UNIT 4-AUTHORIZED RELATIONSHIPS, DUTIES AND DISCLOSURE

A brokerage relationship between a principal (or a customer) and a broker may be terminated for any one of the following reasons:

Fulfillment of the brokerage relationship's purpose (for example, finding a ready, willing, and able buyer). Mutual agreement to terminate the brokerage relationship. Expiration of the terms of the agreement. (If no term is specified, the courts have ruled that a brokerage relationship may be terminated after a "reasonable" time.) Broker renounces the single agent relationship by giving notice to the principal or the broker renounces the transaction broker relationship by giving notice to the customer. Principal revokes a single agent relationship or the customer revokes a transaction broker relationship, by giving notice. (In this case, the principal or the customer may be liable for damages, such as advertising expenses, incurred by revoking the brokerage relationship before the termination date of the listing contract or exclusive buyer contract.) Death of a seller's broker or the buyer before the broker finds a ready, willing, and able buyer. Death of a buyer's broker or the buyer before the broker finds a suitable property for the buyer. Destruction of the property or condemnation by eminent domain. Bankruptcy of the principal or the customer.

Two types of agents are characterized by the extent of authority delegated to an agent in general business dealings:

(1) general agent, and (2) special agent.

COMMON LAW

(called unwritten law) based on usage, general acceptance, and custom. It is judge-made law manifested in decrees and judgments of the courts (case law). Agency law derives from common law.

Residential sales are defined as:

* Improved residential property of 4 or fewer units; * unimproved residential property zoned for 4 or fewer units;and * agricultural property of 10 or fewer acres.

I. The six situations that do not create a brokerage relationship are as follows:

1. When the licensee knows that a single agent or a transaction broker represents a prospective seller or a prospective buyer.

Single agent duties

1. account for all funds. 2. Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer. 3. Deal honestly and fairly. 4. Use skill, care, and diligence in the transaction. 5. Present all offers and counteroffers in a timely manner. 6. Confidentiality. 7. Obedience 8. Loyalty 9. Full Disclosure

TRANSACTION BROKER duties

1. account for all funds. 2. Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer. 3. Deal honestly and fairly. 4. Use skill, care, and diligence in the transaction. 5. Present all offers and counteroffers in a timely manner. 6. Exercise limited confidentiality, unless waived in writting by a party. 7. Perform any additional duties that are mutually agreed to with a party. However, a real estate licensee must be careful not to accept duties beyond the scope of limited representation.

A broker in a no brokerage relationship owe three duties to customers:

1. account for all funds. 2. Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer. 3. Deal honestly and fairly:

II. The six situations that do not create a brokerage relationship are as follows:

2. At a bone fide "open house" or model home showing that does not involve eliciting confidential information; the execution of a contractual offer or an agreement for representation; or negotiations concerning price, terms, or conditions of potential sale.

III. The six situations that do not create a brokerage relationship are as follows:

3. During unanticipated casual encounters between a license and a prospective seller or a prospective buyer that do not involve eliciting confidential information; the execution of a contractual offer or an agreement for representation; or negotiations concerning price, terms, or conditions of a potential sale.

IV. The six situations that do not create a brokerage relationship are as follows:

4. When responding to general factual questions from a prospective seller or a prospective buyer concerning properties that have been advertised for sale.

V. The six situations that do not create a brokerage relationship are as follows:

5. Situations in which a licensee's communications with a prospective buyer or a prospective seller are limited to providing either written or oral communication that is general, factual information about the qualifications, background, and services of the license or the licensee's brokerage firm.

VI. The six situations that do not create a brokerage relationship are as follows:

6. When an owner is selling new residential units built by the owner and the circumstances or setting should reasonably inform the potential buyer that the owner's employee or single agent is acting on behalf of the owner, whether because of the location of the sale office or because of office signage or placards or identification badges worn by the owner's employee or single agent.

NONREPRESENTATION (no brokerage relationship)

A broker is not an agent of either party in a transaction. The broker may only relay information to the parties (not negotiate on behalf of either party). The parties are referred to as customers.

SINGLE AGENT relationship

A broker who represents, as a fiduciary, either the buyer or the seller, but not both, in the same transaction. Only one party in a transaction may be represented by the brokerage in a fiduciary capacity. A fiduciary relationship exist only when a single agent relationship is chosen. the terms principal and client should only be used when referring to a single agent relationship.

