Chapter 4 - What is Agency?

Transaction Broker

A licensee in a real estate transaction who is representing the parties as customers.

Customer

A party to a contract with must be given information and questions must be answered honestly regarding material defects. All questions must be answered honestly but there are no fiduciary duties this party.

Fiduciary Relationship

A relationship based on trust and confidence and when created, the agent owes the client the fiduciary duties of obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care and diligence.

Sub

Agency- an agent of an agent. A concept of agency law whereby an agent appoints another agent to work for the benefit of the same client.

Agency

As an adjective, it describes the relationship between an agent and a client, a relationship under which the agent owes fiduciary duties to a client, a relationship under which the agent owes fiduciary duties to the client. As a noun, it refers to a real estate company licensed by state laws.

Client

This person hires someone else to represent him or her, and this representation created a fiduciary relationship.

Subagent

This term is used to describe an agent of an agent.

What duty does a licensee who is a non-agent have to the parties in a real estate transaction? a) Honesty b) Disclosure c) Loyalty d) Confidentiality

a) Honesty

A designated broker and principal broker are one in the same. a) True b) False

a. true

A transaction broker does not owe fiduciary duties to any party in the transaction. a) True b) False

a. true

Informed consent is always required to create a dual agency. a) True b) False

a. true

Agents who specialize in selling residential property are acting as general agents. a) True b) False

b. false

Fiduciary Duties

obedience, loyalty, disclosure, confidentiality, accountability, reasonable care and diligence.

Commingling

the illegal act of depositing customer or client funds in the same account as company funds, or in a personal account. Other people's money should be kept in an account just for that purpose.

Reasonable Care

this fiduciary duty describes what an agent should know and should do.

Principal

this term has two meanings. It is used to describe any party in a contract, such as the buyer and seller. As it relates to a loan, it refers to the loan balance.

Undisclosed Dual Agent

a licensee attempts to work both the buyer and seller in the transaction without the informed consent of both parties.

A buyer agent is not obligated to discover a) Latent defects of the property b) Obvious physical defects of the property c) How long the property has been on the market d) The values of comparable properties

a) Latent defects of the property

An agent who puts a client's interest ahead of the agent's interest in a transaction is being loyal to the client. a) True b) False

a. true

Universal Agent

an agent given the authority to perform all acts as if he were the other person. Example: Guardian.

General Agent

an agent given the authority to perform in an on-going business relationship on behalf of a person or entity.

When an in-house transaction occurs between two sales associates who are acting as designated agents, dual agency between the two associates is eliminated. a) True b) False

b. false

A property manager is what type of agent of the owner? a) Special agent. b) General agent c) Universal agent. d) Limited agent.

b) General agent

A buyer and seller ask Jane, a licensed real estate agent, to help them complete a real estate sale contract. Jane has not agreed, nor implied that she will represent either party. Both parties are customers if Jane helps them, Jane a) Is acting as a dual agent b) Is acting as a transaction broker c) Would be in violation of her license law d) Could only accept compensation from the seller.

b) Is acting as a transaction broker

An agent is showing her listing to a potential buyer. The buyer does not have an agent. At this point, the listing agent would be a) Treating the buyer as a client b) Treating the buyer as a customer c) Violating agency law for not creating an agency relationship d) A dual agency because she is showing her listing.

b) Treating the buyer as a customer

An licensee cannot work with a customer. a) True b) False

b. false

Dual agency is only allowed when one agent in a company represents the buyer and another agent in the company represents the seller. a) True b) False

b. false

The fiduciary duty of confidentiality ends when a property is sold. a) True b) False

b. false

The listing agent determines when a property will be shown to prospective buyers. a) True b) False

b. false

Universal agency occurs when a) An agent represents both sides of a transaction b) A seller gives his agent permission through a phone conversation to accept offers on the seller's behalf. c) An agent has been given in writing the full power of attorney to represent another person d) When an agent conducts residential, commercial, agricultural and industrial transactions.

c) An agent has been given in writing the full power of attorney to represent another person

