B3- Agency Relationships

G

The buyer has the right to inspect the physical condition of the property which he/she may purchase.

R.

The payment or promise of payment of compensation to a real estate licensee by a seller, buyer, landlord, or tenant does not determine whether an agency relationship has been created between any real estate licensee and a seller, buyer, landlord, or tenant.

Q.

The provisions of this section which are inconsistent with applicable principles of common law supersede the common law, and the common law may be used to aid in interpreting or clarifying the duties described in this section. Except as otherwise stated, nothing in the section precludes an injured party from bringing a cause of action against licensees, their companies, or their BIC.

1. Contractual and/or Consensual

The relationship b/w the agent and the principal must be of a consensual nature. There must be a mutual agreement b/w the parties to form an agency relationship.

B. Informed Consent

Is established when a person consents to enter into an agency relationship with an agent who has rendered full and fair disclosure of all facts necessary for the customer to make a conscious choice. SC requires that the agent obtain the informed consent in writing prior to proceeding as the agent for the customer.

3. Fiduciary

Is the highest standard of care that the agent must exercise to protect the interests of the principal.

O.

Obligations to third parties: Prospective buyers and sellers of unlisted real estate who do not choose to establish an agency relationship with a licensee but who use the services of the licensee are considered customers.

Seller's Agent

Once a written agreement to provide brokerage services for a seller of real estate has been established, a seller's agent will: 1. Execute the terms of the written brokerage agreement made with the seller. 2. Uphold the interest of the seller by performing agency duties which include: a. looking for a buyer for the property at the price and terms stated in the brokerage agreement or at a price and terms acceptable to the seller. The licensee is not obligated to seek additional offers of purchase while there is a sales contract on the table. b. Presenting all offers and counteroffers in a timely manner. c. Make sure the seller is kept up to date on all relevant facts concerning the transaction. d. Advising the seller to obtain expert advice on matters that are beyond the expertise of the licensee.

H. Buyer's Agent

Once reaching a written agreement to provide brokerage services to a potential buyer of real estate, a buyer's agent shall: 1. Execute the terms of the written brokerage agreement made with the buyer. 2. Uphold the interest of the buyer by performing agency's duties which include: a. Locating a property at the price & terms stated in the brokerage agreement. b. Present all offers and counteroffers in a timely manner. c. Making sure the buyer is kept up to date on all relevant facts concerning the transaction. d. Advising the buyer to obtain expert advice on matters that are beyond the expertise of the licensee. e. Accounting for all money and property rec'vd in which the buyer has or may have an interest.

4. Completion, Performance or Fulfillment

Once the agency agreement has been completely performed for the reason in which the agreement was created the agency relationship would end.

Loyalty

Remember the agent's primary responsibility is to the principal. The agent owes the principal 100% loyalty. (ex. the agent cannot encourage a customer/prospect to submit an offer loaw than the listed price in hopes he can talk the principal into taking the offer. Remember 100% loyalty to the principal. Therefore, we must also keep their confidence, and this party of the relationship will continue even after the agency relationship has ended.

Disclosure

Since the agent owes 100% loyalty to the principal, he/she must at all times disclose any info to the principal that may be helpful. He must submit all offers to the principal and any 3rd party info that would influence the principal's decision to complete the transaction. (Note: Never disclose issues that might breach Fair Housing Laws)

4. Confidential

The agent has knowledge of certain confidential info regarding the principal. It is the agent's responsibility to uphold a sense of loyalty and confidentiality regarding the personal affairs of the principal.

The following are permissible agency relationships a licensee may establish...

*seller agency *buyer agency *disclosed dual agency *subagency

Agency Relationships and Responsibilities

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Accountability

The agent is held accountable for all funds handled for the principal. SC Real Estate License Laws are very specific as to how those funds must be handled.

P. Designated Agency: A BIC may assign different licensees as designated agents to exclusively represent different clients in the same transaction.

