General Principals of Agency Flashcards
Definitions
-Agency: used to describe the fiduciary (legal) and consensual relationship between an agent and a principal (client)
-Agency Relationship: required for the agent to provide any professional services to the principal
Agency and Agency Relationship
What type of agency is established in writing through a buyer representation agreement or a listing agreement?
Clue: E________ A________
Express Agency
What type of agency is created purely through the actions of the parties involved but should not be used in real estate transactions?
Clue: I_________ A________
Implied Agency
The agent has six specific legal obligations that they must abide by in their dealings with the principal
-These obligations relate to the trust that the principal has placed in the agent during the transaction.
O.L.D.C.A.R: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care
Fiduciary Relationship
O.L.D.C.A.R: Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care
What type of relationship is this?
Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable Care
Clue: F___________ R______________
Fiduciary Relationship
O.L.D.C.A.R
Requires the agent to obey all instructions from their principal for the duration of the agency relationship
-The agent is free to express ideas contrary to the principal and provide professional guidance on how to proceed, but in the end, the principal’s wishes should be followed, so long as the actions are not illegal or immoral.
Clue: O__________
Fiduciary Relationship
O.L.D.C.A.R
-Obedience
Requires the agent to put the interests of the principal ahead of the interests of all others in the transaction (including the agent)
Clue: L___________
Fiduciary Relationship
O.L.D.C.A.R
-Loyalty
The obligation of the agent to reveal any material information related to the transaction
Clue: D____________
Fiduciary Relationship
O.L.D.C.A.R
-Disclosure
Nothing can be disclosed to anyone else, with just a few exceptions
-When the principal has given permission to the agent to disclose information
-When it is required by law to divulge information
-When the agent is defending themselves in a legal setting against accusations of wrongdoing
Clue: C_____________
Fiduciary Relationship
O.L.D.C.A.R
-Confidentiality
Required of the agent in two areas:
-Money: the agent must account for any money (typically earnest money) that a principal contributes toward the completion of a transaction
-Paperwork: the agent must account for all paperwork related to the transactions and provide copies of all such documents to the principal.
Clue: A_______________
Fiduciary Relationship
O.L.D.C.A.R
-Accounting
The efforts the agent takes are understandable and appropriate, and the agent has the expertise needed to help the client.
Clue: R__________ C_____ and S_____
Fiduciary Relationship
O.L.D.C.A.R
-Reasonable Care and Skill
The person or entity (client) who enlists another party (agent) to represent them in a real estate transaction
Clue: P___________
Principal
The party empowered to represent a principal (client) in a real estate transaction
Clue: A________
Agent
The licensee assigned to assist the principal (client) on behalf of the agent (BIC=broker in charge)
Clue: S___________
Subagent
An agent (BIC=broker in charge) who represents both the buyer and the seller in the same real estate transaction
-This occurs only with the prior informed, written, and signed consent of both parties.
Clue: D________ A_________
Dual Agent
The licensee (subagent) designated by the dual agent (BIC-broker in charge) to solely represent the interests of one client in a real estate transaction in which a dual agency relationship exists
-This occurs only with the prior informed, written, and signed consent of both parties.
Clue: D__________ A__________
Designated Agent
A person who performs only ministerial acts in a transaction
-This person does not represent either party in the transaction; instead, they provide information on the property, show the property, and act as a scribe for the completion and presentation of paperwork between the parties. They do not offer advice, counsel, or expertise during the offer or negotiation phases of a deal.
Clue: T___________ B__________
Transaction Broker
Anyone who is not a principal (represented by the agent through a written agency agreement) in a real estate transaction
Clue: Th_____ P________
Third Party
A specific third party who has chosen not to enter into an agency relationship but still requests assistance from an agent in a real estate transaction
-An agent may not provide fiduciary services (obedience, loyalty, and disclosure) to a customer. The agent, however, must still provide the customer with honesty, fair dealing, accounting for money, and reasonable care.
Clue: C____________
Customer
A person who has been given written authority to legally act on behalf of another
-This written permission is called power of attorney (POA).
Clue: A__________ -in- F______
Attorney-in-fact
The identity of the principal is known to all parties in the transaction
-Most residential transactions involve a disclosed principal.
Clue: D____________ Principal
Disclosed Principal
The identity of the principal is not known to any third parties in the transaction, although the existence of the principal has been established.
Clue: P___________ Disclosed P___________
Partially Disclosed Principal
The existence of a principal is not disclosed; instead, the agent acts as the principal and uses their own name on the contract, et al.
Clue: Und___________ P__________
Undisclosed Principal
An agent who is given broad authority to conduct business on behalf of a large entity
-For example, an agent might work on behalf of a chain grocery store and could be tasked with finding and purchasing new locations for the store.
Clue: U__________ A_______
Universal Agent
An agent who is given authority to work on behalf of another agent
Clue: G__________ A_______
General Agent
An agent who is hired by a principal
-This will typically be the broker-in-charge of a firm. They will enter into an agency relationship and be given a specific level of authority to act on behalf of the principal.
