PORE Module 6

principal

(1) A sum lent or employed as a fund or investment, as distinguished from its income or profits. (2) The amount of the note due and payable. (3) A main party to a transaction - the person for whom the agent works.

deceptive trade practices act

(DTPA) Part of the Federal Consumer Protection Act, originally passed in 1973 and made specifically applicable to real estate in 1975, prohibiting a lengthy number of false, misleading or deceptive acts or practices.

Texas Real Estate License Act Sec. 1101.558. REPRESENTATION DISCLOSURE.

(b) A license holder who represents a party in a proposed real estate transaction shall disclose, orally or in writing, that representation at the time of the license holder's first contact with: (1) another party to the transaction; or (2) another license holder who represents another party to the transaction.

OLD CAR

- Obedience - Loyalty - Disclosure - Confidentiality - Accountability - Reasonable Care

limited to Intermediary Without Appointments for two reasons:

1. As the Intermediary, Broker Susan can never be an appointed associate. 2. We cannot appoint Sean to Michelle because we cannot appoint an associate to one side without appointing an associate to the other side.

There are two key points concerning agency:

1. The principal will count on the agent for specific professional advice. The agent is the "expert." 2. The relationship almost always involves money or property. As a fiduciary, the agent must work in his or her client's best financial interests at all times.

When a brokerage firm sells a property, two possibilities exist:

1. The property is sold by a firm other than the listing firm, which is referred to as a cooperative sale. 2. The property is sold by the listing firm, which is referred to as an in-house sale.

To summarize, two conditions must be met to have a subagency relationship:

1. The sale must be a cooperative sale, AND 2. The buyer must be an unrepresented customer.

transactional broker

A broker that facilitates a buyer and seller to reach an agreement in a real estate transaction both does not represent either party.

single-agency broker

A broker that will only represent one client in a transaction at a time.

dual agency broker

A broker who has written consent to represent both the buyer and the seller in the same transaction.

intermediary

A broker who is employed to negotiate a transaction between both parties and for that purpose may be an agent of both parties to the transaction, acting fairly so as not to favor one party over the other.

ostensible agency

A form of implied agency relationship created by the actions of the parties involved rather than by written agreement or document.

fiduciary

A person who works in an agency relationship for or on behalf of another person.

subagency

A relationship in which one firm sells a property listed by another firm to a customer-buyer that is not represented

license holders

A sponsoring broker must maintain written policies and procedures to ensure that a sponsored sales agent is competent to conduct authorized activities. The sponsoring broker must also ensure that each sponsored sales agent receives educational instruction that the broker deems necessary to obtain and maintain competency in the scope of the sales agent's practice. In addition to establishing the scope of the sponsored sales agent's authorized activities, these requirements may simply mean that a broker must ensure that a sales agent is competent to conduct all authorized activities and that the sales agent receives the necessary education to that end. While agents often achieve competency through actual transactional experience, the sponsoring broker may determine a need for additional training. For example, a new sales agent wanting to engage in property management might need additional education in that area of real estate. A license holder who is not competent to advise a client in a specific situation should always refer that client to one who is. Certain specialists, like attorneys, accountants, inspectors, surveyors, engineers, and appraisers have the knowledge and training to better advise buyers and sellers on certain issues. License holders should never offer legal advice without a law license. If a client wishes to add terms, conditions, or contingencies to a contract, license holders should recommend the client consult with an attorney who will draft the correct legal wording. Brokers must ensure that their licensed sales agents are geographically competent in the market area in which they serve. New training or coaching should be offered for new agents by their brokers when they undertake new tasks or activities. Competent agents are required to practice due diligence. That is, they should exhibit a fair, proper, and due degree of care and activity.

cooperative sale

A transaction that has one broker working with the seller and another broker working with the buyer.

