Law of Agency: Overview and Basic Concepts Chapter 7- unit 1
actual authority
The scope of authority determines whether an agent is universal, general, or special. A broker is a general agent to his or her employing broker. In most cases, a broker is a special agent to a buyer or seller client. A listing agreement gives______________to an agent, express authority to find a buyer, and incidental authority to tell people the property is available. An agent cannot have incidental authority without express authority.
providing a buyer with a list of mortgage lenders
Which of these is MOST LIKELY to be an acceptable action for a transactional broker to perform?
general agent
Which type of agent is a property manager usually considered to be?
Doctrine of Estoppel
is a legal doctrine preventing a person from asserting rights or facts inconsistent with earlier actions or statements when he or she failed to object (or attempt to "stop") another person's actions.
Agency
is a relationship of trust created when one party gives another the right to represent him in dealings with third parties.
Agency
is a relationship of trust created when one person (the principal) gives another person (the agent) the right to represent the principal in dealings with third parties. The individual a broker enters into a contract with to represent (and owes a fiduciary responsibility to) is the client or principal; all third parties are customers. Associated licensees may be considered subagents of the broker. A principal may be liable for an agent's acts.
Expressed (or actual) authority
is power or permission given intentionally for a specific act or outcome communicated by the principal to the agent. As an example, actual authority in an agency relationship for real estate transactions is granted when a broker and seller sign a listing contract.
Agency by Ratification
is the later confirmation or approval of an act that was not authorized when it was performed.
terminate
An agency relationship can _______ by revocation, operation of law, accomplishment of purpose (the best way), mutual agreement, expiration, or renunciation (R-O-A-M-E-R). Agency ends by operation of law if a party to the agreement dies, becomes incapacitated, goes bankrupt, property is destroyed or condemned, or the broker loses his license. Agency coupled with an interest cannot be revoked, nor terminated by death, incapacity, or bankruptcy of the principal.
facilitator
Broker Bill is hired by seller Sue and buyer Ben to assist them with their real estate deal. They are not looking for representation, just administrative help to navigate the process. Bill MOST LIKELY is a
1919
In the United States, the first state real estate license law was enacted in
The Seller
In the past, in a "traditional" agency relationship, who was the principal?
universal agency
Joan has a power of attorney to care for all aspects of her sister's life while her sister is serving in the military overseas. She handles her bills, signs legal papers, and even took on the task of selling her sister's property. Which type of agency does this represent?
create a dual agency situation that requires written consent from buyer and seller.
Joel and Andy work for Blue Roof Realty. Joel has listed 1776 Constitution Road and Andy has an interested buyer. If Joel and Andy put this deal together, then it will
Kim only
Kim's brokerage company offers dual agency. Tom and Don are two of her licensed brokers. Tom has been appointed to represent the seller, and Don has been appointed to represent the buyer in an in-house transaction. In this situation, who is a dual agent?
renunciation.
Agent Dee has a 60-day buyer broker agreement with Melissa. The agreement states that Dee will vigorously pursue finding a house for Melissa. A month into the agreement, Dee goes on a two-week cruise. It's clear to Melissa that Dee has neglected and abandoned her. This could be an example of termination of agency by
state real estate license
All ___________ laws share a common purpose: To protect the public by ensuring a consistent level of competence, ethics, and professionalism.
an indication that the brochure is not a contract. a list of the duties owed by licensees to consumers of real estate services. a place for the prospective client to acknowledge receipt.
All of these elements appear in the Working with Real Estate Agents brochure
universal agency
Teresa is granted a power of attorney to care for all aspects of her incapacitated brother's life. She maintains all of his finances, signs any legal papers, hires caregivers, and if he doesn't look well, Teresa takes him to the doctor, whether he wants to go or not. Which type of agency does this represent?
rules
The Commission has the authority to write _____ that clarify and fulfill the statutes found in the state's Real Estate License Law.
July 1, 1957
The North Carolina Real Estate License Law was passed by the General Assembly effective
mission
The _______ of NCREC is "to protect the public interest in real estate brokerage transactions."
agency agreement
The ____________ is between the employing broker/brokerage firm and the client. As a general agent, a broker will work with the client on behalf of the employing broker, but the broker is not a party to the agreement.
client
The party granting the right of representation through an agency relationship, such as in a real estate transaction, is known as the _____ or principal in the relationship. This could be the seller or the buyer.