1. A BIC may specifically designate, in a written agency agreement one or more of his/her affiliated licensees to act as exclusive agent of the buyer client or seller client to the exclusion of all other affiliated licensees. 2. Buyers & sellers must consent to enter into a designated agency relationship and this consent must be supported by a designated agency agreement, which must be signed by the buyer before writing the offer and y the seller before signing the sales agreement. The designated agency agreement must include info informing the buyer & seller of the obligations of the BIC and affiliated agents. 3. If a buyer client of a designated agent wants to view a property that was personally listed by the BIC, the BIC will act as a dual agent with the written consent of the buyer & seller. 4. A designated agent of the seller or buyer has the duties and obligations to their client as either a seller's agent or buyer's agent.

Care

The agent must exercise a reasonable degree of care and skill in handling the transaction

K. Buyer Agent

1. A licensee who represents a buyer shall treat all prospective sellers honestly and may not knowingly give them false or misleading info about the buyer's ability to perform the terms of a transaction. 2. A buyer's agent is not obligated to discover latent defects or to advise his clients on matters outside the scope of his real estate expertise. 3. A real estate licensee cannot be held liable for info contained in reports prepared by an engineer, termite inspector, mortgage broker, home inspector or other similar reports. 4. A buyer's agent, the company, and the BIC cannot be held liable to a seller for providing the seller with misleading or false info if inaccurate info was provided by the buyer and the agent had no reason to suspect the info was false or incomplete.

U. Effect of termination, expiration, completion or performance of agency agreements; accounting and confidentiality; conflicts of interest

1. A real estate broker and all associated licensees owe no duty or obligation to a client following termination, expiration, completion, or performance of an agency agreement or closing of the real property transaction, whichever occurs first, except the duties of: a. Accounting in a timely manner for all money and property related to and received during the relationship. b. Keeping confidential all info rec'vd during the course of the engagement which was made confidential by request or instructions from the client except: 1. The client permits the disclosure by written agreement. 2. The disclosure is required by law. 3. The info becomes public from a source other than the broker.

Seller Agent

1. A seller's agent should treat all prospective buyers honestly and may not knowingly give them false or misleading info about the condition of the property which is known or should have been known to the licensee. 2. They cannot be held liable for disclosing to a buyer any known material defects including, but not limited to, moisture or mold problems and conditions. 3. Cannot be held liable for info contained in reports prepared by an engineer, termite inspector, mortgage broker, or other similar reports. 4. Not required to discover latent defects or to advise the agent's client on matters outside the scope of the agent's real estate expertise. 5. A seller's agent, the company and the BIC cannot be held liable to a buyer for providing false or misleading info if inaccurate info was provided by the seller & the agent had no reason to suspect the info was false or incomplete.

The following are reasons an agency can be terminated:

1. Death or incapacity of either party. Death or incapacity of either party would terminated the agency relationship. 2. Destruction of property-impossibility of performance: (ex. if the property burns before a sales/purchase contract is signed, we of course cannot sell the property. This is also an example of "impossibility of performance." 3. By operation of law: The following fall under operation of law.... a. Loss of title- If for some reason the principal loses title before the property is sold, we can no longer sell the property. b. Bankruptcy- If either of the parties goes into bankruptcy before the expiration of the agency agreement, the agency relationship would end. c. Change of Law- If we are trying to sell a business such as a liquor store and before the property is sold the law changes and states that all liquor stores in that area must be closed; then we, cannot sell the store as a liquor store business, therefore terminating the agency relationship.

The written policy ought to include:

1. The company's policy regarding cooperation with subagents and buyer agents, or both and how compensation to these agents will be handled. 2. The range of services provided to the company's clients. 3. The extent of services provided tot he company's customers. 4. When and how a licensee should explain and disclose their agency relationships. 5. When & how a licensee should explain to clients the possibility that they may later act as a disclosed dual agent in specific transactions. 6. The company's policy on conformity with state and federal fair housing laws.

