Lesson 2
6 fiduciary duties of an agent- Acronym
"OLD CAR"
What an agent does for a buyer:
-Find a property based on their needs -Determine comps to insure a fair price is negotiated.
Differences between independent contractors and employees
-Instructions and training -Set work hours -Job location: if one can work where they choose -Work specific order: When to do what? -Work expenses: who pays for expenses -Work tools -Also a broker doesn't hold taxes, agents are given a lump sum and taxes are on them to pay. -Must be a written agreement between broker and agent. Must be notarized. Cant be signed under duress.
Advantages of a dual agency
-Listing with MLS -Result in Savings- if the agent is getting the full commission, they may be willing to reduce the amount to help sell the property
Disclosures to a buyer for a condo:
-Maintenance -Any real estate taxes -Any assessments for the current year -Future or current repairs taking place -Current tenants and when lease will be terminated.
Ways to form a brokerage:
-Single licensed brokerage: made by a sole proprietor. -Independent brokerage firms: not associated with any other large firms, usually handle only specific types of real estate. -National: usually has affiliates or franchises.
Independent contractor features
-Taxes on commissions are paid by agent -No set work hours -No specific job location -Can be employed by another company -Agent must cover his own expenses -Broker can't control agents work activities (meaning if you don't want to post advertisements, they can't make you etc.) -Either part can terminate contract at any time.
Disclosures to a seller of a condo:
-That your negotiating in good faith. -That the buyer can fulfill the financial dutys needed.
Upfront guarantee of compensation
-Where an agent gets a specific amount at the completion of the sale. -3% of purchase price is standard in NYS
Reasons for termination of agency
1- Agency terms failed: property didn't sell after 6 months. 2- The purpose of the agency was completed: If you sell a property the agency relationship will end because you did your job. 3- By law: For example the death of the principle, by law, you are no longer that persons agent.
Broker's Agent
A broker's agent is an agent that cooperates or is engaged by a listing agent or a buyer's agent (but does not work for the same firm as the listing agent or buyer's agent) to assist the listing agent or buyer's agent in locating a property to sell or buy, respectively, for the listing agent's seller or the buyer agent's buyer.
Tie-in Arrangement
A contract where one transaction depends upon another.
An MLS listing creates...
A dual agency where the buyers agent becomes aa sub agent of both the seller and buyer
Tenant's Agent
A licensed real estate agent who acts on behalf of a tenant in a commercial property transaction
Tenant's Agent
A licensed real estate agent who acts on behalf of a tenant in a commercial property transaction.
A broker acts as...
A middle man, they bring both sides of a transaction together.
Landlord's Agent
A person who has oral or written authority, either express or implied, to act for or on behalf of a landlord.
Fiduciary
A person who on behalf of or for the benefit of another transacts business or handles money or property not the person's own; such relationship implies great confidence and trust.
Cooperating Agent
A real estate agent who sells a property. The selling agent may be (1) the subagent or listing agent of the seller; (2) a buyer's agent; or (3) a dual agent. Also called a selling agent or participating agent.
Undisclosed Dual Agency
A relationship in which the real estate agent is found to be the agent of both the buyer and seller in a transaction, but without the knowledge and informed consent of both parties. Undisclosed Dual Agency is illegal in all states.
Vicarious Liability
A situation in which one party is held partly responsible for the unlawful actions of a third party. For example, is the agent makes false claims about a property, the principle may be vicariously liable and can be held responsible to the buyer.
Section 442-c
According to Section 442-c of the NY property law, the broker may be held liable for the acts of the agent. This comes into play if the broker had knowledge of an agents wrong doing, or directly benefited from the illegal deed.
Expressed Agency
An actual agency created by written or oral agreement between the principal and the agent
Expressed Agency
An actual agency created by written or oral agreement between the principal and the agent.
Agency by ratification
An agency relationship which is created after the fact when the principal agrees to be bound by the actions of the agent who was acting without authority.
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.
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 know 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.
Sub-agent
An agent of a person already acting as an agent of a principal
Sub-agent
An agent of a person already acting as an agent of a principal.
Buyer Agent
An agent who represents the buyer of real property.
Seller's Agent
An agent who represents the seller of real property.
Special Agent
An agent with limited authority to act on behalf of the principal, such as created by a listing. Very limited span of duties for example one can only sell a house and nothing more.
General Agent
An agent with the full authority over one property of the principal, such as a property manager. Very broad definition of duties.
Loyalty
An agent's duty to place the client's interest above those of all others, including the agent's own self-interest
Group Boycott
An agreement between members of a trade to exclude other members from fair participation in the trade. Illegal for businesses to do.
Market Allocation
An agreement between members of a trade to refrain from competition in specific market areas. An broker can recommend another series or company (such as a bank) but they can not refuse to work with a customer who wanted other. Tie-ins are illegal.
Informed Consent
An agreement to do something or to allow something to happen only after all the relevant facts are disclosed.
Designated Sales Agents
Appointed agents in a firm to represent only the interests of the seller and one or more agents to represent only buyer. -Keeps the sale in-house
Designated Sales Agent
Appointing one or more individual agents in a firm to represent only the interests of the seller and one or more different individual agents in the firm to represent only the interests of the buyer when a firm has an "in-house" dual agency situation
Designated Sales Agent
Appointing one or more individual agents in a firm to represent only the interests of the seller and one or more different individual agents in the firm to represent only the interests of the buyer when a firm has an "in-house" dual agency situation.
