Law of Agency Study Guide

Termination date

All listing agreements must have a definite _____. a. Termination date b. Sell-by date c. Renewal period d. Minimum accepted offering price

Must treat all parties honestly

A broker who acts as an intermediary in a transaction: a. May disclose that the owner will accept a price less than the asking price if the broker feels that it is the right thing to do b. May disclose any confidential information the broker deems will help sell the property c. Must treat all parties honestly d. All of these are correct

Accessible for visual inspection

A broker's responsibility for disclosure is limited to areas: a. Inside the property b. Outside the property c. Accessible for visual inspection d. The seller informs them of

- Do not have to worry about unintentional dual representation. - Brokers do not have to act as intermediaries or make appointments. - Agents only responsible for giving advice and opinion to the buyer or seller, avoiding conflicts of interest.

Advantages of Buyer Agency Only and Seller Agency Only

Exists when an individual grants express authority to the agent to perform some act. The authority granted may be in oral or written form.

Agency by actual authority

Created when a principal inadequately supervises an agent. This happens when a person makes a representation to a third party that another person is their agent - and subsequently the third party deals with that person as an agent.

Agency by estoppel

When an agent acts without prior authorization and the principal accepts it upon learning of the action.

Agency by ratification

When a broker is the owner of a property being sold or is interested in buying a property.

Agency coupled with an interest

Exists when one person, the agent, acts for or on behalf of another person, the principal, also known as the client.

Agency relationship

- Honest dealing - Reasonable care and skill in performance - Disclosure of all material facts (disclosure of agency, property condition, environmental hazards)

Agent's duties to customers

Intermediary without appointments

Broker Steve, having no agents, is a solo practitioner in the state of Texas. He has a buyer-client who wants to purchase one of his listings. The process that Broker Steve must use is: a. Intermediary without appointments b. Transaction brokerage c. Intermediary with appointments d. Dual agency

The seller

Broker Susan is representing the seller at We Sell it Fast Realty while Broker Daniel from Daniel Daniels's Properties is working with a buyer customer. Susan is representing the seller. Who is Daniel representing? a. The seller b. The buyer and seller c. The buyer only d. Broker Susan

The firms will only represent buyers or sellers. No intermediary practice is allowed.

Buyer Agency Only and Seller Agency Only

An individual remains a customer until he or she enters into an agency agreement. A buyer becomes a client by entering into a buyer representation agreement with the broker.

Buyer Representation Agreement

When some adverse event occurs on-site, or people believe that a past event or condition effects it. These include murder, death, suicide, infectious disease, criminal activity, property condition issues (flood, toxic waste, etc.), or paranormal activity.

Stigmatized properties

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

Subagency is: a. When a broker appoints associates to the selling side and the listing side of an in-house sale b. Punishable by revocation of real estate license c. When a license holder not associated with the seller's broker is representing the seller through a cooperative agreement with the seller's broker d. When one agent at a brokerage firm takes over when the listing agent is sick or on vacation

- May not place advertisement that implies that the sales agent is responsible for the operation of a brokerage. - Advertisement must contain the broker's name or assumed name. - Broker's name or assumed name in at least 50 percent the size of the largest item of contact information on the ad.

TREC rules for advertising and signs

Assumed name

TREC's Advertising rules require sales agents to include the broker's name, the brokerage name, or the broker's _____ in at least 50% of the largest contact information font on all forms of advertising. a. E-mail address b. Website URL c. Cell phone # d. Assumed name

- Passed in 1939, administered in 1949 - The purpose of the act was to protect the public against unscrupulous brokers and sales agents - Makes it unlawful for anyone to engage in the business of real estate without a license

TRELA (The Texas Real Estate License Act)

The most limited of all the agency relationships. The agent may perform only limited duties for the principal. The agent is not able to bind (obligate) the principal because he or she isn't allowed to sign or accept any terms or conditions on behalf of the principal. The agent must only follow the instructions of the principal. An example of this is a listing agreement or a buyer/tenant representation agreement.

