3 - Agency Basics

Question 1

443 Disclosure Form

Answer 1

The agency disclosure statement mandated by New York Real Estate Law, Article 12-A Section 443 to be given to consumers explaining agency relationships and serving as acknowledgement that such information was presented. It is not a contract.

Question 2

Accountability

Answer 2

Duty recognizing that money received in an agency relationship belongs to the principal, not the agent. Agent has the duty to account strictly to the principal for any amount received.

Question 3

Affidavit

Answer 3

A sworn statement that is written and acknowledged. It may be submitted as evidence in a trial.

Question 4

Affiliated Licensee

Answer 4

Individuals licensed as salespersons or associate brokers who are employed by the same broker.

Question 5

Agency

Answer 5

A relationship of trust is created when one person (the principal) gives another person (the agent) the right to represent the principal in dealings with third parties.

Question 6

Agency Disclosure Form

Answer 6

Form that states whether an agent is representing the seller, buyer or both in a transaction.

Question 7

Agency Relationship

Answer 7

Relationship between a broker and a seller or a broker and a buyer. Imposes certain duties, obligations, and high standards of good faith and loyalty on the agent, as the representative of the principal.

Question 8

Antitrust

Answer 8

An area of law concerned with maintaining competition in private markets by prohibiting any restraint on trade.

Question 9

Arm’s Length Transaction

Answer 9

A transaction that occurred under typical conditions in the marketplace, with each party acting in his or her own interest.

Question 10

Boycott

Answer 10

An agreement by two or more people who refuse to deal with a person or company.

Question 11

Breach of Contract

Answer 11

An unexcused failure to perform according to the terms of a contract.

Question 12

Broker’s Agent

Answer 12

Engaged and works directly for the broker - a broker’s agent is not a subagent of the seller or buyer. Still owes the same fiduciary duty to the broker’s seller or buyer the broker does.

Question 13

Buyer’s Agent

Answer 13

An agent representing the interests of the buyer of a property.

Question 14

Client

Answer 14

Person who employs a broker, lawyer, or other professional. Real estate clients can be sellers, buyers or both.

Question 15

Commission

Answer 15

The State Real Estate Commission is responsible for carrying out the requirements set forth in in the Real Estate Licensing and Registration Act.

Question 16

Confidential Information

Answer 16

Information exchanged between two people who intend that the information be kept secret, such as an agent’s fiduciary obligation to maintain a client’s confidential information.

Question 17

Confidentiality

Answer 17

Any information learned during the course of the agency relationship can never be revealed or used later against the principal, even after the transaction is closed.

Question 18

Consensual Dual Agency

Answer 18

Occurs with 1. the broker and all licensees are dual agents for both parties in the transaction, or 2. the buyer and seller each appoint a designated agent who fully represents them. The broker, however, would (with consent) act as a dual agent in the transaction.

Question 19

Cooperating Agent

Answer 19

An agent who works with a listing agent to sell property in a real estate transaction; the selling agent who found a buyer for the listed property. The cooperating agent could be a buyer’s agent, or a cooperating agent could be a subagent of the seller, working as an agent of the listing agent. Also called Cooperating Broker.

Question 20

Customer

Answer 20

A party in a transaction to whom an agent does not have a fiduciary duty or relationship.

Question 21

Designated Agency

Answer 21

An agency relationship where a licensee is assigned by a broker to represent a buyer or seller in a transaction, usually in an in-company dual agency situation.

Question 22

Disclosure

Answer 22

The revelation of any material facts, often used to refer to defects in the property of which the owner is aware but are not obvious to the buyer. Owners may be liable for undisclosed defects.

Question 23

Dual Agent

Answer 23

When a broker or salesperson represents both parties (buyer and seller) in a transaction.

Question 24

Estoppel

Answer 24

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.

Question 25

Expressed Agency

Answer 25

Authority expressly communicated, in words or in writing, buy the principal to the agent. Also called Express Authority.

Question 26

Fiduciary Duties

Answer 26

Obedience, loyalty, disclosure, confidentiality, accountability and reasonable care owed to all clients in an agency relationship.

Question 27

First Substantive Contact

Answer 27

An event triggering agency disclosure (e.g., prior to entering into a listing agreement, showing a property, etc.).

Question 28

Actionable Fraud

Answer 28

Fraud that meets certain criteria, so that a victim can successfully sue. Victim/plaintiff must prove the defendant concealed material facts or made false statements (intentionally or negligently) with intent to induce victim to enter a transaction, and victim was harmed by relying on misrepresentations.

Question 29

Constructive Fraud

Answer 29

A negligent misrepresentation or concealment of a material fact; when a person carelessly fails to disclose material information or makes statements that he or she should realize are false or misleading.

Question 30

General Agent

Answer 30

An agent authorized to handle all of the principal’s affairs in one area or in specified areas.

Question 31

Implied Agency

Answer 31

Authority indirectly given to an agent to do everything reasonably necessary to cary out the principal’s express orders. Also called Implied Authority.