T. Duties of licensee respecting disclosures

1. The licensee must provide at the first practical opportunity to all buyers and sellers with whom the licensee has substantive contact: a. An explanation of agency relationships in real estate transactions that are offered by that brokerage. b. An agency disclosure form approved by the commission. 2. A licensee who becomes a seller's agent shall provide an agency disclosure form to the seller at the time the listing is obtained and signed. Acknowledgement of receipt of the form must be contained in the listing agreement. 3. A licensee who becomes a buyer's agent shall provide an agency disclosure form to the buyer at the time an agency agreement is signed. Acknowledgement of receipt of the form must be contained in the buyer agency agreement.

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10. The designation of one or more of a BIC's affiliated licensees as designated agents does not permit the disclosure by the BIC or affiliated licensees of any info made confidential by an express written request or instruction by a party before or after the creation of the designated agency. The BIC & affiliated licensees shall continue to maintain this confidential info unless the party from whom the confidential info was obtained permits its disclosure by written agreement or disclosure is required by law. a. Confidential info is info the disclosure of which has not been consented to by the client and that could harm the negotiating position of the client.

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2. If a conflict arises b/w a broker's duty to keep the confidence of a client and the duty not to give customers false info, the broker's duty not to give false info to customer's prevails and governs the broker's actions. No cause of action arises on behalf of a person against a BIC or affiliated licensees for revealing necessary info in compliance. 3. A BIC and his affiliated licensees in the broker's main office may conduct business with a pervious client of the broker's branch offices as a customer or client, so long as the branch offices have a separate BIC and do not share the same BIC as the main office.

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3. Exercise reasonable skill & care in fulfilling the licensees agency duties. 4. Act in accordance with all provisions and regulations adopted by the LLR. 5. Complying with all applicable federal, state, or local laws, rules, regulations, and ordinances. 6. Protect all confidential info given by the buyer during and following the course of the agency relationship that might have a negative impact on the buyer's real estate activity unless: a. The buyer gives permission to reveal the info. b. Disclosure is required by law. c. Disclosure is necessary to defend the licensee against an accusation of wrongful conduct in a proceeding before the commission.

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3. The buyer has the right to inspect the physical condition of the property. 4. A licensee can not intentionally give a party involved in a real estate transaction false info. However, the licensee is not liable to a party for providing false info to the party if the real estate licensee did not have actual knowledge that the info was false and discloses to the party of the source of the info. a. Sellers must disclose all adverse material facts actually known by the seller pertaining to the physical condition of the property. b. Nothing limits the obligation of the buyer to inspect and to familiarize themselves with potentially adverse conditions related to: 1. The physical condition of the property. 2. The improvements located on the property. 3. The area in which the property is located

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4. A licensee who becomes a disclosed dual agent shall provide to both buyer & seller an agency disclosure form after the buyer has completed and signed a buyer agency agreement and seller has completed and signed a listing agreement. Acknowledgement of receipt of the form by buyer and seller must be contained in their separate agency agreements. 5. A licensee who has substantive contact with a potential buyer or seller shall provide the potential buyer or seller an agency disclosure form at the first substantive contact. 6. If first contact occurs over the phone or other electronic means, including the internet and electronic mail, a licensee shall provide a buyer with the agency disclosure form at the first substantive contact or a copy of the form may be sent by electronic means, including the internet and electronic mail.

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5. In a transaction where both buyer & seller are represented by designated agents and the agents are supervised by the same BIC, the BIC shall act as a dual agent. The BIC is not required to complete a dual agency agreement under this provision. Consent must be contained in the designated agency agreement. 6. A designated agent may disclose his/her BIC, or his licensed representative, confidential info of a client for the purpose of seeking advice or assistance for the benefit of the client in regard to a transaction. 7. If a buyer client of a designated buyer wants to view and make an offer to purchase a property the designated buyer agent has listed. The designated buyer agent must act as a dual agent with the written consent of the buyer & seller.