Fiduciary

A fiduciary act in a position of trust and confidence for another. The fiduciary owes complete allegiance to the principal.

Fiduciary Relationships.

A fiduciary relationship contrasts with the common public relationship that exists in normal trading transactions where people with adverse interests deal at arm's length with one another.

Customer (chapter 475)

A member of the public who is or may be a buyer or a seller of real property and may or may not be represented by a real estate licensee in an authorized brokerage relationship. The customer Is not responsible for the acts of a licensee.

Subagent

A person authorized to assist and represent the agent and whose duties are delegated by the original agent.

In general is called the principal

A person who delegates authority to another.

Transition from single agent to transaction broker

A single agent relationship may be changed to a transaction broker relationship at any time during the relationship between the agent and principal, provided the agent first obtains the principal's written consent to the change in relationship.

No Brokerage Relationship Disclosure

A written No Brokerage Relationship Disclosure must be given to the customer before the showing of property

LAW OF AGENCY

Agency relationships is when a person delegates authority to someone to act on his behalf, fall within the body of law called law of agency. Absolute loyalty is one of the fundamental principles of the agency relationship.

7. Obedience

An agent is obligated to act in good faith according to the principal's lawful instructions.

the agent.

An agent is the person entrusted with another's business. An agent is authorized to represent and act for the principal.

6. Confidentiality

An agent may not reveal to a third party, without the principal's permission, personal or private information that might lessen the principal's bargaining position.

DISCLOSURE REQUIREMENTS Recordkeeping and Retention of Disclosure Documents

Brokers must retain brokerage relationship disclosure documents for FIVE YEARS for all residential transactions that result in a written contract to purchase and sell real property. Documents may be stored in a digital format.

NONRESIDENTIAL TRANSACTIONS

Brokers who deal in residential and nonresidential transactions, such as commercial and industrial property, are bound by chapter 475 regarding the brokerage relationship duties of transaction brokers, single agent brokers, and nonrepresentation.

Terminating a Brokerage Relationship

Generally speaking, a transaction broker relationship or a single agent relationship is terminated when the objectives have been accomplished according to the terms of the contract that created the brokerage relationship and notice is given to the other party. A principal is justified in revoking a single agent relationship with the broker if the broker agent breaches any of the fiduciary duties.

Designated Sales Associates

In a nonresidential real estate transaction where the buyer and seller each have assets of $ 1 million or more, the broker at the request of the buyer and the seller may designate two sales associates to act as single agents for the buyer and the seller in the same transaction. Two sales associates in such an arrangement are called designated sales associates. Note that in a residential transaction this is a illegal dual agency.

9. Full Disclosure

It is broker-agent's duty to keep the principal fully informed at all times of all the facts or information that might affect the transaction or the value of the property.

2. Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer.

Licensee have a duty to disclose to buyers all known facts that materially affect the value of residential property.

3. Deal honestly and fairly.

Licensee owe a duty of good faith and honesty to customers. A broker's customers are entitled to rely on any material statement related to a real estate transaction that is made by a licensee.

3. Deal honestly and fairly:

Licensee owe a duty of good faith and honesty to customers. A broker's customers are entitled to rely on any material statement related to a real estate transaction that is made by a licensee.

The duty of loyalty includes, for example:

Obtaining the most favorable price and terms for the principal, acting on behalf of the principal, not acting for parties with adverse interest in the same transaction, never concealing the identity of the purchaser to induce the principal to sell, disclosing to the principal if the agent becomes personally interested in the principal's property, and never advancing the agent's or another person's interest at the expense of the principal.

Dual Agency

Occurs when a brokerage firm represents as a fiduciary both the buyer and the seller in the same transaction. It is illegal in Florida for a real estate licensee to operate as a dual agent.

Caveat emptor( let the buyer beware)

People dealing at arm's length conduct negotiations on their own behalf without trusting the other's fairness or integrity and without being subject to the other's control or influence.

FREC rules affect to:

Real estate license law and the FREC rules directly affect and regulate the brokerage relationships among real estate licensees, buyers and sellers, and the public.

