Unit 8: Agency Contracts
All written agency agreements are required by license law to
-be signed by all parties -include the brokers RE license number -have a definite termination date -contain the prescribed nondiscrimination provision.
Termination of Listing Agreement
-completion/fulfillment of purpose -death/incapacity of broker or seller -expiration of the terms; no automatic renewal -mutual agreement to terminate agency -breach by one of the parties -destruction or condemnation of property
Buyer's Agent Responsibilities
-give and review the Working with Real Estate Agents brochure with the buyer; -explain agency duties and responsibilities; -ensure that a proper agency contract is executed; -properly qualify the prospective buyer/client (preferable approach is by a mortgage loan officer); -obtain and verify information about the property, including, if applicable, the Residential Property and Owners' Association Disclosure Statement, the Mineral and Oil and Gas Rights Mandatory Disclosure Statement, the Lead-based Paint Addendum, and the Owner Association Disclosure and Addendum, etc.; -disclose agency status to all parties to the transaction; -discover and disclose material facts about the property; -perform a CMA to assist buyer in determining an appropriate offer price; -assist in the preparation, presentation, and negotiation of offers submitted by and on behalf of the buyer/client; and -assist the buyer/client with preparation for closing the transaction.
Exclusive Agency Listing
1) Only one broker is authorized to sell 2) If the owner finds a buyer, no commission is owed.
exclusive right-to-sell listing
1) Only one broker is authorized to sell 2) the broker receives a commission no matter who finds the buyer.
Types of Listing Agreements
1) Open Listing 2) Exclusive-agency listing 3) Exclusive right-to-sell listing
3 exceptions to do not call rule
1)A real estate broker may call a consumer with whom they have an established business relationship for up to 18 MONTHS after the consumer's last purchase, delivery, or payment, even if the consumer is listed on the National Do Not Call Registry. 2)A broker may call a consumer for up to three months after the consumer makes an inquiry or submits an application. 3)a buyer's agent may call for sale by owners that are on the Registry if the buyer-client is interested in the property.
Open listing
1)Any number of brokers authorized to sell. 2)Only selling broker is paid. -NONEXCLUSIVE -Obligated to pay a commission ONLY to the broker who successfully procures a ready,willing, and able buyer. -IF the SELLER sells the property without help, the seller is NOT OBLIGATED to pay any broker a commission. **NOT FAVORED BY BROKERS. **MLS RULES MAY PROHIBIT THIS TYPE OF LISTING.
extender clause or override clause
A clause in a listing contract that says the listing broker is entitled to commission for a time period after the listing expires if the property is sold to a prospect that the broker initially introduced to the client during the listing term. -AKA carry-over clause.
Buyer Agency Agreement
A contract for real estate brokerage services between a buyer and a real estate agent. The broker receives compensation for successfully locating a property for the buyer to purchase. -AKA: Representation Agreement -controls how much compensation is to be paid to the buyers agent and which party will pay that compensation. -Buyers agents may also be compensated by the buyer paying retainer fees and/or success fees.
Multiple Listing Service (MLS) AKA- Cooperative listing service (CLS)
A listing service whereby local members of the Board of REALTORS agree to share listings and commissions on properties sold jointly. Members of the public may have access to the MLS, but not to all of the features and content.
National Do Not Call Registry
A national registry, managed by the Federal Trade Commission, that lists the phone numbers of consumers who prefer to limit the telemarketing calls they receive.
retainer fee
A small monetary compensation paid by the buyer when the buyer agency agreement is established. -A buyer agent must enter into a written buyer agency agreement with a buyer-client before receiving a retainer fee. -This fee is advanced partial compensation for services.
How are an exclusive-agency listing and an exclusive right-to-sell listing alike? A)The responsibility of representing the seller is given to one broker only. B)The seller retains the right to sell the real estate without the broker's help and without paying the broker a commission. C)There is no similarity between the two listing types. D)The seller authorizes only one particular agent to show the property.
A- In an exclusive agency listing and exclusive right-to-sell listing, one broker is specifically authorized to act as the exclusive agent of the principal. However, in an exclusive agency listing, the seller retains the right to personally sell the property, without obligation to the broker.
When a buyer broker has an opportunity to work with a limited services listing broker, the buyer's agent: A)should be very clear about expected compensation arrangements before entering a transaction. B)will act as a dual agent. C)should boycott those opportunities. D)will be paid by the seller.
A- Some, but not all, limited service brokers will offer no buyer's agent compensation and direct all property inquiries to the property owner. Sellers, buyer's agents, and buyers would be wise to be very clear about compensation agreements before entering a transaction.
