Real Estate: Texas Law of Agency

15 Minute Rule

15 minutes after the moving van leaves, a neighbor will be disclosing what the real estate agent should have disclosed.

Buyer's Agent

A broker licensee who represents the buyer in a transaction (also known as the selling broker or cooperating broker)

Seller's Agent

A broker licensee who represents the seller in a transaction (also known as the listing agent)

Intermediary

A broker licensee who works for both the seller and the buyer in the same transaction (a special agency alternative allowed in Texas)

Assignable Contract

A contract which the rights can be given, or assigned, to some other party. The parties should understand if a contract is assignable or not before entering into negotiations.

What is meant by a latent defect?

A latent defect is not readily observable or readily discoverable by reasonable means.

Subagent

A licensee who is not affiliated with the client's broker, but who represents the client as a cooperating broker

What is meant by a material fact?

A material fact is an issue that would be useful for a reasonable person to know when making a decision.

What is a material fact?

A material fact is anything that the customer may not be able to discover by himself that would change his approach on whether or not to continue with the transaction.

What is a patent defect?

A patent defect is a problem or issue with a property that is obvious to most people.

Consumer

A person requesting or receiving licensed services

Sponsoring Broker

A person who has responsibility for the real estate activities of a salesperson or another broker working under him or her (also known as an employing broker)

Client

A person who is being represented by an agent

Customer

A person who is not represented by an agent, but receiving ministerial acts

Agency

A relationship established between a principal and a real estate agent

Fiduciary Relationship

A relationship in which one party places special trust, confidence, and reliance in another

What is required to turn a customer into a "client or principal?"

A written and signed agency agreement (listing agreement or buyer's agency agreement) is required to work with a client or principal.

Brokerage Agreement

A written or oral agreement for brokerage services in exchange for compensation

Ministerial Acts

Acts performed by a licensed agent for a customer that are informative or clerical in nature

Agency by ratification is also known as what?

Agency after the Fact

Agency Relationship

Agency is a relationship in which a person from the public now has a licensed broker and the broker's salespeople to assist the client in accomplishing either selling a property, buying a property, or leasing a property.

A broker's policy that allows intermediary without appointments mostly benefits

Agents

The Law of Agency

An agency relationship imposes fiduciary duties on both the client and the agent, but mostly the agent. These duties are both moral and ethical, but also legal

What exception exists to the duty of obedience when working with a client?

An agent is not bound by the duty of if the principal's directions are not legal.

List three services that need to be clarified by the buyer agent to the client.

Assisting in determining favorable financing Providing information relating to market values Giving advice during contract negotiations

When must a buyer's agent provide a written statement about brokerage services to a party?

At first contact with the seller, landlord, or either party's agent

When must a seller's agent provide a written statement about brokerage services to a party?

At the time of the first substantive dialogue with the party

When does buyer agency exist?

Buyer agency exists when the broker represents the buyer exclusively in the real estate transaction.

Buyer Agency

Buyer agency exists when the broker represents the buyer exclusively in the real estate transaction. A buyer-agency relationship can be created by verbal agreement or by implication and be expressed in writing or orally. A buyer's agent spends time discussing the buyer's preferences and qualifications.

How does an agent become an undisclosed dual agent?

By conduct that misleads a buyer into thinking that the agent represents him or her

COALD

Care Obedience Accountability Loyalty Disclosure

An agent's fiduciary responsibilities to a client usually end when the transaction closes. This is not true of which duty?

Confidentiality.

What is the person called that is allowed to receive a commission that is offered by the listing broker?

Cooperating Broker

What is the number one rule that a broker must follow when working a 1031 Exchange?

Disclosure to all parties

What are agreements between brokers and clients called?

Employment Contracts

What is the best way for a broker to avoid intermediary relationships?

Establish a policy that when one person in the transaction is a client, then the other one will be a customer.

What is a sales person who has been designated as an intermediary without appointment forbidden to do?

Give Advice

What policy is being practiced when a listing agent warns the buyer where the licensee's loyalties reside?

Honesty

What is the best way to handle questions regarding structural issues of a building?

