Chapter 3 Law of Agency Flashcards
The creation of Agency
A contractual agreement between the broker & the buyer or seller.
Fiduciary Relationship
It requires the agent to put the principal’s interest above all others. Including the Broker and the agent his or her self. It is built on trust.
Fiduciary’s responsibilities
NOCAL N= Notice O= Obedience C= Care A= Accounting L= Loyalty
Real Estate Agent can act as:
1) Seller’s Agent
2) Buyer’s Agent
3) Disclosed Dual Agent
4) Transaction Broker
Fiduciary’s responsibilities: Continued; NOTICE
. It is the agent’s duty to pass on to the principal all the facts or information he or she obtains that could affect the principal’s interests. ALL WRITTEN OFFERS MUST BE PRESENTED IMMEDIATELY.
Breach of duty of Notice
When an agent does not discloses any changes, any offers to the principal.
Fiduciary’s responsibilities: Continued: OBEDIENCE
The agent is obligated to obey the principal’s lawful instructions.
Breach of Duty of Obedience
The failure to obey the principal’s lawful instructions.
Fiduciary’s responsibilities: Continued; CARE
The duty of care requires the seller’s agent to be knowledgeable about all aspects of the property to arrive at a reasonable price
Breach of Duty of Care
The failure to be properly informed about a property’s condition and value, and to effectively navigate the transaction through to closing, constitutes a breach of duty of care.
Fiduciary’s responsibilities: Continued: ACCOUNTING
The agent is obligated to safeguard and account for all money or property entrusted to his or her professional care.
Breach of Duty of Accounting
The failure to inform the seller of the exact form and status of the deposit. The broker clearly owes the seller an accounting of the exact status of the deposit and disclosure a key element.
Fiduciary’s responsibilities: Continued; LOYALTY
An agent must always place a principal’s interests above those of other persons, including the the agents own interests.
Breach of Duty of Loyalty
An agent cannot advance their interest at the expense of the principal’s any attempt to profit from a transaction except through the agreed on commission is a breach of Loyalty.
Customer
A buyer you work with. No Agency Relationship established.
Real Estate salesperson is:
Is an agent of the broker and a sub agent of the principals.
Is an independent contractor. They are not employees.
Commission
An agent’s commission is paid only by the broker they are with. No other broker pay the agent a commission. The broker has to pay the agent’s commission within 10 days.
Ready, willing and able buyer
Is one who is prepared to buy on the seller’s terms, is financially capable, and is ready to take positive steps towards consummation of the transaction.
The reasons a deal falls through, the Broker may be still entitled to a commission
1) The owners changes their mind and refuses to sell
2) There are defects in the owner’s title that are not corrected.
3) The owner commits fraud with the respect to the transaction
4) The owner is unable to deliver possession within a reasonable time.
5) The owner insists on terms not on the listing. (Example: The right to restrict the use of the property)
6) The owner and the buyer enter into a contract but later agree to cancel the transaction.
In other words, if the sale is not finalized because of the principal’s default.
Disclosure of Agency
NJ regulations require all agents to present a CIS (Consumer Information Statement) to all sellers, buyers, landlords, and tenants on the sale or rentals of all one ti four family residential properties.
Attorney-in-fact
Person authorized to act under the power of attorney.
Broker
One authorized to act for another in real estate transactions.
Fraud
Intentional or unintentional misleading of another, who is harmed thereby.
General Agent
One empowered for a wide range of actions
Dual Agency
Brokers taking both parties (Seller & Buyer) as principals.
Client
Principal who engages the agent
Disclosure
Revealing to another any pertinent information
Latent Defect
Problem not discoverable by normal prudent inspection.
Law of Agency
Rules governing conduct of agents
Listing Agreement
Contract by which the owner retains a broker to find a buyer.
Principal
The one who employs the agent. The Client.
Procuring Clause
The one who brings about the sale.
Transaction Broker
One who facilitates a transaction without functioning as an agent.
Puffing
Harmless exaggeration as salesmanship
Code of Ethics
Standards of conduct adopted by REALTORS (R)
Conflicts of interests
Problem when serving best interests of the clients and oneself.
Standard of care
Competence normally expected.
Negligent misrepresentation
Fraud committed by someone who should have known better.
Errors and Omissions insurance
Real Estate equivalent of Malpractice Insurance
Antitrust laws
Sherman Antitrust Law
Sherman Antitrust Law
Agents or Brokers cannot price fix or allocate markets
Punishment for Sherman Antitrust law
Maximum $1,000,000 and 10 years in prison.
Disciplinable offenses
Racial Steering
Discrimination
Violation of non-solicitation orders
Failure to’ disclose licensee’s interest in a transaction.
Failure to disclose dual compensation
Unauthorized practice of law
Failure to deliver copies of documents
Net listing
Inducing breach of another’s contract.
Material misstatement on a license application
Deceptive and improper advertising.
Improper information on stationary & business cards
Personal offenses not necessarily related to real estate. (fraud, failure to pay a judgement, convictions of a felony.)
Agency
Nature of the relationship between the Principal and the Broker (agent).
Express Agency
Is created verbally or in writing by a formal agreement or contract. It must be in writing to be enforceable so a commission can be collected.
Implied Agency
May be created when the actions indicate they have mutually consented to an agency relationship.