Unlicensed Assistants CAN

Accompany a license holder on showings and open houses Set appointments for a license holder to show property Place For Sale signs on property, accompany an inspector, place advertisements as directed by the license holder Assist in arranging financing at the direction of a license holder in an administrative way - assist a buyer in obtaining forms or information to apply and qualify for a loan Train and motivate license holders Manage an office Perform all clerical activities for the broker, such as typing contracts, preparing reports and CMAs, filing, copying, and organizing information Act as an on-site apartment manager

obedience

Adhere to given lawful instructions

example 1 disclosure of representation

Agent Anne is holding an open house at 123 Main St. She is very excited about this new listing because she feels it will sell quickly. The Smiths attend the open house and begin to question Anne about some of the property's features. She must disclose to these buyers that she is the agent for the seller.

example 2 disclosure of representation

Agent Bob has signed a buyer's representation agreement with the Nelsons. He is calling ABC Realty to make an appointment to show their listing at 10 Park Lane. While making the appointment, he must mention that he is a buyer's agent. This oral disclosure on the phone is sufficient. Later, when they arrive at 10 Park Lane, they find the owners at home. When the sellers come to the door, Bob tells them that he is a buyer's agent. A written statement would also be acceptable. Because this disclosure may be made orally or in writing, there is no required form or wording for this disclosure of representation.

implied agency

An agency created by acts or words of the principal and agent; an agency inferred by circumstances.

general agency

An agency relationship that allows the agent to bind the client into a particular transaction or business. individual has the right to represent a principal in a particular type of transaction or business. One common example of a general agent in real estate is the property manager. The property manager is primarily responsible for preserving the value of an investment property while generating income as an agent for the owners.

universal agency

An agency relationship that allows the agent to transact all matters for the client. has full authority to conduct business on behalf of the client. The universal agent can sign documents and bind (obligate) the client in the same manner in which the client would do in person. It is the equivalent of having unlimited power of attorney and is very rare in real estate.

agency by ratification

An agency relationship that is established after the fact.

example 3 of disclosure of representation

An out-of-state buyer finds your website on the Internet and inquires about one of your listings by sending you an e-mail. You respond to the e-mail with information about the property and an offer to provide additional information and service to the buyer. Your response must include the information that you represent the seller.

Delegated Supervisor

Brokers are required to designate anyone who leads, supervises, or directs a team in their brokerage as a delegated supervisor with TREC if the agent has/will be supervising for more than three months. The designated agent will be required to take the six-hour Broker Responsibility Course at each license renewal.

The broker is responsible for the following types of activities on the part of his associates:

Compliance with fair housing laws Use of promulgated forms Compliance with all aspects of the Texas Real Estate License Act Compliance with advertising regulations Compliance with regulations for disclosure

A Texas consumer protection law

DTPA

The purpose of the Seller's Disclosure Notice is to have the owner of the property disclose all facts and defects concerning the property. This is a good tool to use as a defense in a ___________ lawsuit.

DTPA

accounting

Handle funds with care. Never engage in commingling or conversion

Unlicensed Assistants CANNOT

Host an open house or show a property Unlock a door to a property for a prospect Telemarket for listings Engage in any activity requiring a license

Termination

If a broker wishes to terminate the sponsorship of a licensed sales agent, he/she must notify the agent in writing and return the agent's license to TREC immediately. Likewise, a licensed sales agent who wishes to terminate his/her association with his/her sponsoring broker must do so in writing.

In order to determine if it is Intermediary With or Intermediary Without Appointments, use the following rule as a guide:

If one agent is involved, that is, one agent is selling his or her own listing to his or her own buyer, it will be Intermediary Without Appointments. The agent will not provide advice or opinions to the parties. The parties must be notified in writing. If two agents from the same brokerage are involved, one working with the seller and the other with the buyer, we will probably have Intermediary With Appointments. The agents will provide both advice and opinions to their respective parties, and the appointments must be made in writing.

IABS

Information About Brokerage Services is the required method in Texas to provide written notice to consumers regarding information about brokerage services.

