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WY Real Eatate > Chapter 11 - Agency > Flashcards

Chapter 11 - Agency Flashcards

1
Q

The most primary of relationships in real estate brokerage is that between

A

broker and client, the relationship known in law as the agency relationship.

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2
Q

law of agency, defines and regulates the legal roles of

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the agency relationship.

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3
Q

The laws of agency are distinct from laws of contracts, although

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the two groups of laws interact with each other. For example, the listing agreement – a contract -establishes an agency relationship.

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4
Q

The essence of the agency relationship is

A

trust, confidence, and mutual good faith

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5
Q

In an agency relationship, a principal hires an agent as a

A

fiduciary to perform a desired service on the principal’s behalf

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6
Q

As a fiduciary, the agent has a

A

legal obligation to fulfill specific fiduciary duties throughout the term of the relationship.

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7
Q

The principal, or client, is the party

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who hires the agent. The agent works for the client. The principal may be a seller, a buyer, a landlord, or a tenant.

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8
Q

The role of the agent is the

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fiduciary of the principal, hired to perform the authorized work and bound to fulfill fiduciary duties. In real estate brokerage the agent must be a licensed broker.

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9
Q

customer or prospect is a

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third party in the transaction whom the agent does not represent. The agent works with a customer in fulfilling the client’s objectives. A seller, buyer, landlord, or tenant may be a customer. A third party who is a potential customer is a prospect

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10
Q

According to the level of authority delegated to the agent, there are three types of agency:

A

universal, general, and special.

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11
Q

Universal agency

A

In a universal agency relationship, the principal empowers the agent to perform any and all actions that may be legally delegated to an agency representative. The instrument of authorization is the power of attorney

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12
Q

General agency

A

In a general agency, the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts

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13
Q

Special, or limited, agency

A

Under a special agency agreement, the principal delegates authority to conduct a specific activity, after which the agency relationship terminates. In most cases, the special agent may not bind the principal to a contract.

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14
Q

In most instances, real estate brokerage is based on

A

a special agency. The principal hires a licensed broker to procure a ready, willing, and able buyer or seller. When the objective is achieved, the relationship terminates, although certain fiduciary duties survive the relationship.

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15
Q

An agency relationship may arise from an

A

express oral or written agreement between the principal and the agent, or from the actions of the parties by implication.

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16
Q

Written or oral listing agreement

A

The most common way of creating an agency relationship is by listing agreement, which may be oral or written.

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17
Q

A listing agreement establishes an agency

A

for a specified transaction and has a stated expiration

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18
Q

Implied agency

A

An agency relationship can arise by implication, intentionally or unintentionally. Implication means that the parties act as if there were an agreement.

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19
Q

Full performance of all obligations by the parties terminates an agency relationship. In addition, the parties may terminate the relationship at any time

A

by mutual agreement

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20
Q

Involuntary termination. An agency relationship may terminate contrary to the wishes of the parties by reason of:

A

 death or incapacity of either party
 abandonment by the agent
 condemnation or destruction of the property
 renunciation
 breach
 bankruptcy
 revocation of the agent’s license

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21
Q

The agency relationship imposes fiduciary duties on

A

the client and agent, but particularly on the agent. An agent must also observe certain standards of conduct in dealing with customers and other outside parties.

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22
Q

Skill, care, and diligence. The agent is hired to do a job, and is therefore

A

expected to do it with diligence and reasonable competence

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23
Q

Competence is generally defined as

A

a level of real estate marketing skills and knowledge comparable to those of other practitioners in the area.

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24
Q

The duty of loyalty requires the agent to

A

place the interests of the client above those of all others, particularly the agent’s own.

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25
Q

Obedience. An agent must comply with the client’s

A

directions and instructions, provided they are legal.

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26
Q

An agent must hold in confidence

A

any personal or business information received from the client during the term of employment

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27
Q

The confidentiality standard is one of the duties that extends

A

beyond the termination of the listing: at no time in the future may the agent disclose confidential information.

