Chapter 04 - Authorized Relationships: Duties & Disclosures (P06) Flashcards
Unwritten law that is derived from court decisions that tend to reflect the attitudes of the community
Common Law
Penalty imposed by civil courts that is typically determined by measurable loss
Compensatory Damages
Penalty imposed by civil courts that imposes addition damages to punish the party whose actions gave cause for the suit
Punitive Damages
Law, enforceable in court, that is based on written statutes that have been enacted by a unit of the government
Statutory Law
Law that gives the FREC the ability to levy monetary fines for violation of Commission rules
Administrative Law
Law enacted by the Florida legislature that is intended to protect the public by the regulation real estate and appraisal licensees
Statutory Law (F.S. 475)
Law that addresses the rights, duties, and related obligations that arise from an individual that is authorized and entrusted to work on behalf of his or her employer and represents the best interests of that employer
Agency Law
Agent’s employer in an agency relationship
Principal
Agent authorized by the principal to perform a single act defined in the employment contract
Special Agent
Agent authorized by power of attorney to act for and represent the principal in all matters, without limitation
Universal Agent
Agent with the principal’s authority to act for him or her on a continuing basis, but with authority limited to a specific trade of business
General Agent
Party who has been granted authority to act on behalf of another agent and has the same duties to the principal as the agent who was employed by the principal
subagent
Agency that exists when a broker is employed under a single agency listing for the sale of a property and is authorized to locate a purchaser on behalf of the owner
The broker is a Special Agent of the owner for the single act of locating a purchaser
Relationship that exists when a broker gives permission to a sales associate to transact real estate on the broker’s behalf
Subagent of the broker’s principal and has the same duties to the principal as the broker
The Act (legislation) that specifies and defined the relationship between a broker and the broker’s employer and disclosure requirements in residential real estate transactions
Brokerage Relationship Disclosure Act (BRDA)
A member of the public who is NOT represented in a single agency relationship
Customer
A broker who represents, as a fiduciary, either the buyer or the seller, but not both in the same transaction
Single Agent
The party with whom a real estate licensee has entered into a single agent relationship with
Principal
A broker who provides limited representation to a buyer, a seller, or both, in a real estate transaction
Transaction Broker
Agency relationship created by a broker who represents both the buyer and seller in a transaction as a single agent
(Illegal) Dual Agency
Residential sales transaction
- Sale of improved residential property of 4 units or fewer
- Sale of unimproved residential property of 4 units or fewer
- Sale of agricultural properties of ten acres or fewer
Purpose of the “Consent to Transition to Transaction Broker” disclosure notice
Transition from Single Agent to Transaction Broker
Written disclosure notices required
- Consent to Transition to Transaction Broker
- No Brokerage Relationship (Notice of Non-representation)
- Single Agent
The only disclosure notice that must be signed by the principal
Consent to Transition to Transaction Broker
Time period required to keep copies of disclosure documents for residential sales transactions that result in a written sales contract
Five years from the date of execution (regardless of whether the transaction closes or not)
Three authorized forms of representation
- Transaction Broker
- Single Agent
- Non-representation (no brokerage relationship)
How the relationship between the broker and the potential customer is determined
By agreement between the broker and the buyer or seller
Duties that ALL licensees must perform in any type of customer or agency relationship
- Dealing honestly and fairly
- Disclosing all known facts that affect value that aren’t readily observable
- Accounting for all funds
Additional duties required for licensees in a transaction broker or single agent relationship
- Using skill, care, and diligence in the transaction
- Presenting all offers and counteroffers in a timely manner
Types of offers that must be presented
All offers must be presented, whether written or oral, with or without a binder deposit
Possible consequence(s) of failure to present an offer to the employer
Concealment or Breach of Trust
Condition(s) under which a broker may be authorized to accept an offer on behalf of his or her employer
When the broker has been authorized by power of attorney by the employer of by terms specified in the listing contract
The presumed relationship between the broker and the employer when no representation has been established in writing
Transaction Broker
Role of a transaction broker
Provide limited representation to a buyer, a seller, or both in a real estate transaction