Special agent

A relationship built on trust. An agency relationship is an example of this.

Fiduciary relationship

Implied

In Texas, there is no _____ agency relationship with any party to a transaction. a. Implied b. General c. Special d. Universal

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.

Subagency

When the agent and buyer have their first substantive discussion about real estate.

When should the IABS be provided?

Shows the sum of the payments received during the tax year.

1090-MISC

Represented by another license holder

A license holder is not required to provide the IABS when the license holder meets with a party who is: a. Not already represented b. Represented by another license holder c. A family member d. Also a real estate license holder

Group

According to TREC's advertising rules, which of the following terms MUST be used in a real estate team name? a. Company b. Realty c. Associates d. Group

Agent, principal

An agency relationship exists when one person, the _____, acts for or on behalf of another person, the _____. a. Client, agent b. Agent, principal c. Principal, agent d. Broker, customer

Property manager

An example of a general agent in the world of real estate would be a(n) _____. a. Property manager b. Escrow agent c. Cooperative Broker d. Intermediary

The agent uses sales information from the MLS data to show a seller the market value of the property. This information is based on properties that have recently sold that are most similar to the seller's property.

CMAs (Comparative Market Analysis)

Also known as the principal.

Client

Mixing a client's funds with a broker's business, operating, or personal funds. TRELA prohibits it.

Commingling

The agent should be paid on the completion of the agency.

Compensation

When a broker spends his or her client's funds without authorization. TRELA prohibits it. A more serious offense.

Conversion

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

Cooperative broker

A person who receives limited brokerage services without establishing an agency relationship.

Customer

Protects consumers from unethical and unfair sales practices.

DTPA (Deceptive Trade Practices ACT)

- The act of harming another person's reputation by making a false statement to a third party either by slander (spoken words) or libel (printed words). - Occurs when a person publishes a false statement of such significant matter that the law does not require proof of harm.

Defamation

- Parties that are included in the agreement - Property information (lot, address, city, etc.) - Listing price - Term - Broker compensation

Details in a valid listing

- Many buyers do not want to sign a Buyer's Representation Agreement because they do not want to pay a commission to a Buyer's Agent. - Agents can only list properties for sellers, or have buyers sign Buyer's Representation Agreements, limiting the firm to either selling the side only or listing side only commission.

Disadvantages of Buyer Agency Only and Seller Agency Only

Texas Real Estate License Act

Disclosure of representation is required by the _____. a. Texas Real Estate License Act b. The Supreme Court c. The Governor d. National Association of REALTORS®

No. The duty of confidentiality extends forever into the future.

Do the duties of an agent end with the termination or expiration of an agency relationship?

Allows a real estate firm to represent both sides of a transaction at the same time. This is illegal in Texas.

Dual agency

CRIP - Compensation, Reimbursement, Indemnification, Performance

Duties of the principal and definitions of duties

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

Elements of a valid listing agreement

Can protect a broker if the seller misrepresents property condition, the broker is unaware of the misrepresentation, and could not have detected it by visual inspection.

Errors & Omissions Insurance

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

Ethical dilemma

- Advertisements that imply that a sales agent is responsible for the brokerage business - Causes someone to believe a person not authorized to conduct brokerage is engaged in brokerage - Advertisements that are inaccurate in any material way or misrepresents any property, terms, values, services, or policies - Advertising another broker's listing without permission and without disclosing the name of the listing broker - Failing to remove an advertisement about a listing within a reasonable time - Advertisement that identifies a sales agent as a broker - Advertisement that creates confusion about the permitted use of a property

Examples of deceptive or misleading advertisements or advertisement practices

The seller agrees to list the property with only one broker during the listing term, with the provision that the seller can sell the property himself or herself without owing a commission.

Exclusive agency

The broker receives a commission even if the owner sells the property. Real estate brokers recommend this listing.

Exclusive right to sell

Comes from the specific oral instructions given to the agent by the principal.