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28
Q

An agent must safeguard and account for all

A

monies, documents, and other property received from a client or customer. State license laws regulate the broker’s accounting obligations and escrow practices.

29
Q

An agent has the duty to inform the client of all

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material facts, reports, and rumors that might affect the client’s interests in the property transaction.

30
Q

Critical material facts for disclosure include:

A

*the agent’s opinion of the property’s condition
 information about the buyer’s motivations and financial qualifications
 discussions between agent and buyer regarding the possibility of the agent’s representing the buyer in another transaction.
 adverse material facts, including property condition, title defects, environmental hazards, and property defects

31
Q

The traditional notion of caveat emptor– let the buyer beware– no longer applies unequivocally to real estate transactions. Agents do have certain obligations to customers, even though they do not represent them. In general, they owe a third party:

A

 honesty and fair dealing
 reasonable care and skill
 proper disclosure

32
Q

An agent who fails to live up to prevailing standards may be

A

held liable for negligence, fraud, or violation of state real estate license laws and regulations.

33
Q

Intentional misrepresentation. An agent may intentionally or unintentionally defraud a buyer

A

by misrepresenting or concealing facts. While it is acceptable to promote the features of a property to a buyer or the virtues of a buyer to a seller, it is a fine line that divides promotion from misrepresentation

34
Q

Negligent misrepresentation. An agent can be held liable for failure to disclose

A

facts the agent was not aware of if it can be demonstrated that the agent should have known such facts.

35
Q

Misrepresentation of expertise. An agent should not act or speak outside the

A

agent’s area of expertise. A customer may rely on anything an agent says, and the agent will be held accountable.

36
Q

The obligations of a principal in an agency relationship concern the following:

A

-availability
-information
-compensation

37
Q

A breach of duty by the agent may result in:

A

 rescission of the listing agreement (causing a loss of a potential commission)
 forfeiture of any compensation that may have already been earned
 disciplinary action by state license law authorities, including license suspension or revocation
 suit for damages in court

38
Q

The primary forms of agency relationship between brokers and principals are:

A

single agency, dual agency, and subagency

39
Q

Single Agency

A

The agent represents one party in a transaction

40
Q

Seller agency

A

In the traditional situation, a seller or landlord is the agent’s client. A buyer or tenant is the customer.

41
Q

Buyer agency

A

Recently, it has become common for an agent to represent a buyer or tenant. In this relationship, the property buyer or tenant is the client and the property owner is the customer.

42
Q

In a subagency, a broker or licensed salesperson works as

A

the agent of a broker who is the agent of a client.

43
Q

Outside “co-brokers” and agents

A

It is common practice for brokers and salespersons to “cooperate” with a listing broker in finding buyers or tenants

44
Q

The broker’s salespersons

A

All of the listing broker’s salespeople who have agreed to work for the broker to find a customer are subagents of the listing broker and owe the fiduciary duties to the broker and, by extension, to the broker’s client

45
Q

Dual agency means

A

representing both principal parties to a transaction. The agent represents both buyer and seller or tenant and owner.

46
Q

Dual agency contains an inherent

A

conflict of interest. Since many of an agent’s fiduciary duties can only be rendered to one party, dual agency is, by definition, difficult, if not impossible.

47
Q

In states that permit dual agency, the agent must meet strict

A

disclosure requirements, and principals must agree in writing to proceed with the dual agency relationship

48
Q

The parties to a transaction may create a dual agency by

A

giving written consent in disclosure forms, confirmation forms, and sale contract forms. Disclosed (voluntary) dual agency

49
Q

Implied and undisclosed dual agency.

A

If a broker or agent acts in any way that leads a customer to believe that the agent is representing the customer

50
Q

Duties of a disclosed dual agent

A

A dual agent’s first duty is to disclose the agency relationship to both principal parties or to withdraw from one side of the duality. After disclosing, the agent must obtain the written consent of both parties.

