Chapter 4 - Agency Relationships, Ethics, and Fair Housing Flashcards
General Agent
A person who can act for another person for many DIFFERENT tasks.
Special Agent
A person who can act for another person for a SPECIFIC task.
Real estate agents are special agents.
What is an agency relationship and how are they created?
Agency Relationship - Relationship of trust between a PRINCIPAL and their AGENT.
Created by –
- EXPRESS CONTRACT
- IMPLIED Agency (including ostensible agency + agency by ratification)
Express Agency
An agency relationship that is expressed either orally or in writing.
WRITTEN is better than ORAL.
Implied Agency
Created by–
- Conduct of the parties
- Oral agreement
- Written agreement
What are 2 types of implied agency and how are they formed?
- Ostensible Agency - Results from a conduct and actions of the parties, even though there is no express agency agreement between the agent and principals.
Example - When SELLER allows BUYER assume that AGENT 1 is SELLER’S agent.
- Agency by Ratification - When a person ACTS AS THE AGENT for a principal WITHOUT a WRITTEN AUTHORIZATION, and the principal accepts (ratifies) the agent’s actions.
Revocation
When an AGENCY RELATIONSHIP is TERMINATED by either the AGENT or PRINCIPAL. This will EFFECTIVELY END the agency relationship UPON NOTICE to the other party of the termination of relationship.
**If this happens in an EXCLUSIVE AUTHORIZATION AND RIGHT TO SELL (EARS) listing agreement and the principle revokes the relationship before the end of listing period, this will effectively revoke the agreement; however the agent may be able to sue the principle for damages caused for terminating prior to its expiration date.
What are ways AGENCY RELATIONSHIPS can be terminated?
- Revocation
- Agreement
- Death of the agent or principal
- Destruction of the subject property
- Close of escrow
What are requirements of an Agency Relationship?
- Fiduciary
- Legality
- Competence of each party
Gratuitous Agent
Agent who acts as an agent (with all responsibilities & liabilities) and is not paid a commission.
Fiduciary Duty
An agent has a duty of UTMOST CARE, INTEGRITY, HONESTY, and LOYALTY in dealings with the principal.
What do fiduciary obligations include?
- Truth
- Confidentiality
- Competence
- Trust
- Broker’s duty to keep a principal informed
*Real estate agent must obey all LAWFUL instructions provided by the principal.
True or False– An agent is prohibited from sharing anything that could harm the buyer or seller in negotiations.
TRUE
Material of Fact
A fact that WILL AFFECT THE VALUE of a parcel of real property.
Hold Harmless Clause
A clause in a listing agreement that holds the agent harmless for incorrect information PROVIDED BY THE SELLER.
Duty of Honest and Fair Dealing
An agent owes a DUTY OF HONEST AND FAIR DEALING to other parties in a transaction.
Example – MUST DISCLOSE all MATERIAL FACTS about property
True or False – Compensation is required to establish an agency relationship.
FALSE
Subagency – Who is the Principal, Agent and Subagent in an agency relationship?
Principal = Buyer / Seller
Agent = Broker representing the principal
Subagent = Salesperson working under Agent (broker)
Broker Associate
aka Associate Licensee
A real estate broker who is working under another broker. They are NOT CONSIDERED a SUBAGENT of the principle
Vicarious Liability
A broker is liable for the actions of salespersons working under their broker’s license.
The broker and salesperson are BOTH LIABLE when a salesperson does something wrong.
When an agent is the agent of a SELLER – to WHOM do they owe a duty of HONEST and FAIR DEALING to?
The listing agent OWES a duty of HONEST AND FAIR DEALING to the BUYER.
Must disclose ALL MATERIAL FACTS!
When an agent is the agent of a BUYER – who do they owe a duty of HONEST and FAIR DEALING to?
`The selling agent OWES a duty of HONEST AND FAIR DEALING to the SELLER.
Must disclose ALL MATERIAL FACTS!
What happens if an agent does not disclose dual agency representation?
Agent may be –
- Disciplined by the Real Estate Commissioner
- Not receive a commission
- Can be grounds for either party to rescind the contract
What is Conflict of Interest and give an example:
Agent has a duty to NOT COMPETE with their principal.
