Nc Real Estate Unit 7
Dual Agency - "Disclosed"
~Intentionally Created ~In-house transactions ONLY ~Informed in written consent from all parties ~Discloser is to reduce risks
Property Value
~Principal has the right to rely on Agent to provide a reasonable estimate of the market value (not as an Appraiser though) ~To not do this, would be considered a breach of duty
Buyer Agency Only— Single Agency
~Seller is unrepresented (FSBO) ~All brokers of the firm are Buyer Subagents
Disclosure of Identity of Designated Agent
No later than the presentation of the first offer to purchase or sell ~Both Buyer and seller must be aware of the brokers designated to represent them AND to represent the other party
A Note About Compensation
Firms and Brokers owe their loyalty to the client who is employing them no matter if they are being compensated by another party. For example, sellers often pay the commission to buyer representatives.
NOT Material Facts
~Sex Offender Status ~Stigmatized Properties ~Haunted ~Someone died in the property ~Someone was sick in the property
How does agency terminate?
1. Completion - closing on the property 2. Expiration of the term of agency 3. Mutual agreement 4. Breach by the agent or principal (may be liable for damages) 5. Operation of law - bankruptcy 6. Destruction or condemnation of the property 7. Death of the client or brokerage - note death of a broker affiliated with a firm would not result in termination - the brokerage would appoint another broker to act on the firm's behalf.
In an exclusive buyer agency relationship, a real estate agent owes his/her buyer-client all the following EXCEPT:
A buyer's agent owes many fiduciary responsibilities to the buyer. They do NOT owe the buyer a guarantee (assurance) that there are no hidden issues with the property.
What is the Working with Real Estate Agents Brochure?
A consumer protection form - it is the real estate version of the miranda warning - anything you say can and will be used against you unless you are my client. It is triggered by first substantial contact, where the conversation shifts from facts about a property to personal/confidential information. It is NOT A CONTRACT and only explains agency. The broker must discuss agency options - exclusive, dual, designated dual and subagency. The customer/client signs to confirm the receipt of the brochure and discussion. A customer/client can refuse to sign - and the broker would need to document it on the signature page of the form. The broker may continue to work for the client or with the customer.
Misrepresentation or Omission
A misrepresentation regarding a material fact is made by any broker who makes a statement that is factually incorrect. An omission is made by any broker who does not disclose a material fact they know or reasonably could have known.
What are examples of information that is NOT a material fact?
A property may be stigmatized, however in NC it is not considered a material fact. Murder, death, suicide, gang activity, haunted house, or sex offender lives nearby are not a material fact. A broker cannot disclose if the past owner or tenant had HIV/AIDS as this is a violation of Federal Fair Housing (handicap).
Sub-agent
A subagent is a real estate agent or broker who brings in the buyer to purchase a property, but he is not the property's listing agent. The subagent usually earns a portion of the commission. Subagents are rare today because of the popularity of buyer's agents and due to liability concerns.
Which of the following is required to have an active real estate broker license in order to receive compensation for selling or leasing real estate in North Carolina?
A(A person leasing personally-owned rental properties) does not require a license as it is not done for someone else. B(An attorney-at-law when selling properties of an estate he/she is administering for the family) and C(An officer or an employee of a corporation selling or leasing corporate-owned properties) are both exceptions to the license law rule and thus do not require a license. correct is D(The son of an elderly couple who is hired by his parents to lease units in the apartment building the couple owns)
Which of the following activities requires an active real estate license in North Carolina?
A(Selling personally owned investment property) does not require a license because it is not done for someone else. B (Showing rental units managed by broker-employer) and C(Making a listing appointment for a broker-employer) do not require a license because that is one of the exemptions to the rule...salaried employees of brokers. D hits both parts of the rule....it is a real estate service done for someone else and done for some form of compensation. It is not one of the exemptions and therefore requires a license.
