Chapter 28 Indiana Agency Relationships

Question 1

Agency Relationship:

Answer 1

A relationship in which a licensee represents a client in a real estate transaction. The relationship is formed when the client (also called the principal) hires a broker (also called an agent) to represent the client in a transaction. The relationship is a fiduciary relationship, meaning it is based on trust and loyalty. It is formalized by the signing of a contract so the duties, obligations, and timeframe are agreed to by both the agent and the principal.

Question 2

Principal:

Answer 2

The client in an agency relationship.

Question 3

Client:

Answer 3

The principal in an agency relationship.

Question 4

Agent:

Answer 4

The broker in an agency relationship.

Question 5

Fiduciary:

Answer 5

A relationship based on trust and loyalty that always includes fiduciary responsibilities as outlined in a signed agreement.

Question 6

Common Law:

Answer 6

Previous cases that have established precedents that regulate fiduciary relationships.

Question 7

Contract Law:

Answer 7

Law the regulates fiduciary relationships because it is the contract that establishes the relationship.

Question 8

Single Agnet/ Single Agency:

Answer 8

An agency relationship involving the agent and only one client, such as the buyer, the seller, the landlord, or the tenant. The agent owes fiduciary duties to only the one client and can provide advice to that client.

Question 9

In-house Agent/ In-house Agnecy:

Answer 9

A relationship involving two or more clients who are represented by different licensees within the same real estate firm. One broker would represent the buyer while another broker would represent the seller, with both brokers from the same real estate firm. This relationship is also known as a designated agency in that the managing broker designates one broker to represent the seller and designates a second broker to represent the buyer.

Question 10

Limited Agent/ Limited Agency:

Answer 10

A licensee who has the written and informed consent of all parties to a real estate transaction to represent both the seller and buyer or both the landlord and tenant. In some states, this is called a dual agent. In Indiana, an agent who is representing both the seller and the buyer or the landlord and the tenant in a consensual dual agency is a limited agent. This relationship limits the level of fiduciary duties to the clients because the agent is unable to provide undivided loyalty to both clients.

Question 11

Dual Agent/ Dual Agency:

Answer 11

A licensee who has the written and informed consent of all parties to a real estate transaction to represent both the seller and buyer or both the landlord and tenant.

Question 12

Subagency:

Answer 12

A broker who acts for another broker in performing brokerage services for a client.

Question 13

No Agency:

Answer 13

A non-agency relationship occurs when the broker is facilitating the transaction without being an agent for either party. The broker acts as a neutral party between the involved parties.

Question 14

Seller’s Agent:

Answer 14

A broker who is representing a seller or landlord in an agency relationship.

Question 15

Buyer’s Agent:

Answer 15

A broker who is representing a buyer or tenant in an agency relationship.

Question 16

Substantive Contact:

Answer 16

Substantive contact between a broker and a customer occurs when the broker is: showing the customer a property to purchase
gathering confidential information from the customer regarding the customer’s needs, motivation, or financial qualifications
executing a contractual offer to sell or lease real property

Question 17

Designated Agent:

Answer 17

In Indiana, a broker must also disclose the following in writing to a consumer

that an in-house designated agency relationship exists unless there is a written agreement for a different type of relationship
the name of the client’s designated agent
The written disclosure regarding the designation can be included in a brokerage agreement or in a separate document. A copy of the disclosure is to be retained by the managing broker.

Question 18

Voluntary Termination:

Answer 18

Typically, the agency relationship terminates when the transaction is completed. However, if the relationship is not fulfilled or completed for any reason, the relationship ends when either of the following occurs:

the date of expiration that the parties agreed on arrives, or
the parties agree to terminate the relationship
The relationship may be voluntarily terminated by mutual agreement of the parties involved or by one party if that party provides notice to the other party of the termination.

Question 19

Seller Agreement:

Answer 19

A listing agreement is a legally binding contract that creates an agency relationship between a broker and a seller of real estate. It authorizes the broker to serve as the agent for the seller in a real estate transaction in which the agent is to sell or lease the subject property or to obtain a buyer or lessee for the property. The listing agreement is a promise that the broker will find a buyer for the subject property and the seller will compensate the broker for doing so.

Question 20

Open Listing:

Answer 20

This type of listing agreement allows the owner to list the subject property with more than one broker. Thus, an open listing is a non-exclusive contract. The owner may pay a lower commission only to the broker who actually sells the property. The owner also retains the right to sell the property him or herself and pay no commission at all.

Question 21

Exclusive Agency Listing:

Answer 21

This type of listing agreement gives the broker the right to sell the property. The property is listed with only one broker, so the agreement is exclusive. As with all listing agreements, there must be an expiration date listed in the agreement.

The seller pays a commission to the broker only if that broker or one of the broker’s authorized agents sells the property.

Question 22

Exclusive Right to Sell:

Answer 22

This type of listing agreement is the most commonly used of the three types. The property is listed with one broker who retains the exclusive right to market and sell the property. The agreement must include an expiration date.

If the property sells during the agreement timeframe, the listing broker collects the commission even if the broker did not find the buyer.

Question 23

Net Listing:

Answer 23

No listing agreements shall be accepted by a broker company or by an associated broker on the broker company’s behalf that provides for a net return to the seller, unless said listing agreement provides for a maximum commission to be paid by the seller to the broker company.

With a net listing, the owner decides how much he or she wants to net from the sale of the subject property. The owner agrees to allow the broker to sell the property for any amount above the owner’s minimum price. As compensation, the broker then keeps the difference between the minimum price and the actual selling price.

Question 24

Buyer’s Agency Agreement:

Answer 24

This agreement includes the duration of the agreement with an expiration date, the commission or other compensation the broker will receive, and the rights and obligations of the broker and the buyer.