Chapter 2 LAW OF AGENCY Flashcards
Fiduciary
one who is in a position of trust and loyalty to the principal
Agency
when one person hires another individual to act on his or her behalf
Principal/ Client
person who selects the agent to act on his behalf
Fiduciary Duties
O-obedience L-loyalty D- disclosure of information C-confidentiality A-accountability R-reasonable care, skill, and diligence
Obedience
obey reasonable and legal instructions from the principal
Loyalty
must work diligently to serve the best interest of the principal under the terms of the agency contract. The agent may not work for personal interest of others adverse to the principals interest.
Confidentiality
Due to the fiduciary the relationship, the agent owes the principal faith, trust, and confidentiality
Accountability
Agent must account for and promptly remit as required all money or property entrusted to the agent for the benefit of others
Reasonable skill and care
when offering services to the principal, agents assert that they posses the necessary skill and training to perform the required services
General Agent
someone authorized to handle all affairs of the principal concerning a certain matter or property.
Ex. Property Manager
Power of attorney
a relationship that allows one individual to handle the limited affairs of another, can be a general or special agency
Special Agent
Someone who has narrow authorization to act on behalf of the principal
Third Parties
The broker and the principal are the first two parties in an agency relationship. Others individual involved with the principal and broker are the third part
Subagent
A person appointed by an agent with permission of the principal to assist in performing some or all of the task of the agency
Positive Misrepresentation
by a seller broker occurs when the broker conceals a defeat in the property from the buyer or misrepresents to the buyer the existence of a defeat.
Misrepresentation
- A false statement or omission of a material fact
- In real estate, making an intentionally false statement to induce someone to contract
Self-dealing
Illegal activity that can occur when a broker has an undisclosed interest in property.
Unintentional Misrepresentation
occurs when the seller broker makes a false statement to the buyer about the property and the broker does not know whether the statement is true or false.
Brokerage
the business of bringing buyer and sellers together and assisting in negotiations for the sale of real estate
Seller agent
A listing agent who acts alone or cooperates with other agents as a subagent or a brokers agent.
Buyer agent
The agent represents the buyer as principal and enters into a listing agreement with the buyer. Locates a property and negotiates for the buyer.
Cooperating agent
Representation includes seller agents, subagents, buyer agents, and brokers agents. These agents work to assist the listing brokers in the sale of the property. Cooperating agents may or may not work through MLS
Vicarious Liability
one person is responsible or liable for the actions of another person
Section 442c
a broker is vicariously liable for a salespersons actions only when “the broker had actual knowledge of such violations or if the broker retains the benefits from the transaction after he knows that the salesperson has engaged in some wrongdoings
Express Agency
an agency relationship created by an oral or written agreement between the principal and agent
Implied agency
The words or actions of the principal and agent indication that they have an agreement may create an agency relationship
Estoppel
when a principal does not stop an individual from representing his or her interests, thus creating an agency relationship between the two
In NY, the courts do not easily enforce implied real estate agency agreements. This is because, according to the Statue of Frauds, all real estate contracts, except listing contracts and leases of less than one year’s duration must be in writing.
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Referral Fees
In New York, such fees are payable to the broker only with the informed consent of the party being referred
Antitrust violations
are illegal restraints of trades that are harmful to free competition. Illegal restrains of trade include:
Price fixing
Group boycotts
Market allocation agreements
Tie-in Agreements
Price Fixing
occurs when competitors in a group or an industry conspire to charge the same or similar prices for services
Ex. All brokers firms in a community agree to charge a 6% commission
Group boycotts
a conspiracy in which a person or group is persuaded or coerced into not doing business with another person or group.
Ex. An MLS that directs all broker members not to do business with a certain REC.
Market Allocation agreements
an agreement between competitors who are dividing or assigning a certain area or territory for sales.
Ex. Two business franchises agree that they will each sell goods or service in certain areas. In order for both companies not to compete with each other
Tie-in agreements
agreements between a party selling a product or service with a buyer that, as a condition of the sale, will buy another product from the seller or the buyer will not buy a product or use a service of another.
Ex. Using a certain mortgage company as a condition of the buyer agency agreement
Single Agent
The agent works for the buyer and seller
Dual Agent
Represents both buyer and seller in the same transaction; undisclosed dual agency is a breach of fiduciary duty and violation of license law
Brokers Agent
Cooperates with or is engaged by a listing agent, buyers agent, or tenants agent. The seller, buyer, landlord, or tenant does not have vicarious liability for the acts of the brokers agent
Informed Consent
the parties must be fully informed as to the meaning and purpose of dual agency. Also, the agent needs to inform the consumer as to the fiduciary obligations he or she will be losing by agreeing to dual agency including undivided loyalty.
Advance informed consent to dual agency
the revised law allows consumers to select and allow a dual agency relationship in advance of it actually occurring.
Undivided Loyalty
The seller and the purchaser must release the portion of the fiduciary agreement relationship
Undisclosed dual agency
occurs when a subagent or a seller agent is working with a buyer customer and agrees to negotiate for that buyer customer rather than work in the best interests of the other client, the seller
Designated Agent
is a salesperson or an associate broker, supervised by a broker, who is assigned to represent a client when a different client is also represented by such real estate broker in the same transaction
NYS Disclosure Form for Buyer and Seller
must accompany all real estate listing agreements for the sale or rental of one-to-four unit residential properties and residential condominiums and cooperatives in any size building
Exclusive Right to Sell
Only one broker can lists the property. If anyone else sells the property during contract term, the broker is legally entitled to the commission
Exclusive agency listing
only on broker lists the property. If the broker or any other broker or agent through the MLS sells the property, the broker or agent is legally entitled to the agreed-upon commission. If the owner sells the property, the broker earns no comission.
Open Listing
The seller allows a property to be shown by one or more brokers. The broker effecting the sale is entitled to the commission. If the owner sells the property to a prospect not generated by any broker, the owner owes no commission.
Agency Disclosure Form
Details consumer choices about representation
First Substantive Contract
A prospective seller or buyer
Independent Contractor
The employer does not have the right to control the details of a worker’s performance.