Question 32

Informed Consent

Answer 32

Written evidence that a client is aware of and has given permission to an agent to perform a specific action or take on a specific role in the client agent relationship.

Question 33

In-House Transaction

Answer 33

A real estate transaction in which the listing broker is the only broker involved.

Question 34

Kickbacks

Answer 34

Fees or other compensation given for services not performed but as a means of undisclosed commission for business referrals (prohibited by RESPA).

Question 35

Listing

Answer 35

A written agency contract between a seller and a real estate broker, stating that the broker will be paid commission for finding (or attempting to find) a buyer for the seller’s real property. A listing is a personal services contract.

Question 36

Listing Broker

Answer 36

The broker with whom a seller signs a listing agent and to whom commission is typically paid upon the successful procurement of a buyer. Also called a Listing Agent or Seller’s Agent.

Question 37

Loyalty

Answer 37

An agent must put the principal’s interests above all others’ including the agent’s own.

Question 38

Material Facts

Answer 38

A truth that would change the individual’s actions of it were known; in real estate, this usually refers specifically to things wrong with the property itself.

Question 39

Misrepresentation

Answer 39

A false or misleading statement. See: Actual Fraud.

Question 40

Negligence

Answer 40

Conduct that falls below the standard of care a reasonable person would exercise under the circumstances; an unintentional breach of a legal duty resulting from carelessness, recklessness, or incompetence.

Question 41

Obedience

Answer 41

An agent must follow the (legal) instructions of the principal, obey the parameters of the agency relationship, and not stray beyond the scope of authority.

Question 42

Offer of Cooperation

Answer 42

Usually published in the form of an MLS listing, the listing includes the amount, (most frequently a percent of the gross sales price or a flat fee) offered as compensation for either a subagent, broker’s agent, or buyer’s agent.

Question 43

Price-Fixing

Answer 43

An antitrust violation that occurs when two or more competitors agree to fix the prices that they will change.

Question 44

Principal

Answer 44

A person who grants another person (the agent) authority to represent him or her in dealings with third parties.

Question 45

Ratification

Answer 45

Later confirmation or approval of an act not authorized when it was performed.

Question 46

Real Estate Recovery Fund

Answer 46

A fund administered by the State Real Estate Commission to protect consumers by providing some degree of satisfaction to someone who has won a final judgement due to fraud, misrepresentation, or deceit of a licensee.

Question 47

Reasonable Care

Answer 47

Must always be used, because an agent could be held liable for negligence - an unintentional breach of legal duty.

Question 48

Renunciation

Answer 48

When someone who has been granted something or has accepted something later gives it up or rejects it; as when an agent withdraws from the agency relationship.

Question 49

Revocation

Answer 49

When someone who granted or offered something withdraws it; as when a principal withdraws the authority granted to the agent or an offeror withdraws the offer.

Question 50

Secret Profit

Answer 50

A financial benefit an agent takes from a transaction without authority from the principal, nor informing the principal of the benefit retained.

Question 51

Self-Dealing

Answer 51

When a real estate agent buys the principal’s property (or sells it to a relative, friend, or associate, or to a business he or she has an interest in), without disclosing that fact to the principal, and then sells it again for a profit.

Question 52

Seller’s Agent

Answer 52

An agent representing the interests of the seller of a property. Also called Listing Agent.

Question 53

Selling Agent

Answer 53

The agent who finds a buyer in a real estate transaction, often as a cooperating agent. Also called Selling Broker.

Question 54

Special Agent

Answer 54

An agent with limited authority to do a specific thing or conduct a specific transaction, also called a limited agent.

Question 55

Subagent

Answer 55

An agent of an agent; a person that a client permits an agent to delegate authority to, so that the subagent can assist in carrying out the principal’s orders. In a real estate scenario, a broker who cooperates with a listing broker to represent the seller is a subagent of the seller client.

Question 56

Tie-In Agreement

Answer 56

An agreement in which one transaction or agreement is contingent on a second transaction or agreement; also called a tying agreement.

Question 57

Traditional Agency

Answer 57

An agency relationship where the seller is the only client and the buyer has no representation.

Question 58

Transaction Coordinator

Answer 58

A licensee not working directly for either party whose duty is to see that all details of the transaction are completed in a timely and accurate manner. Also called Transaction Licensee.

Question 59

Undisclosed Dual Agency

Answer 59

Very often may be practiced unintentionally, possibly by implying to a party that, for example, an agent’s loyalty is to them when the agent’s duty is actually to someone else.

Question 60

Undivided Loyalty

Answer 60

A fiduciary obligation that is given up by both the buyer and seller when they consent to dual agency or dual agency with designated agents.

Question 61

Universal Agent

Answer 61

An agent authorized to do everything that can be lawfully delegated to a representative.

Question 62

Vicarious Liability

Answer 62

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 has vicarious liability for the actions of his or her affiliated agents even though the broker may have done nothing wrong.