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7. In all real estate transactions, no agency relationship between a buyer, seller, landlord, or tenant and a brokerage company and its affiliated licensees exists unless the parties involved agree, in writing, to the agency relationship. 8. If a licensee with an existing or prior agency agreement with either a customer or a client enters into a new agency agreement with the customer or client, the licensee must disclose that fact and the new agency relationship to all licensees, customers, or clients involved in the contemplated real estate transaction. 9. The agency disclosure requirements do not apply if: a. The transaction is regarding the rental or lease of residential or commercial property. b. The communication from the licensee is a solicitation of business. c. The transaction is regarding the sale of property by auction.

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8. If a BIC appoints different designated agents, the BIC and all remaining affiliated licensees of that real estate brokerage firm must be deemed to be dual agents, except: a. The appointed designated licensees. b. Licensees in any of the firm's branch office as long as those branch offices have a separate BIC. 9. When designated agents are appointed by the BIC, the clients, and the designated agents must be considered to possess only actual knowledge and info.

M. Dual Agency

A licensee may act as a disclosed dual agent as long as they have prior informed and written consent of all parties. The informed consent must be in the form of a dual agency agreement, put out by the commission, and must be signed by the buyer before writing an offer and by the seller before signing the sales contract. The agreement must specify the transaction in which the agent is serving as, dual agent and must state that: 1. The informed consent must be evidenced by a dual agency agreement, signed by the buyer before writing an offer and by the seller before signing the sales contract.

1.

A licensee should inquire at first contact whether the consumer has already established an agency relationship with another licensee.

L.

A licensee who represents one party to a real estate transaction may provide assistance to other parties to the transaction by performing ministerial acts such as writing and conveying offers, and providing info & aid concerning other professional services not related to the real estate brokerage services being performed for a client. Performing ministerial acts does not create an agency relationship.

6. Mutual Agreement

A mutual agreement between all parties to the agreement would result in termination of the agency relationship.

A. Agents duties to the principal:

A real estate brokerage company's duties to the client and how common law is applied.

N.

A subagent is a designated broker and all associated licensees selected by a broker of another company to act as agent for his client. A subagent owes the same duties and responsibilities to the client as the client's primary broker.

I. Agency Relationships & Responsibilities

A. Characteristics

I. Company Policy

A. Seller/Buyer single agency representation: An agent would represent one party only in a single transaction. The agent would have fiduciary responsibilities exclusively to one principal whether it is the buyer or the seller. B. Disclosed Dual Agency: In some cases a company could represent both the buyer & the seller. This is only allowed with full knowledge and informed consent of both parties.

II. SC Agency Disclosure Form

A. Timing of Disclosure: SC requires a written "Agency Disclosure Brochure" on a specific state from that may not be altered by a company or licensee. The agent must give this brochure to all consumers along with an explanation of the types of representation available to them in a specific transaction. This must be done up front before entering into discussions regarding real property transactions. This only discloses and does not create the agency relationship. Unless and until the consumer chooses to be represented, the consumer is considered to be a customer and must be treated as such.

2.

After receiving the agency disclosure form and having agency relationships explained to them, all consumers (buyers & sellers) have a choice: a. They may choose to remain a customer and not establish an agency relationship w/ the licensee or they may consent to enter into an agency relationship. b. They may choose to establish an agency relationship with the licensee and rec'v full client-level services by signing a listing agreement or a buyer agency agreement. An acknowledgment of receipt of agency info is included in these documents.

Note**

Agents owe their clients confidentiality which requires them not to disclose any personal info that could be of benefit to the other party in the transaction.

2. Personal

An agency relationship is personal in nature. Agency will dictate behavior. The acts of the agent, while acting within the scope of the authority given by the principal (client), are considered to be as if the principal had acted himself.

Obedience

An agent must act in good faith and obey any instructions given by the principal unless these instructions are unlawful or unethical. If the principal insists that the agent do something unlawful or unethical, the agent should withdraw from the transaction.

