Chapter 7: Real Estate Brokerage and the Law of the Agency Flashcards
agency
The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions
agent
One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be the property owner’s agent
See OLD CAR
apparent authority
When someone claims to be an agent but there is no express agreement, the principal can establish an agency relationship by performing any act that accepts (ratifies) the conduct of the agent as that of an agent.
broker
(1) One who acts as an intermediary on behalf of others for a fee or commission.
(2) One who is licensed to list, lease, buy, exchange, auction, negotiate or sell interest in real estate for others for a fee
brokerage
The bringing together of buyers and sellers in the marketplace
broker-in-charge (BIC)
Required for each brokerage firm and each branch office, the full broker responsible for displaying all licenses properly, notifying the North Carolina Real Estate Commission of any change of business address or trade name, ensuring that all advertising
caveat emptor
A Latin phrase meaning “let the buyer beware.” In a caveat emptor state, sellers do not have to enclose any facts about their property when selling.
client
A main party to a transaction–the person for whom the agent works
AKA principal
co-brokered transaction
A real estate transaction involving two or more brokerage firms, one firm representing the seller and the other representing the buyer.
commingling
The illegal act by a real estate broker of placing consumer funds with personal funds. By law, brokers are required to maintain a separate trust or escrow account for other parties’ funds held temporarily by the broker
commission
Payment to a broker for services rendered, as in the sale or purchase of real property; traditionally a percentage of the gross sales price of the property but can be a flat fee or some other calculation
common law of agency
The basic framework of law that governs the legal responsibilities of the broker to the people the broker represents.
cooperating broker
The broker/firm in a multiple-listing situation representing the buyer, as opposed to the listing broker who represents the seller. The listing broker and the cooperating broker may be the same person/firm
customer
A third party to whom is owed honesty and fairness; not a fiduciary relationship
designated dual agency
An agency option, under dual agency that allows the firm, with both client’s permission, to appoint one or more licensees to exclusively represent the seller-client and one or more licensees to exclusively represent the buyer-client; also called designated agency
dual agency
Representing both parties to a transaction; must be consensual and reduced to writing prior to presentation of first offer
employee
Someone who works as a direct employee of an employer and has employee status. The employer is obligated to withhold income taxes and Social Security taxes from the compensation of the employee
express agreement
An oral or written contract in which the parties state the contract’s terms and express their intentions in words.
fiduciary
One in whom trust and confidence are placed; a reference to a principal-agent relationship
first substantial contract
A flexible moment in time when conversation between a licensee and a consumer begins to address confidential needs, desires and abilities; latest moment to legally disclose agency choices to a consumer
fraud
An international misrepresentation of material fact so as to harm or take advantage of another person
general agent
One who is authorized to represent the principal in a broad range of matters related to a specific business or activity; a property manager might have this power.
implied agreement
A contract under which the agreement of the parties is demonstrated by their conduct.
implied authority
An agency relationship created when principals and agents, without formally agreeing to the agency, act as if one exists.
independent contractor
Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. Unlike an employee, an independent contractor pays all expenses and Social Security and income taxes and receives no employee benefits. Most real estate licensees are independent contractors
in-house sale
A real estate transaction where the listing firm actually produces the buyer for their listing, as opposed to a co-brokered or cross sale that involves two firms.
material fact
Any fact that is important or relevant to the issue at hand; mandatory disclosure by all agents in a transaction to all parties of the transaction
multiple listing service (MLS)
A marketing organization composed of member brokers who agree to share their listing agreements with one another in the hope of procuring ready, willing, and able buyers for their properties more quickly than they could on their own. Most MLSs accept only exclusive right-to-sell or exclusive-agency listings from their member brokers
negligent misrepresentation
Unintentionally misinforming any party involved in a transaction about a material fact.
negligent omission
Unintentionally failing to disclose a material fact to any party involved in a transaction.
OLD CAR
The mnemonic for fiduciary duties of obedience, loyalty, disclosure of information, confidentiality, accounting, and reasonable skill, care, and diligence.
oral buyer agency
A non-exclusive verbal agency agreement between a firm and a buyer-client. There can be no time limit on oral agency, but it must be reduced to writing prior to presentation of first offer.
principal
(1) A sum loaned or employed as a fund or an investment, as distinguished from its income or profits
(2) The original amount (as in a loan) of the total balance due and payable at a certain date.
(3) A main party to the transaction – the person for whom the agent works; the client
provisional broker
A real estate licensee who performs real estate activities under the supervision of a licensed real estate broker-in-charge. Must complete post-licensing courses to remove the provisional license status.
puffing
Exaggerated or superlative comments or opinions: e.g., “This house has the best view in town!”
ratification
A method of creating an agency relationship in which the principal accepts/confirms the conduct of someone who acted without prior authorization as the principal’s agent
self-dealing
AKA a secret profit, an illegal act by a licensee who takes advantage of clients by failing to disclose the appropriate value of property
special agent
One who is authorized by a principal to perform a single act or transaction. A real estate broker is usually a special agent of the seller authorized to find a ready, willing, and able buyer for a particular property, or a special agent of the buyer to find a specific type of property to purchase. Special agent has limited authority and cannot bind his principal.
stigmatized property
Property regarded as undesirable because of events that occurred there; also called a psychologically impacted property. Some conditions that typically stigmatize a property are murder, gang-related activity, proximity to a nuclear plant, and even the alleged presence of ghosts.
subagent
One who is employed by a person already acting as an agent; typically a reference to a provisional broker licensed under a broker (agent) who is employed under the terms of a listing agreement. A subagent has the same duties to the client as the agent.
tort
A wrongful act, injury, or violation of legal right to the person or property of another
undisclosed dual agency
An illegal agency relationship where buyers and/or sellers are unaware of an individual broker or firms conflicting duties to their clients
universal agent
Person empowered to do anything the principal could do personally; unlimited authority; unusual in real estate; has power of attorney
willful misrepresentation
Intentionally misinforming any party involved in a transaction about a material fact
willful omission
Intentionally failing to disclose a material fact to any party involved in a transaction
Working with Real Estate Agents (WWREA)
A mandatory agency information brochure that a licensee must give to and review with consumers in all real estate sales transactions no later than first substantial contact; it does not create agency.
listing broker
The broker/firm in a multiple-listing situation representing the seller, as opposed to the cooperating broker/firm that brings the buyer to the transaction. The listing broker and the cooperating broker may be the same person/firm
What does an agent owe a customer?
- fair dealing
- honesty
- material facts
