Law of Agency study guide for Exam 1

TREC rules for advertising and signs.

- Advertising must contain name of broker or assumed name, name of designated officer if sponsoring broker is corporation. - Team names must end in TEAM or GROUP, broker's name must be the last ford in a team name.

What are the duties of the Principal

- COMPENSATION; agents should be paid on the completion of the agency - REIMBURSEMENT; agent should be reimbursed by principal for expenses incurred on behalf of principal - INDEMNIFICATION ; Principal will protect agent form suffering loss due to agent's reliance on information received from principal. - PERFORMANCE ; Principal is expected to perform as promised in agency agreement.

Client vs. Customer

- Client a person who engages the professional advice or services of another, and whose interests are protected by the specific duties and loyalties of an agency relationship. Customer a person who receives limited brokerage services without establishing an agency relationship

IRS Independent Contractor Status rules :

- Commission must compensate sales agents. - Sales agent shall pay own business expenses - Sales agent cannot be made to attend sales meetings. - Sales agent cannot be made to attend sales seminars. - Sales agent cannot be made to work set hours. - Sales agent should not be offered participation in broker's insurance or retirement program.

Intermediary with/without appointments

- Intermediary with appointments; two appointed associates, give advice and opinions (negotiate) to their respective parties. - Intermediary without appointments; agent sells own listing, agent can not give advice and opinions to either party, cannon negotiate for either client.

What are the permitted activities of unlicensed assistants?

- Manage and office; answer calls, register prospects, type correspondence, schedule, tele-market if not soliciting for listings of buyers. - accompany license holder on showings, and open houses. - train and motivate license holders - act as on-site apartment manager - assist in arranging financial direction of a license holder in administrative way. - Place for sale signs on property, accompany an inspector, place ads as directed by license holder.

Texas Real Estate License Act (TRELA) - Creation -Purpose

- Passed in 1939 - TREC was created to enforce and administer the act in 1949. - Purpose of the acts is to protect the public against unscrupulous brokers and sales agents.

What are the requirements of a valid listing agreement

- Signatures of all owners and listing agent - Legal description of property, including street address - List price of property as set by seller - Definite starting and ending date - Agreement to pay a stated commission to broker

Defamation - definition -explanation -examples

- The act of harming the reputation of another person by making false statement to a third party either by slander or libel. - claims require evidence of a false statement, the damage person defamed.

Types of Agents

- Universal Agency; power to act for the principal in all transactions. - General Agency; represents principal in a particular type of transaction (property manager or broker and real estate agent - Special Agency; most limited, agent performs limited duties for the principal.

How is agency terminated

- When the purpose of the agency is completed; property is sold - Expiration of the period stated in the listing contract. - Anytime by mutual agreement - Death or incapacity of either party - Condemnation or destruction of the property - Bankruptcy - Operation of law - Revocation of broker's license - Abandonment by the agent - Revocation of the agreement at any time by principal - Termination of agreement at any time by broker.

REALTOR; meaning of term and how/when its used.

- a registered collective membership mark, identifying a real estate professional as a member of the National Association of REALTORS

Disclosure of representation -how and when-

- all buyers should be provided with an oral or written disclosure of representation at first contact. when agent and buyer have a substantive discussion about real estate, the buyer must be provided the Information About Brokers Services.

Deceptive Trade Practices Act (DTPA)

- allows consumer to sue a seller of goods for damages. - lists over 30 practices that are considered unlawful under the act in order to protect the consumer from unethical and unfair sales practices.

appointed associates under intermediary

- associates will give advice and opinions to their respective parties. broker makes the appointments likely using Intermediary Relationship Notice. - transaction must be in-house sale - both sides must be clients - broker has clients written consent.

Requirements for independent contractor status

- compensation based on commission - policies and procedures manual provided but there may not be mandatory compliance. - sales agent shall pay own business expenses - sales agent cannot be made to attend sales meetings - sales agent cannot be made to attend training seminars. - sales agent cannot be made to work set hours. - sales agent should not be offered participation in brokers insurance/retirement plan.

