Ch 8: Agency Law Flashcards
What is a fiduciary relationship?
A relationship in which one party places special trust, confidence, and reliance in another
What is the term given to a licensee who is not affiliated with the client’s broker, but who represents the client as a cooperating broker?
Subagent
What is the definition of a client?
A client is a party in a transaction who has an agency agreement with a broker for brokerage services.
Under what conditions can a broker be held responsible for a client’s misrepresentation to a customer during a showing?
If the broker knows that the client is lying and fails to correct the statement
Identify at least three legal and ethical duties that an agent has towards a customer?
Honesty
Agency Disclosure
Material Facts Disclosure
Accounting
What feature allows an agent to legally act on behalf of another party?
Proxy
What is the definition of single agency?
Single agency is when a licensee represents either a seller/landlord or a buyer/tenant directly and exclusively as an agent.
What are the two disadvantages of dual agency?
Potential risk for conflict of interest
A dual agent must be careful not to harm one party while advancing the interests of the other
What is the role of an attorney-of-fact?
An attorney-in-fact is an agent authorized to act on behalf of another person, but not necessarily authorized to practice law. An attorney-in-fact is a fiduciary position, which also goes by the name of private attorney. An attorney-in-fact is given the power of attorney over specific actions.
Define the role and actions of a transaction broker.
A transaction brokerage is a third-party that provides real estate services to buyers and sellers. A transaction broker remains legally neutral and assists both the buyer and the seller in a transaction.
At what level is agency formed?
Agency is always formed at the broker level, never at the salesperson level.
What are the major disadvantages for the buyer under subagency?
The major disadvantage is that there is no obligation to obtain the best price or terms for the buyer, since the broker, as subagent, was obligated to obtain the best terms for the seller.
What major role does a licensee play after the property goes under contract?
The licensee needs to think of him or herself as a problem solver when the property goes under contract.
What is the best way to end agency?
The best way to end agency is to close the deal.
What is rescission?
Rescission is when both the client and the broker agree to end the relationship that they are in.
Identify at least 3 uncommon ways that end agency.
Broker failure
Bankruptcy of the seller
Foreclosure of the property
Property is destroyed
Broker’s breach of fiduciary
Incompetence of broker or client
What is the only fiduciary duty that continues beyond the agency relationship?
The one fiduciary duty that continues beyond the agency relationship is confidentiality.
What is self-dealing?
Self-dealing is any wrongful behavior conducted by a fiduciary.
Define the concept of Undisclosed Profits.
Undisclosed profits refer to the act of a broker making a secrete profit in a transaction at the seller’s expense.
Agent Jones does not show property with low cooperating compensation. What might be said about Agent Jones actions?
Agent Jones is unethical
What is the main objective of a listing agreement?
For the licensed broker to procure a ready, willing, and able buyer.
What is the best way to avoid implied agency?
Always create an agency relationships in writing.
What type of agency is the one that is most common between brokers and their affiliated licensees and is created when using independent contractor agreements?
General Agency
What type of principal is used for negotiations when a third party has no knowledge of the identity of the agent’s principal?
Undisclosed principal
What fiduciary responsibilities do transaction brokers owe to a seller in a real estate transaction?
No fiduciary duties
What type of principal refers to a principal whose identity is revealed to a third party by an agent?
Disclosed principal
What should a licensee ask for when the time period for a listing is coming near the end?
An extension
What must a broker do to be able to act in an intermediary capacity?
Get written permission from the parties.
What describes when both the client and broker agree to end the relationship they are in?
Rescission
When a licensee first meets a person, what is that person called?
A customer
What protects the broker from misunderstandings regarding hiring and tax violations?
A written working agreement
What do you call an agent that is legally authorized to act on the behalf of another party?
A proxy
What do you call a person who is being represented by an agent?
A client
In real estate, what do you call a third party that provides services to both buyers and sellers?
A transaction brokerage
What are designated agents also known as?
Appointed agents
What services can a broker legally provide to a customer?
Ministerial acts
An agent who may or may not be authorized to practice law and is authorized to act on behalf of another person is called:
an attorney-in-fact.
What is a relationship between a principal and an agent called when the principal authorizes the agent to work on his or her behalf?
An agency
If a man lists his property with a licensee, then soon gets married, what happens to the agency relationship?
It continues.
What type of agency is most common between brokers and their affiliated licensees?
General agency
What kind of agency relationship is created with listing contracts and buyer representation agreements?
Special agency
Under what status can a broker assist two principals involved in the same transaction?
Intermediary agency status
