Chapter 7- Brokerage Relationships: Laws & Practices

Agency

1. Acting on someone else' behalf 2. The relationship that exists in which one person is empowered to act on behalf of another.

Not liable for disclosing (4 things).... and why?

1. Death 2. Serious Illness of owner 3. Proximity of sex offender 4. Haunted houses Because it can stigmatize the properties and we are not liable for failing to disclose. if asked... simply state we are not responsible for researching that information.

Material facts include:

1. Defects about the property itself (What is wrong with the property?) 2. Facts relating to the property's surrounding area (Whats around the property? anything we should know?) 3. Anything affecting the parties ability to perform (Clear title? Bankruptcy? Don't have the funds to fulfill the contract?) 4. Facts known to be of particular important to a party (Any specifics they want to know about the house... can they have chickens on the property? proximity to the neighbors house...?)

Customers

3rd party The OTHER people in the transaction 4 duties that we owe them: 1. Fairness 2. Honesty 3. Disclosure of material facts 4. Prompt presentation of offers

Misdemeanor

A criminal violation punishable by a fine and/or imprisonment. It is not considered as severe an offense as a felony.

Willful Omission

A deliberate failure to inform a party of a known/unknown material fact when one has an obligation to that party to relay all material facts regardless of whether the agent was asked or not!

Willful Misrepresentation

A deliberate false statement concerning a material fact by one who knows the true fact and is responsible for disclosing it. Intentional misrepresentation a material fact to a party

Employment Authority/ Agreement

A document or contract giving Real Estate agents the right to act for a principle with certain specific guidelines in a real estate contact (I.E. a listing contact or a buyer agency contract)

Subagent

A person appointed by an agent to assist in performing some or all of the tasks of the agency. AKA Agent of the agent.. (Firm is agent and broker is subagent)

Fiduciary

A person, such as an agent who is placed in a position of trust in relation to the person for whose benefit the relationship is created... Essentially the same as trustee. Foundation of professionalism Relationship based on trust that includes OLDCAR A carload of responsibilities

Material Facts.... What must we disclose and to who?

ALL material facts and to EVERYONE!! (Both clients and customers) Everything you know and everything you should have known.

Implied Agency

Acting on behalf of someone without an agreement. The actions of the principal and the agent indicate that they have an agency agreement but nothing has been put into writing. Unlikely in Real Estate and rare in NC

Universal Agency

Agents have all-encompassing powers to make decisions and act on behalf of the principal. (Complete authority over all activity of the principal may be created by an unlimited Power of Attorney.) NEVER used in real estate

Loyalty

An absolute duty of an agent to a principal to serve the best interest of the principle.

negligent omission

An unintended failure to communicate a known or unknown material fact by a person responsible for disclosing it because this person did not exercise that due skill,care, and diligence that would have revealed the fact.

Estoppel/ Apparent Authority

Anyone acting as if they have authority but in fact they may not have that authority.... When an agent gives the impression that she/he has certain authority that a 3rd party might rely on when in fact she/he does not have that authority.

When do you use the WWREA brochure?

At first substantial contact "Working with a Real Estate Agent" brochure #TimeOutWhipitOut Brochure that must be shared with anyone at first substantial contact- becomes part of the clients file for 3 years, ask for their signature but not necessary

Designated Dual Agency

BIC can designate one licensee (Agent) to represent the seller and one to represent the buyer AKA the BIC DESIGNATES the licensee A form of dual agency but gives client more representation (you get more information regarding designated dual agency) BIC and PB cannot be in a designated dual agency agreement Cannot be designated if the agent already possess personal, confidential or motivational info. "Take off Coach's hat, put on referee hat"

General Agency

BOARD range of activities Perform acts for particular activities Ex. Property Manager for a particular unit or complex Ex. When a real estate licensee becomes associated with a brokerage firm , the licensee becomes a general agent of the broker/principal.

If first substantial contact has not occurred with the SELLER, you last chance is....

Before the beginning of the listing presentation Listing presentation: "How you get houses sold"

If the first substantial contact has not occurred with the BUYER your last chance is...

Before you open the door for them

Express Agency

By express agreement Any oral or written agreement establishing a trust relationship between a principal and agent.

The 3 D's of Agency disclosure

Disclose Discuss Decide

RPOADS

Form which seller must disclose HOA fees and anything that is wrong with the property. "Residential Property Owners Association and Disclosure Statement"

Residential Property Disclosure Act

Law requiring sellers of 1-4 residential properties to fill out a disclosure statement. Seller must complete the form (even if FSBO) but can mark no representation.

Special Agency

Limited to one well-defined task one time. Detailed instructions needed Once the task or the time period has been fulfilled, the agency relationship will no longer exist. The agent is not authorized to make decisions for the principal.... You take information received and bring the information to the principal for a decision. (ex. Buyers agents and Listing agents)

Caveat Emptor

Literally "Let the buyer beware". Does not relieve agents obligation of disclosing material facts

MOG

Mineral, Oil and Gas disclosure All residential sellers must disclose (Expect new home construction) Buyer gets prior to offer

OLD CAR

O- Obedience L- Loyalty D- Disclosure C- Confidential A- Accounting R- Reasonable skill and care

Client

People you represent Agent owe Fiduciary duties (OLD CAR)

Confidentiality during the term of the relationship....

Starts at the signing and ends at the completion

Express Authority

That authority specifically granted in a contract.

First substantial contact

That flexible point in time in which can an agent must disclose to the buyer that she represents the seller and that the buyer should not disclose to the agent any personal information that she would not want the seller to know. Or Vis versa When client begins to discuss personal, motivational or financial information

Breach of Duty

The failure to fulfill an agents duty to his or her principle. Include: disloyalty, disobedience, Lack of Skill, care and Diligence, and Failure to either properly disclose information or to accurately account for funds.

Listing Agreement

The firm is the agent and the principal is the seller. The firm is being hired to use its best efforts to secure a ready, willing and able buyer for the seller's property.

Dual Agency Agreement

The firm represents both the buyer and the seller in the same transaction. Client must give consent at the start of relationship. Consent and disclosure must be in writing at the formation of the relationship. If oral: you must reduce into writing prior to offer The BIC and the PB can be in a Dual Agency Agreement Limitations: Limited in negotiations, disclosure of confidential information, advocating on behalf of the client.

Buyer Agency Agreement

The firm represents the buyer in locating the desired property to purchase. A contract in which a buyer engages a firm to act in a fiduciary relationship towards the purchase property.

Law of Agency

The laws and regulations which govern the relationships of agents to their principals and to one another.

Agent

The party who acts on behalf of the principal

Principal/ Client

The person for whom the agent acts

Disclosure of Information

The prompt and total communication to the principle by the agent of any information that is material to the transaction for which the agency was created.

Negligent Misrepresentation

an unintended misrepresentation of a material fact that the party did not make knowingly but should have known the truth by exercising due skill, care, and diligence