General - Chapter 7 Lesson 1 Flashcards
simple mistakes or oversights can lead to…
significant consequences and possible legal issues
Responsible for…
protecting your clents’ best interest while cooperating fully with third parties. CLents are safe
Risk management plan
identifies potential hazards and threats and describes plans necessary to mitigate them
risk assessment
continuous process of understanding and categorizing potential risk
Risk assessment parts
identification, analysis, and evaluation
What is the process of identifying potential hazards and threats and implementing plans to mitigate them?
risk management
imputed knowledge
concept that any information made known to an agent is communicated to their client
real estate licensees are expected to know certain things about the industry as part of their fiduciary duty of
reasonable skill and care
imputed knowledge helps mitigate risk
by ensuring all parties are aware of the details and nobody is caught off-guard
imputed knowledge creates risk
by creating assumptions
Vicarious liability
real estate salespeople and associate brokers are agents of sponsoring broker, the broker may be help liable for their actions
material fact
detail that could affect the value of a property to a consumer
material defect
flaw that could impact value or pose a safety risk
failure to disclose a defect…
violates the duty an agent owes to third parties
Examples of material facts
age of major utility systems, age of roof, location in a flood zone, easements or encroachments, tax assessments
Examples of material defects
rook leak or damage, malfunctioning furnace, sinking foundation, damaged electrical system, broken windows
Misrepresentation
false or misleading statement
omission
failure to mention or disclose information completely
Misrepresentation and omission can…
arise at any point in a transaction, and they don’t necessarily have to be related to the features of a property
Misrepresentation and Omission: Property details
square footage, condition, or features. Inaccurate listing descriptions, misleading or edited photos, or verbal statements made by sellers and their agents.
Misrepresentation and Omission: inaccurate pricing
agents should be transparent about the property’s true value
Misrepresentation and Omission: Contract Omissions
legal disputes, all parties should review the details in a contract before signing it
Misrepresentation and Omission: Dual agency conflicts
must receive consent from both parties, failure to do so could lead to conflict of interest and legal action against the agent
Misrepresentation and Omission: Misleading Marketing
heavily editing photos or using photos showing features that don’t exist are forms of misrepresentation
Errors and Omissions (E&O) insurance
help cover the expenses of a lawsuit if a client claims the licensee committed an error while performing professional duties (risk transfer tool)
Who carries E&O insurance
brokers for themselves and licensees
Make sure all required documentation is…
present and kept on file in a safe place
Practicing good record keeping ensures…
safety of all parties in the transaction and minimizes the risk of unforeseen issues
Broker’s duty to…
supervise and assist the licensees who work for them
Accounting
obligation to strictly account for all money and other valuables received
supervising broker deposits money in an
escrow account (trust account)
commingling
mixing brokerage’s business funds and escrow money
conversion
broker using escrow money for their own purposes
If licensee is found liable and they don’t have enough money to pay damages
personal assets can be seized
asset
item of economic value owned by someone that can be converted to cash
Protecting Personal Assets: Limited Liability Company
legal business structure that allows a licensee to separate personal assets from business assets
Protecting Personal Assets: Personal Liability Insurance
offers protections that E&O doesn’t like bodily injury or property damage
Protecting Personal Assets: Personal Asset Trusts
transfers property to a trustee, who manages it for beneficiary. Assets are managed by trustee and owned by trust shielding the assets from creditors.
Protecting Personal Assets: Arbitration and mediation
avoid court case, resolve matters outside the legal system
Responsible for paying own…
income taxes
Personal safety, first interaction…
at office or in public
Pictures of clients infront of new home
get their consent
Seller information posting
get consent