What is Agency?( Like a contract or relationship )
Agency is the legal representation of one party by another party An agency relationship exists when two persons agree that one (the "agent") will act on behalf of the other (the "principal")
Co-Brokered Transactions (Most Common in NC)
Agent (Selling Firm) Represents -> Buyer Agent (listing Firm) Represents -> Seller (The person who wants to list their home)
Disclosure of Agency NCREC Rule 58A.0104
All agents must give to and review with all Sellers and Buyers Working With Real Estate Agents brochure ->Brokers must disclose agency status at "First Substantial Contact" -> This is for SALES transactions (not leases)
Law of Agency
Although the law of agency has not changed, the application of the law continues to change:
First substantial contact occurs when a
First substantial contact is not first contact. It is the first time a buyer or seller gives personal information about themselves that could be used against them in the transaction.
Disclosure of Agency Status by Buyer's Agent to Seller or Seller's Agent
At initial contact—This means if you represent the buyer and you approach a seller or their agent, you should immediately tell them you represent the buyer.
A North Carolina real estate broker properly explained real estate agency options to a prospective buyer who then chose to enter into a written buyer agency agreement with the broker without authorizing dual agency. The broker showed the prospective buyer fifteen houses listed by other companies before the client asked to see a property listed by the brokerÂ's firm. Given these circumstances, what kind of authority to act as a dual agent must the broker obtain in order to proceed with the transaction?
Because the buyer has a WRITTEN buyer agency agreement, the firm is required to have WRITTEN permission from BOTH parties prior to any dual agency showings. If the buyer were working with the firm under an oral buyer agency agreement, the firm could obtain oral approval from both the buyer and the seller for the showing.
A prospective buyer is approached by Billy of HPW Real Estate. The buyer introduces himself and inquires generically about properties for sale in a particular neighborhood wanting to know square footage and list price. Abruptly the buyer takes a cell phone call and walks away ending the conversation. Based on this interaction, which of the following is FALSE?
Billy has not had "first substantial contact" with this buyer because no personal/motivating information has been shared by the buyer about themselves. Therefore, statement A is false(Billy's interaction with the buyer represented first substantial contact and thus would trigger a disclosure of BillyÂ's relationship to the transactions.). Statement B is true(HPW Real Estate should maintain a copy of the Working with Real Estate Agents brochure for any buyer who discloses their motivation for being interested in the property.) even though that did not happen in this instance. Statement C is true(Should Billy wish to represent this buyer in the future, he would need to formally present the Working With Real Estate Agents brochure.)...can't represent (have them be your client) a buyer without presenting the WWREA brochure. Statement D is true( Having not discussed personal or motivating information regarding this particular buyer, Billy is operating within the confines of license law by not presenting the Working With Real Estate Agents brochure.)and accurate regarding this scenario.
Carlos lists a property for sale at 108 Main Street in Garner. He tours the property with the sellers in anticipation of listing it in the local Multiple Listing Service. As part of his tour of the property, he notes that the sellers are using the dishwasher to store food and inquires about the operability of the appliance. The sellers inform him that they do not believe the dishwasher works but that they have not tried it in years so they cannot say for certain. Armed with all of the information he collected during this visit, Carlos places his listing for the home in the MLS and conducts several open houses over the coming weeks. During one such open house, a potential buyer inquires about the functionality of the kitchen appliances. Carlos states that to the best of his knowledge all of the appliances are in good working order. Later, the dishwasher is found to be completely inoperable and require replacement by the new buyers. Which of the following best describes Carlos's actions relating to this material fact disclosure?
Carlos misrepresented the situation when he SAID that all of the appliances were in good working order. His misrepresentation is willful because he had knowledge that what he was saying was very likely wrong. This is not an omission because the information wasn't left out....it was given incorrectly. Furthermore, NCREC does not have the power to fine a licensee even if they have violated license law.
What is caveat emptor?
Caveat emptor means "let the buyer beware". There are very few items for which the seller must disclose and the duty of disclosure falls to the licensed real estate agents. The seller cannot conceal problems (making it impossible to discover), but they can choose to make "no representation". NC is a caveat emptor state.
A listing broker should advise his/her client that the seller should not expect to receive the net proceeds from the sale of the seller's real property until
Closing in North Carolina happens when the deed is recorded. Nobody should expect funds from a closing until the transaction is closed (recorded).
