Chapter 4 - Real Estate Brokerage and Law of Agency Flashcards
Chapter Objectives
1) Explain the purpose of a listing contract, and identify what parties sign the contract.
2) Explain the difference between a special agent and general agent, and express agency and implied agency, and provide at least one example of each.
3) Summarize the fiduciary duties owed by a seller’s agent to the seller, and provide at least one example of each duty.
4) Summarize the fiduciary duties owed by a principal to their agent, and provide at least one example of each duty.
5) Explain the purpose of the DTPA, and list at least three examples of a misleading act under the DTPA.
Brokerage
The business of bringing buyers and sellers together and assisting in negotiations for the terms of sale of real estate.
Real Estate Broker
A person who is licensed to buy, sell, exchange, or lease real property for others and to charge a fee for these services. Acts as an agent for a principal/client
Agency
The relationship between the principal and the principal’s agent which arises out of a contract, either expressed or implied, written or oral, wherein the agent is employed by the principal to do certain acts dealing with a third party.
Agent
A person authorized to act on behalf of another. Will work for a client and with a customer
Principal
The employer of an agent.
Customer
The party the agent brings to the principal as seller or buyer of the property.
Fiduciary Duty
That duty owed by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress or pressure.
Listing Contract
A contract in which a property owner employs a real estate broker to market the property described in the contract. Describes the obligations of each party.
Also used for leasing/rental
General Agent
An agent with full authority over one property of the principal, such as a property manager.
Special Agent
An agent with limited authority to act on behalf of the principal, such as created by a listing.
Express Agency
An agency relationship created by oral or written agreement between principal and the agent. The terms are ‘expressed’ in the form of documents or oral communication (Listing/Buyer Rep Contracts)
Implied Agency
Agency that exists as a result of actions of the parties.
Agency by Ratification
like if you were giving advice to a neighbor and they were acting on it - compensation is not required
Seven Categories of Agency Termination
1) Death or Incapacity of either party
2) Destruction of property
3) Expiration of term - required by TREC
4) Mutual Agreement
5) Broker can renounce the agency
6) Bankruptcy of Owner of property
7) The completion of purpose of creation
Sub-Agent
what a salesperson is to their broker
Universal Agent
An agent who is authorized to perform all acts or
duties his/her principal is empowered to perform. The broadest form of agency
Statute of Frauds
requires most real estate contracts to be in writing
Single Agent
works only for the buyer or the seller
Dual Agent
acts concurrently for both principals in the transaction
COALD (Acronym - Fiduciary Responsibilities)
Care, Obedience, Accounting, Loyalty, Disclosure
C - Exercise a reasonable degree of care while handling the business
O - Obey the clients instructions (Lawful & Ethical)
A - report and account for all funds received from and on behalf of principal
L - always place client’s interests first
D - disclosure of ALL known facts regarding the transaction
Information of Brokerage Services Form (PDF)
used for generally every type of transaction
Indemnification
Reimbursement or compensation paid to someone for a loss already suffered.
Puffing
The exaggeration of the good points of a product, or real property, and the prospects for future rise in value, profits, and growth. This does not cover “mistakes” where it was an honest mix up - outside of competence circle of knowledge
CIIA (Acronym) - Duties of Principal to Agent
Compensation, Information, Indemnification, Availability
C - compensating the fee upon completion of brokers duties
I - provide accurate information
I - to reimburse broker if financial injury is suffered during duty
A - they have to be available to discuss offers, accept notices, allow showings
Agents duties to Customers
reasonable care/skill, honesty & fair dealings, disclosure of any known facts about the property
Fraud
The intentional and successful employment of any cunning, deception, collusion, or artifice, used to circumvent, cheat or deceive another person whereby that person acts upon it to the loss of property and to legal injury.
Latent Defect
known to the seller but not to the buyer, and is not discoverable by ordinary inspections
Example: driveway that crosses the property line
Deceptive Trade Practices Act (DTPA)
Protects consumers against false, misleading, or deceptive acts.
- Representing that something is new or original when not the case (or particular quality)
- advertising a prop w/ no intention of selling as advertised
- Making false statement of fact (typically around explaining price reductions)
- Misrepresenting authority of agent to finalize a closing contract
- When work has been done on property but it really hasn’t
Caveat Emptor
Let the buyer beware. The buyer must examine the goods or property and buy at his or her own risk.
The responsibility is now placed more and more on the sellers.
Sellers Disclosure Notice
Required in Texas that lists certain features or known defects of the property