Dual agency vs. intermediary

- dual agency; allows real estate firm represent both sides of a transaction at the same time. broker represents both parties with their written permission. broker may appoint designated agent to represent buyer or seller. - intermediary; makes it possible to bring buyers and sellers together while representing their best interest. broker remains neutral

Sellers Disclosure notice requirements

- have abstract examined by an attorney chosen by buyer - or be provided with or obtain title insurance policy

DTPA - steps for an agent to help avoid lawsuits

- material misrepresentation, failing to disclose - lottery or deceptive practice - false promise - failing to make clear which party to a transaction he is acting for or receiving compensation. - guarantee future profits - accepting undisclosed commission -

What are the five sources of ethical standards

- the utilitarian approach - the rights approach - the fairness or justice approach - the common good approach - the virtue approach

What are the duties of the principal

-Compensation -Reimbursement -Indemnification (principal will protect agent from suffering a loss due to agents reliance on info received from principal) -Performance

Intermediary - appointed associates - duties and requirements

-Intermediary; a broker who negotiates the transaction between the parties, may appoint licensees associated with the intermediary to work with and advise the party to whom they have been appointed. - appointed associates; may advise the person to whom the licensee has been appointed.

Details in a valid listing

-Paragraph 1. Parties - Paragraph 2. Property -Paragraph 3. Listing Price - Paragraph 4. Term - Paragraph 5. Broker's Compensation - Paragraph 6. Listing Services - Paragraph 7. Access to The Property - Paragraph 8. Cooperation with other Brokers - Paragraph 9. Intermediary - Paragraph 10. Confidential Information - Paragraph 11. Broker's Authority - Paragraph 12. Seller's Representations - Paragraph 13. Seller's Additional Promises - 14. Limitation of Liability - 15. Special Provisions - 16. Default - 17. Mediation - 18. Attorney's Fees - 19. Addenda and other Documents - 20. Agreement of Parties - 21. Additional Notices -

Types of listings and commissions owed under each.

-open listing; gives seller right to list property with multiple brokers and sell property personally without liability for payment of a commission. - exclusive agency; seller agrees to list property with ONLY ONE broker, seller can sell property personally without payment of a commission - exclusive right to sell; gives broker greatest protection, lists property with one broker, commission is paid even if property is sold by owner. - net listing; seller establishes minimum net amount for proceeds at closing, brokers commission is difference between minimum net established by seller.

Stigmatized Properties; Conditions and Disclosure requirements

-psychological stigma; house is haunted, murder, death, infectious disease. -physical stigma; results from environmental or natural conditions near or on property. previous flood, foundation, landfill, power plant -license holder IS NOT required to disclose AIDS-HIV, or death on property , stigma relating to material defect in property MUST be disclosed. (land/soil conditions, pest infestation, structural, electrical/plumbing, known alterations, latent or hidden defects must also be disclosed , encroachment, zoning, deed restrictions)

Cooperative Broker

A broker selling the listing of another broker. A cooperative broker may complete the transaction as a subagent of the listing broker or may represent the buyers under and agency agreement; also known as the other broker.

Comparative Market Analysis (CMA)

A comparison of the prices of recently sold homes that are similar to a listing seller's home in terms of location, style, and amenities.

Buyer representations agreement

Agreement that buyers signs, allowing a broker to represent them, "employment contract" - IABS - general characteristics of property search - buyer's and brokers obligations -terms of the agreement - broker's duties to clients and customers - compensation agreement - intermediary consent - consent for the broker to represent other buyers - fair-housing language - signatures of the parties.

The concept of agency and agency relationships

An agency relationship exists when one person (agent) acts for or on behalf of another person (client/principal)

Broker license holder

An individual holding a broker's license issued by TREC. Brokers may act independently in conducting real estate transactions or may engage other brokers or sales agent license holders to represent them in the conduct of real estate business.

Team name registration rules

Broker is required to register assumed name with TREC - broker must notify TREC within 30 days after broker or sales agent starts or stops using assumed name.

Sherman Anti-Trust Act and commission rates

Commission rates must be a matter of negotiation between broker and client. A "standard" or "goin rate" could be evidence of violation

What are the disclosure requirements for the agent to customers and clients.

Disclosure of all Material Facts, they know or should reasonably be expected to know that materially affect the value of or desirability of property. Disclosure of agency, property condition, and environmental hazards.

The Fairness or Justice Approach

Ethical action is equal for all or if not, then fair for some, based on some defensible standard.

The Utilitarian Approach

Ethical action produces the greatest balance of good over harm to those who are affected.