What creates the agency relationship?

The agency relationship creates a fiduciary relationship with the principal.

4. Use skill, care, and diligence in the transaction.

The broker must keep informed of current zoning and other developments that may affect the value of property and must use diligence in facilitating the transaction.

NONRESIDENTIAL TRANSACTIONS Explanation (Designated Sales Associates)

The broker serves as an advisor to each designated sales associate-not to the buyer or the seller. The broker serves as a neutral party helping to facilitate the process without giving guidance or representation to the parties in the transaction. Designated sales associates have the of a single agent.

Brokerage Relationship Limitations

The brokerage firm cannot represent the BUYER as a single agent if the firm has a transaction broker relationship with the seller. The brokerage firm cannot represent the BUYER as a single agent or work with the buyer as a transaction broker if the firm is also representing the seller as a single agent.

NONRESIDENTIAL TRANSACTIONS Disclosure Requirements

The buyer and the seller must sign a disclosure notice stating that their assets meet the $1 million Threshold and requesting that the broker use the designated sales associate form of representation. The disclosure notice includes special language regarding confidential information and also includes duties of a single agent. Brokers must retain brokerage relationship disclosure documents for five years for all nonresidential transactions that use designated sales associates.

DISCLOSURE REQUIREMENTS Nonrepresentation

The no brokerage relationship notice must be disclosed in writting before showing property.

Disclosure Format

The required disclosure notice when is incorporated into other documents must be the same size than other provisions of the document and must be conspicuous in its placement to advise customers of the brokerage duties. The first sentence must be printed in uppercase and bold type. the list of duties must be presented in the same order as listed in the statute. The notice may include information about the brokerage, such as company name, logo, address, phone number, email address, etc....

DISCLOSURE REQUIREMENTS Single Agent

The single agent disclosure must be made before, or at the time of, entering into a LISTING AGREEMENT or an agreement for representation, or before the SHOWING OF PROPERTY, whichever occurs first.

5. Present all offers and counteroffers in a timely manner.

Unless a party has previously directed the licensee otherwise in witting, the licensee must present all oral and written offers and counteroffers in a timely manner even if a valid contract exists.

DISCLOSURE REQUIREMENTS Transaction broker

Unless another brokerage relationship is established, there is no requirement to give a written disclosure to the buyer and /or the seller. Licensees must fulfill the duties of a transaction broker when that form of representation is selected.

Written Disclosures are required only for residential transactions

When the brokerage firm acts in the capacity of a single agent or in a no brokerage relationship.

Brokerage relationship options

brokerage firm or broker will assume for buyers and sellers: 1. Nonrepresentation (no brokerage relationship) 2. Single agent 3. Transaction broker The appropriate type of brokerage relationship is determined by the broker

1. account for all funds.

brokers must account for all funds entrusted to them with regard to a real estate transaction.

There are three types of law that society looks to for guidance regarding agency relationships:

common law, statutory law, and administrative law.

A brokerage relationship can be accidentally

created by a licensee's actions and words.

ADMINISTRATIVE Law

is a body of law created by administrative agencies in the form of rules, regulations, orders, and decisions. Florida statute 475 empowers the Commission to govern real estate practice in Florida.

TRANSACTION BROKER RELATIONSHIP

is a broker who provides limited representation to a buyer, a seller, or both in a real estate transaction, but who does not represent either party in a fiduciary capacity or as a single agent. Florida law refers to the parties as customers

A special agent

is authorized by the principal to handle only a specific business transaction or to perform only a specific act.

A general agent

is authorized by the principal to perform acts associated with the continued operations of a particular job or a certain business of the principal.

the Brokerage Relationship Disclosure Act.

is intended to inform and educate the public regarding the types of authority (brokerage relationships) that can be granted to a broker and the duties brokers have in each type of brokerage relationship.

STATUTORY LAW

is written statutes enacted by a legislature. Chapters 455 and 475 are two Florida statutes enacted by the Florida Legislature pertaining to license law.

Types of transactions that do not require brokerage relationship disclosures

nonresidential transaction, rent or lease agreements, Business opportunities, auctions, and appraisals.

8. Loyalty

requires brokers to always place the principal' interests above those of other persons with whom the broker deals.