What duties does the principal owe to the firm?
Good Faith - don't lie. Compensation - pay us.
All the following situations will terminate an agency relationship EXCEPT:
Death of the parties to an agency agreement would terminate the agency agreement, but it is the entire FIRM which is a party to the agreement with the client. The death of the individual broker does not matter. It would require death of the entire firm (going out of business)
Sea Coast Real Estate has executed a written agency agreement with Billy the buyer. Which of the following would end that agency agreement?
Destruction of the property only terminates seller (listing) agency agreements. Since the buyer hires their firm to help purchase ANY property, the agreement would continue until the buyer found another acceptable property or the agreement expired. Once the buyer purchases ANY property, the buyer agency agreement comes to an end.
In an exclusive buyer agency relationship, a real estate agent owes his/her buyer-client all the following
Disclosure to buyer of any known information about the seller's motivation to sell. Confirmation that buyer has received credit at settlement for all pre-paid monies. Advice on how to respond to a seller's counteroffer.
Dual Agency
Dual agency is when a real estate agent works with the buyer and the seller on the same transaction simultaneously. Here's a common scenario on when dual agency may occur: A real estate agent is hired to sell the home of a client named Mary. That real estate agent has a second client, named Rob, who is in the market to buy a home. Rob tours Mary's home and decides he wants to purchase the home. Because both Rob and Mary are clients of the same real estate agent, the transaction is considered an example of dual agency. Another example of dual agency is if Rob and Mary are represented by different real estate agents, but both real estate agents work for the same brokerage company. A third example is if a real estate agent is hosting an open house and meets a buyer who is interested in buying the home. If the buyer is not represented by a real estate agent, the buyer may request that the seller's agent represent them in the transaction. If both the buyer and seller are in agreement that the same real estate agent can represent both parties, the realtor becomes a dual agent in the transaction. It's important to note that dual agency is different in each state. There may be different forms of dual agency as well such as designated dual agency which is something we have here in Raleigh and Charlotte. Dual agents, which represent the interests of both the buyer and seller simultaneously, are also known as transaction brokers.
Agency Relationships in Real Estate Sales
Exclusive Seller Agency_>When Firms/Brokers Cooperate on a Sale Exclusive Buyer Agency -> Dual Agency (Inhouse Sales)
Scope of Authority
Express Agreement: (Oral Written) Implied: (Based on the actions of the broker)
What is First Substantial Contact? What does it trigger?
FSC - Point in time that the coversation shifts from facts about the property to information that is personal / confidential and may weaken a party's bargaining position. It requires the broker to discuss the Working With Real Estate Agent's Brochure - where agency is explained and then the customer/client decides how to proceed. For a buyer it can occur at any time up to a broker showing a home, where the broker is opening the door for the buyer. For a seller it can occur at any time up to the listing presentation, where the broker is actively seeking the listing.
Disclosure to Third Parties (Customers)
ITEMS THAT SHOULD BE DISCLOSED TO BOTH CLIENTS AND CUSTOMERS ALIKE ARE KNOWN AS MATERIAL FACTS
A provisional broker lists a property for sale. How will dual agency arise? Any limitations on brokers praticing dual agency?
If the provisional broker or another broker within his/her firm represent a buyer that is interested in seeing/purchasing the property. The firm must practice dual ageny and the buyer and seller must consent to dual agency representation. There are no limitations on who can act as dual agent - BIC, PB, Non-PB or any combination thereof.
If authorized, designated agency could be practiced between all the following licensees EXCEPT:
If the two brokers are in different firms, this is not any form of dual agency, much less designated dual agency. Remember that dual agency of any type involves one firm representing two clients.
How does designated dual agency arise? Any limitations?
In order for designated agency to arise, we must first have dual agency. In order to be practicing dual agency both the buyer and the seller are represented by the same firm. Under designated dual agency, the BIC will appoint a broker to be designated agent of the seller and another broker to be designated agent of the buyer. The brokers can now act in the same capacity of an exclusive agent. Limitations: No BIC and PB and no P&C. A BIC and PB cannot act as designated agents in a transaction as the BIC has supervisory duties over the PB and will become aware of information that could harm the PB's client. The brokers that are acting as designated agents cannot have personal or confidential information about the other side prior to designation.
Which of the following statements is true regarding a dual agency transaction in North Carolina?
In statement I, the broker shows the property as a "subagent of the seller". This means the broker is affiliated with the listing firm....they work for the firm who represents the seller and therefore they personally also represent the seller. If they later (subsequently) execute a buyer agency agreement with the same buyer on that same property, the firm would then be representing both the seller and the buyer in the transaction....this creates dual agency. Statement II is correct of all true dual agency transactions (but not designated dual agency). Because the firm represents both seller and buyer, it is impossible in dual agency to seek the best possible outcome for one without harming the other.
Agency Disclosure should be made no later than the moment confidential information is shared with a licensee by a buyer or seller in all of the following situations EXCEPT
In this context, "agency disclosure" means giving the buyer or seller the Working With Real Estate Agents brochure. This is done in all sales transactions whenever a buyer or seller gives confidential information. It can be done sooner, but there is no requirement to do it sooner. There is ONE EXCEPTION to this rule. When a licensee/agent/broker/salesperson is representing a buyer as a buyer's agent and that licensee is reaching out to a seller or seller's agent, agency disclosure must be made at first contact. This is a key distinction that will absolutely show up on the state side of the exam. MAKE SURE YOU KNOW IT.
Facts relating to client's ability to close/ Any facts of special importance to a party (usually the buyer)
Material Facts: ~Seller has gone into the foreclosure process ~Cloud on the title ~ Buyer's loan falls through Any facts of special importance to a party (usually the buyer) ~Buyer needs property that allows fenced yard ~Buyer wants to be able to operate a home business
The North Carolina General Assembly has declared the following item to be a material fact about listed property in North Carolina
Items B, C, D are all stigmatized properties which are not material facts. Polybutylene piping is a material fact in NC
Basic Agent's Duties (to clients)
Loyalty, Obedience, Accounting, Disclosure, & Skill,Care and Diligence
A North Carolina licensee is working with Buyer A as a seller's agent and with Buyer B as a buyer's agent. Buyer A makes an offer to purchase one of the licensee's listings and the licensee promptly delivers the offer to the seller. A few hours later, Buyer B tells the licensee that she would like to make an offer on the same property by the end of the week. The licensee promptly calls the seller to report that another offer may soon be forthcoming. The seller tells the licensee to disclose the sale price offered by Buyer A to Buyer B in hopes that Buyer B will make a higher offer. The licensee
No matter what the seller says and no matter the agency of the licensee to the buyers, a broker in North Carolina can NEVER disclose the offer made by one buyer to another interested buyer without the permission of the first buyer to do so. This is called "shopping offers" and is very much against the law in NC.
The listing broker is aware that the seller is behind on the mortgage. Must the listing broker disclose this to potential buyers? Is the agent guilty of willful omission?
No. The fact that the seller is behind on the mortgage is not a material fact. The listing agent has a duty to conceal this information unless foreclosure notice has been received. No the agent is not guilty of willful omission. Willful omission occurs when a broker intentionally does not disclose a material fact.
What are the duties that a broker owes to his/her client?
O.L.D. C.A.R. Obedience - follow lawful instructionsLoyalty - client's interest above all othersDisclosure - disclose material facts and all information obtained (unless prohibited) Confidentiality - conceal personal / confidential information (unless a material fact)Accounting - keep accurate records / safeguard money and property Resonable skill, care, diligence - be an expert in the area you practice
When to give the WWREA form and explain...
~Must be given at first substantial contact in all situations EXCEPT.... ~When a licensee is a buyer's agent and is talking to either a seller OR the seller's agent, this disclosure and form must be done IMMEDIATELY
Working With Real Estate Agents Brochure
~Not a contract ~Mandatory review of agency choices ~Request acknowledgment that it was explained to them ~Keep signature panel in the file ~What if they don't sign??? They don't have to!
