Chapter 4 Real Estate Practice - Agency Law

One who acts for and with authority from another, called the principal, is known as a/an...?

Agent

Dual Agent

An agency relationship in which the agent acts concurrently for both of the principals in a transaction.

Which of the following is an example of express agency?

Tory is a real estate broker who has just signed an exclusive listing agreement with Jon to sell his house.

In real estate, which type of contract is the most common way to establish agency relationships?

Listing Contract

What does the acronym OLDCAR stand for?

Obedience Loyalty Disclosure Confidentiality Accounting Reasonable Care

Agency

The relationship between principal and the principal's agent, which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.

Which is true of a single agent?

When they represent a principal, they do not represent any other principals who have competing interests.

General Agent

- An agent with full authority over one property of the principal, such as a property manager.

Fiduciary

A person in a position of trust and confidence, as between principal and broker; broker as fiduciary owes certain loyalty which cannot be breached under the rules of agency.

Subagent

A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent's principal.

Bailey is a real estate salesperson working with Lenore, who wants to buy a home, and who has signed a buyer's agreement with Bailey's office. Bailey shows Lenore a house which her office has the exclusive listing on, but it will expire in less than a week. Lenore says it's not exactly what she's looking for, but maybe she should just put an offer on it. Bailey saw a new listing on MLS that morning that sounds like it is exactly what Lenore was looking for. Which is true:

Bailey should tell Lenore about the new listing.

Chris is a real estate salesperson who has been working with Jake to help him sell his home. Which statement is true:

Chris should make sure that the broker he works for establishes a clear agency agreement with Jake.

You are required to protect your principal's secrets, unless it is unlawful to do so. If you know anything that can compromise your client's bargaining position, you have to keep it to yourself and not share it with the other party to the transaction. This describes which duty to your client?

Confidentiality

Pace Walker is the buyer's broker for Ellen Rigby. After a recent showing, Pace finds out that crime rates have doubled in the last five years and that traffic noise from the highway is clearly audible from within the home. When Ellen asks about property values, Pace not only answers her question, but shares what he knows about crime rates and traffic noise as well. Ellen decides to keep looking. What duty has Pace fulfilled?

Disclosure

If a broker represents both the seller and buyer, they operate as a ................agent.

Dual

Agent

One who acts for and with authority from another called the principal.

Which term below goes with the following definition? The seller or buyer of real property who benefits from a fiduciary relationship with a real estate agent or broker.

Principal

Select which groups most accurately fills the usual roles in agency relationships in real estate:

The broker is the agent, the subagent is the salesperson, and the principal is the client.

Ostensible Agency

A person who has been given the appearance of being an employee or acting (an agent) for another (principal), which would make anyone dealing with the ostensible agent reasonably believe he/she was an employee or agent.

Sydney's brother Lawrence is a real estate salesperson in a prestigious brokerage that is a member of several active MLS services. Sydney wants to sell her condo, and she wants to negotiate a listing agreement with her brother that will allow him to make 100% of the commission. Which statement is true?

Sydney should negotiate a listing agreement with Lawrence's sponsoring broker. It's very unlikely she'll be able to get 100% for Lawrence, but she may be able to negotiate a listing agreement that gives Lawrence a significant split of any commission as a subagent.

Obedience

This fiduciary relationship obligates the agent to act in good faith at all times, obeying the client's instructions in accordance with the contract.

A person upon whom the powers of an agent have been conferred, not by the principal, but by an agent as authorized by the agent's principal is known as a/an?

Sub-agent

Universal Agent

The agent who has complete authority over any activity of the principal; for example, power of attorney.

In a strong rental market, agents are charging the renters for their fees. Justin rents a $2,200 apartment and charges 10% of the annual rent as his fee. What commission has he earned on this rental?

$2,640 (Dollars)

Which statement is true about a general agent?

A property manager is a type of general agent.

Single Agent

An agent who works only for the buyer or the seller.

Loyalty

An agent's duty to place the client's interest above those of all others, including the agent's own self-interest.

A property manager operates as a ..............agent.

General

An agent who works for only the buyer or the seller is referred to as a/an...?

Single agent

Reasonable Care

The degree of caution and concern for the safety of himself/herself and others an ordinarily prudent and rational person would use in the circumstances. This is a subjective test of determining if a person is negligent, meaning he/she did not exercise reasonable care.