8. Revocation by the principal

B/c the agency relationship is the equivalent of an employment agreement; the agent can be fired by the principal. But remember if you are fired, you can sue the principal for any losses you may have sustained in the transaction up to that point.

5. Breach of Contract

By one of the parties would result in termination of the agency agreement. The breaching party may be held liable for damages.

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C. The clients may choose to either consent to disclosed dual agency or may they can reject it. D. The clients have read and understand the agency agreement as well as the agency disclosure form and acknowledge that their consent to the dual agency is voluntary. E. A BIC and his affiliated licensees in the broker's main office may conduct business with a client in any of the broker's branch offices as a customer or client without creating a dual agency relationship, so long as the branch offices each have a separate BIC and do not share the same real estate licensees as the main office.

1. When a real estate brokerage company provides services through an agency agreement for a client they are bound by the duties of:

Care, Obedience, Accountability, Loyalty, Disclosure C.O.A.L.D.

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D. A seller's agent may offer alternative properties to prospective buyers. A seller's agent also may list for sale competing properties. E. A seller's agent may not offer a subagency relationship or compensate another broker who represents a buyer without the consent of the principal.

5. A licensee cannot be held liable for truthfully disclosing to a customer known material defects including, but not limited to, moisture or mold problems and conditions

a. A licensee cannot be held liable by a customer for info contained in any reports prepared by an engineer, land surveyor, geologist, wood destroying inspection control expert, termite inspector, mortgage broker, home inspector or other home inspection expert, or other similar reports. b. A real estate licensee cannot be held liable by a customer for info contained in the Residential Property Condition Disclosure Act unless the real estate licensee is party to that opinion or report.

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a. As a dual agent, a licensee represents clients whose interests may be adverse and that agency duties are limited. b. The dual agent may disclose info gained from one party to another party if the info is relevant to the transaction, except if the info concerns: 1. the willingness or ability of a seller to accept less than the asking price. 2. the willingness or ability of a buyer to pay more than an offered price. 3. a confidential negotiating strategy not disclosed in an offer as terms of a sale. 4. the motivation of a seller for selling property or the motivation of a buyer for buying property.

A licensee may offer the following services to a customer including but not limited to:

a. Identify and show property for sale, lease or exchange. b. Provide real estate statistics and info on a property. c. Provide pre-printed real estate contract and lease forms and related documents. d. Be able to help in the preparation of real estate contract and leases forms and related documents. e. Be able to provide a list of architects, engineers, surveyors, inspectors, lenders, insurance agents, attorneys, or any other professionals occupations that pertain to the real estate transaction. f. Identify schools, shopping facilities, places of worship, and other similar facilities on behalf of any of the parties in a real estate transaction.

2. A licensee offering services to a customer shall:

a. Present all offers to and from the parties involving the sale, lease and exchange of property in a timely manner. b. Account for all money and property rec'vd by the broker on behalf of a party in a real estate transaction in a timely manner. c. Provide a meaningful explanation of agency relationships. d. Provide an explanation of the extent of the services they are able to provide. e. Be fair and honest and provide accurate info in all dealings.

The following normally apply to the independent contractor relationship:

a. Safe Harbor Act- The internal revenue service indicates that a broker must do certain things if he/she wishes to hire independent contractors. If the broker does these things, he/she will be in "safe harbor" and the IRS will not hold him/her liable for not withholding FICA and IRS payments. 1. Hire qualified agents, and agents must be licensed. 2. Remuneration based on sales; they are paid a commission rather than a salary. 3. The salesperson must pay their own FICA & IRS taxes and shall rec'v no minimum salary. The broker will file a From 1099 with the IRS showing how much was paid to the independent contractor. 4. The salespersons must pay their own license fees & board membership feeds, and the broker may not reimburse the salespersons for business related expenses such as automobile and entertainment expenses. 5.There must be a written agreement b/w the salesperson and the broker.