Clue: S__________ A________
Special Agent
Definitions
-Listing Agent: represents a seller in a home sale transaction
-Selling Agent: represents a buyer in a home sale transaction (a cooperating agent)
Listing Agent VS Selling Agent
A contract between an agent and the owner of a property
-This enables the agent to act on behalf of the property owner to find potential buyers.
Clue: L_________ A_______
Listing Agreement
Allows the seller to hire as many agents as they want
-The seller will only be obligated to pay a commission to the agent who brings the successful contract. The seller has the right to sell the property and not pay a commission to any agent.
Which one is this?
A. Listing Agreement: Open Listing
B. Listing Agreement: Exclusive Listing
C. Listing Agreement: Net Listing
Listing Agreement: Open Listing
The seller hires only one agent to represent them in the sale of the property.
-There are two different versions of this:
-Exclusive agency: allows the seller to sell the property themselves and not pay the agent a commission
-Exclusive right to sell: commits the seller to paying the agent a commission regardless of who brings the buyer
Which one is this?
A. Listing Agreement: Open Listing
B. Listing Agreement: Exclusive Listing
C. Listing Agreement: Net Listing
Listing Agreement: Exclusive Listing
An agent’s relationship with a seller
-The seller and the agent agree that the seller will receive a predetermined amount at closing. The agent’s commission will be the difference between the final sales price and that predetermined amount.
Which one is this?
A. Listing Agreement: Open Listing
B. Listing Agreement: Exclusive Listing
C. Listing Agreement: Net Listing
Listing Agreement: Net Listing
An agent’s relationship with a buyer
-The agent and the buyer obligate themselves in the same manner as sellers and agents do. Termination of the buyer representation agreement occurs in the same way.
Clue: B_________ Rep____________ A________
Buyer Representation Agreement
Allows the buyer to hire as many agents as they want
-The only agent to receive commission is the one who facilitates the successful purchase. The buyer also reserves the right to buy the property on their own without paying commissions to an agent.
Clue: O_______ B_______ Rep_____________ A______
Open Buyer Representation Agreement
The buyer hires only one agent to represent them in the purchase of a property.
There are two different versions of this:
-Exclusive agency: allows the buyer to purchase the property themselves and owe the agent no commission
-Exclusive right to purchase: commits the buyer to paying the agent a commission regardless of who facilitates the purchase
Clue: E__________ B_______ Agreement
Exclusive Buyer Agreement
All agency agreements must have a defied termination date.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Expiration
The transaction is closed successfully.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Performance
This refers to the death or incapacitation of the agent or the principal.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Loss of Authority
The property is no longer viable due to comprehensive damage.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Destruction
The owner no longer has the legal right to the property.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Loss of Title
Either the agent or the principal is bankrupt.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Bankruptcy
Termination due to circumstances which could not have been anticipated
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Force Majeure
The parties agree to terminate their relationship.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Mutual Agreement
The agent fires the principal.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Renunciation
The principal fires the agent.
Which type of Agency Termination is this?
A. Expiration
B. Performance
C. Loss of Authority
D. Destruction
E. Loss of Title
F. Bankruptcy
G. Force Majeure
H. Mutual
I. Renunciation
J. Revocation
Agency Termination: Revocation
After already agreeing to represent the interests of one potential buyer, a real estate agent secretly chose to represent another without disclosing this information to either. What law has the agent defied?
A. Antitrust Law
B. Law of Agency
C. Fair Housing Law
D. Real Estate Law
Answer is B
-Under the Law of Agency, an agent is allowed to represent more than one client, but only if they have the consent of the first client. If they do so secretly without informing either, then they are in violation of this law.
What is an agreement called when the listing agent will be paid a commission regardless of who finds the buyer?
A. Open listing
B. Exclusive right to sell
C. Exclusive agency listing
D. Net listing
Answer is B
-In an Exclusive Right to Sell agreement, the seller agrees to pay the listing agent regardless of who brings the buyer.
Which of the following details is an agent NOT required to tell a potential buyer?
A. Previous water damage
B. Recent repairs to the property
C. Previous owner’s occupation
D. Potential hazards
Answer is C
-Buyers have no need to know unnecessary personal information about a previous owner, therefore, an agent does not need to disclose this information.
A broker named Kristin is showing property listed for sale through her company to a buyer named Bob. After having agency relationships explained to him, Bob refuses to sign a buyer representation agreement. What is Bob’s relationship to Kristin?
A. Client
B. Principal
C. Fiduciary
D. Customer
Answer is D
-Anyone who does not enter into an agency relationship is considered a customer. Choices A and B both describe a buyer who has established an agency relationship with a agent. Choice C describes the role of the agent in the agency relationship with a principal.
A seller, Manuel, signed a 90-day listing agreement with a broker, Bill. Manuel died before the listing expired. What happens?
A. The listing is terminated because Manuel died.
B. The listing is in effect because Manuel signed the agreement.
C. The listing is binding if any offers come to the broker before the 90 days expire.
D. The listing is binding on Manuel’s spouse for the duration of the 90 days.
Answer is A
-The death of one of the parties in the agency agreement is one valid reason to terminate the agreement. The intent of the principal does not survive death, regardless of how much time was left in the agreement. In order for the broker to receive a commission for bringing a buyer for that property, the heir to the property would need to enter into a new agency agreement.