Express authority

Multiple Listing Service (MLS)

Fee-splitting arrangements between brokers are often established in the _____. a. Statement of Understanding b. Seller's Disclosure c. Texas Real Estate License Act d. Multiple Listing Service

An individual has the right to represent his or her principal in a particular type of transaction or business. One common example is the property manager.

General agent

- Commissions must compensate the sales agents. - Not required to follow policies and procedures manual. - Shall pay his own expenses. - Cannot be made to attend sales meetings. - Cannot be made to attend training seminars. - Cannot be made to work set hours. - Should not be offered.participation in broker's insurance or retirement programs.

IRS Independent Contractor Status rules

trust account

If trust funds are held by a license holder, they must be maintained in the broker's ___________. Placing such money in a license holder's operating account is evidence of commingling.

Any attempt by a group of brokers to set the commission rates in their area or between a group of brokerage firms. This would be a violation of federal law. The Sherman Anti-Trust Act and the Clayton Act have a significant impact in this area.

Illegal price-fixing

"The norm", or what is considered customary in the business. For example, showing houses on the weekends or in the evenings.

Implied authority

- By personal delivery - By first class mail or overnight common carrier delivery - In the body of an email - As an attachment to an email, or a link within the body of an email, with specific reference to the IABS Form in the body

In what ways can the IABS be provided?

The principal will protect the agent from suffering a loss due to the agent's reliance on information received from the principal.

Indemnification

A process that makes it possible to bring client buyers and sellers together while at the same time representing their best interests.

Intermediary

One agent is appointed to the buyer and another agent is appointed to the seller. Each agent gives advice to their own buyer or seller.

Intermediary with appointments

The agent cannot give advice or opinions to either side because he/she is representing both the buyer and seller. Risks someone saying that they were not treated equally.

Intermediary without appointments

The seller establishes a minimum net amount for his/her proceeds at closing. The broker's commission is the difference between the minimum net established by the seller and the actual seller's net. Broker could earn more than the seller, or perhaps nothing at all.

Net listings

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

Open listing

When actions lead another person to assume that one is an agent.

Ostensible agency

The principal is expected to perform in the agency agreement. For example, it is reasonable to expect the property to be available to be shown.

Performance

The principal should reimburse the agent for expenses incurred on behalf of the principal, above and beyond the expenses related to the sale itself.

Reimbursement

Special agency

Seller Kristin meets with agent Angel and likes his plan for marketing her home. She decides to sign a listing agreement with him, thereby creating a _____ relationship. a. General agency b. Special agency c. Intermediary d. Universal agency

Seller's disclosure of all material facts relating to the condition of the property.

Seller's Disclosure Notice

Prevents any combination in restraint of trade. Commission rates must always be a matter of negotiation between the broker and the client.

Sherman Anti-Trust and commission rates

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

Termination of agency relationship

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

The Common Good Approach

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

The Fairness or Justice Approach

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

The Rights Approach

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

The Utilitarian Approach

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

The Virtue Approach

Buyer/Tenant Representation Agreement

The agreement that buyers sign allowing a broker to represent them is called a _____. a. Listing agreement b. Seller's Disclosure c. Buyer/Tenant Representation Agreement d. Independent Contractor Agreement

Determination of fitness

The commission can deny licensure to an applicant based on the applicant's _____. a. Credit score b. Work history c. Determination of fitness d. College transcript

The procuring cause of sale

The individual who, through a series of uninterrupted activities or actions, brought about the completion of a contract is also known as _____. a. The procuring cause of sale b. The closer c. The closing coordinator d. The escrow agent

- Show properties to buyers - Answer questions about listings, closings, financing, title issues, market conditions, or market values - Host open houses - Negotiate a commission - Unlock a door to a property - Telemarket for listings - Engage in any activity requiring a license

Things that unlicensed assistant CAN'T do

- Manage an office (clerical work) - Accompany a license holder on showings and open houses - Train and motivate license holders - Act as an on-site apartment manager - Assist in arranging financing - Place for sale signs on properties, accompany inspectors, place advertisements - Schedule appointments - Register prospects - Be a closing or transaction coordinator

Things that unlicensed assistants CAN do

- Always disclose any defects or information a prospective buyer would want to know - Use the Seller's Disclosure Notice form - Recommend that an inspection be done (give list of 3 to choose from) - Have the buyer reinspect the property to ensure that repairs were done properly - If buyer is not willing to have an inspection, have them initial next to a written statement saying that you highly recommended it but they declined - Avoid giving personal opinion on the condition of the property - Keep notes on all aspects of the transaction from very beginning to end

What are some ways to avoid a lawsuit?