IABS

Is a statutory info form, required to be given to non-represented parties, which explains agency, agency options, and the duties of the agents for each option. Must be given at the time of the first substantive dialogue - meaning a meeting or written communication that involves a substantive dialogue relating to specific real estate property. A signature is not required but is a very good idea for evidence that the disclosure was given and received.

in-house sale

Occurs when a single brokerage firm sells one of its own listings; the broker is on both the listing and the selling side of the transaction.

customer

One who purchases or sells property without being represented by an agent.

loyalty

Place your client's best interests first

Confidentiality

Protect the private information of your client

reasonable care

Protect the property and legal interest of your client.

disclosure

Reveal all known facts, give advice and opinions

general agency between broker and associates duties include:

Securing listings with sellers and landlords Securing buyer representation agreements with buyers and tenants Marketing listed properties Showing properties to prospective buyers Preparing offers Negotiating offers

general agency duties may include

Securing tenants Collecting rents Caring for the premises Budgeting and controlling expenses Hiring and supervising employees Keeping proper accounts Making periodic reports to the owner it is the property manager's responsibility to be knowledgeable and competent regarding the law relating to property management. Because the property owner has given the agent so much authority, the property owner is liable and accountable for all the agent's actions.

independent contractors

Someone 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 the way in which he or she performs the act. Unlike an employee, an independent contractor pays for all his or her expenses and social security and income taxes and receives no employee benefits. Most real estate sales agents are independent contractors.

Deceptive Trade Practices Act (DTPA)

Texas law that was passed in 1973 that allows an aggrieved consumer to sue a seller of goods for damages. The act by the servicer of the goods has to be deceptive or unfair for the consumer to sue for monetary damages successfully.

express authority

The authority derived from express agency.

selling side

The buyer side of the transaction.

client

The person who employs an agent to perform a service for a fee.

A license holder is not required to provide the Information About Brokerage Services if:

The proposed transaction is for a residential lease for not more than one year, and no sale is being considered; or The license holder meets with a party who is represented by another license holder. The communication occurs at a property that is held open for any prospective buyer or tenant, and the communication concerns that property.

Listing side

The seller side of the transaction.

The broker would NOT be responsible for the following types of activities on the part of his associates:

Timely renewal of license Adequate opportunities for generating income Completion of continuing education requirements Company car, health insurance, vacation, or disability benefits Compliance with regulations for disclosure

Producing cause includes of any of the following:

Use or employment by any person of a false, misleading, or deceptive act or practice that is specifically identified in the act. Breach of an express or implied warranty. Any unconscionable action or course of action by any person. The use or employment by any person of an act or practice in violation of the Texas Insurance Code

agency

a relationship between one person and another when one person acts for or on behalf of another person

Any relationship in which one party acts for or represents another

agency

A person who acts for or on behalf of another person, representing the best interests of the other person.

agent

A person who is authorized to act for another.

agent

dual agency broker

agrees to represent both the buyer and the seller, with their written permission, in a real estate transaction. Operating under the Common Law of Agency, the dual agent may appoint a designated agent to represent the buyer and appoint another designated agent to represent the seller.

senate bill 489

allows broker to act as intermediary, must give IABS at first substantive dialogue, must disclose representation oral or written

special agency

authorization by a principal to perform a single act or transaction; a real estate broker is usually a special agent for a seller, authorized to find a buyer for a particular property. most limited of all the agency relationships and is also referred to as "limited agency." In a special agency relationship, the agent may perform only limited duties for the principal. The special agent is NOT able to bind the principal because he/she is not allowed to sign or accept any terms or conditions on behalf of the principal. The special agent must simply follow the instructions of the principal. In real estate, the listing agreement establishes a special agency relationship between the broker and a seller or landlord. A buyer/tenant representation agreement will also create a special agency relationship with the broker.

Another name for the principal.

client

principal also known as

client

implied agency

created by the behavior of the parties. If a license holder behaves in a manner that makes a party reasonably believe that he or she is being represented, an implied agency relationship may have been created. For example, a buyer is an unrepresented buyer until he or she enters into an agency relationship with a broker. If the license holder begins negotiating on behalf of the buyer, the buyer may be led to assume that he is being represented by the license holder. License holders should always refrain from providing client services to any party to a transaction prior to entering into an agency agreement.

consumer

defined as an individual, corporation, partnership, or government source who seeks to acquire or purchase the goods or services.

goods

defined as tangible chattels (real property is tangible when purchased or leased). Under DTPA, the sale of a house is considered a good.

transactional broker

facilitates a buyer and a seller to reach an agreement in a real estate transaction, even though he/she does not have an agency relationship with either. Transactional brokers may also be referred to as transaction coordinators, finds, or middlemen.

