Lesson 7: Real Estate Agency: Terms

Caveat emptor

"let the buyer beware"

Patent defect

A defect that is readily apparent, through ordinary inspection.

Material facts

A fact is considered "material" if it has a substantially negative effect on the property's value or a party's ability to perform his or her contractual obligations, or it defeats the purpose of the transaction.

Latent defect

A material fact. A problem with the property that a buyer wouldn't discover through a casual inspection of it.

Third party

A person outside the agency relationship who deals with the principal through the agent is referred to as a third party.

Scope of the agent's authority

A principal may grant varying degrees of authority to her agent, giving the agent sweeping powers or strictly limited ones.

Agent

A property seller or buyer hires a real estate firm to act as his representative, or agent, in a real estate transaction.

Client

A real estate agent's client is the person who engaged the agent's services. The client may be a seller, a buyer, a landlord, or a tenant.

Special agent

A special agent has more limited authority. She is authorized only to do a specific thing or conduct a specific transaction.

Customer

A third party that a real estate agent is dealing with on behalf of a client may be referred to as the agent's customer

Tort lawsuit

A tort is a civil wrong, as opposed to a criminal wrong. This means that in a tort suit, one private individual (the injured party) sues another (the wrongdoer) for redress

Under washington real estate agency law, after termination the agent still owes the principal 2 duties

Accounting & confidentiality

2 categories of ways to terminate and agency

Acts of parties & operation of law

Accounting

Agent must account for all money and property received during agency relationship

Confidentiality

Agent must not disclose principal's confidential information

Cooperating agent

All the members of the listing firm's multiple listing service (and the members of any other MLS that is participating in the transaction) are called cooperating agents

Ratification

An agency is created by ratification if the principal gives approval after the fact to acts that weren't authorized at the time they were performed.

Termination under Washington State Real estate agency law

Complete performance Term expires Mutual consent Notice of termination

Agent classifications

Depending on the scope of authority granted, an agent may be classified as a universal agent, general agent, or special agent.

Listing agent

Either a licensee or a real estate firm may be referred to as the listing agent. The licensee who actually takes the listing is called the listing agent.

Agency relationship

Established when one person authorizes another to represent her in dealings with other people.

Duties real estate agent has for principal

In regard to her principal, the licensee must be: Loyal disclose conflicts of interest protect confidential information recommend expert advice make a good faith and continuous effort

Vicarious liability

In some circumstances, a principal may be held liable for his agent's negligent or wrongful acts as if he had committed them himself

Implication

In some situations where there's no express agreement, an agency relationship may be created by implication. This can occur when one person is behaving in a way that implies that he's acting as another person's agent.

Non-agency

In some transactions, real estate licensees choose to act merely as facilitators, not as agents. In other words, they make a deliberate decision not to take on any agency duties in regard to either the seller or the buyer.

Revocation by principal

In the absence of mutual agreement, the principal can revoke the agency at any time. In other words, the principal can fire the agent for any reason, or for no reason at all.

Renunciation

Just as the principal can terminate the agency unilaterally, the agent also has the power to terminate the agency at any time without the principal's consent.

Express agreement

Most agency relationships are created by express agreement. The principal appoints someone to act as his agent, and the agent accepts the appointment.

Seller paid fee

Probably the most common compensation arrangement for buyer's agents is the seller-paid fee. Under this arrangement, the buyer's agent receives a share of the listing agent's commission.

3 compensation options

Retainer seller paid fee buyer paid fee

Duty of loyalty

The licensee must put the principal's interests above those of a third party, and above his own interests.

Duties real estate agents have to all parties

The licensee must: exercise reasonable skill and care deal honestly and in good faith present all written offers disclose material facts account for trust funds provide an agency law pamphlet make an agency disclosure.

Selling agent

The licensee who actually procures the buyer for a home is referred to as the selling agent

Agent

The person authorized to act as the principal's representative

Principal

The person who authorizes the other to represent her

Mutual agreement

The principal and the agent can terminate their relationship by mutual agreement at any time. It's a good idea to put the termination in writing, especially if the agency was based on a written contract (such as a listing agreement).

Duty of loyalty

This means that the agent is legally obligated to act in the principal's best interests.

Real Estate Brokerage Relationships Act

Traditionally, the general rules of agency law also applied to the relationship between a real estate licensee and a client. However, in 1997 the Washington State Legislature adopted a statute that modified these rules in the real estate context. This statute now governs real estate agency in Washington.

Imputed knowledge rule

Under general agency law, a principal is held to have notice of all information that is in the possession of the agent. In Washington, the rule no longer applies in real estate transactions.

Estoppel

Under the legal doctrine of estoppel, a person cannot take a position that contradicts her previous conduct, if someone else has relied on the previous conduct.

General agency law

a body of law that applies to agency relationships in nearly any context.

Retainer

a fee paid up front, before the agent starts to work for the buyer

Tort

a mistake, accident, or misconduct that results in an injury to another person.

Apparent authority

agency authority that someone appears to have, although the principal didn't actually grant it.

Exception to revocation rule

an agency coupled with an interest can't be revoked. An agency is coupled with an interest if the agent has a financial stake or other interest in the subject matter of the agency.

Actual authority

authority granted to the agent by the principal

General agent

authorized to act only in a specified area of the principal's affairs. Within that area, however, the general agent has broad authority

Universal agent

authorized to perform any acts that the law allows one person to delegate to another. This type of agent has the greatest degree of authority.

4 ways an agency relationship can be established

express agreement, ratification, estoppel, implication

Trust funds

funds that the licensee is holding on behalf of a client or another party. A buyer's earnest money deposit and a tenant's security deposit are examples of trust funds commonly held by licensees

Independent contractor

hired to perform a particular job and is allowed to use her own judgment in carrying out the work

Acts of parties

mutual agreement, revocation by principal, renunciation by agent

Inadvertent dual agency

occurs if an agent unintentionally leads each party to believe that he or she (rather than the other party) is the principal, but the agent fails to make the dual agency disclosures, obtain written consent, and secure an agency agreement with each party.

Types of agency relationships

seller agency buyer agency dual agency non-agency

Fiduciary

someone who acts for the benefit of another in a relationship founded on trust and confidence.

Employee

supervised and controlled much more closely than an independent contractor.

Operation of law

term expires purposed is fulfilled death, incompetence, or bankruptcy of party subject property is extinguished

Dual agency

when a real estate agent represents both the seller and the buyer in the same transaction