- Marketing - Negotiations - Legal and financial details are better facilitated - Finding qualified potential buyers - Safety

What are the benefits of seller agency?

All of these are duties and obligations of an intermediary

What are the duties and obligations of an Intermediary? a. To treat all parties fairly b. To decide whether or not to appoint associates c. To obtain written consent from both parties to act as the intermediary d. All of these are duties and obligations of an intermediary

OLDCAR - Obedience Loyalty Disclosure Confidentiality Accounting of funds Reasonable care and due diligence

What are the duties of an agent?

- A broker is required to register an assumed name with TREC - Broker must notify TREC within 30 days after the broker or broker's sales agent starts or stops an assumed name

What are the rules for team name registration?

Team names must end in the word "team" or "group".

What are the rules for team names?

License holders must provide a link to the IABS form in a readily noticeable place on the homepage of their website, in at least 10-point font, and labeled "Texas Real Estate Commission Information About Brokerage Services."

What are the website requirements for links to the IABS Form?

Information About Brokerage Services

What form must an agent provide to a potential client at the first substantive discussion of a real estate transaction? a. Buyer's Representation Agreement b. Information About Brokerage Services c. Statement of Understanding d. Independent Contractor Agreement

The agents' licenses are placed on inactive status upon the death of the designated broker.

What happens when the sponsoring broker for the sales agents in a brokerage firm passes away or becomes incapacitated due to sudden illness?

TRELA

What is the Canons of Professional Ethics and Conduct included in?

A registered collective membership mark, identifying a real estate professional as a member of the National Association of Realtors who subscribes to its strict Code of Ethics.

What is the meaning of the term Realtor?

- If a previous or current occupant had or has AIDS or HIV - If a death occurred on the property by natural causes, suicide, or accident unrelated to the condition of the property

What stigmatized property issues is a license holder NOT required to disclose?

At the time of the license holder's first contact with another party to the transaction or another license holder who represents another party to the transaction.

When should a license holder who represents a party in a proposed transaction disclose, orally or in writing, their representation?

Regardless of representation, all buyers should be provided with an oral or written disclosure of representation at first contact.

When should you disclose representation to a buyer?

All of these are true

Which of the following is TRUE regarding intermediary rules for a transaction? a. The transaction must be an in-house sale. b. Both sides of the transaction must be clients of the broker. c. The broker must have written consent from both parties. d. All of these are true.

Splitting a commission with a person other than a license holder

Which of the following is grounds for suspension or revocation of a real estate license by TREC? a. Splitting a commission with a person other than a license holder b. Splitting a commission with a Texas real estate license holder c. Disclosing a material defect of a property d. All of these are grounds for suspension or revocation of a real estate license

Taking the buyer or seller out to dinner when the transaction closes

Which of the following would NOT be an example of the fiduciary duty of reasonable care? a. Helping the client meet contract deadlines b. Assisting the seller to arrive at a reasonable listing price c. Discovering relevant facts and disclosing these facts to the client d. Taking the buyer or seller out to dinner when the transaction closes

The IABS can be provided in the body of an email

Which statement is CORRECT? a. The IABS may not be sent as an attachment in an email or a link in the body of an email with specific reference to the IABS form in the body of the email. b. The IABS can be provided in the body of an email. c. An agent may provide a link to the IABS in the signature line of an email. d. An agent must provide a blank copy of the IABS at the first substantive dialogue with a potential client.

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

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