A cooperative sale has only one broker who works with both the buyer and seller.

false

Both brokers in a cooperative sale must represent the seller in the transaction.

false

Brokers are general agents of the buyer or seller in a transaction.

false

The seller is on the selling side of the transaction.

false

An agent that has the authority to bind the client into a trade or a particular transaction.

general agency

________________ are defined as tangible chattels (real property is tangible when purchased or leased).

goods

In the real estate brokerage business, most license holders are not employees of the broker. They are ______________________, engaged in a principal-agent relationship.

independent contractors

_____________ means actual awareness, or flagrant disregard of prudent and fair business practices.

intentionally

________________ means actual awareness of a falsity, deception, or unfairness of an act.

knowingly

A person who has the legal authority to act as a broker or sales agent in a real estate transaction.

license holder

Fidicuary Relationship

means that it is a relationship based on trust. While treating all others honestly, the agent places the interests of the principal or client first; the agent must always remain loyal to the principal.

A buyer calls a listing agent about a property the agent has listed for sale. After the conversation, the agent emails the buyer a document that discloses how agency works.

must disclose IABS

Agent Sue is meeting a potential seller this evening to give her information about listing her property for sale.

must disclose IABS

A buyer calls a listing agent to get information about a home he saw listed for sale. The agent reminds the buyer that she represents the seller.

must disclose the disclosure of representation

Agent Mary, a buyer's agent, calls Agent Steve, a listing agent, to ask questions about some of the features of Agent Steve's listing. During her introduction, Agent Mary, tells Agent Steve that she represents a buyer.

must disclose the disclosure of representation

agency by ratification

occurs when an agent acts without prior authorization, and upon learning of this action, the principal accepts it. For example, a seller, relocating to another state, has left the home vacant and listed with a local real estate agent. The agent has found a buyer, and the seller accepts the offer. At closing, the seller is surprised to learn that he will receive one week's rent in addition to the sales price. Despite the fact that the agent had no authority to do it, the seller's agent authorized the buyers to move in one week before closing. This behavior on the part of the agent was extremely risky and unprofessional. The seller accepts this action on the part of the agent and receives rental income in addition to the sales price. In accepting the rent payment, this seller has ratified the unauthorized action of the agent.

selling side

occurs when the buyer retains the services of a broker. The agent working with the buyer is referred to as the selling agent.

listing side

occurs when the seller retains the services of a broker

A person who hires an agent and gives the agent authority.

principal

The most limited type of agency relationship that does not give the agent the authority to bind a principal only advise the principal.

special agency

An agent sponsored by a broker is usually a general agent of the broker.

true

Because of the agency relationship the broker has with the broker's clients, all the sales agents of the broker share the same agency duties of the broker.

true

Each transaction has two sides: a listing side and a selling side.

true

Subagency is a cooperative sale that occurs when the selling broker along with the listing broker represents the seller.

true

The agent working with the buyer is the selling agent.

true

The broker represents a seller through a special agency relationship.

true

The listing side is the side of the seller.

true

The selling side is the side of the buyer.

true

A relationship that allows an agent to transact all matters for the client. The agent can sign documents and bid the client the same way the client would.

universal agency

customer

unrepresented person Customers must be treated fairly and honestly. Customers must receive disclosure of property condition.

agency coupled with an interest

when a license holder is the owner of a property that is being sold, or is interested in buying a property. A license holder must always disclose this dual role. A real estate license holder is obligated to advise a property owner as to the license holder's opinion of the market value of a property when negotiating a listing or offering to purchase the property for the license holder's own account as a result of contact made while acting as a real estate agent. If a family or business relationship exists between an agent and a property owner or buyer, this should be disclosed also.

ostensible agency

when actions lead another person to assume that one is an agent. For example, if you had the key to your neighbor's home, and allowed a tradesperson to enter, it is reasonable for that tradesperson to believe you are your neighbor's agent.

single-agency broker

will not act as a dual agent when his/her buyer-client is interested in purchasing one of the broker's in-house listings. The broker will instead recommend that either one of the parties (usually the buyer) find another broker to represent him/her, or continue in the transaction unrepresented. Simply stated, a single agent will represent either the buyer or the seller, but not both in the same transaction.

services

work, labor, or repair of goods. Brokerage is a service.