51
Q

Duties of the transaction broker, or facilitator. In the role of transaction broker, the broker’s duties and standards of conduct are to

A

 account for all money and property received or handled
 exercise reasonable skill and care
 provide honesty and fair dealing
 present all offers in a timely fashion
 assist the parties in closing the transaction
 keep the parties fully informed
 advise the parties to obtain expert advice or counsel
 disclose to both parties in residential sale transactions all material facts affecting the property’s value
 protect the confidences of both parties in matters that would materially disadvantage one party over the other

52
Q

Duties not imposed on the transaction broker. Since there are no fiduciary duties binding the transaction broker, the broker

A

is held to standards for dealing with customers as opposed to clients.

53
Q

As another response to the problem of ‘who works for whom,’ some states have recently moved in the direction of disallowing

A

subagency

54
Q

Disclosure removes confusion about

A

who an agent is working for. It may obviate complaints arising from customers and clients who feel they have been deceived

55
Q

Specifically, the requirement to disclose aims to:

A

 notify clients and customers about whom the agent represents
 inform clients and customers of the fiduciary duties and standards of care the agent owes them
 inform prospective clients and customers that they have a choice in how they are represented
 obtain acknowledgement and acceptance of the disclosure from the principal parties

56
Q

an agent who intends to represent a seller or owner must

A

disclose the import of the proposed agency relationship in writing before the listing agreement is executed. The agent must inform the seller or landlord in writing that the agent will be representing the client’s interests as a fiduciary, and will not be representing the interests of any potential buyer.

57
Q

A listing agent must disclose in writing to a buyer or tenant that the

A

agent represents the owner in the transaction. This disclosure must occur before or at the first “substantive contact” with the customer prospect

58
Q

“substantive contact” between listing agent and customer occurs whenever the agent is:

A

 showing the prospect a property
 eliciting confidential information from a prospect regarding needs, motivation, or financial qualification
 executing a contractual offer to sell or lease

59
Q

Interaction between a seller’s agent and a customer is not always substantive. Possible instances that might be excluded from the requirement of disclosure are:

A

 attendance at, or supervision of, an open house, providing the agent does not engage in any of the contacts described above
 preliminary “small talk” concerning price ranges, locations, and architectural styles
 responding to questions of fact regarding advertised properties

60
Q

If an agent becomes involved in a substantive contact over the phone or in a such way that it is not feasible to make written disclosure, the agent

A

must make the disclosure orally and follow up with a written disclosure at the first face-to-face meeting

61
Q

An agent who plans to represent a buyer or tenant must disclose

A

the import of the proposed agency relationship in writing before the representation agreement is executed.

62
Q

A buyer agent must disclose the agency relationship to the seller or seller’s agent on

A

first contact. Substantive contact is assumed.

63
Q

An agent who desires to operate in a dual agency capacity must obtain the

A

informed written consent of all parties. Subsequent contracts should confirm the disclosure. “Informed written consent” means both parties have read, understood, and signed an acceptable disclosure form.

64
Q

State regulations prohibit a dual agent from making certain disclosures. For instance, a dual agent, unless expressly instructed by the relevant party, usually cannot disclose:

A

 to the buyer that the seller will accept less than the listed price
 to the seller that the buyer will pay more than the price submitted in a written offer to the seller
 the motivation of any party concerning the transaction
 that a seller or buyer will agree to financing terms other than those offered

65
Q

A principal empowers an agent to conduct the ongoing activities of one of her business enterprises. This is an example of

A

general agency.

66
Q

In an agency relationship, the principal is required to

A

provide the agent with the needed information so that the agent can complete the required tasks.

67
Q

A principal discloses that she would sell a property for $150,000. During the listing period, the house is marketed for $180,000. No offers come in, and the listing expires. Two weeks later, the agent grumbles to a customer that the seller would have sold for less than the listed price.The agent has

A

violated the duty of confidentiality

68
Q

A principal instructs an agent to market a property only to families on the north side of town. The agent refuses to comply. In this case,

A

the agent has not violated fiduciary duty

WY Real Eatate (30 decks)

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