Principal

The employer of an agent, such as a buyer or seller.

Who acts as the principal to the listing broker?

The seller

Which statement is true of the third party in a real estate agency relationship?

The third party is called the customer.

The agent who has complete authority over any activity of the principal is known as a/an...?

Universal agent

Dwayne is a real estate salesperson who represents the buyer in a deal on a property that closes for a million dollars. The seller's broker has a listing agreement for 4%. The seller's broker has a 60/40 split with the buyer's broker. Dwayne has a 50/50 split with his sponsoring broker. How much will Dwayne make on this deal?

$8,000 (Dollars)

Why is dual agency problematic?

All of the answer choices provided are correct. - It makes it difficult for the agent to uphold their fiduciary responsibility to both principals. - It can occur without the agent realizing it. - If both parties are not made aware of it being in effect, then it is always illegal.

Express Agent

An agency relationship created by oral or written agreement between principal and the agent.

Which is true about commissions on sales...?

it is always negotiable

Implied Agency

Agency that exists as a result of actions of the parties.

What are ways in which an agency relationship can be terminated?

All of the answer choices provided are correct. Completion of the transaction Mutual agreement of the parties Expiration of the listing contract

Who are the parties that are ALWAYS involved in an agency relationship?

The principal, the agent and at least one third-party.

Why are implied agency relationships so bad for real estate brokers?

They risk losing out on commission.

Tom is acting as an agent for property owner Bill in a building that has rent restrictions. Tom has been knowingly charging rents that are above the maximum that is legally allowed. Which statement is true about Bill's liability?

All of the answer choices provided are correct. Bill has signed an agreement for Tom to be his special agent in renting apartments. The agreements state the legal rents that should be charged for each unit that. Tom has been charging tenants more without Bill's knowledge and pocketing the difference. Only Tom is liable. If Tom is acting as a special agent for Bill, but has been authorized to set the rent rates and giving higher profits to Bill, then the agency relationship could have transformed from special agent to general agent and Bill could be held liable. If Tom is acting as the general agent for Bill, then Bill could be held liable, regardless of whether he is aware of the increased charges.

Confidentiality

An agent is obligated to safeguard his/her principal's lawful confidences and secrets. Therefore, a real estate broker must keep confidential any information that may weaken a principal's bargaining position. The duty of confidentiality precludes a broker who represents a seller from disclosing to a buyer that the seller can, or must, sell a property below the listed price. Conversely, a broker who represents a buyer is prohibited from disclosing to a seller that the buyer can, or will, pay more than what has been offered for a property. The duty of confidentiality does not include an obligation by a broker who represents a seller to withhold known material facts about the condition of the seller's property from the buyer, or to misrepresent the property's condition. To do so constitutes misrepresentation and may impose liability on both the broker and/or the seller.

What is a special agent when referring to the real estate industry?

An agent who is granted limited authority on behalf of the principal. Almost all real estate agents are acting as special agents.

Special Agent

An agent with limited authority to act on behalf of the principal, such as created by a listing contract.

Commission

An agent's compensation for performing the duties of agency; in real estate practice, a percentage of the selling price of property, percentage of rentals, etc. A fee for services.

You are the listing agent for Ivan Beeker, who has recently discovered there is a lien on his property that must be resolved prior to listing the property for sale. You refer Ivan to a property attorney and municipal authorities who can help him clear the lien quickly. Which of the following best describes this scenario?

As a real estate licensee, you are not required to offer advice outside your area of expertise, such as legal advice.

Susan is a real estate broker and believes that she owes every person she works with the same benefits of an agency relationship. Why is she incorrect?

It's not possible to put two competing interests first, but that is what an agency relationship requires.

Julie is a real estate salesperson who has been trying to sell a home for their brokerage's client for 6 months. Her very good friend, Jenny, mentions she's looking to buy and Julie thinks the house will be a great match for her friend. Her friend does love the house and wants to put an offer in at asking price. Which statement is true?

Julie should very carefully explain that she represents the seller's interest in this transaction, and while Jenny is her friend, her loyalty must be to the seller's interests in all things related to this transaction.

Fiduciary Duty

That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure