Unit 5: Agency Relationships
find a purchaser and receive an offer to purchase accompanied by a deposit. Almost all listing agreements give the broker express authority to accept a deposit as an agent of the owner. It does not authorize the broker to convey property on behalf of a principal or legally bind the seller to make a deal.
The usual listing contract authorizes a broker to:
Exclusive agency Hint: In California, the commonly used listing agreements are exclusive right to sell listing, exclusive agency listing, and open listing
Which of the following is not a listing agreement typically used in California?
Act of law Hint: An agency relationship is created between an agent and principal, by agreement, ratification, or estoppel.
Which of the following is not a way to create an agency?
Misrepresentation
(1) Making a false statement or concealing a material fact. (2) A false statement of fact.
The principal's refusal of an offer to purchase that was presented in the name of a third party.
An agency relationship may be terminated by all of the following, except:
innocent
Statements not known to be false at the time they are made are called _____ misrepresentations.
innocent Hint: Innocent misrepresentations are statements not known to be untrue at the time they are made, and usually carry no criminal liability for an agent.
Statements not known to be false at the time they are made are called _____ misrepresentations.
attorney-in-fact
1) The person holding the power of attorney. (2) A competent and disinterested person who is authorized by another person to act in his or her place in legal matters.
associate licensee
Another term used for a licensed real estate salesperson employed by a licensed real estate broker.
general agent
A person authorized by a principal to perform any and all tasks associated with the continued operation of a particular project.
special agent
A person employed to perform a specific task.
agent
A person who acts for and in the place of another, called a principal, for the purpose of affecting the principal's legal relationship with third persons
principal.
A person who authorizes another to act in his or her place in regard to relations with third persons is the:
principal. Hint: Agency is a legal relationship in which a principal authorizes an agent to act as the principal's representative when dealing with third parties.
A person who authorizes another to act in his or her place in regard to relations with third persons is the:
Third Party
A person who would be considered the customer in an agency relationship.
real estate salesperson
A person with a real estate license and employed by a real estate broker—agent of the broker—not the seller or buyer.
customer
A prospective buyer of real estate; not to be confused with a property seller, who is the listing broker's client.
fiduciary relationship
A relationship that implies a position of trust or confidence.
agency relationship
A special relationship of trust by which one person (agent) is authorized to conduct business, sign papers, or otherwise act on behalf of another person (principal). This relationship may be created by expressed agreement, ratification, or estoppel
Listing agreement
A written contract by which a principal, or seller, employs a broker to sell real estate.
broker Every agency relationship has a principal, an agent, and a third party. In a real estate transaction the principal (buyer or seller), agent (real estate broker), and third party (customer) are bound together in a legal relationship, with all the duties and rights that go with that connection
Every agency relationship has a principal, an agent, and a third party. In a real estate transaction the agent is the:
broker.
Every agency relationship has a principal, an agent, and a third party. In a real estate transaction the agent is the:
Puffing
Exaggerated comments or opinions not made as representations of fact, thus not grounds for misrepresentation.
third party.
In a real estate transaction the customer is considered the:
third party. Hint: In a real estate transaction the principal (buyer or seller), agent (real estate broker), and third party (customer) are bound together in a legal relationship, with all the duties and rights that go with that connection.
In a real estate transaction the customer is considered the:
Principal
In a real estate transaction, the one (seller) who hires the broker to represent him or her in the sale of the property.
must have a definite termination date.
In an exclusive listing, as a matter of law, a listing between the broker and seller:
must have a definite termination date. Hint: Every exclusive agency agreement must have a definite termination date.
In an exclusive listing, as a matter of law, a listing between the broker and seller:
must have a definite termination date. Every exclusive agency agreement must have a definite termination date.
In an exclusive listing, as a matter of law, a listing between the broker and seller:
conversion
The appropriation of property belonging to another as in a broker using a client's funds.
Ratification
The approval of a previously authorized act, performed on behalf of a person, which makes the act valid and legally binding.
Procuring Cause
The broker who produces a buyer ready, willing, and able to purchase the property for the price and on the terms specified by the seller, regardless of whether the sale is completed.
to a seller before listing a property or to a buyer before writing an offer.
An agent must supply a written Agency Disclosure:
Net Listing
An employment contract in which the commission is not definite.
the commission stated in the listing agreement An exclusive authorization and right-to-sell listing is an exclusive contract in which the seller must pay the listing broker a commission if the property is sold within the time limit by the listing broker, any other broker, or even by the owner.