Example – If a property is offered for sale, the agent must not move in and make an offer to purchase the property when their principal (buyer) is attempting to purchase the property as well.
Power of Attorney (POA)
Legal document giving AUTHORITY to a person to ACT ON BEHALF (or execute documents) of ANOTHER PERSON.
Attorney-in-Fact
The person who acts and executes documents for another person through a Power of Attorney (POA)
Secret Profit
Occurs when an agent lists a property for sale at below market value by misrepresenting the value of the property to the seller. Then either personally or through a family member, purchase the property at this below market price and immediately resells it for a higher price, thus keeping the profits.
*This is ILLEGAL!
Desist and Refrain Orders
An order from DRE directing a person to stop committing an act in violation of the RE law.
Commingling
Mixing a broker’s own funds with their trust account funds.
*Only $200 of the broker’s own money is allowed to cover account expenses
Misrepresentation
A false or misleading statement or assertion.
Intentional Misrepresentation
aka FRAUD – Occurs when a RE agent (or principal) intentionally misrepresents information.
Actual Fraud - agent purposefully makes an untrue statement that detrimentally affects the principal
Negative Fraud - intentional nondisclosures of a material fact
Negligent Misrepresentation
Honest mistake that causes a client harm. - Unintentionally misrepresenting information.
Negligent Advice
Incorrect information given when knowledge of the circumstances should have been within the agent’s diligent observation.
False Promise
Agent makes a promise that influences a person to enter into a transaction, then does not fulfill that promise.
Civil Rights Act of 1866
Provided all citizens in the US to purchase, rent, sell, hold and convey all (residential and commercial) real property and personal property without regard to race.
In addition, all persons have the right to contract, sue, be sued and enjoy the full benefits of the law
Federal Fair Housing Act / Civil Rights Act of 1968
Prohibits discrimination in the: sale rental advertising offer of brokerage services loans appraisal services
disciminatory actions based on a person's: race color religion sex marital status national origin handicap
If a person has been a victim of discrimination, they may file a complaint with:
U.S. Department of Housing and Urban Development (HUD) within 1 year.
Steering
The act of steering a buyer out of one neighborhood because of racial considerations.
Panic Selling
Occurs when an agent induces or attempts to induce a person to sell or rent their real property because of the entry of a certain class (race/religion) of people into the neighborhood.
Blockbusting
The result of panic selling. Both ILLEGAL.
Americans with Disabilities Act of 1990, Title III
Enacted to prohibit discrimination against people with disabilities.
Equal Credit Opportunity Act (ECOA)
Federal law that prohibits discrimination in lending.
Home Mortgage Disclosure Act
An Act that requires lenders to disclose home loan information to the public.
What are some California State Fair Housing Laws?
- CA Fair Employment and Housing Act (Rumford Act)
- Unruh Civil Rights Act
- Ralph Civil Rights Act
- CA Housing and Financial Discrimination Act (Holden Act)
- California DRE regulations
Boarder
A person renting/living inside someone’s home.
Example - room for rent
Unruh Civil Rights Act
All persons are entitled to full and equal accommodations, advantages, facilities, privileges, or services in business establishments, including private and public entities.
Ralph Civil Rights Act (hate violence)
Prohibits violence or threats of violence based on an individuals: race color religion sex gender gender identity gender expression ancestry national origin physical or mental disability medical condition genetic information marital status sexual orientation
Housing Financial Discrimination Act (Holden Act)
aka Holden Act
Prohibits discrimination in lending. A loan cannot be denied to an applicant based upon:
race, color, religion, marital status, sex, ancestry, and national origin
Redling
Occurs when a lender uses a red pen/pencil to draw a circle around areas where the lender does not want to make loans. THIS IS ILLEGAL!
Death Disclosure
If a person died in a property – it must be disclosed to buyers and tenants for up to 3 years from the time of death. Except in the case of AIDS.
If a client asks a DIRECT QUESTION if a person passed due to AIDS, then you must disclose so.
California Department of Real Estate
Prohibits discrimination by real estate brokers.