While showing a property that he had personally listed, an agent told the buyer, "If you want to purchase the property, I can take care of everything for you" Unless the agent has the informed and written consent of both the buyer and seller, he is a) Just the agent of the seller b) Treating the buyer as a customer c) An undisclosed dual agent d) A designated agent.

c) An undisclosed dual agent

In order for a selling licensee to be a disclosed dual agent, she must have signed written consent from a) Only the seller b) Only the buyer c) Both the buyer and the seller d) Whichever party signed a brokerage listing agreement first.

c) Both the buyer and the seller

Which word best defines a relationship that is based on trust and confidence? a) Customer b) Employment c) Fiduciary d) Agent coordinator

c) Fiduciary

Acts that a real estate brokerage agency performs for a person who is not a client and that are informative or clerical in nature are called a) Fiduciary duties b) Material facts c) Ministerial acts d) Subagency duties

c) Ministerial acts

Which of the following situations would most likely create sub-agency? a) When a seller enters into open listings with two or more brokers b) When a broker from one company lists the property and a broker from another company sells it. c) When an agent lists a property, he or she is a subagent to the seller and an agent of the broker. d) None of the situations can create sub-agency.

c) When an agent lists a property, he or she is a subagent to the seller and an agent of the broker.

Which of the following is a service that an agent may provide to a client? a) Presenting all material facts relating to the transaction of substantial importance to influence the client's decision b) Advising a client to obtain expert advice on matters beyond the expertise of the agent c) Accounting in a timely manner for all money and property received on behalf of a client d) All of the above.

d) All of the above.

A person passed the test and affiliated with a brokerage firm. The licensee would be classified as a/an: a) Special agent of the brokerage firm b) Limited agent of the brokerage firm c) Universal agent of the brokerage firm d) General agent of the brokerage firm

d) General agent of the brokerage firm

The seller, Lucy, instructs her agent Linus not to schedule any showings on Monday afternoons as that is when her book club meets at her home. Linus complies. This is an example of which fiduciary duty? a) Loyalty b) Confidentiality c) Diligence d) Obedience

d) Obedience

When the brokerage policy is dual agency it means that the a) Broker is the dual agent representing the buyer and seller b) Listing licensee is the dual agent when representing the buyer and seller c) Buyer's agent would be the dual agent when representing the buyer and seller d) Principal broker and all agents of the firm are dual agents.

d) Principal broker and all agents of the firm are dual agents.

Disclosure

one of the seven fiduciary duties an agent owes to his of her client; this duty requires the agent to inform the client of any material facts and material defects regarding the physical condition of the property.

Accounting

one of the seven fiduciary duties of an agent to a client; agent must report to the client how money held for client is to be handled.

Confidentiality

one of the seven fiduciary duties; an agent may not disclose information that might have and adverse effect on clients' real estate dealings. This fiduciary survives the termination of the agency relationship.

Diligence

one of the seven fiduciary duties; it requires agent to be attentive to the interests of his client.

Agent

one person who, by agreement with another person, (the client or principal), is authorized to act on his or her behalf.

Loyalty

this fiduciary duty requires that the client's interest comes before all others.

Designated Agency

this is a type of brokerage policy on agency. The broker appoints the listing licensee to represent the seller and another licensee in the company to represent the buyer. (Please note that more than one licensee may be appointed to represent the seller or buyer)

Disclosed Dual Agent

this means a licensee is representing both the buyer and seller in the transaction with the knowledge and consent of both parties.

Conversion

this term has two meanings. First, it is used to describe the illegal act of using the client's money as if it belonged to the licensee. Second, this term describes the process used to convert a building from one use to another use such as an apartment building to a condo community.

Implied Agency

this type of agency if created by the actions of the parties.

Express Agency

this type of agency is created by an oral or written agreement between the parties.

Obedience

this type of agency is created by an oral or written agreement between the parties.

Special Agent

this type of agent is authorized to perform a specific act for a client or principal. The relationship is not expected to be on-going, but when end upon the fulfillment or expiration of the purpose.