Broker Davis signed an exclusive right-to-sell listing to sell John's $365,000 house. Davis diligently advertised the sale of the house. One week before the listing was to expire, the house was sold through John's own efforts to a friend. Under current rules and regulations, Davis is most likely to receive:
A duty of fair and honest dealing A listing broker has the duty of fair and honest dealings with third parties—the buyer. This duty includes full disclosure of all material facts.
If a listing broker acts as an agent, the broker owes to the seller a fiduciary duty. What does the broker owe to the buyer?
is not entitled to a commission because of the open listing. In an open listing, the seller may sell the property without paying the broker a commission.
Seller Janet signs a memorandum for an open listing with a broker authorizing the sale of her house for $165,000. The broker expends considerable time and money advertising and showing the house and obtains several offers. However, Janet rejects the offers and instead sells the house to a friend. The broker:
exclusive right-to-sell The types of listing agreements in choices (a), (b), and (c) require the broker to prove he or she was the procuring cause. In the exclusive right-to-sell listing agreement, the broker is entitled to a commission regardless of who sells the property.
To be entitled to a commission, a broker must show that he or she was the procuring cause of the sale under all of the following types of listing agreements, except a(n) (BLANK) listing.
subagent
A broker delegated by the listing agent (if authorized by the seller) who represents the seller in finding a buyer for the listed property.
communicates the seller's acceptance to the buyer. Communication of the seller's acceptance to the buyer shows that the broker is the procuring cause of the sale and that the broker has found a ready, willing, and able buyer
A broker is most likely to earn a commission when the broker:
exclusive right-to-sell Hint: In the exclusive right-to-sell listing agreement, the broker is entitled to a commission regardless of who sells the property.
A broker receives a commission in a(n) __________ listing regardless of who sells the property.
dual agent
A broker who represents both parties in a transaction.
ready, willing, and able
A buyer who is prepared to enter a purchase contract, who really wants to buy, and who meets the financing requirements of purchase.
is legally entitled to a commission.
A licensed broker obtained an exclusive right-to-sell listing from an owner. During the listing period, the broker found a buyer who made an offer on the property that was accepted by the seller. Neither the offer nor the escrow instructions mentioned: (a) the broker as the agent, or (b) terms for payment of a commission. Under these circumstances the broker:
is legally entitled to a commission. Hint: An exclusive right-to-sell listing agreement stipulates the broker will be paid a commission regardless of who sells the property—the broker, the seller, or another cooperating broker.
A licensed broker obtained an exclusive right-to-sell listing from an owner. During the listing period, the broker found a buyer who made an offer on the property that was accepted by the seller. Neither the offer nor the escrow instructions mentioned: (a) the broker as the agent, or (b) terms for payment of a commission. Under these circumstances the broker:
broker is acting on written instructions from the principal or the offer is patently frivolous A listing agent must present all written offers to the owner before closing unless expressly instructed otherwise or unless the offer is patently frivolous (not a serious offer)
A listing broker is relieved of the obligation to present an offer to purchase real property to his or her principal when the:
broker is acting on written instructions from the principal or the offer is patently frivolous. Hint: A listing agent must present all written offers to the owner before closing unless expressly instructed otherwise or unless the offer is patently frivolous (not a serious offer).
A listing broker is relieved of the obligation to present an offer to purchase real property to his or her principal when the:
inform the seller. The listing broker's fiduciary duty requires full disclosure of material facts. If the buyer instructs the listing broker to hold the check uncashed until the offer is accepted, this material fact must be disclosed to the seller when the offer is presented.
A listing broker received a bona fide offer and a personal check as a deposit. The prospective buyer asked the listing broker to hold the check uncashed until the end of the week. The listing broker must:
the principal's refusal of an offer to purchase that was presented in the name of a third party. Hint: At any time during the agency, the principal or agent may terminate the agency, except in an agency coupled with an interest. An agency is also terminated by the destruction of the property or by the parties to terminate the agency. In Choice (b) the seller's refusal to accept an offer does not terminate the agency.
An agency relationship may be terminated by all of the following, except:
the principal's refusal of an offer to purchase that was presented in the name of a third party.c. mutual agreement of both the principal and the agent before the original term expires.d. the renunciation of the agency by the agent. At any time during the agency, the principal or agent may terminate the agency, except in an agency coupled with an interest. An agency is also terminated by the destruction of the property or by the parties to terminate the agency. In Choice (b) the seller's refusal to accept an offer does not terminate the agency.