Designated Dual Agency
Real Estate Firm (Both Listing and Selling): Designated Buyer Agent (Buyer Client) Designated Seller Agent (Seller Client)
A real estate broker in a typical residential real estate sales transaction normally serves as a
Sales agents are typically special agents who have no decision making authority. They can advise but not decide. Property managers usually function as general agents because they have decision making authority for things like what tenants to accept/reject/evict.
Omission
Samarah is a provisional broker who takes her first ever listing. She tours the property with the seller but is a bit too nervous to ask the seller about the obvious cracks in the foundation wall. A buyer who did not have a home inspection purchases the property and later finds foundation settlement issues.
Caveat Emptor
Sellers may avoid liability to buyers due to "buyer beware", but brokers do not
A North Carolina real estate firm consists of just a broker-in-charge and one provisional broker. The broker-in-charge is the listing agent for a residential property. The listing agreement authorizes dual agency. The provisional broker enters into a written buyer agency agreement with a potential buyer authorizing dual agency. The provisional broker shows buyer the listed property and the buyer decides to make an offer. The provisional brokerÂ's relationship with the buyer is
Since the same firm is representing both the buyer and the seller in this transaction, it must be a form of dual agency. This particular case CANNOT be designated dual agency because that would be a Broker in Charge designated against a provisional broker under their supervision. That leaves dual agency as the only possible choice here.
The following statements regarding the Working With Real Estate Agents brochure are all true EXCEPT:
Statement D is not true because the Working With Real Estate Agents Brochure is only used in sales transactions. You really need to stop and think about that rule. This will absolutely show up on a license exam and it's silly to miss it. If there is property being SOLD, then the WWREA brochure should be used. It does not matter whether the licensee is talking to a buyer or a seller or who the licensee represents. If a real estate licensee in North Carolina is talking with a buyer or a seller and has "first substantial contact" by receiving confidential information, the licensee must present the WWREA brochure and explain it. The form is NOT used in all real estate transactions.....that would include leases and property management, which is incorrect.
Which of the following statements regarding Designated Dual Agency in North Carolina is correct?
Statement I is true. Any two nonprovisional brokers (even if one is the BIC) can be appointed in a transaction as long as they do not know confidential information about the opposing party before being designated. Statement II is false. Provisional Brokers can be designated dual agents in the exact same way as nonprovisional brokers with only one exception. A provisional broker cannot be designated against (on the opposite side of) their Broker in Charge.
All of the following are potential negative outcomes resulting from the failure of a North Carolina broker to properly carry out their fiduciary responsibilities EXCEPT:
The North Carolina Real Estate Commission can NEVER fine a licensee for violating license law or improper representation of a client. They can reprimand/suspend/revoke the license. The licensee could be sued (civil liability) by the harmed party. The licensee could also be prosecuted criminally by the local district attorney (not by NCREC) in that county. True: Revocation of License & Civil Liability & Criminal Liability
Working With Real Estate Agents brochure are all true
The WWREA brochure is properly presented to any potential client no later than the time that person first shares personal and confidential information about themselves. Should a seller refuse to sign the WWREA brochure, the broker and their affiliated firm may still be engaged through an Exclusive Right to Sell Listing to represent that seller in a transaction There is a separate location on the signature panel of the WWREA brochure where a buyer can acknowledge that the broker working with them is functioning as a "subagent of the seller"
Designated Agent's Duty
~Only represent the interest of the client they are designated to ~Treat the other broker as if they work for a completely different firm
A seller confided to his listing broker that he was eager to sell his property as soon as possible due to financial hardship. During the term of the listing agreement, the broker's sister moved to the town where the listed property was located. Knowing that the seller was becoming desperate and that the listed property had many features that his sister desired in a house, the broker encouraged his sister to make a low offer on the property. His sister agreed and the broker helped her prepare a written offer without entering into any kind of express agency agreement with his sister. When the broker presented the offer, he did not disclose to the seller his relationship to the prospective buyer. The seller thought the offer was very low, but the broker encouraged him to make a counteroffer and eventually the parties went under contract. Given these facts, each of the following statements is true EXCEPT:
The broker should DEFINITELY have disclosed this relationship and should DEFINITELY have never given advice to a buyer (any buyer) to make a low offer on a property where the broker represented the seller. It is also very likely that a court would find that this broker is acting as a buyer's agent even though they don't have a buyer agency agreement. This is the definition of implied agency...acting as if a broker has authority even though the client never actually hired them.