Transaction broker duties
- Dealing honestly and fairly
- Disclosing all known facts
- Accounting for all funds
- Using skill, care, and diligence
- Presenting all offers
- Providing limited confidentiality
- Performing additional agreed upon duties
Items a transaction broker may NOT discuss under the duty of limited confidentiality
May not discuss:
- Price (other than listing price)
- Motivation
- Terms
- Other confidential information that may harm that party’s bargaining position
Fiduciary duties
- Confidentiality of harmful information (other than material defects)
- Obedience to all legal instructions
- Loyalty to act in the principal’s best interest
- Full Disclosure of facts or rumors
Type of brokerage relationship that establishes a fiduciary relationship
Single Agency (Single Agent) - the only brokerage relationship with fiduciary duties
Single agent duties
- Honest and fair
- Disclose all known facts
- Account for all funds
- Skill, care, and diligence
- Present all offers
- Confidentiality
- Obedience
- Loyalty
- Full Disclosure
The individual(s) that a single agent may represent in a sales transaction
A seller or a buyer, but never both
Single agent’s employer
Principal
Individual that the sales associate has an agency relationship with
His or her employing broker, not an agent of the principal
Individuals who owe a fiduciary relationship to the principal in a transaction
The broker and the sales associate (or broker associate) who is an agent of the broker)
Method by which a single agency relationship must be disclosed
Fully described and disclosed in writing and completed before, or at the time of, entering into a listing agreement or showing property
Parties acting in their own best interest in an adversarial relationship
Arm’s Length Relationship (Also Caveat Emptor, or buyer beware)
Parties that typically operate at an arm’s length relationship
Buyer and Seller
The opposite of an arm’s length relationship
Fiduciary relationship, where the broker is acting in the principal’s best interest
The reason that a broker may need to transition from a single agent to a transaction broker
To avoid an illegal dual agency since a broker cannot be an agent for both parties in a transaction
Typical reason for a written No Brokerage Relationship notice
A For-Sale-By-Owner (FSBO)
Broker designates one sales associate to represent buyer and another to represent the seller in the same nonresidential transaction. Buyer and seller must have $1M or more, request single agency representation in a nonresidential transaction
Designated Sales Associate
Point in time when the broker is entitle to compensation
In Florida, when a sales contract is signed by all parties (find a purchaser state)
Employment contract between the broker and the seller (owner)
Listing Contract
Broker is entitled to compensation when employed by an owner to find a purchaser
When the broker provides a ready, willing, and able buyer and the contract is signed by all parties
The broker is entitled to compensation when employed by an owner to effect a sale
When the transaction closes
Method by which sales commissions are determined
By agreement between the broker and the party or parties paying commission
Basis of a real estate sales commission
A percentage of the purchase price
Amount of compensation if the compensation has not been specified by terms of an employment contract
A customary commission rate based on the type of property and fee the broker would normally charge
Criminal penalty that can be charged against a broker for refusing to pay commission or compensation to another broker or sales associate as agreed
Failure to Account, which is a form of fraud
The broker who earns the commission when two or more brokers are competing for a sale
Procuring Cause (the one who produced “a continuous and uninterrupted series of events that resulted in the conclusion of a sale”)
Illegal action of competing brokers who discuss or establish a uniform price or fee for services
Price fixing or Uniform commission rates
Condition under which a broker may collect a commission from both parties in a transaction
With knowledge and consent of both parties in the transaction
Illegal act of manipulating a transaction so as to profit at the expense of the employer without the knowledge of the employer
Overage, Secret Profit, of Unjust Commission
Legislation that prohibits a broker from giving or accepting a fee, kickback, or anything of value in exchange for the referral of real estate services unless the broker performs that service, is licensed to perform the service, and discloses and receives consent from the parties
Real Estate Settlement Procedures Act (RESPA)
Florida broker may pay a referral fee to, or share a commission with, a broker licensed or registered by another state or foreign country
Out-of-state broker may accompany customer to Florida, but may NOT participate in the transaction in any manner
Florida broker may pay compensation, fees, or share a commission with unlicensed individuals in exchange for soliciting or referring business
under NO condition (this also includes gifts or reimbursement of expenses)