Tony, a real estate broker, is assisting a buyer purchasing a property. While showing a property listed with Tony's firm, he notices that the hot water faucet was not operating properly in the downstairs bathroom. Regarding questions on the residential property disclosure statement, the seller has checked all the boxes with "no representation." When the prospective buyer expresses interest in the home, what are Tony's obligations? A) Tony must disclose the faucet issue as a material fact to the firm's seller, and he must also disclose it to the firm's prospective buyer, even if the seller objects to such disclosure. B) Tony has no duty to disclose because the seller checked "no representation" and Tony's fiduciary duties are to protect and promote the interests of his firm's buyer. C) Tony has a duty to disclose material facts to clients. Therefore, he must make the disclosure only to a buyer if he is representing the buyer as a dual agent. D) Tony must disclose the material fact only if he is working with an unrepresented buyer. If the buyer is represented by another agent, that agent has the obligation to discover the defect and should recommend to the buyer that they get a home inspection. Tony does not owe obligations to other agent's clients.
A- The faucet is a material fact. Material facts must be disclosed to all parties in a transaction, regardless of who Tony represents and regardless of which party Tony owes fiduciary duties.
Listing Agreement
An employment contract obligating a broker to act as a fiduciary to a seller
fee-for-service agreement (AKA limited service agreements)
Arrangement where consumer asks licensee to perform specific real estate services for a set fee; unbundling of services; limited service firms. Example: if someone wants to buy a house without contracting with a brokerage firm for a full range of brokerage services, but needs help writing an offer.
Typical matters addressed in a buyer agency agreement include the following EXCEPT A) the need for the buyer to retain specialized assistance. B) the broker's requirement to disclose the nature of the buyer's offers to other buyer clients. C) the type of property that the buyer is seeking. D) whether or not the brokers may disclose the name of the buyer.
B-Similarities between a seller's listing agreement and a buyer agency agreement include provisions dealing with similar issues such as duration of the agreement, broker's compensation, descriptions of the duties of the firm and the client, nondiscrimination clause, acknowledgment of receipt of agency disclosure brochure, and the possible practice of dual agency. Unless otherwise noted in the agency agreement, the buyer authorizes the broker to disclose the buyer's name(s) as necessary. The buyer also is advised that although brokers are prohibited from disclosing terms of any offer without the express permission of the offering party, the seller is under no such restriction.
Advantages of placing listings in an MLS
Broker: develop a sizable inventory of properties to be sold and are ensured a portion of the commission if they list a property or participate in its sale. Seller: also gain under this form of listing agreement because all members of the multiple listing organization are eligible to sell their property and are made aware of its availability.
A buyer's agent must A) disclose the possible presence of sex offenders in an area, if asked. B) show the buyer at least 20 properties. C) properly qualify the prospective buyer/client. D) guarantee that the contract price represents a good investment for the buyer.
C- A buyer's agent must consider the buyer's desires and financial qualifications when selecting properties for showing while making sure not to violate fair housing laws. A buyer's agent must properly qualify the prospective buyer client. The preferable approach is by a mortgage loan officer.
The NCREC rules require a listing broker who is about to discuss a buyer's confidential information with a buyer consumer to do all of the following EXCEPT A) disclose available agency options before learning any confidential information. B) ask the buyer to sign the Working with Real Estate Agents acknowledgment panel. C) disclose the broker's agency relationship orally before learning any information about buyer motivations. D) give the Working with Real Estate Agents disclosure at first physical contact.
D- Disclosure and delivery of the brochure are not required at initial or physical contact; they are required at first substantial contact. Buyers do not have to sign the disclosure.
Per the Offer to Purchase and Contract form jointly approved by the North Carolina Association of REALTORS® and the North Carolina Bar Association, a buyer who terminates the contract before the end of the due diligence period because of the buyer's inability to get a loan will have what funds returned? A) Credit report, appraisal fee, and earnest money B) None, because the buyer terminated the contract C) Due diligence fee and earnest money D) Earnest money
D- If the buyer terminates during the due diligence period, the buyer will receive the earnest money upon termination.
Which of these is FALSE about dual agency? A)Dual agency always requires consent and disclosure of all parties. B)Dual agency will only exist when there is one firm involved. C)Designated agency is a form of dual agency. D)Dual agency can exist when there are dual (two) firms.
D- When the buyer is represented by one firm and the seller is represented by another firm, dual agency cannot exist. This would be single agency representation.
success fee
Due and payable by the buyer/principal on the signing and acceptance of an offer to purchase property found by the buyer's agent. -typically it is paid at CLOSING.
Comparative Market Analysis (CMA)
Estimate of property value for appraisals based on indicators from the sale of comparable properties.
T/F?- Broker commissions are typically based on the net sales price.
FALSE- Broker commissions are typically based on the gross sales price.
T/F?- All sellers of residential properties must provide buyers the Residential Property and Owners' Association Disclosure Statement
FALSE- There are exceptions to the requirement that residential sellers must provide the disclosure statement. For example, owners of properties that are greater than four units do not have to provide this form and sellers of brand-new homes that have not been occupied.