Implied Authority—
The power or permission to do everything reasonably necessary to carry out the principal's express orders.
Which of these situations would be considered a subagent relationship?
Broker Archie works to find a property for his BIC's buyer client.
subagent
A ____ may be defined as anyone given authority by an agent so that the subagent can assist in carrying out the principal's orders.
universal, general, special
A _______ agent has the greatest level of authority, followed by a _______ agent. A _______ agent's authority is most limited.
special agent
A ________ has limited authority to perform a specific task or conduct a specific transaction. This is generally a short-term relationship. For example, when a real estate broker is contracted by a homeowner to sell his or her property, the broker is considered to be a special agent. A special agent may also be called a limited agent.
universal agent
A ____________ is authorized to do anything and everything that can be lawfully delegated to a representative
general agent
A ____________ is authorized to represent the principal in a broad range of matters as specified, usually as part of a long-term relationship.
apparent agency
A homeowner finds out that a broker is marketing his property, even though he has a FSBO sign in his front yard. But the homeowner does nothing to stop the broker. What type of agency relationship may have been created, if any?
Estoppel—
A legal doctrine that prevents a person from asserting rights or facts that are inconsistent with his or her earlier actions or statements, when he or she failed to object (or attempt to "stop") another person's actions.
renunciation
—When someone who has been granted something or has accepted something later gives it up or rejects it; as when an employing broker withdraws from an agency relationship with a client.
Customer—
A party to a transaction with whom a real estate licensee does not have a fiduciary duty or relationship, but with whom a licensee must be honest and fair.
General Agent—
A person authorized to handle a principal's affairs in one area or in specified areas.
Attorney-In-Fact—
A person specifically designated in an instrument (e.g., power of attorney) to do something legally for another in his stead. An attorney-in-fact has a fiduciary relationship with the principal. An attorney-in-fact need not be an attorney-at-law.
property manager
A prime example of a general agent is a ________ who is usually authorized to perform a wide range of tasks on behalf of the property owner, such as leasing, maintenance, rent collection, tenant relationships, etc. Another example would be the relationship between an employing broker and his or her affiliated licensees. The broker gives general authority to his or her licensees to conduct real estate business on his or her behalf, such as listing and marketing property for sale.
Agency—
A relationship of trust created when one person (the principal) gives another person (the agent) the right to represent the principal in dealings with third parties.
11
A-Squared Brokerage in Wilmington, which practices traditional agency, has 10 affiliated salespersons. Seller Susan meets with agent Lucy and signs a listing contract. How many people represent Susan?
Lisa could be Kyle's client through implied agency.
After meeting at an open house, Lisa tells listing agent Kyle her wish list and how much she has to spend. He tells her that he has another property that is exactly what she's looking for, and there will be an open house there tomorrow. Lisa tells him she'll be there and hopes that he can help her get a good deal. Identify the statement that best describes the situation.
fiduciary
Agency creates a ____________ An agent owes fiduciary duties to the principal. These basic fiduciary duties are obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care (OLD CAR).
Implied Agency—
Agency relationship created through the behavior (actions or words) of one or both parties.
at first contact
Brad is a buyer's agent. His client is interested in a property listed by Toni at another brokerage firm. Brad's buyer is interested in seeing Toni's listing. At what point must Brad disclose to Toni that he represents the buyer?
Gratuitous Agency—
An agency relationship where a real estate licensee is not compensated for his or her services, but still owes the principal all statutory obligations due every client.
written
An agency relationship with a seller should be created with a _____ listing contract.
Special Agent—
An agent with limited authority to do a specific thing or conduct a specific transaction.
In-House Brokerage Employment Contracts
As we mentioned earlier, when a real estate broker associates with a real estate firm, it creates an agency relationship where the employing broker is the principal and the affiliated licensee is the agent. This, too, requires a written contract that specifies the specifics of the broker-agent relationship, such as the associate's responsibility for expenses and taxes, brokerage compensation splits, and the activities that the licensee may or may not perform on behalf of the brokerage.
third party
Because the primary relationship in a real estate transaction is between the broker and principal, the customer is often considered a _______ in the transaction.
Obedience Loyalty Disclosure of information Confidentiality Accounting Reasonable skill, care, and diligence
Common law defines these basic fiduciary duties that an agent owes a principal in an agency relationship:
The listing agreement is terminated.