A designated agency
is one that represents both buyers' and sellers' interests. One agent, working for the broker or agency, represents the seller and another stands in for the buyer. It's a requirement that certain procedures are put in place to ensure that client information is kept separate.
A house seller told the listing agent that there had been recurring leaks around the toilet in the half bath in recent months. The agent saw no signs of moisture around the toilet and made no further inquiry concerning the matter. No mention of the leak was made on the property disclosure form. When personally showing the house a few months later, the listing agent was asked by a prospective buyer-customer who was concerned about mold if there were any problems with moisture. The listing agent responded that there were no known problems. The prospective buyer subsequently purchased the property through the listing agent but did not have the property inspected prior to settlement. Shortly after moving into the house, the new owner discovered that the wooden subfloor around the toilet in the half bath was completely rotten due to water damage. Given these circumstances, the listing agent was
The licensee in question misrepresented the situation when they responded (SAID) to the buyer that there were no known problems. This turned out to be untrue. That is the misrepresentation pieceÂ....an untrue statement of a factual situation. This is also willful because the broker had at least some knowledge of the problem as they had been told of the issue by the seller. This makes it willful
The North Carolina Real Estate Commission's Working with Real Estate Agents brochure is
The purpose of the document is to disclose agency choices that are available to consumers who are involved in the sale of real property and warn them not to give further confidential information unless they hire the salesperson/firm they are talking to. Think of it like a menu. The agent must go over the menu choices and we give the brochure as proof that we have explained the choices to the consumer. A is false because of the "in all real estate transactions". Remember this document is only used in SALES transactions.
The broker-in-charge of XYZ Real Estate Company has hired an unlicensed assistant who has recently completed the real estate broker prelicensing course. The assistant may lawfully perform which of the following services in return for an hourly wage paid by the broker-in-charge?
The salaried assistant of a broker can do only office/administrative type tasks directly under the supervision of their employing broker. B, C, D would all require the employee to act too much on their own and would not be allowed.
North Carolina Real Estate Commission Rules include which of the following requirements regarding agency contracts?
These statements are both false. Listing agreements must ALWAYS be in writing, never oral. Buyer agency agreements can indeed be oral, but the requirement is to put them into writing before an offer can be presented, not within a 3 day timeframe. Both False: A listing agreement may be oral provided it is express and is reduced to writing and signed by the broker and the seller no later than the time the property is shown to a prospective purchaser. A buyer agency agreement may be oral provided it is express and is reduced to writing and signed by the broker and the buyer within three (3) days of the oral agreement.
A prospective buyer arrives to view a North Carolina residential property during an open house. The broker on duty must
This is a question regarding when we present the Working With Real Estate Agents brochure, which we do at "first substantial contact". This happens when a buyer or seller gives personal/motivating information (why they want to buy or sell, how much they would pay, they are in a hurry, etc) about themselves.
Which of the following information would NOT be kept confidential by a provisional broker in a fiduciary relationship with a seller?
This is a question that centers on what we disclose to the public about our CLIENTS. If the provisional broker has a fiduciary relationship, that means the seller is a CLIENT. We owe clients confidentiality. We never disclose any of the personal information of our clients unless it is a material fact. Items A(The seller's motivation for selling the property), B(Price or terms to which the seller might be willing to agree but which are less than the advertised list price), and C (The status of the seller's job transfer) are all personal info and would be kept confidential. Item D (A bankruptcy filing by the seller)is a material fact (the ability of my client to complete the transaction) because a bankruptcy could stop a seller's ability to sell.
Misrepresentation
Tommy is a listing broker and states to a potential buyer that one of his listings has "no problems with the roofing". Later, the buyer finds out that the roof is actually leaking.
Do we disclose ALL Material Facts?
