4. Real Estate Brokerage and Law of Agency

Question 1

Agency

Answer 1

The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.

Question 2

Agency By Ratification

Answer 2

An agency relationship that is established after the fact.

Question 3

Agent

Answer 3

One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be her agent.

Question 4

Antitrust Laws

Answer 4

Laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Violations of antitrust laws in the real estate business generally involve price-fixing (brokers conspiring to set fixed compensation rates), allocation of customers or markets (brokers agreeing to limit their areas of trade or dealing to certain areas or properties), or agreement to
boycott competitors.

Question 5

Appointed License Holder

Answer 5

A license holder associated with and appointed by an intermediary broker to communicate with, carry out instructions of, and provide opinions and advice to the parties to whom the license holder is appointed.

Question 6

Broker

Answer 6

One who buys and sells for another for a commission.

Question 7

Brokerage

Answer 7

For a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property.

Question 8

Buyer Representation Agreement

Answer 8

A contract that establishes a broker-buyer agency relationship.

Question 9

Caveat Emptor

Answer 9

A Latin phrase meaning “let the buyer beware.”

Question 10

Client

Answer 10

The person who employs an agent to perform a service for a fee.

Question 11

Commingle

Answer 11

The illegal act of a real estate broker who mixes the money of other people with his own money instead of maintaining a separate trust account for other parties’ funds held temporarily by the broker.

Question 12

Commission

Answer 12

Payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.

Question 13

Consumer

Answer 13

An individual, partnership, corporation, or Texas government agency that seeks or acquires, by purchase or lease, any goods or services, as defined by the Texas Deceptive Trade Practices Act.

Question 14

Customer

Answer 14

One who purchases or sells property without being represented by an agent.

Question 15

Employee

Answer 15

One who works under the supervision and control of another. !e employer is obligated to withhold income taxes and Social Security taxes from the compensation of an employee. See also independent contractor.

Question 16

Express Agency

Answer 16

An agency created by specific agreement, whether written or oral, of principal and agent.

Question 17

Fiduciary Relationship

Answer 17

A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

Question 18

Fraud

Answer 18

A misstatement of a material fact made with intent to deceive or made with reckless disregard of the truth, and that actually does deceive.

Question 19

General agent

Answer 19

One authorized by the principal to represent the principal in a broad range of matters, for example, a property manager.

Question 20

Implied Agency

Answer 20

An agency created by acts or words of principal and agent; an agency inferred by circumstances.

Question 21

Independent Contractor

Answer 21

Someone retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which she performs the act. Unlike an employee, an independent contractor pays for all her own expenses and both Social Security and income taxes and receives no employee benefits. Most real estate sales agents are independent contractors.

Question 22

IABS Disclosure

Answer 22

Texas law requires all real estate license holders to give the following information about brokerage services to prospective buyers, tenants, sellers and landlords.

Question 23

Intermediary Broker

Answer 23

A broker who is employed to negotiate a transaction between both parties and who for that purpose may be an agent of both parties to the transaction, acting fairly so as not to favor one party over the other.

Question 24

Law Of Agency

Answer 24

defines the rights and duties of the parties in a real estate transaction—the principal, the agent, and the customer.

Question 25

Listing Agreement

Answer 25

A contract between a landowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to sell real estate on the owner’s terms within a given time, for which service the landowner agrees to pay a commission.

Question 26

Misrepresentation

Answer 26

An unintentional misstatement of a fact; incorrect or misleading representation.

Question 27

Principal

Answer 27

1. A sum lent or employed as a fund or investment, as distinguished from its income or profits.
2. The amount of the note due and payable.
3. A main party to a transaction—the person for whom the agent works.

Question 28

Procuring Cause

Answer 28

The effort that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission.

Question 29

Puffing

Answer 29

Exaggerated or superlative comments or opinions not made as representations of fact and thus not grounds for misrepresentation.

Question 30

Ready, Willing, and Able Buyer

Answer 30

One who is prepared to buy property on the seller’s terms and is ready to take positive steps to consummate the transaction.

Question 31

Special Agent

Answer 31

One authorized by a principal to perform a single act or transaction; a special agent for a seller is authorized to find a ready, willing, and able buyer for a particular property; a special agent for a buyer is authorized to assist a buyer in locating and negotiating the purchase of a property.

Question 32

Subagent

Answer 32

A license holder who represents a principal through cooperation with and consent of a broker representing the principal and who is not sponsored by or associated with the principal’s broker.

Question 33

Texas Deceptive Trade Practice-Consumer Protection Act

Answer 33

Makes it illegal to use false, misleading, or deceptive acts or practices in the advertising, offering for sale, selling, or leasing of any real or personal property.