Ch. 8 - Agency Law

How Buyers Become Clients

1)buyer comes in contact with a real estate agent is through an internet search or by calling the phone number from a sign in the yard or in a publication, online or print. 2)goal of the licensee is to get a face-to-face meeting with the buyer. 3)A buyer who chooses to become a client will receive a much higher degree of service, and it will be the salesperson's job to get the buyer the best transaction possible.

How Sellers Become Clients

1)reputation the licensee has in the community or because a friend referred the salesperson 2)appointment to see the property and discuss the possibility of marketing it on behalf of the owner. If the parties agree, 3)agency begins with the signing of a listing agreement. (not necessary for the broker to sign the document. The salesperson has the power to create agency on behalf of the broker through his or her independent contractor agreement.)

What refers to the act of a broker making a secret profit, at the seller's expense, in a real estate transaction? A ministerial act Self-dealing Broker failure Undisclosed profits

Undisclosed profits

In what type of agency would a court give an agent full control over someone's life and belongings in order to meet a specific need? Ostensible agency General agency Universal agency Special agency

Universal agency

Rescission.

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

fiduciary

"...a person holding the character of a trustee...in respect to the trust and confidence involved in it and the scrupulous good faith and candor which it requires. A person having duty, created by his undertaking, to act primarily for another's benefit in matters connected with such undertaking."

A multiple listing service (MLS)

-1800s -service used by a group of real estate brokers which band together to create a database which allows each of them to see one another's listings of properties for sale. -benefit by sharing information that might result in a completed sales transaction. -It serves a purpose by connecting those who wish to sell their homes with those looking to buy. -MLSs level the playing field by allowing small and large brokerages to compete at the same level. -An MLS allows competing brokers to work together for a shared goal of helping buyers find the perfect properties, and helping sellers sell their properties. -MLSs are private databases that are created, maintained, and paid for by association members. -Today, there are more than 800 MLSs operating in the U.S. which allow brokers to share information on properties with other brokers.

Imputed knowledge.

-The knowledge attributed to a party because of his/her position, or his/her relationship with or responsibility for another party. Such knowledge is attributed for the reason that the facts in issue were open to discovery and it was that person's duty to apprise him/her of such facts. -The agent and principal are responsible for knowing the same information,

Subagent

-a licensee who is not affiliated with the client's broker, but who represents the client as a cooperating broker. -In subagency, the agent bringing the buyer is actually working for the seller as a subagent of the listing broker. -This is important, as the agent working with the buyer actually owes fiduciary duties to the seller, not the buyer.

Universal Agency

-a person or court would give an agent full control over someone's life and belongings to meet a specific need. -A principal can have only one universal agent. A universal agent could perform such duties as: -Acquiring and disposing of assets -Disbursing a principal's funds -Entering into contracts -the principal would be held accountable for the actions of the agent. -this agency is rare.

attorney-in-fact

-an agent authorized to act on behalf of another person, but not necessarily authorized to practice law -a fiduciary position, which also goes by the name of private attorney. -signing a contract, handling financial transactions, or signing closing documents for the principal.

intermediary agency

-broker could assist two principles involved in the same transaction. -intermediary broker negotiates a transaction between parties and acts as an agent of both parties. - A broker must first obtain written permission from the parties to act in an intermediary capacity.

Ostensible agency

-created when a principal gives a third-party reason to believe that another person is his or her agent even though that person is unaware of the appointment. -If the third party accepts this as true, the principal may well be bound by the acts of his agent.

Special Agency

-limited agency -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. -Listing contracts and buyer representation agreements create special agency relationships,

General Agency

-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. -This type of agency is the one that is most common between brokers and their affiliated licensees and is created using the independent contractor agreement. -ex- Property management

The ethical guidelines an agent owes a customer are accounting, material fact disclosure, honesty, and: confidentiality. obedience. loyalty. agency disclosure.

agency disclosure.

proxy

an agent legally authorized to act on behalf of another party. For example, shareholders not attending a company's annual meeting may choose to vote their shares by proxy by allowing someone else to cast votes on their behalf.

What do you call a person who is being represented by an agent? A customer A purchaser A client A consumer

A client

What is the definition of a client?

A client is a party in a transaction who has an agency agreement with a broker for brokerage services.

What occurs when a close associate of the agent wants to buy a property that has been listed by that agent? An appraisal A conflict of interest A coalition A discount

A conflict of interest

In real estate, what do you call a third party that provides services to both buyers and sellers? A subagent A cooperating broker A transaction brokerage An escrow officer

A transaction brokerage

What protects the broker from misunderstandings regarding hiring and tax violations? NAR A written working agreement The Commission E&O insurance

A written working agreement

At what level is agency formed?