During a 90-day listing agreement, the seller dies. What statement is TRUE?
North Carolina Real Estate Commission
Everything that you do in your professional life is subject to the laws and rules of the State of North Carolina, and it's the _________, an independent governmental agency, that issues licenses and oversees all your activities as a licensee.
power of attorney
For example, a universal agent may be created through the granting of a _________. Such a person would be known as an attorney-in-fact. Real estate licensees are not considered to be universal agents.
Lisa Dawn
George is a licensee at Lisa Dawn Realty. He brings in a buyer-broker agreement with buyer Darlene, who just made an offer on Gavin's property, which is listed with John Tucker Realty. The agency relationship between Lisa Dawn Realty and Darlene can be terminated legally without recourse when which party dies?
special agent
Homeowner Lucy hires broker Louis to sell her property. They have a 180-day listing agreement. Louis is Lucy's _______.
Yes
If Teresa is a universal agent for her brother, could she put him in a nursing home and sell his property to pay for it?
universal agency
Iggy is granted a power of attorney to care for all aspects of his elderly mother's life. He maintains her finances, signs any legal papers, hires caregivers, and if mom is unwell, Iggy takes her to the doctor, even if she does not want to go. Which type of agency does this represent?
Kim only
Kim's brokerage company offers dual agency. Tom and Don are two of her licensed brokers. Tom has been appointed to represent the seller, and Don has been appointed to represent the buyer in an in-house transaction. In this situation, who is a dual agent?The licensees are both designated agents. Whenever specific licensees are designated to represent two different parties in a transaction, to the exclusion of all other brokers in the firm, only the broker-in-charge takes on the role of dual agent.
Lisa signs a listing contract.
Lisa is looking for someone to sell her property, and she speaks to several brokers. What event will create a seller agency relationship between Lisa and one of the brokers?
Lisa signs a listing agreement.
Lisa is looking for someone to sell her property, and she speaks to several potential brokers. What event will create an express agency relationship between Lisa and one of the brokers?
Listing Contract.
Listing Contract. This is a written agency contract between a seller and a real estate broker stipulating the conditions under which the broker will perform his or her duties and be paid a commission with regard to the seller's property.
general agent
Lou is an employing broker. He contracts with licensee Ed to work for him as an affiliated real estate broker. What level of agency authority does Ed have?
general agent.
Louie is a real estate broker. He contracts with licensee Edwina to work at his brokerage to help sell properties. Edwina is Louie's
permit
North Carolina does not _______ a licensee to perform the role of facilitator or transactional broker.
a property manager engaged by a property owner
Of these, which is the best example of a general agent?
The seller dies before the listing period ends.
Of these, which termination of agency would be due to operation of law?
traditional
Only the seller was represented in a ______ agency relationship.
Mary, his customer.
Pam at ABC Realty is the listing broker for Brian's property. ABC Realty extends an offer of subagency to ROB Realty. Mary sees the property on ROB Realty's website and calls Greg, a broker for employing broker Rob, to see if he'll show her the house. Mary does not sign a buyer broker contract with ROB Realty. Greg does NOT have a fiduciary relationship with
Fiduciary—
Person in a position of trust, held by law to high standards of good faith and loyalty.
This is an example of a gratuitous agency.
Phil is the managing broker of Wildcat Realty. He agrees to list property owned by a favorite charity and forego any commission on the deal. Which statement is TRUE?
This might help you recall the different ways an agency relationship may be terminated.
R=Renunciation O=Operation of law A=Accomplishment of purpose M=Mutual agreement E=Expiration R=Revocation
non-agency, transactional brokerage, or facilitational brokerage,
Some states allow a licensee to work with a buyer and a seller (or landlord and tenant) to facilitate a real estate transaction without having any agency relationship with either party. In such cases, the licensee is simply assisting in the transaction in a neutral capacity without providing the fiduciary duties an agent owes to a principal.
Cooperation Agreement Between Brokers/Firms
There are times when two different real estate firms or sole proprietors choose to work together. It might be a broker seeking subagents to represent a seller client, for example, or a broker looking to partner with another firm to handle a large or complicated transaction. More often, brokerage cooperation is handled through membership in a multiple listing service (MLS), where all member firms agree to cooperate with other member firms and to split the commission.
