Agency Review

Agency

"Agency is the fiduciary relationship that results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act." Fiduciary relationship where an agent is given consent to act on behalf of the principle.

Creation of Agency

-Delegation of authority for agent to act. -Does NOT need to have all elements of a contract. Can be gratuitous. -Act of law (courts) will determine if a consensual relationship existed.

Agent:

A person who performs acts on behalf of others is deemed to be an agent under the common law of every state. (Agent DOES NOT MEAN real estate agent.)

Power of Attorney

A written legal document that authorizes a person, who becomes an agent of the principal, to act on behalf of the principal. If the principal is not available at the time of closing, the agent who has power of attorney acts on the principal's behalf. The power of attorney form must be notarized and must be recorded if real property is being conveyed.

Loyalty

Act at all times solely in the best interests of the principal to the exclusion of all other interests, including the broker's own self-interest.

Agent-Principle vs. Non-Agent-Customer

Agent entrusted with confidential info and fiduciary responsibility to the principle while a non-agent does not have these duties to a customer.

Disclosure

An agent is obligated to disclose to the principal all relevant and material information the agent knows pertaining to the scope of the agency. Any facts affecting the value of property; All known facts about the buyer; Information known about buyer's willingness to purchase, complete sale, highest price. Broker's relationship to, or interest in the prospective purchaser. A buyer's intention to subdivide to make a profit. Any other information that might affect highest and best price. *NOTE: Caveat - Real estate agent must disclose known material defects to buyers and must treat all persons honestly and fairly with no misrepresentation or fraud.

Subagent

An agent of an agent. Licensees who have their licenses with managing brokers are sub-agents of the broker.

Non-agent

An intermediary between a buyer and seller who assists with the transaction without representing either party as an agent.

Implied Authority

Authority implied to be conferred to the agent by the principles actions.

Actual Authority

Authority the principle intentionally confers to the agent.

Reasonable care and diligence

Discover relevant facts that a reasonable real estate agent could discover--zoning, school closure, new roads, etc.

Fiduciary Duties of an Agent

Loyalty Obediance Confidentiality Reasonable Care and Diligence

Disclosure of agency

Mandatory agency disclosure laws now exist in all states. Most require a written form. Licensees are required to disclose seller and buyer agency services so customers can decide whether they want or need an agency relationship versus a facilitator/customer relationship.

Obedience

Obey lawful instructions.

Special or specific agent

Real estate agents generally work as special agents. A buyer agent has the limited authority to locate a property that meets the buyer's criteria, while a seller's agent has the limited authority to find a buyer for the seller's property.

General Agent

Represents the principal in a wide variety of matters in a specific business activity. Property managers are general agents performing a variety of tasks for the owner/principal.

Remedies for an agent's breach of fiduciary duties

Rescission Forfeiture of commission Damages

Confidentiality

Safeguard the principal's confidence and secrets. Must not weaken the principal's position. Example: Must not disclose clients are divorcing or being foreclosed upon, etc.

Single agent

The agent could be a buyer's agent, landlord's agent, seller's agent, tenant's agent, or subagent. The agent represents only one party in any single transaction, and any third party is a customer.

Brokerage Relationships

The broker/salesperson who obtains a listing to sell a property is known as the listing broker, however the listing is a contract between the property owner and the brokerage company that the broker/salesperson where they are employed. The broker/salesperson who is working with the buyer is known as the cooperating broker because he/she cooperates with the listing broker to close the transaction.

Principle

The one for whom action is taken (by the agent) and who benefits.

Agent

The one who is entrusted to act (on behalf of the principle).

Dual Agency

Working for both parties (buyer and seller) in the same transaction as their agent. In the strictest sense, it cannot really be done since as agent you must work in the best interest of both principals and their best interests are really at odds. Undisclosed dual agency is considered fraud. Buying on own account without disclosure. Telling buyer what to offer. Future dealings with buyer concerning said property. Compensation from buyer without seller permission. Buyer's broker selling own listing (must renounce agency). Disclosed dual agency: All parties acknowledge and agree to the dual agent role. Becomes a special agent. Usually in writing stating what agent will and can do and what the agent will not do.

Facilitator-Intermediary

Works for both the seller and the buyer to complete a transaction but not in an agency relationship with either party. No fiduciary relationship with either buyer or seller but must be fair with both parties. All material facts must be disclosed to both the seller and buyer. Written agreement between all parties stating what the broker (non-agent) shall and shall not do. Cannot help one party to the transaction to the detriment of the other party.