An agency relationship may be terminated by all of the following, except:
to a seller before listing a property or to a buyer before writing an offer. Hint: As of January 1, 1988, the Agency Relationship Disclosure Act became effective in an attempt to clarify the agency relationships among sellers, agents, and buyers. It applies to every residential property transaction of one-to-four units. The law requires that an agent supply a written document, called Disclosure Regarding Real Estate Agency Relationships, explaining the nature of agency. This disclosure must be made prior to taking a listing or writing an offer.
An agent must supply a written Agency Disclosure:
convey the two new offers at the same time.
An agent receives an offer. The agent gives the offer to the seller, who asks to consider it for 24 hours. At 6 p.m. the same day, the agent receives two more offers. The agent believes the seller will not accept any of the three offers. The agent should:
convey the two new offers at the same time. Hint: The agent must act in the best interests of the seller and must present all offers, unless patently frivolous. It is best to present them at the same time.
An agent receives an offer. The agent gives the offer to the seller, who asks to consider it for 24 hours. At 6 p.m. the same day, the agent receives two more offers. The agent believes the seller will not accept any of the three offers. The agent should:
convey the two new offers at the same time. he agent must act in the best interests of the seller and must present all offers, unless patently frivolous. It is best to present them at the same time.
An agent receives an offer. The agent gives the offer to the seller, who asks to consider it for 24 hours. At 6 p.m. the same day, the agent receives two more offers. The agent believes the seller will not accept any of the three offers. The agent should:
dual agent. Hint: A dual agent is a broker acting as agent for both the seller and the buyer in the same transaction.
An agent who represents both the buyer and the seller in a transaction is known as a:
in writing A real estate agreement must be in writing to be enforceable in a court of law. This includes listing agreements. However, listing agreements are not recorded, and therefore not acknowledged
An enforceable listing contract for the sale of real property must be:
in writing. Hint: A real estate agreement must be in writing to be enforceable in a court of law. This includes listing agreements. However, listing agreements are not recorded, and therefore not acknowledged.
An enforceable listing contract for the sale of real property must be:
safety clause
Clause that protects the listing broker's commission, if the owner personally sells the property to someone who was shown the property or made an offer during the term of the listing.
commingling
Depositing client funds in the broker's personal account or general business account
is not entitled to a commission because of the open listing.Hint: In an open listing, the seller may sell the property without paying the broker a commission.
Seller Jordan signs a memorandum for an open listing with a broker authorizing the sale of her house for $65,000. The broker expends considerable time and money advertising and showing the house and obtains several offers. However, Jordan rejects the offers and instead sells the house to a friend. The broker:
Sam does not have to accept the offer. A seller cannot be forced to sell, even after signing a listing agreement
Seller Sam signed a listing contract with broker Baker. If Baker brings the seller a full price offer:
RLA - exclusive form
The new C.A.R. name for the Exclusive Authorization and Right to Sell Listing Agreement.
procuring cause
The term, __________, refers to a broker who produces a buyer "ready, willing, and able" to purchase the property for the sale price and on the terms specified by the seller, regardless of whether the sale is completed.
only the open agent is owed a commission. Under an exclusive agency or an open listing, Wes could sell the property himself and owe no commission. Wes cancelled Horn's listing prior to accepting the offer from another broker, so Horn is not entitled to a commission. However if another agent sold the property during Horn's listing agreement, Wes could be liable for two full commissions.
Wes hired Horn to sell a property through a 90-day exclusive agency listing. Thirty (30) days later the house had not sold, so Wes sent Horn a certified letter ending the agency listing which Horn accepted. A few days later, another broker sold the house through an open listing. Under such circumstances:
The seller must agree to it in writing
What must occur before a broker decides to exercise an option during an option listing?
The seller must agree to it in writing Hint: An option listing gives the broker the right to purchase the property that is listed. A broker with an option is acting as a principal as well as an agent. Prior to exercising the option, the seller must be informed of the full amount of the broker's profit and agree to it in writing.
What must occur before a broker decides to exercise an option during an option listing?
single agency
When a broker represents only the buyer or only the seller in the transaction.
Estoppel Hint: An agency relationship is created between an agent and principal by agreement, ratification, or estoppel.
Which of the following is a way to create an agency relationship?
Estoppel Hint: An agency relationship is created between an agent and principal by agreement, ratification, or estoppel.
Which of the following is a way to create an agency relationship?
It allows a broker to complete a specific task
Which of the following is true of a listing agreement?