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c. There is no cause of action that can be brought, on behalf of a person, against a real estate licensee for revealing info that meets the above criteria. d. No licensee is liable for failure to disclose a matter other than those matters stated above. e. Violations of the above do not create liability on the part of the real estate licensee absent a finding of fraud on the part of the licensee.

What else do they do?

e. Accounting for all money and property rev'd in which the seller has or may have an interest. 3. Exercise reasonable skill and care in fulfilling the licensee's agency duties. 4. Act in accordance with all provisions and regulations adopted by LLR. 5. Comply with all applicable federal, state, or local laws, rules, regulations, and ordinances. 6. Protect all confidential info given by the seller during and following the course of the agency relationship that could have a negative impact on the seller's real estate activity unless: a. The seller grants consent to reveal the info. b. Disclosure is required by law. c. Disclosure is necessary to defend the licensee against an accusation of wrongful conduct in a proceeding before the commission.

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I. A licensee acting as a buyer's agent may offer properties which interest his buyer client to other potential buyers. J. A licensee acting as a buyer's agent may not offer a subagency relationship to other brokers or offer to compensate another broker who represents a seller without the knowledge and consent of the buyer client.

10. Disloyalty

IF the agent attempts to act for more than one party without all parties consent, or if he breaches his duty of loyalty, the relationship will terminate.

C. Agency coupled with an Interest

If a broker were to provide financing out of his/her own pocket for the development of a project w/ the agreement by the developer to let the broker sell the properties, the broker has an agency coupled with interest. Once the broker provides the financing, the developer cannot fire the broker. You cannot fire yourself.

B. Creation & Termination of Agency

The agency relationship can be created by an official agreement b/w parties (express agency) or it can result from the behavior of the parties involved (implied agency). These agency relationships can be terminated by "operation of law" or by the "acts of the parties".

S. Principal's obligations to agent

Cooperating with the agent & complying to the agency agreement are obligations that the principal owes to the agent. 1. Compensation: How the agent is to be compensated should be clearly stated in the written agency agreement. 2. Reimbursement/Indeminity: If the principal agrees to reimburse/indemnify the agent for specific charges incurred on his/her behalf, then the principal must do so. 3. Opportunity: If the principal hires the agent to do certain work, then the principal must give the agent the opportunity to do the work. In other words if the principal hires the agent to sell his/her home then the seller must let the agent show the home at a reasonable times. 4. Good Conduct: The principal must conduct himself in such a way as not to hinder the agent's activities. 5. Good Faith: The principal owes the agent good faith in all dealings.

3.

Customers visiting open houses and model homes should be "mirandized" at initial contact. This means that the licensee should introduce himself & disclose the company with which they are associated and that they are representing the seller in the marketing of the open house or model home. The licensee must still provide the agency disclosure form and a full explanation of agency relationships prior to engaging in any substantive discussions with the customers or before showing them other properties.

9. Renunciation by the Agent

Here again, b/c the agency relationship is the equivalent of an employment agreement; the agent can quit his/her job. The principal, can sue for any losses he/she may have sustained due to the agents actions.

C. BIC/Licensee relationships, statutory & contractual

Most brokerages today cannot perform without the assistance of a salesperson(s) therefore; the relationship b/w the broker and the salesperson has a huge impact on how successful the brokerage is going to be. The nature, duties & responsibilities of the relationship b/w the broker & the salesperson should be clearly stated in the employee agreement.

D. Independent Contractor/Employee Status

Most real estate salespeople work as independent contractors rather than employees. The employer/employee relationship is normally where the employee works for a fixed amount of money paid by the employer. The employer withholds FICA and IRS payments. An independent contractor is defined as one who is retained to perform a certain act, but who is subject to the control and direction of another only as to the end result and not as to how he/she performs the act.

Written Company Policy

The BIC is required to adopt a written company policy that identifies and describes the types of agency relationships in which associated licensees may engage.

7. Expiration

The agency agreement would naturally end once the listed expiration date has passed.