Dual Agency Contract
This is a written agency contract that secures the services of a broker for both the seller and the buyer in the same transaction. Because a client in a dual agency situation must give up some of the fiduciary duties owed, such a contract requires the informed, written consent of both parties.
Tenant Representation Contract
This is a written agreement that creates an agency relationship between a broker and a tenant, similar to buyer representation. The broker promotes the best interests of the tenant by seeking the lease of a unit of rental real estate at the price and terms acceptable to the tenant in exchange for a fee or other valuable consideration. These agreements may be exclusive or non-exclusive.
Property Management Agreement
This is a written agreement that creates an agency relationship between the landlord/property owner and a property manager that details the duties, responsibilities, allocation of costs, and compensation of the property manager. A critical component of the management agreement is the detailed description of the property manager's authority. Landlords could also contract with brokers to find tenants.
agency coupled with an interest
This is when the agent holds an ownership interest in the property being sold.
Buyer Agency Contract
This written agreement—which may also be called a buyer representation agreement, a buyer brokerage agreement, or a buyer listing, among other things—is a written agency contract between a buyer and a real estate broker stipulating the broker's duties and how the broker will be paid a commission when the buyer purchases real estate.
principal
What is another word for client?
operation of law.
When a party to a contract—in this case, a listing agreement—dies, the agency relationship terminates as an
authority
When discussing ______________, we are referring to the power or permission given to an agent by the principal
dual agency
Which agency relationship requires the written consent of both parties to the transaction?
state real estate regulatory agencies
Which entities lead the effort to clarify for consumers who real estate licensees do and do not represent in their real estate transactions?
September 1, the date the listing contract expired
You met Charles on June 1 to discuss listing his property. You reviewed the Working with Real Estate Agents brochure that day, which he signed. Charles signed a listing contract on June 6. On July 17, Charles accepted an offer. On August 29, two days before the transaction closed, the buyer was told his mortgage was denied, and the transaction fell apart. The listing agreement expired on September 1 and Charles decided to list with someone else. You must retain the WWREA brochure that Charles signed for three years from what event?
Implied (or incidental) authority
is the power or permission to do everything reasonably necessary to carry out the principal's express orders. For example, a seller gives a real estate agent express authority to find a buyer for the property. This is understood to give the agent some incidental authority to market the property. Implied authority is communicated to an agent by the principal's actions, rather than by the principal's express words. You cannot have incidental authority without express authority.
Revocation
occurs when someone who granted or offered something withdraws it.
Renunciation
occurs when someone who has been granted something or has accepted something later gives it up or rejects it
Apparent authority
occurs when someone who has not been authorized to represent another, acts as if he or she is that person's agent. This can also occur when an agent acts beyond the scope of his or her authority, giving a third party the impression the acts are authorized. This can create what is called ostensible agency.
fiduciary
the relationship between an agent and a principal can be described as a _______ relationship, which is one of trust and confidence where one party owes the other a higher standard of good faith than is owed to third parties or customers.
The North Carolina Real Estate License Law
was passed by the General Assembly effective July 1, 1957. License laws are intended to protect the public by ensuring a consistent level of competence, ethics, and professionalism. The North Carolina Real Estate Commission has the authority to write rules that clarify and fulfill the statutes found in the Real Estate License Law.
Agent
—A licensed broker who, through their firm, represents another (the principal) in a real estate transaction; a person authorized to represent the principal in dealings with third parties (clients or customers).
Facilitator
—A licensee who assists in the successful completion of a real estate transaction but has no agency relationship with and, therefore, no fiduciary obligation to either party. Also called Transactional Broker.
Client
—A person being represented by a licensee. Also called Principal.
Express Authority
—Agency relationship based on an expressed agreement, either written or oral.
Universal Agent
—An agent authorized to do everything that can be lawfully delegated to a representative.
Subagent
—An agent who has been given authority by another agent to assist in carrying out the principal's orders.
Vicarious Liability
—Liability that is created because of the relationship between someone and the actions of the person who is actually liable, such as a broker who may have vicarious liability for the actions of her affiliated agents even though the broker may have done nothing wrong.
Apparent Authority
—Occurs when someone who has not been authorized to represent another, acts as if he or she is that person's agent.
Revocation
—When someone who granted or offered something withdraws it; as when a principal withdraws the authority granted to an agent or an offeror withdraws the offer.