction.

*Key Elements of Different Types of Listing Contracts* *A)* Listing contracts(agreements) *should/shouldn't* be written for the greatest level of licensee and client protection. *B)* Listing agreements documents the _________ and the _________ duties. *C)* Licensee duties document in the listing agreement including *confidentiality*, *the disclosure of ________________*, the *obligation to market the property*, and the *obligation to promptly present all _______________* *D)* Clauses in the listing agreement specify whether the property can be placed on the *Multiple Listing Service (MLS), marketed on the internet, or market via yard signage*

*A)* Listing contracts(agreements) *SHOULD* be written for the greatest level of licensee and client protection. *Agreements are generally written, but some jurisdictions consider oral listing agreements to be binding. They almost always require a definite end date* *B)* Listing agreements documents the *licensee's* and the *seller's* duties. *C)* Licensee duties document in the listing agreement including *confidentiality*, *the disclosure of material facts*, the *obligation to market the property*, and the *obligation to promptly present all offers and counteroffers* *D)* Clauses in the listing agreement specify whether the property can be placed on the *Multiple Listing Service (MLS), marketed on the internet, or market via yard signage*

*Responsibilities of Agent to Customers and third parties, including disclosure, honesty, integrity, accounting for money* *A)* To parties other than your client, you owe the duties of __________________________. *B)* You owe the duty of _______________ on showing to other licensee who are part of a transaction. *C)* The duty to disclose all known ____________________ is generally dictated by state law. Licensees need to be aware of state disclosure requirements. *D)* The obligations of fairness and integrity requires licensees to disclose their ___________________ with the client to customers they assist, before the third party reveals anything confidential. *E)* Licensees have the duty of ____________ to customers, meaning proper handling of client property, which includes keys, funds, and paperwork.

*A)* To parties other than your client, you owe the duties of *honesty, integrity, fairness, and accounting* *B)* You owe the duty of *cooperating* on showing to other licensee who are part of a transaction. *C)* The duty to disclose all known *facts (material and/or adverse material)* is generally dictated by state law. Licensees need to be aware of state disclosure requirements. *D)* The obligations of fairness and integrity requires licensees to disclose their*agency relationship* with the client to customers they assist, before the third party reveals anything confidential. *E)* Licensees have the duty of *accounting* to customers, meaning proper handling of client property, which includes keys, funds, and paperwork.

Someone who acts on behalf of someone else

*Agent*

_________________________ agreements allow only one brokerage to market and sell the property. However, if the seller finds her own buyer, she doesn't pay commission to the brokerage. ___________________________ agreement allow the seller to work with multiple agents. They don't always result in a listing agent earning a commission, as only the agent who successfully brings a buyer will be paid.

*Exclusive Agency* agreements allow only one brokerage to market and sell the property. However, if the seller finds her own buyer, she doesn't pay commission to the brokerage. *Open Listing* agreement allow the seller to work with multiple agents. They don't always result in a listing agent earning a commission, as only the agent who successfully brings a buyer will be paid.

__________________ is an agency that's understood and agreed to by the parties. Spoken or Written Words create express agency.

*Express Agency* is an agency that's understood and agreed to by the parties. Spoken or Written Words create express agency.

Who is someone in a position of trust who owes loyalty to another?

*Fiduciary*

________________________ agreements allow the buyer to work with many agents during a home search process. If buyer enters into an *exclusive agreement* with a broker, any of these agreements are terminated.

*Non-exclusive/open buyer representation* agreements allow the buyer to work with many agents during a home search process. If buyer enters into an *exclusive agreement* with a broker, any of these agreements are terminated. *The agreement should address compensation as well as obligations the parties have to one another. Other common elements of a buyer representation agreement include a general description of the property sought by the buyer including price, location, size, etc.*

*Single Agency* vs *Dual Agency*

*Single Agency* is when a licensee represents *ONE* party, either the buyer or the seller, in a transaction. They don't permit licensees to engage in a dual agency, even if the state permits it *Dual Agency* is the representation of *BOTH* the buyer and the seller in the same transaction

*Dual Agency* Difference Between *Single licensee Dual Agency* and *Designated/Appointed Agency(or Dual Licensed Dual Agency)*

*Single Licensee Dual Agency* is when a single licensee represents both the buyer and the seller in the same transaction *Duel-Licensed Dual Agency* is when two separate licensees from a single firm each represent one party (buyer or seller) in the same transaction

*Non-Agency Relationships* *(T/F)* Both facilitator and transactional broker roles can be different from state to state based on statutory laws

*True* Both facilitator and transactional broker roles can be different from state to state based on statutory laws. *In fact, some states may use other terms to describe a non-agency relationship between a licensee and consumer. When in comes to general (not state specific) concepts, the term "facilitator" and "transactional broker" are used interchangeably to describe a non-agency relationship*

*Universal Agent* vs *Special Agent* vs *General Agent*

*Universal Agent:* has broad authority to act for the principal, such as who has power of attorney *Special Agent:* or *limiting agent* has limited authority to act on a client's behalf, such as a real estate agent or an escrow officer. This type of agent can't bind a client to a contract *General Agent:* Responsible for handling all dealings in a given area for a client, such as property manager. This type of agent may bind a client to a contract

The concept of agency is one which a licensee enters into a

...contract to represent a client in a real estate transaction in exchange for compensation

To whom is the fiduciary duty of disclosure displayed to?

It's owed to the licensee's clients only. Emphasis on Fiduciary

A ____________ *Power of Attorney* gives broad powers to the agent in act in someone else's behalf. A _____________*Power of Attorney* is more narrow in scope and authorizes the agent to act in specific circumstances or transactions. Grants authority similar to that of an agency agreement between a licensee and a client.

A *General* *Power of Attorney* gives broad powers to the agent in act in someone else's behalf. A *Special* *Power of Attorney* is more narrow in scope and authorizes the agent to act in specific circumstances or transactions. Grants authority similar to that of an agency agreement between a licensee and a client.

A __________________ is one in which the broker contracts with the seller to receive all net proceeds from a sale above a specified sale price

A *Net Listing* is one in which the broker contracts with the seller to receive all net proceeds from a sale above a specified sale price *Net Listings are illegal in most jurisdictions because they create a conflict of interest and encourage unethical behavior*

Actions of the parties may create __________________, which is to be avoided. All Agreements should be in writing

Actions of the parties may create *implied agency*, which is to be avoided. All Agreements should be in writing

*(T/F)* An agency may renounce the relationship before the agreement fulfillment or expiration. The licensee may have duties that must still be fulfilled *(T/F)* Sellers who terminate an agency agreement before it expires may still owe the agent a commission *(T/F)* The duty of confidentiality extends beyond the termination of the agency relationship

ALL True

What are *Traditional Agency Duties*

Act in the principal's best interests Avoid and disclose any conflict of interest Disclose any compensation or profit Maintain confidentiality Act with reasonable care and skill Account and care for any property received from or on behalf of the client Obey lawful and reasonable instructions from the principal Do not delegate authority or duty without the principal's consent

Agency is created solely through the _______________-*not through compensation*.

Agency is created solely through the *agency agreement*—not through compensation. *Paying a commission does not create an agency relationship between the payer and the licensee. Licensees who receive compensation from someone other than the client must disclose that to the client.*

An *Exclusive Right-To-Sell* agreement provides the listing agent with a......

An *Exclusive Right-To-Sell* agreement provides the listing agent with a *commission no matter who brings the buyer to the transaction. Includes a DEFINITE state and end dates.*

If the property is destroyed, or if the broker or principal dies or becomes incapacitated, the the agency relationship ______.

If the property is destroyed, or if the broker or principal dies or becomes incapacitated, the the agency relationship *ends.*

*Completion/Performance* in a real estate transaction (related to termination)

If the real estate transaction with which the agent was assisting closes, then the agency relationship terminates

In addition to the 5 basic ways to terminate agency agreements, a client may revoke the agency relationship before the agreement's fulfillment or expiration due to ________________________ in the agent or agency.

