Chapter 5 Agency Relationships Flashcards
fiduciary relationship
between the agent and the principal. A fiduciary relationship implies a position of trust or confidence. The agent is in a position of trust or confidence with the principal and owes the principal certain fiduciary
special agent
employed to perform a specific task
general agent
A real estate broker, for example, who has a contract is a special agent authorized to perform certain acts for a specified time
special power of attorney
authorizes the agent to do certain specific acts.
general power of attorney
allows the agent to transact all the business of the principal. The agent is then known as an attorney-in-fact.
subagent
is a broker delegated by the listing agent (if authorized by the seller) who represents the seller in finding a buyer for the listed property.
dual agent
A broker can legally be the agent of both the seller and the buyer in a transaction, but the broker must have the informed, written consent of both the seller and the buyer
cooperating broker
a selling agent who assists another broker by finding a buyer. A cooperating broker participates in the multiple listing service (MLS), and finds a buyer for a property listed in MLS. A cooperating broker may represent either the seller or the buyer.
Agency Relationship Disclosure Act
became effective in an attempt to clarify the agency relationships among sellers, agents, and buyers. It applies to every residential property transaction of one-to-four units. The law requires that an agent supply a written document, called Disclosure Regarding Real Estate Agency Relationships, explaining the nature of agency
Steps in the Disclosure Process DEC
- Disclose
- Elect
- Confirm
Who Presents a Written Disclosure
- Listing agent (or his or her sales associate) must deliver the form to the seller before entering into a listing agreement.
- Selling agent (who may also be the listing agent) must provide the form to the buyer before the buyer makes an offer to purchase.
- Selling agent (if different from the listing agent) must provide the form to the seller before the offer to purchase is accepted.
Basic Requirements of the Agent in the Disclosure of Agency
- A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the agent’s principal
- Reasonable skill and care in performance of agent’s duties
- A duty of honesty, fair dealing, and good faith
- A duty to disclose all facts known to the agent materially affecting the value or desirability of the property not known to the other parties
can an agency relationship be created with or without a written contract?
yes, its an agreement.. however, its not held held up in court though.
listing agreement
a contract in which the seller promises to pay a commission upon presentation of a ready, willing, and able buyer who meets all the terms of the listing
Ratification
means acceptance of an act already performed. Ratification of an agency relationship is created by approving acts after they are done. For example, a seller can accept an offer presented by a licensee and agree to pay a commission, even though no agency has been approved
Estoppel
is a legal bar that prevents a person from asserting facts or rights that are not consistent with what was implied by the person’s previous behavior.
implied or ostensible (apparent) agency
Agency is created when the principal causes a third party to believe another person is the principal’s agent. What the principal has implied by his or her behavior is barred, or estopped, from being denied. Authority is given when a principal allows a third party to believe that another person is the agent, even if the third party is unaware of the appointment
Seller’s agent may
- show the buyer properties meeting the buyer’s requirements and describe to the buyer a property’s amenities, attributes, condition, and status.
- complete a standard purchase contract by inserting the terms of the buyer’s offer in the form’s blanks and transmit all offers of the buyer to the seller on a timely basis.
- inform the buyer about the availability of financing, legal service, inspection companies, title companies, or other related services desired or required by the buyer to complete the transaction.
termination of Agency Relationship
- Full performance
- Expiration of its term
- Agreement of the parties
- Acts of the parties
- Destruction of the property
- Death, incapacity, or insanity of the broker or principal
- Bankruptcy of the principal
agency coupled with an interest
is one in which the agent gets an interest in the subject of the agency, which is the property. For example, a broker might advance funds to pay for a defaulted loan on the property to keep it out of foreclosure.
exclusive authorization and right-to-sell listing
is an exclusive contract where the seller must pay the listing broker a commission if the property is sold within the time limit by the listing broker, any other person, or even by the owner. If the broker brings the seller a mirror offer, or an offer that matches exactly all terms in the listing, the seller does not have to accept the offer. However, under the terms of the listing, the seller must pay the broker a commission. In this listing, the phrase “right to sell” means right to find a buyer. It does not authorize the broker the right to convey any property belonging to the principal unless the agent has a power of attorney to do so.