Inform the buyer to seek out professional advice.

What are the three types of misrepresentation?

Innocent Negligent Fraudulent

What transaction model was developed to replace dual agency?

Intermediary

caveat emptor

Let the Buyer Beware

What type of stigma is commonly known to many, but only taken seriously by a small select group?

Minimal Stigma

What type of lawsuits are most often brought against brokers?

Misrepresentation

A transaction broker has fiduciary responsibilities towards which party?

Neither side of the sale

Which agency is sometimes practiced when brokers decide intermediary transactions are too complicated?

Non-Agency

Which document is used to notify clients that intermediary has happened?

Notification of Intermediary Relationships

What are the fiduciary duties assigned to do?

Place the client's needs above the desires of the brokers and salespeople

What is the name of the Texas' disclosure statement?

Seller's Disclosure of Property Condition

What four types of agency positions are recognized in Texas?

Seller's agent (single agent) Subagent Buyer's agent (single agent) Intermediary

What is a licensee's responsibility to a client?

Since the licensee is representing the broker, he or she has the same responsibility to the client that the broker does.

Revocation by the Client

Some sellers will not be happy with the lack of progress in showing and selling their home. The client can request the listing be revoked. This is termed

Licensee

Someone who is licensed in Texas as a salesperson or broker

Real estate brokerage is based on what kind of agency?

Special Agency

Whose responsibility is it to find out things about a listing that a seller might not want to disclose?

The Buyer's Agent

procuring cause agent

The agent who ultimately caused the buyer to purchase the home and earned the commission

In any real estate transaction, what is the best way to turn a customer into a client?

The best way to turn a customer into a client is by written agreement - a listing agreement with a seller or a buyer's representation agreement.

What types of things is a broker NOT authorized to do for a client?

The broker does not have the authority to do certain things such as: Accepting an offer on a listing even if it is for the full purchase price. Only the owner can decide whether or not to accept an offer Allowing the buyer to move into the property before the closing without the owner's permission Proposing an offer on a property on behalf of a buyer client without the client's permission

When a broker becomes a property manager, what is his or her agency relationship to the owner and to the tenants?

The broker has an agency relationship with the owner, who is the principal. The tenant is a customer, so there is no agency relationship between the broker and the tenants.

Implied Authority

The broker has implied authority to work on behalf of the client when he or she has verbally formed agency with the seller or buyer. The broker will not make decisions on behalf of the client. The broker will give the client a list of possible options on what to do and will even give advice to the client on what the broker feels would be appropriate. It is the client, however, who must make the decisions.

What is the broker's responsibility to a client?

The broker is responsible for meeting the needs of the client above the needs of everyone else, including him or herself.

Open Listing

The broker verbally agrees to attempt to find a ready, willing, and able buyer for a seller, but this is not an exclusive arrangement between the seller and broker. The seller has shared this same opportunity with other brokers. It is just a matter of which broker is able to locate a buyer first as to who receives the commission.

Which of the parties in a buyer's agency agreement makes the ultimate decisions?

The buyer-principal always makes the final decisions.

Principal

The person who hires the agent and delegates to the agent the responsibility of representing the principal's interests

Agent

The person who is authorized to represent and act on the behalf of another person

What is a duty agent?

The person who is given the opportunity to answer the phones or greet someone walking off the street in an attempt to find leads

Contract Acceptance

The seller's acceptance of the offer is effective only if delivered in writing to the buyer or buyer's agent. The buyer can revoke the offer at any time before the seller's acceptance. The acceptance should be dated and timed.

How much time notice is required when a licensee decides to leave his or her broker?

There is no notice required

General Agency

This agency relationship between the broker and the salesperson is created with an independent contractor agreement. It explains all the duties of the broker and the salesperson while the two are in this relationship.

Ostensible Agency

This occurs when a court declares that the licensee was acting like an agent. The judge would then in effect say, "Therefore, you were the agent." This means that now the licensee and the broker are responsible for their actions and that if the complainants were damaged by the actions of the licensees, then the office is liable for those actions.

intermediary with appointments

This occurs when the broker appoints one agent to represent the seller and another agent to represent the buyer.

A broker may enter into an agreement to work for free. Which type of agency does this create?

This type of agency is a gratuitous agency

What is the minimum number of disclosures required whether working for a buyer-client or seller-client?

Three

All lenders require a buyer to get what type of insurance?

Title insurance policy

Which transaction model has been used to replace dual agency?

Transaction Brokerage

Implied Agency

When a salesperson says or does something that creates agency such as giving advice to a customer, giving an opinion to a customer, or negotiating on the customer's behalf

Express Agency

When an agency relationship begins, the best type for both the broker and the client is a relationship in which everything is very clear, concise, and understandable. This is a situation in which both parties know what they are supposed to do and what they can expect from the other.

Accidental Dual Agency

When an agent creates a dual agency situation, but the intent was not to purposely deceive anyone.

Renunciation

When the broker wants to end the relationship

Gross Price Method

Which method of broker compensation helps reduce the concerns over excess commission expense and double charging, and is easier for the seller to understand and respond to a customary sales price offer?

Special Agent

also known as a specific agent. Under a special agency agreement, the principal delegates authority to conduct a specific activity, after which the agency relationship terminates. In most cases, the special agent may not bind the principal to a contract. In most instances, real estate brokerage is based on a special agency.

Agency coupled with an interest

an agency relationship in which the agent has an interest in the property that is being sold. This type of agency cannot be revoked by the principal, nor is it terminated if the principal dies.

Third Party

defined as a person who is not a principal in a real estate transaction; in other words, not in an agency relationship with a licensee. Customers are considered third parties, until such time as they might choose to become clients by entering into an agency agreement. (customers)

Common law

evolves through a series of steps that allow for gradual change.

A real estate syndicate

is a financial services group formed temporarily for the purpose of handling a large transaction that would be difficult or impossible for an individual entity to handle. Syndication allows companies to pool their resources and share risks.

In-house sale

is one in which the seller is being represented by the broker and the buyer is also obtaining help from the same office. This could happen when the buyer is a customer. It could also happen when the buyer is a client of the same firm that the seller is a client.

Unintended dual agency

is when an agent creates a dual agency relationship by taking on responsibilities that normally should be done by a cooperating agent?

Rescission

is when both the client and the broker agree to end the relationship that they are in.

Dual agency

occurs when the same brokerage represents both the seller and the buyer under a written agreement. Dual agency changes the type of representation the broker and any agents in that company can provide.

Subagency

practiced between brokerage firms where "cooperating" licensees, of other firms, are subagents of the listing supervising broker of the principal. Subagency is legal in Texas. A subagent is a license holder who: Represents a principal through cooperation with a broker, and the consent of a broker representing the principal: and Is not sponsored by, or associated with the principal's broker

Subagency

refers to a specific client representation relationship between a property broker or real estate agent and another real estate broker or agent who brings the buyer to the property. Subagency exists when the buyer is a customer and there are two brokers involved.

A transaction broker must

remain legally neutral

exclusive-right-to-represent agreement

the agent does not sell a house; he or she assists the buyer-client in purchasing a home.

General Agent

the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts.

Universal Agent

the principal empowers the agent to perform any and all actions that may be legally delegated to an agency representative. The instrument of authorization is the power of attorney.

What is the most important task a broker needs to perform with the seller-principal?

to give a market analysis of what the property is worth.

specialized real estate transaction

usually involves three or more parties and a number of party representatives. Often a person involved in a transaction incorrectly assumes that everyone in the transaction knows the role of everyone else. exchanges, syndications, farm sales, and leases of industrial and commercial properties

Single Agency

when a licensee represents a either a seller/landlord or a buyer/tenant directly and exclusively as an agent. This relationship is normally bound by a written agency agreement, or listing agreement having a specified and limited duration

Intermediary Agency

where a licensee represents both sides of a transaction in an agent-client capacity. In a firm, intermediary agency can occur in two ways: The supervising broker or a single licensee represents both parties. One of the principal broker's agents represents a seller and another of his agents represents a buyer.

The best way to practice intermediary is

with appointments