The common Good Approach

Ethical standards and actions embrace common conditions that are important to the welfare (common good) of all

The Virtue Approach

Ethics are habits than enable us to act accordingly as persons who are truthful, honest, courageous, compassionate, generous, tolerant, and posses integrity, fairness, self-control, and prudence

(Types of listings) Exclusive right to sell

Exclusive right to sell to one broker during the listing term. Commission is paid even if property is sold by owner.

Types of Authority

Express Authority; comes from specific instructions, either oral or written, (listing agreement or buyer representation agreement signed) Implied Authority ; customary to business (the norm)

What are the duties of an agent

Fiduciary Duties (OLD CAR) - Obedience - Loyalty - Disclosure - Confidentiality - Accounting - Reasonable care

Buyer agency only

Firm will only represent buyers, - no worry about unintentional dual representation. - brokers do not act as intermediaries - agents are responsible for giving advice and opinions to buyer only. -disadvantage ; buyers don't want to sign Sellers representation agreement, agents can only list properties for sellers, limiting firm to either the selling side only or listing side only commission.

Trust accounts, commingling and conversion

Funds that are held for a client or customer are held in trust and must be placed in a separate account. Commingling is mixing client's funds with the business or personal funds. Conversion is when a broker spends client's funds without authorization. Commingling and Conversion are serious violations of TRELA

(Types of listings) Open listing

Gives the seller the right to list property with multiple competing brokers, and sell property personally without liability for payment of a commission.

The Rights Approach

Individuals have the right to have their moral rights protected and respected, and the right to be told the truth, and not be injured.

Defamation of character

License holder may have the legal right to sue the publisher for defamation if the false statement is injurious.

How most real estate agents are paid

Most license holders are independent contractors engaged in a principal-agent relationship. (general agency between broker and sponsored license holder) 1099-MISC

Information About Brokers Services

Must be provided when the first substantive discussion of a real estate transaction takes place. provide this info before doing a listing presentation for a seller and before discussing properties, needs, and wants. purpose; so that buyers/sellers may be better informed about agency relationships.

Who can legally earn a commission / sue for a commission / share a commission

Only a broker may earn a commission, and only a broker may sue to collect a commission.

(Types of listings) Exclusive Agency

Seller agrees to list property with only ONE broker during listing term, seller can sell property himself without payment of a commission.

(Types of listings) Net Listing

Seller establishes minimum net amount for proceeds at closing. Broker's commission is the difference between the minimum net established by the seller and the actual seller's net. - Take net listing only if principal insists upon it. - Principal appears to be familiar with the current market values of real property.

Cannons of Professional Ethics

TREC included in the Rules of the Commission - Article 1. Fidelity -Article 2. Integrity - Article 3. Competency - Article 4 Consumer Information - Article 5. Discriminatory Practices - Article

TREC advertising rules and font requirements.

The license holders name or team's name and the broker's name is at least 1/2 the size of the largest contact information. it is important to make a distinction between the size of the logo and the size of the text.

Subagency

When a license holder is not associated with the seller's broker but is representing the seller through a cooperative agreement with the seller's broker.

Results of broker death and the effect on sponsored agents.

When the designated broker of a business entity dies, the licenses of agents sponsored by the business entity are placed on inactive status.

Deceptive advertising

license holder can not place advertisement that implies sales agent is responsible fo brokerage business or causes someone to believe a person not authorized to conduct brokerage is engaged in brokerage. - inaccurate in any material way , property terms, values, services, policies . - advertising another brokers list without permission and disclosing that brokers name - failing to remove ad about listing within reasonable time -

what are the duties of an agent

performance, notification, loyalty, obedience, accounting

Setting commission rates - violations

rates are always negotiable - attempt by a group of brokers to set commission rates in their area or between a group of brokerage firms is ILLEGAL (price- fixing) Sherman-Anti-Trust Act and Clayton Act have the most impact in this area.

TREC website requirements for links on the IABS form

sales agent must provide form in body of an email. or as attachment to an email or a link within the body of an email, with a specific reference to the IABS Form in the body of the email. - link to the IABS in the signature line or footnote of an email does not satisfy requirement.

What is an ethical dilemma?

situation in which individuals may find themselves when they do not know right course of action, have difficulty doing what they consider to be right. find the wrong choice very tempting.

Benefits of seller agency

the firm will only represent sellers. no intermediary practice is allowed - Firms do not have to worry about unintentional dual representation - Brokers do not have to act as intermediaries or make appointments - Agents are only responsible for giving advice and opinion to the buyer or seller, avoiding conflicts of interest