Chapter 5 - Agency Relationships

Question 1

Buyer’s Agent

Answer 1

An agency relationship between a buyer and a licensee in a real estate transaction.
Buyers agent owe all loyalty to buyer in real estate transaction.

Question 2

Seller’s Agent

Answer 2

When representing only the seller in a transaction, the agent owes all loyalty to that seller client.

Question 3

Single Agency

Answer 3

The most basic form of real estate agency is when one agent of a brokerage represents just one party in a specific transaction. (aka single agency, principal agency, traditional agency)

Question 4

Vicarious Liability

Answer 4

Since an agent’s authority comes from the principal, in this case, the sponsoring broker, when an affiliated licensee acts within the scope of his or her authority, the sponsoring broker is legally liable for the licensee’s acts
Liability that is created because of the relationship between the principal and the actions of an agent who is actually liable.

Question 5

Gratuitous Agency

Answer 5

An agent may choose to offer his or her services free of charge. Although compensation is not part of the agreement, the agent is not released from his statutory obligations to his client.

Question 6

Implied Agency

Answer 6

created through the actions of words of one or both parties. Implied agreements are difficult to enforce and often lead to confusion and misunderstanding between the parties.

Question 7

Expressed Agency

Answer 7

An agency relationship is formed through a contract between the agent and the principal for example a listing agreement between a broker and a seller or broker and buyer.

Question 8

Agency coupled w/ Interest

Answer 8

This is when the agent holds an ownership interest in the property being sold.

Question 9

Special Agent

Answer 9

also called a limited agent, has limited authority to perform a specific task or conduct a specific transaction.
For example when a real estate broker is contracted by a client to sell a house, the broker is considered a special agent.

Question 10

General Agent

Answer 10

Is authorized to represent the principal in a broad range of specified matters, usually as part of a long-term relationship.
A real estate agent is actually a general agent of his or her sponsoring broker.

Question 11

Universal Agent

Answer 11

A universal agent is authorized to do anything and everything that can be lawfully delegated to a representative.
Real estate agents are rarely considered universal agents
Universal agents may be created through the granting of power of attorney, which allows the attorney-in-fact to do almost everything the person granting the authority could do (sell assets, make purchases, sign legal documents)

Question 12

Express Vs. Implied Authority

Answer 12

Express - is power or permission for a specific act or outcome communicated by principal to agent.
Implied - (incidental) is the authority to do everything reasonably necessary to carry out the principal’s express orders, within the limits of the law

Question 13

Reasonable Care

Answer 13

Common Law Fiduciary Duties
Agents must always use reasonable care, skill, diligence when acting on behalf of a client. The agent is viewed as a professional and expert. A form filled out incorrectly or a law misunderstood could cause problems for the client. If a client loses money due to an agent’s incompetence or carelessness, the agent can be held liable for negligence, which is an unintentional breach of legal duty.

Question 14

Accountability

Answer 14

Common law fiduciary duties
The duty of financial accountability recognizes that money received in an agency relationship is received on behalf of the principal, not the agent. Since the agent acts on behalf of the principal, the agent has the duty to strictly account for any amount received.

Question 15

Confidentiality

Answer 15

Common law fiduciary duties
To keep from destroying the integrity of the agency process, an agent can neither reveal confidential information nor take advantage of it for personal benefit

Question 16

Loyalty

Answer 16

Common law fiduciary duties
The agent must put the principal’s interests above all others’, including his own.
Can’t tell owner not to accept a low bid because of commission to agent.

Question 17

Obedience

Answer 17

Common law fiduciary duties
An agent must follow the legal instructions of the principal, obey the parameters of the agency relationship, and not stray beyond the scope of his authority.
Of course if principal gives agent an illegal instruction the agent must not follow it

Question 18

Fiduciary Relationship - OLD CAR

Answer 18

In most general sense, relationship between the agent and principal can be described as fiduciary.
Which is one of trust and confidence where one party owes the other a higher standard of good faith than they owe to third parties or customers.
The fiduciary role is that of an advocate and the agent owes such duties only to the client.
O - Obedience
L - Loyalty
D - Disclosure
C - Confidentiality
A - Accountability
R - Reasonable care

Question 19

Customer

Answer 19

A third party to a transaction whom the agent work with, but not for, is considered to be a customer of the agent.

Question 20

Client/Principal

Answer 20

The party granting the right of representation through an agency relationship, such as in real estate transaction, is known as the client or principal in the relationship.

Question 21

Agency

Answer 21

Is the relationship of trust created when one party gives another the right to represent him in dealings with third parties.
Consensual relationship that both parties enter into willingly
Alludes to a relationship between a principal and a party representing her interests

Question 22

Brokerage

Answer 22

Is a business concept premised primarily on bringing parties together for the purpose of a transaction

Question 23

Dual Agency

Answer 23

Refers to a single licensee who represents both a buyer and seller in the same transaction.
A dual agent owes statutory duties to both the buyer and the seller but must remain neutral at all times
Must be careful not to disclose confidential information from one party to the other

Question 24

In-House Transaction

Answer 24

Keeping transactions within the brokerage. This occurs when the brokerage procures a buyer for one of it’s listed properties.

Question 25

Designated Agency

Answer 25

When the sponsoring broker enters into an agency agreement with any person - buyer or seller, lessee or lessor - the sponsoring broker delegates the authority to act as the legal agent of the client to one or more affiliated licensees to the exclusion of any other affiliated licensees.

Question 26

Selling Agent

Answer 26

An agency relationship between buyer and a licensee in a real estate transaction can be created with a document such as a buyers brokerage agreement

Question 27

Offer of Cooperation

Answer 27

When sponsoring broker submits a property listing to MLS, the act consitutes a unilateral blanket offer of cooperation, an open invitation to other brokers to sell property listed by another broker

Question 28

Undisclosed Dual Agency

Answer 28

When both principals in the same transaction are represented by an agent w/o full disclosure to and approval from both clients

Question 29

Disclosure

Answer 29

Common law fiduciary duties
An agent must make a complete disclosure of any material facts.
A material fact is something that could affect someone’s decision regarding the transaction if it were known.