T/F?- The North Carolina Association of REALTORS® contracts have been characterized as the only contract forms acceptable for use in North Carolina.
FALSE- There are many contract forms acceptable and appropriate to use in North Carolina, as long as the contract forms meet the North Carolina Real Estate Commission's standards.
Do not call statue Penalties (Federal level and NC)
NC- $500-$5000 (depending on violation FEDERAL- Up to $11,000 PER CALL
ready, willing, and able buyer
One who is prepared to buy property on the seller's terms and is ready to take positive steps to consummate the transaction.
Soliciting active clients of other firms/brokers is
PROHIBITED. -Could end up being a lawsuit
T/F?- The sales price of a residential lot using a commission of $4,550 and a commission rate of 7% is $65,000.
TRUE- $4,550 divided by 7% equals $65,000.
T/F?- A real estate broker may work with a buyer initially with an oral agreement, but once the buyer asks for assistance with developing an offer, the broker must be formally employed by that buyer using a written agreement.
TRUE- A broker may work initially as a buyer agent without a written agreement under some circumstances, but once the buyer needs help in developing an offer, a written and signed buyer broker agreement, even a simple one, must be in place before the broker provides such assistance.
T/F?- When scheduling properties for showing, the buyer's agent must disclose her agency status to the listing agent or to the seller if the seller is a for sale by owner.
TRUE- Buyer's agents must disclose their agency status to the seller or the seller's agent, if there is one. Any expected compensation by the seller or the listing firm should also be clarified by the time of showing.
T/F?- Dual agency agreements commonly have a provision for the parties to accept designated dual agency.
TRUE- Designated dual agency is usually an option in most dual agency agreements allowing brokerage firms to assign two brokers in the firm to each represent one side.
T/F?- Real estate brokers may call consumers with whom they have an established business relationship for up to 18 months after the consumer's last transaction even if the consumer is listing on the National Do Not Call Registry.
TRUE- Since 2003 when the National Do Not Call Registry was established, real estate professionals must comply with its provisions and not contact individuals on the registry. However, there are some exceptions, including contacting consumers with whom brokers have established business relationships.
T/F?- Dual agents must still discover and disclose all material facts, but they do not disclose personal information to both the buyer and the seller.
TRUE- While dual agency agreements seek to modify and limit the duties of agents to their principals, they must still discover and disclose all material facts but not disclose personal information.
T/F?- Sellers of brand-new homes must provide a complete Mineral, Oil and Gas Disclosure Statement (MOG) to consumers.
TRUE- While sellers of brand-new homes are exempt from providing the Residential Property and Owners' Association Disclosure Statement, they are not exempt from providing the MOG disclosure statement.
Procuring Cause
The actions by a broker which result in the owner being able to make a sale.
Net Listing
The broker agrees to sell the property in order to achieve a net price to the owner, and anything which is received above the net price is the broker's commission. A net listing is prohibited by the licensing law in many states. -Although NOT ILLEGAL in NC, this type of listing is NOT RECOMMENDED.
Co-listing
Two brokerage firms team up to sell a property in order to obtain more exposure for that listing. -they will also share in the listing commission if they are successful in finding a buyer who is ready, willing, and able.
Earnest Money
a portion of the price of a home that the buyer deposits as evidence of good faith to indicate a serious purchase offer
in-house sale
a sale in which both the selling agent and the listing agent are from the same firm. -the brokerage company determines what the split will be to each licensee based on company policies.
co-brokered sale
a transaction where competing brokerage firms cooperate on the sale of listed properties. The amount of compensation paid by the listing firm to the selling firm is negotiable, however, firms that participate in an MLs routinely disclose the amount of compensation that will be paid to a successful selling firm.
Protection Agreement
an agreement between an unlisted property owner and a broker to secure payment for the broker if the property is sold to the particular buyer named in the agreement; it does not create a general listing, and may not create agency at all - only compensation for a buyer's agent. Sometimes called a "one-shot" listing.
consummation
completion
Puffing
exaggeration of a property's benefits, is NOT PERMITTED in the MLS.
A multiple-listing clause is usually included in an
exclusive listing
antitrust laws
laws that prevent monopolies and promote competition and fairness. EXAMPLES -price fixing -group boycotting -allocation of customers or markets
CAN-SPAM Act of 2003
laws that the US Federal Trade Commission (FTC) enforce regarding false advertising and prohibit senders of spam from sending spam to recipients who have requested not to receive such emails. **MUST HAVE "OPT-OUT" OPTION
Most listing agreements include "an offer of compensation and cooperation" which means
the commission is divided between the listing broker AND the selling broker, regardless of which party the selling broker represents.
price fixing
the practice of colluding with other firms to control prices. -in real estate it occurs when brokers agree to set sales commissions, fees, or management rates, and it is ILLEGAL!!!