Brokerage Relationships Flashcards
The common law of agency
I mean the body of laws affecting agency that result from custom and/or case law, as opposed to statutory law introduced at the state or federal level.
What is caveat emptor?
“Caveat emptor” is a Latin term that means “let the buyer beware.” In real estate, it means that when you’re buying a property, you must be careful and ensure you’re getting a good deal. The seller might not tell you everything, so you must do your research and inspections to avoid later surprises. So, be thoughtful and cautious when buying real estate!
In North Carolina, agency relationships can only be created through
a written agreement
These individuals generally participate in the transaction under one of the following roles:
Client (your principal)
Customer (the “other” principal)
Third-party (anyone other than your client, including customers)
In the world of real estate, a principal can be understood as:
An individual who authorizes a brokerage firm
A party to a real estate transaction (a buyer, seller, landlord, or tenant)
For real estate license holders, who is considered your principal?
client
This type of nonagency relationship is not allowed in North Carolina. 🚫
A facilitator (also called a transactional broker) assists both the buyer and seller in a real estate transaction and treats them both as customers.
Special agents have limited authority, which restricts an agent’s scope of authority to
one or more specific acts as directed by the principal
Special agents are unable to make decisions that would
Bind or obligate their principals.
A general agent is authorized to
Manage all of a principal’s affairs within certain specified areas.
And since the general agent is assumed to have broad authority within the specific area of concern, any limits to that authority need to be
Explicitly defined.
General vs. universal agency
This is different from the general agency. A general agent has broad authority to act, but only regarding a specific business concern of the principal. Universal agency, on the other hand, gives the agent the scope of authority to act on the principal’s behalf for ALL business concerns.
Power of attorney is…
This is a legal instrument used to confer the right of one individual to act on behalf of another.
Attorney-in-fact is…
Armed with a power of attorney, the agent
the brokerage firm and its affiliated brokers’ relationship
general agency
When working with a seller, the brokerage firm must put the agency agreement in writing.
immediately
When working with a buyer, however, the agency agreement can be made orally at first, but the agreement.
It must be put in writing before the buyer makes an offer to purchase a property.
North Carolina __ recognizes implied agency.
does not
Agency by ratification (also known as apparent authority) is
In some states, when an agent takes an unauthorized action on behalf of a principal, which the principal then accepts after the fact
In-House Brokerage Employment Contract:
an agreement between a broker and a brokerage firm that defines their relationship
Cooperation Agreements:
agreements between brokers or brokerage firms that defines their relationship and compensation-sharing
explain each termination contract:
Performance (fulfillment of purpose)
Expiration
Mutual agreement
Breach of agreement
Destruction or condemnation
Death or incapacitation
Operation of law
- Performance (fulfillment of purpose): “Hey there, I’m Performance! I’m like the superhero of contracts. When I’m in action, it means everything is going according to plan. Think of me as the high-five moment between parties where we all say, ‘We did it!’”
- Expiration: “Hi, I’m Expiration, and I’m the party pooper of contracts. You see, contracts have a shelf life, just like that carton of milk in your fridge. When I come around, it’s like yelling, ‘Time’s up!’ to a game of hide and seek. Contract’s over, folks!”
- Mutual agreement: “Howdy, I’m Mutual Agreement, and I’m all about that sweet harmony in contracts. When both parties agree, it’s like a duet in perfect harmony. We’re basically the contract version of a dynamic duo, sealing the deal with a smile.”
- Breach of agreement: “Hey, I’m Breach of Agreement, and I’m the troublemaker of the contract world. When you see me, someone messed up big time. It’s like catching your friend eating your secret stash of cookies - not cool, right?”
- Destruction or condemnation: “Greetings, I’m Destruction or Condemnation, the dramatic exits of contracts. Picture me as the ‘mic drop’ moment in a contract’s life. Sometimes things just go south, and it’s time to call it quits with a bang!”
- Death or incapacitation: “Hello, I’m Death or Incapacitation, the serious side of contracts. When a party can’t fulfill their end due to, well, life’s unpredictabilities, I step in. Think of me as the ‘get out of contract free’ card, but for serious reasons.”
- Operation of law: “How’s it going? I’m Operation of Law, the contract’s silent referee. When things get messy, and nobody’s playing fair, I jump in to make sure justice is served. I’m like the judge in the courtroom of contracts, keeping things in order.”
an agent-initiated termination
renunciation
a client-initiated termination
revocation
Cooperating brokerage is
An agency arrangement in which two brokerage firms work together to achieve a real estate transaction for a specific piece of property.
exclusive agency vs. seller subagency
In summary, the main difference between exclusive agency and seller subagency lies in the exclusivity of representation:
Exclusive Agency: Only one brokerage is authorized to represent the seller, but the seller may not owe a commission if they find a buyer themselves.
Seller Subagency: Multiple agents from different brokerages can represent the seller, and commissions are typically shared among them, but the seller might still owe a commission even if they find a buyer independently.
Who is not represented in the subagency?
Buyer. When you sign a subagency, your fiduciary duties transfer from your buyer to the seller and seller’s agent.
They are no longer working for their buyer-client but rather with them. In other words, the buyer changes from a client to a customer.
Even if confidential information has not been exchanged, a switch of representation is
strongly discouraged due to confidential information being known
NCREC both defines dual agency and lays out specific rules around dual agency. Let’s look at the most important rule. According to NCREC rule 58A .0104:
A firm that represents more than one party in the same real estate transaction is a dual agent and, through the brokers associated with the firm, shall disclose its dual agency to the parties.
An agent who practices dual agency without informing both parties could have their
License suspended or revoked by the NCREC.
Brokerages can do this by using agency contracts, or agency agreements, with their clients to accomplish a few things. The contract will:
Alter and limit their duties (and those of all the affiliated brokers at the firm) at the start of the agency relationship.
Provide clear, written guidelines for the client around the limited duties of a dual agent.
Ensure the client either accepts or rejects the limited duties.
In dual agency, agents must limit the information shared with clients in order to
Prevent one party from gaining an advantage over the other party.
When a brokerage chooses to practice designated dual agency, they are saying that.
The licensee (or licensees) designated to represent a single client in a transaction looks out for that client’s best interests exclusively.
dual agency vs. designated dual agency
All agents in the firm are considered dual agents
vs
There are certain designated agent(s) for the seller-client and they are the ONLY licensees in the firm with an agency relationship with that client.
There are certain designated agent(s) for the buyer-client and they are the ONLY licensees in the firm with an agency relationship with that client. The brokerage firm and all the non-designated agents at the firm are dual agents.
With respect to the sort of information that can affect a client’s leverage in a negotiation, the designated agent should
Keep ALL other license holders at arm’s length — including those in their own brokerage, so they do not accidentally share confidential information with them.
Can a sole practitioner agent be a dual agent? If so, under what conditions can they be so?
Yes.
The same conditions apply to them that apply to a brokerage firm. Informed consent of all parties, no disclosure of terms, prices, time pressure/motivations, and any other info the clients want confidential.
Seller Alonzo and Buyer Trisha are both being represented by the same broker in their in-house transaction. Landlord Leslie and Tenant Terrance are also in an in-house transaction but are each working with their own separate brokers who are operating as designated agents.
What is true about these two real estate transactions?
All in-house transactions are handled by dual agents.
Only Alonzo and Trisha’s transaction is being handled by a dual agent.
Only Leslie and Terrance’s transaction is being handled by a dual agent.
Neither transaction is being handled by dual agents.
All in-house transactions are handled by dual agents.