Agency is always formed at the broker level, never at the salesperson level.

What type of representation do designated agents give their clients? Selective representation Full representation Dual representation Partial representation

Full representation

What type of agency is most common between brokers and their affiliated licensees? General agency Ostensible agency Universal agency Special agency

General agency

What type of agency relationship is established through the actions of the parties? Special agency Express agency Universal agency Implied agency

Implied agency

What happens to an agency relationship when the seller files for bankruptcy? It's assigned. The agency ends. The courts decide. It continues.

The agency ends.

If a client tells the salesperson that he or she wants to end the agency relationship who will the licensee need to consult with? The broker An attorney The Commission A cooperating broker

The broker

transaction brokerage

-third-party that provides real estate services to buyers and sellers. -remains legally neutral and assists both the buyer and the seller in a transaction. -takes on the role of professional assistant. -often charge a flat fee instead of a percentage of the sale. -Transaction brokers have no fiduciary responsibility to any party in the transaction, which means they cannot always be held legally liable if something goes wrong. -Transaction brokers cannot assist with negotiations on price or act as an advocate for buyer or seller.

Constructive notice.

The legal fiction that signifies that a person or entity should have known, as a reasonable person would have, of a legal action taken or to be taken, even if they have no actual knowledge of it

What major role does a licensee play after the property goes under contract?

The licensee needs to think of him or herself as a problem solver when the property goes under contract.

What are the major disadvantages for the buyer under subagency?

The major disadvantage is that there is no obligation to obtain the best price or terms for the buyer, since the broker, as subagent, was obligated to obtain the best terms for the seller.

The law of agency

an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships involving a person, called the agent, that is authorized to act on behalf of another person, called the principal, to create legal relations with a third party. -agency is a relationship between a principal and an agent whereby the principal, expressly or implicitly, authorizes the agent to work under his or her control and on his or her behalf.

An agent who may or may not be authorized to practice law and is authorized to act on behalf of another person is called: a counselor. a litigator. an advisor. an attorney-in-fact.

an attorney-in-fact.

Self-Dealing

any wrongful behavior conducted by a fiduciary. Fiduciaries have expert knowledge and skill and are paid to apply that knowledge and skill for the benefit of their client's not themselves.

Undisclosed Profits

refer to the act of a broker making a secret profit in a transaction at the seller's expense.

When a property goes through foreclosure it will either go to a bidder on the courthouse steps or to: the government. the community. the HOA. the lender.

the lender.

What fiduciary responsibilities do transaction brokers owe to a seller in a real estate transaction? Confidentiality Appointed agents Loyalty No fiduciary duties

No fiduciary duties

What type of agency relationship is created when a principal gives a third party reason to believe that another person is his or her agent even though that person is unaware? Express agency Universal agency Ostensible agency Implied agency

Ostensible agency

What describes when both the client and broker agree to end the relationship they are in? Revocation Rescission Annulment Renunciation

Rescission

What describes any wrongful behavior by a fiduciary? Impropriety Self-dealing Insubordination Undisclosed profits

Self-dealing

What kind of agency relationship is created with listing contracts and buyer representation agreements? Universal agency Special agency Sub agency Implied agency

Special agency

What is it called when a person should know the details of a deal regardless if actual notice was given? Imputed knowledge Disclosure Constructive notice Ascribed notice

Constructive notice

What is the best way to end agency? Expiration Mutual agreement Renunciation Culmination of the transaction

Culmination of the transaction

Agency termination

At closing Expiration Reasonable time Mutual agreement Renunciation by client Broker renunciation Death of principal or broker Broker failure Bankruptcy of seller Property destroyed Breach of fiduciary duties Incompetence

What are acts called that are performed by an agent on a customer's behalf that are clerical or informative in nature? Ministerial acts Amending acts Legation acts Representational acts

Ministerial acts

What is the knowledge attributed to a party because of his or her responsibility to another party? Ascribed understanding Effects of agency Imputed knowledge Assigned knowledge

Imputed knowledge

What is it called when agency ends due to the broker or client not being able to make rational decisions? Broker failure Broker's Breach of Fiduciary Duties Foreclosure of the property Incompetence of broker or client

Incompetence of broker or client

Under what status can a broker assist two principals involved in the same transaction? Intermediary agency status Central agency status Medial agency status Peripheral agency status

Intermediary agency status