In addition to the 5 basic ways to terminate agency agreements, a client may revoke the agency relationship before the agreement's fulfillment or expiration due to *lack of trust* in the agent or agency. *which may be accomplished without penalty or without good cause(which may be a breach of contract)*

Which clause in the listing agreement gives the listing broker the authority and obligates the broker to market the property to other brokers?

Multiple listing clause

Other licensees can't represent the buyer during the term of an ___________________________.

Other licensees can't represent the buyer during the term of an *Exclusive Right-To-Represent Agreement.*

What are options for accepting an agency relationship after the fact?

Prepare an agency agreement or continue to assist Carly with the purchase.

*Traditional Agency* based on the general duties, licensees have many specific duties, including:

Seek a sale at a price and on terms acceptable to the seller Showing buyers properties that meet their criteria Ensure that all offers and counter-offers are presented in a timely fashion Ensure that clients receive copies of all signed documents

Random *Power of Attorney* Information

Usually, a POA may be granted to a spouse, family member, friend, or neutral third party. There are a number of risks and conflicts of interest if a licensee were to be granted a power of attorney by a client. For this reason, the situation is generally avoided by many brokers. If used, there must be a paper trail and the POA is usually limited to signing on behalf of a client at closing if the client can't attend. However, many brokerages strongly believe that another party could be granted POA so that a licensee doesn't need to act in that capacity. Licensees should discuss POA situations with their broker before participating in any POA situation.

*Dual Agency* As an agent with two clients in the same transaction, you owe *fiduciary* duties to

both parties. *One duty that is impossible to provide in dual agency is undivided loyalty. This is why informed consent is so important* *the other duty that may be impossible to deliver is full disclosure of any information relevant to the transaction. Dual agents must take care to keep all confidential information truly confidential. This means they may not disclose one client's confidential information to the other.*

Define *Power of Attorney*

a legal document that grants legal rights and powers from one person (the *principal*) to another (the *agent*) to make decisions on behalf of the principal. *An agent may never override the principal's wishes*

Define *Sub-Agency*

a situation in which a licensee brings an unrepresented buyer to a transaction. In state's where *Sub-Agency* is permitted, that licensee represents and owes fiduciary duties to the seller. *Today's buyers are typically represented by a licensee, thus eliminating Sub-Agency of this type in most transactions*

Define *Ratification*

acceptance after the fact, either through signing paperwork or through the parties' actions. If the parties choose, implied agency can be *ratified* through signing an agency agreement after the implied agency relationships has been created

What are *Non-Agency Relationships*

called *transactional* or *facilitator* roles the licensee doesn't represent the consumer in an agency capacity but instead provides non-agency assistance that doesn't require the licensee to exercise judgement or discretion. *State statutes govern non-agent duties*

Force of law terminations include:

events that are beyond the control of the parties, such as bankruptcy of the broker or principal, property destruction, or incapacitation of the agent or principal.

Define *Agency coupled with interest*

means that the agent has some form of ownership of, security interest in, or possession of the principal's property. The agent's compensation depends on continuance of the agency agreement.

What's included in a licensee's *Fiduciary Duties* ?

obedience, loyalty, disclosure, confidentiality, accounting, and reasonable skill and care (*OLD CAR*). *There's details of each duty on this slide if needed*

Define *Estoppel*

prevents one party from suing another, because the party's actions or statements implied he or she agreed with the other party.

Define *Client*

someone who's represented by a real estate licensee (and owed certain agency responsibilities)

Define **Customer*

someone who's working with a real estate licensee but who isn't represented by that licensee (nor owed the full range of agency responsibilities) the customer may or may not be represented by another licensee

Define *Expiration*

the agency relationship will end if the agency agreement between agent and client expires

Define *Principal*

the party to the transaction who is represented (the client)

*Dual Agency* Licensees may legally engage in dual agency only if:

they practice in a state that permits it their brokerage firm permits it made the proper disclosures to and written consent received from the buyer(s) and seller(s). *If both parties don't agree to dual agency, then the licensee won't be permitted to represent both parties in the transaction. One party would need to work with a different agent or brokerage*