For a dual agency...
Both the buyer and seller must give written informed consent.
Price Fixing
Conspiring to establish fixed fees or prices for services or products
The agent brings the ___ to the ____
Customer to the principle
When must disclosure forms be signed?
Disclosure forms must be singed at the first subsequent meeting.
FSBO
For sale by owner, when a seller does their own open house.
Implied Agency
Form of agency that occurs when the words and actions of the parties indicate that there is an agency relationship.
All real estate agents are considered...
Independent contractors
Agency structure
It goes client, broker, subagent. The broker is the clients agent, and the real estate agent is the subagent to the customer, a client legally works with a broker directly and the agents are just his employees.
Failing to disclose the dual agency...
It violates NYS law and the principle can lagers revoke the contract.
Caveat Temtor
Latin for "buyer beware". When a seller sells a property, they are not required to disclose facts, it is up to the buyer to do their due diligence. However if the seller does disclose a fact is must be the truth.
Antitrust Liability
Law the protects trade and commerce from unlawful restrains and unfair business practices. Example- Price fixing where all agents would band together to get a higher commission- its illegal.
Misrepresentation
Making an intentionally false statement to induce someone to contract
Misrepresentation
Making an intentionally false statement to induce someone to contract.
Always to disclose:
Material information: It is best to disclose material information which will hep a third party make an informed decision.
OLD CAR
Obedience- Agent much act in accordance to clients demands and instructions (Can not push a bigger house if the customer wanted a small one) Loyalty- Agent must work in the best interest of his client. (If an agent finds an apartment perfect for a client, they can't not show it to buy for themselves). Also can't force a sale on a client to make a sale. Disclosure- Agent must communicate and present offers. (Cant withhold a small offer to get a bigger commission, can't conceal defects. etc.) Confidentiality- All confidential information as described by client must remain so unless given permission in writing. Accountability- Finical accountability- The agent must not change/modify the financial terms of a deal and must act in the best interest of this or her clients. (If there is any doubt of financial settlement of a transaction it must be in the favor of the client.) Reasonable Care- The agent must be competent and not act in a negligent manner. An agent may be help liable for costly mistakes. (for example engaging in a commercial transaction but you only know residential you can be held responsible if things go badly.)
Agent
One who undertakes to transact some business or to manage some affair for another by authority of the latter
Referral Fees
Payments made by an agent or broker to other parties as quid pro quo for referring customers. -Always paid to the broker and shared with the sales person -Also, In NY a referral fee must only be paid with the consent of the client.
The agent works for the
Principal
Dual Agency
Representing both principals (seller and buyer) to a transaction.
Real Estate Property Law 175-7
Says agents can receive referral commissions. -Must be disclosed to the principle.
The principal pays...
The broker, the broker then gives the agent his commission.
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.
If a principle doesn't want a dual agency
The dual agency can not go though. Also, The can withdraw their consent at any time.
Principal
The employer of an agent or broker; the broker's or agent's client
Undivided Loyalty
The fiduciary duty that prohibits the agent from advancing any interests adverse to the principal's interest or conducting the principal's business in such a way as to benefit a customer, a subagent, the agent or any other party to the detriment of the principal's interest unless required by statute, regulation or common law - e.g., disclosing material facts and defects of a property.
Obedience
The fiduciary relationship obligates the agent to act in good faith at all times, obeying the client's instructions in accordance with the contract.
Fiduciary Duties
The legal duty of a fiduciary to act in the best interests of the beneficiary. One common duty includes confidentiality.
Client
The one by whom a broker is employed
Indemnification
The principal must act to defend the agent in the case the agent is sued while acting on behalf of the principle. Usually means attorney fees and court costs, the agent wouldn't have been put in a bad situation if not for acting on behalf of the principle. Therefore they are responsible to covering the agent.
Estoppel
The principle which prevents a person from asserting something contrary to what is implied by a previous action or statement of that person
Estoppel
The principle which prevents a person from asserting something contrary to what is implied by a previous action or statement of that person. -This comes into play when an agent goes rouge and works on behalf of a principle without their knowledge. The concept of estoppel is when the principle tries to stop them. -If they don't, they can not claim an implied agency didn't exist.
Disclosure
The release of relevant information about a property that may influence the final sale, especially if it represents defects or problems
Advance Consent to Dual Agency
The seller or buyer agrees to dual agency before it occurs by indicating the same on the agency disclosure form.
Accountability
To be responsible
2 main compensation models
Two main models for compensation, flat fee and percentage of the transaction price.
Fiduciary responsibilities end...
When the transaction is finalized. -The agent must keep the information shared between him and a customer confidential even after the relationship has been terminated.
In-House Sale
Where a single brokerage represents a buy and a seller
If clients refuse to sign disclosure forms...
You must continue with the showing, and when you get back to the office document the instruction on an affidavit with buyers name and date and why they refused sign.
Principal is the
client
The principals duty is to...
cooperate with the agent and not get in the agents way
Standard percentage
is 6% in New York.
The principals also commit to...
paying the agent compensation for the transaction.
Landlord's Agent
person who has oral or written authority, either express or implied, to act for or on behalf of a landlord.