exclusive agency listing
is an exclusive contract where the seller must pay the listing broker a commission if any broker sells the property. However, the seller has the right to sell the property without a broker, and pay no commission. Every exclusive listing must specify a definite termination date.
open listing
listing agreement that gives any number of brokers the right to sell a property. It is not exclusive and may be given to any number of agents at the same time. The first broker to obtain a buyer who meets the terms of the listing, and whose offer is accepted by the seller, earns the commission.
listing agreement that gives any number of brokers the right to sell a property. It is not exclusive and may be given to any number of agents at the same time. The first broker to obtain a buyer who meets the terms of the listing, and whose offer is accepted by the seller, earns the commission.
refers to a broker who produces a buyer ready, willing, and able to purchase the property for the price and on the terms specified by the seller, regardless of whether the sale is completed.
net listingis
employment contract in which the commission is not definite. Instead, the broker receives all the money from the sale of the property that is in excess of the selling price set by the seller. The broker must disclose the selling price to both buyer and seller within 30 days after closing the transaction.
option listing
gives the broker the right to purchase the property that is listed. A broker with an option is acting as a principal as well as an agent. Prior to exercising the option, the seller must be informed of the full amount of the broker’s profit and agree to it in writing.
Duties an Agent Owes to a Principal COALD
Care, Obedience, Accounting, Loyalty, and Disclosure
Listing Violations
- Every exclusive listing must specify a definite termination date.
- A listing broker must give a copy of the listing to the seller at the time the seller signs it.
- A listing broker cannot accept a deposit from a buyer unless specifically authorized to do so in the listing agreement. When a listing broker does so without authorization from the seller, he or she is acting as an agent of the buyer and not the seller. Any misappropriation of these funds by the listing broker would result in loss to the buyer and not the seller. Most listing agreements, however, do allow the broker to receive the buyer’s deposit on behalf of the seller. This authority given to the broker also applies to any subagents, unless the subagent is working as the agent of the buyer
- A listing broker may not return a buyer’s deposit after the seller accepts the offer, without the consent of the seller.
- The acceptance of a check, rather than cash or a promissory note, as an earnest money deposit must be disclosed to the seller at the time the offer is presented.
- Also, if the buyer instructs the listing broker to hold the check uncashed until the offer is accepted, the fact must be disclosed to the seller when the offer is presented. The check may be held until the offer is accepted and then placed in escrow but only when directed to do so by the buyer
Commingling
legal practice of depositing client’s funds in a broker’s personal or general business account.
conversion
a broker uses the client’s money, it is known as
Puffing
statement of opinion that is not factual about a piece of property
tort
violation of a legal right or a civil wrong, such as negligence, libel, or nuisance. An agent is not liable for torts committed by the principal, only his or her own torts
Commissions
- The amount of commission is not set by law and is always negotiable.
- It is a violation of the Sherman Anti-Trust Law for brokers to discuss or set commission rates in a community.
When Does the Agent Earn the Commission
The obligation to pay compensation to the broker must be in writing. A broker has earned a commission once he or she produces a buyer who is ready, willing, and able to purchase the property according to the price and terms of the listing agreement or any price and terms acceptable to the seller. Thus, if buyer and seller enter into a valid contract, the broker is entitled to a commission even though the sale is never completed.
During the term of the listing, if a broker presents an accepted offer to the seller, the broker has earned the commission. If, after a listing has expired, a buyer and seller complete a sale on the exact terms of those presented and rejected during the term of the listing, the broker has earned a commission.
safety clause
clause protects the listing broker’s commission, if the owner personally sells the property to someone who was shown the property or made an offer during the term of the listing.
Agent’s Commission is Earned When
- The agent produces a ready, willing, and able buyer to purchase on the terms and at the price asked by the seller.
- The agent secures from a prospective buyer a binding contract with terms and conditions that are accepted by the seller.