~Disclose Material Facts that are known ~Disclose Material Facts that reasonably could/should be known ~Brokers will almost never be able to know ALL Material Facts Material Facts examples: (FACTS ABOUT THE PROPERTY LEAKING ROOF, ELECTRICAL ISSUE, FOUNDATION PROBLEM, HVAC NOT FUNCTIONING, Zoning/Rezoning,Covenants, Planned development, Future roads)
Designated Agent's Duty:
~Only represent the interest of the client they are designated to ~Treat the other broker as if they work for a completely different firm
Dual Agency Basics
When a Firm agrees to act as the agent to both the Seller and Buyer in a real estate transaction
ABC Real Estate signs an exclusive agency agreement to represent the seller of 123 Main Street. The home is subsequently destroyed by fire prior to any buyer making an offer on the listing. What is the correct status of the situation?
When an agency agreement is created with a seller, we call this a listing agreement. Because the "job" of the listing firm is to market the property to and find a buyer for the property, the agency agreement would end if the property were largely changed or destroyed. The two parties could choose to sign a new agreement if they wanted, but the original agreement would go away with the fire.
Special Features Of Designated Agency
~Does not eliminate Dual Agency. The firm remains as a Dual Agent ~This option may only be used for "inhouse" dual agency situations ~Prior approval of both Seller and Buyer is mandatory ~Individual designated agents have obligation (duty) only to their appointed principal
Limiting the Duties of Loyalty and Skill, Care and Diligence
~Dual Agency Provision states that Agent will make every effort to represent Buyer and seller in balanced and fair manner Provision calls for Agent to be "conduit" for information rather than to advise client or advocate for the client...NO ADVICE!!!!!
Jack is working with Sally of Keller Williams Cary as he purchases his new home. The broker has shown him several listings and eventually Jack agreed to sign a buyer agency agreement with KW for the transaction. Upon inquiring about the home at 123 Main Street, he found that Sally is affiliated with the listing firm of the property. Based on this new information, what is the most likely course of action that will need to be taken by Sally?
When getting permission from a buyer or seller for dual agency, the buyer and/or seller may give oral permission for dual agency in order to show the property if the buyer has an oral buyer agency agreement. Stop and read that again! If the buyer has an ORAL agreement, then permission for dual agency showings can be ORAL. If the buyer has a written buyer agency agreement, the permission must be from BOTH parties IN WRITING prior to even showing the property. Since Jack has a written buyer agency agreement with KW Cary and KW Cary is the listing firm of the property he is interested in seeing, written permission must be obtained from both Jack (buyer) and the seller before Jack can be shown the property by anyone affiliated with KW Cary.
A broker learns that the buyer is willing to pay more than the amount that they have offered to the seller. When must a broker disclose this information? When must it be concealed?
When must the broker disclose: When broker is exclusive agent of the seller, designated dual agent of the seller or subagent of the seller. When must the broker keep it confidential: When the broker is exclusive agent of the buyer, designated dual agent of the buyer or acting as a dual agent in the transaction (representing both the buyer and seller).
What is exclusive representation?
Where the firm only represents one party - buyer or seller in the sales transaction / tenant or landlord in a lease transaction.
A seller asks the listing broker what type of deed should they provide to the buyer in order to have the least liability. What should the broker do?
While a broker may know that a quitclaim deed offers no warranties whatsoever, the broker should refer the seller to an attorney and have the attorney advise the seller.
What is the difference between willful omission and willful misrepresentation?
Willful omission - is purposely not disclosing something known about the property that is a material fact. The agent has not made a statement orally or in writing. Example: The owner knows that the road is about to be widened causing a significant increase in traffic and the loss of a substantial portion of the front yard, but does not inform potential buyers. Willful misprepresentation - is lying. The broker knows that the statement that they have made is a lie. Example: The agent knows that the basement floods during spring rains, but tells the buyer that there are no issues with regard to flooding.
What is the difference between working "with" a buyer and working "for" a buyer?
Working With = no agency representation (the agent is agent or subagent of the seller) Working For = agency representation (the agent has an agency agreement- whether oral or in writing)
Exclusive Seller Agency
~Firm ONLY represents the Seller in the transaction. ~The Buyer is unrepresented ~We refer to brokers in this situation as "subagents of the Seller" ~Must be careful not to lead a Buyer into believing they working for them ~Oldest form of real estate brokerage
Biggest problem is Disclosure of Material Facts
You're suppose to disclose everything to your client that would be beneficial to them when you work as an exclusive agent
Dual agency
is when a real estate agent works with the buyer and the seller on the same transaction simultaneously. Here's a common scenario on when dual agency may occur: A real estate agent is hired to sell the home of a client named Mary. That real estate agent has a second client, named Rob, who is in the market to buy a home. Rob tours Mary's home and decides he wants to purchase the home. Because both Rob and Mary are clients of the same real estate agent, the transaction is considered an example of dual agency. Another example of dual agency is if Rob and Mary are represented by different real estate agents, but both real estate agents work for the same brokerage company. A third example is if a real estate agent is hosting an open house and meets a buyer who is interested in buying the home. If the buyer is not represented by a real estate agent, the buyer may request that the seller's agent represent them in the transaction. If both the buyer and seller are in agreement that the same real estate agent can represent both parties, the realtor becomes a dual agent in the transaction.
Skill, Care and Diligence
~Advise principal about offers ~Assist with contract preparation ~It is expected that the Agent provide the Buyer-Client with the appropriate sales contract and assist in its completion ~Work with Seller-Client to complete counter offer (contract) as needed
Basic Agency Terms
~Agency - The relationship that exits when one person is authorized to act for another ~Principal - The person for whom the agent acts and to whom the agent owes certain legal duties. Synonym of client ~ Agent - The one who acts for or on behalf of another by authority from the principal. In North Carolina, this is the FIRM ~ Subagent - The agent of an agent ~Fiduciary - A trust based relationship with a client ~Customer - Anyone other than our client
Accounting
~All client funds should be held in a trust account ~Brokers must properly protect and account for entrusted money
Special Features Of Designated Agency
~An individual agent may not be appointed if they possess confidential information about the other party ~Provisional Brokers can serve as Designated Dual Agents ~The BIC can be a Designated Dual Agent but never opposite a Provisional Broker in their firm
Disclosure to Clients
~Any information brokers know (or reasonably could have known) about the property or transaction which could impact the decision of the client. ~All offers ~Identity of potential buyers ~Any relationship brokers have with potential purchasers ~Intent of a buyer to resell the property for a profit ~Terms the other party might be willing to agree to ~ The other party's reason for engaging in the transaction ~Personal information about the other party which might influence decision making ~Dual Agents cannot give advice of any kind OR disclose any information about one client to the other. (Susan is prohibited from informing Mary about the need of the seller to have a quick sale)
Loyalty and Obedience
~Brokers must follow the lawful instructions of their clients ~Brokers must represent the clients' best interest ~Keep clients' personal information confidential
The Flow of Agency
~Client ->Real Estate Firm •Agent->Brokers Affiliated with Firm •Subagents
Termination of Agency
~Completion ~Expiration ~Mutual agreement to terminate ~Breach ~Operation of Law ~Destruction of Condemnation of the property ~Death of either client or Firm
Designated (Dual) Agency
~Created in 1997 to avoid some of the risks with Dual Agency ~Primary purpose is to help overcome SOME of the conflicts of interest of true Dual Agency
Disclosure of Information:Clients or Customers?
~Customers are anyone we deal with in a transaction but do NOT represent ~Clients are those we represent in a transaction ~Listing Brokers have sellers as clients ~Selling Brokers working as buyers' agents have buyers as clients
Dual Agency
~Increases possibility of engaging in conduct that violates agency law ~In practicing Dual Agency it should be intentional and disclosed
Levels of Agencies
~Universal Agent - represents the principal in all matters ~ General Agent - represents the principal in a particular business or related range of activities (A Property Manager is a General Agent) ~ Special Agent - limited to representing the principal in a specific transaction.(A sales broker is a Special Agent)
Other Points
~Value of property or compensation has nothing to do with the Agent's duties ~Agents need to cooperate in order to facilitate the closing ~Agent's duties do not end with the signing of the contract