Law Of Agency 1 Flashcards
1
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fiduciary:
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an individual upon whom is placed the highest levels of trust and confidence when acting on behalf of another; specific fiduciary duties include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care
2
Q
TRELA is a
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law passed by the Texas Legislature to govern Texas real estate.
3
Q
TREC is a
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government agency created by the Texas Legislature to enforce TRELA.
4
Q
Principal: A major
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party to a real estate transaction (buyer, seller, landlord, tenant) or an individual who authorizes an agent to represent their interests as a client in a real estate transaction
5
Q
Client: A person who has
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signed an agency agreement with you as their agent a.k.a your principal
6
Q
Customer: A person on
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the other side of the transaction with whom the license holder does not have an agency relationship
7
Q
Third Party: A third party is any person
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involved in a real estate transaction who is not your client
8
Q
Ostensible Agency:
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When a principal allows a license holder to act in such a way as to cause a third party to believe that license holder is the principal’s agent
9
Q
Agency by Estoppel:
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Agency imposed by law when it is determined that ostensible agency existed; used to create legal accountability for the agent or the principal on whose behalf the agent acted
10
Q
Agency by Ratification:
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Created when a license holder acts on behalf of but without prior authorization of a principal and that principal accepts the license holder’s action after the fact
11
Q
Agency Coupled with Interest:
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When an agent is involved in a real estate transaction with a personal interest (either for themselves, a family member, or a business interest)
12
Q
Agency by Actual Authority:
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Actions taken by an agent for which they have permission, whether given through express or implied authority by a principal
13
Q
Express Authority:
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When a principal gives an agent authority to act on their behalf by mutual consent, either by written or oral agreement
14
Q
Implied Authority:
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When an agent takes actions that are considered customary for the profession in order to represent their agent’s interests
15
Q
Agency by estoppel occurs in an environment of
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ostensible agency.
16
Q
Agency by estoppel is created to address any of the following issues of liability:
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To hold the agent accountable to the principal for their actions
To hold the principal accountable to a third party for the actions of the agent
17
Q
Special agency
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A form of agency relationship in which agents are limited in scope and are only authorized to perform acts permitted by their principal (Broker-Client)
18
Q
General agency
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A form of agency relationship in which the principal is responsible for the acts of their agent as long as the agent is acting within the scope of their duties (Broker-Sales Agent)
19
Q
Universal agency
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A form of agency relationship in which agents have a very broad and general scope of power to act on behalf of the principal — agents have the general power of attorney (Child-Parent)
20
Q
special agents are unable to make decisions that may
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bind or obligate their principals.
21
Q
Third party
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Any individual in a real estate transaction who is not your client
22
Q
Innocent misrepresentative
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Occurs when an agent communicates false information that the agent is not aware is false
23
Q
Negligent misrepresentation
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Occurs when an agent fails to disclose significant property flaws out of ignorance
24
Q
Fraudulent misrepresentation
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Occurs when an agent purposely and deliberately hides a property flaw or feature to make the sale
25
A defect is an item that was
installed or is attached to the home and has an imperfection.
26
A malfunction is when something is
designed or built to perform a certain function and no longer does so.
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Stigmatized Property:
A property on which an event has occurred that is affecting the perceived value of the property
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murder disclosure is
Required
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Net listing
An agreement in which the seller names an amount they want their property to sell for, and then the broker tries to sell it for more because they receive the difference (the dollar amount above what the owner wants) as their commission
30
Procuring cause
The defining actions that brought a buyer to purchase a property
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Excluded Prospect:
A prospective buyer or tenant who is procured by the seller instead of the agent
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Subagent
A license holder who represents a principal through cooperation with or consent of the principal’s broker AND is not sponsored or associated with the principal's broker
33
Disclosure Form Exceptions
There are exceptions to those residential sellers of single family units who don’t have to complete the form described in Section 5.008 of the Texas Property Code. Sellers don't have to complete the form when:
A residential property consists of more than one unit.
The sale is made as part of a court order, foreclosure, or bankruptcy.
The property is being transferred back to a lender in lieu of foreclosure.
A lender is selling a home to a new buyer that resulted from the lender’s repossession of the property through foreclosure or deed in lieu of foreclosure.
A fiduciary (executors, administrators and trustees) is selling to a new buyer via an estate, guardianship, conservatorship or trust.
The sale is between one co-owner and another.
The sale is between spouses or direct relatives.
The sale occurs as part of a divorce.
The sale is to or from a governmental entity.
The sale is a new residential home.
The home value equates to 5% or less of the property value as a whole.
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Protection period
A period of time after the buyer's representation term ends in which the agent can still get compensation for their role in a transaction
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Single agency
The most commonly practiced agency form in which the agent represents only one side of a transaction
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Dual agency
Type of agency in which the agent represents the buyer and seller in a transaction
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Exclusive broker agreement
An agreement that binds the buyer into working only with that broker/agent for the specified duration of the contract
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Non-exclusive broker agreement
An agreement that leaves the buyer free to work with other agents to acquire a home under the condition that if the buyer does purchase a home because of that agent, the buyer will be required to compensate that agent based on procuring cause
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When the National Association of REALTORS® conducted the 2016 Profile of Home Buyers and Sellers the survey revealed that the things that buyers expect or want most from their agents include help:
Understanding the home buying process
Pointing out unnoticed defects and features of homes, particularly for first-time buyers
Finding the right home to purchase
Negotiating sale terms and home prices
Determining the selling price for comparable homes
Obtaining lists of service providers
40
Actual authority
Specific powers given to an agent by the principal that allows them to act on the principal's behalf
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Implied buyer agency
A type of agency where authority is implied or presumed based on the nature of the relationship between the agent and the buyer
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Exclusive right to represent –
Buyer is exclusively represented by the agent and the buyer ensures that the agent will be paid compensation if the buyer purchases a property from any source
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Non-exclusive right to represent –
Buyer is free to work with other agents, agent’s liability is limited, and the agent can be compensated if they find the home the buyer ends up purchasing
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Non-exclusive not-for-compensation –
Buyer is free to work with agents, the buyer is not required to compensate the agent, and the broker or the agent can cancel and withdraw from the agreement anytime they choose
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Home price –The fee percentage or amount can be based on the price of the home the buyer is purchasing. When the home price is higher, the agent may accept
lower percentage fee.
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Attorney representation
A situation in which a real estate attorney can represent the buyer in the purchase of a home (this option is only available in certain states)
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Know The Process of buying
```
Finding and acquiring financing
Making an offer to purchase
Writing the purchase contract
Disclosures
Inspections
Negotiations
Closing/escrow
```
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Ready, Willing, and Able Buyer Clause:
Clause in a listing agreement that offers brokers more protection and certainty of being paid compensation for the work and services performed on the client’s behalf
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Junk fees
Additional fees charged by agents and brokers on top of the sales commission
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broker compensation consists of two commissions:
The fee or commission paid to the listing broker who represents the seller by listing and marketing the home for sale
The fee or commission paid to the broker who finds a buyer to purchase the home. This broker is considered a “cooperating broker.” Typically, but not always, this is the broker that represents the buyer (buyer's broker).
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the brokerage fee charged by a listing broker is ultimately decided by the
broker and the principal.
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Broker compensation can consist of one or some combination of the following:
A flat fee based on the sales commission from the home sale
A percentage of the sales commission from the home sale
A combination of flat fees and a percentage of the sales commission
Fee for service or menu options – flat fees charged for each service an agent or broker offers
Credits to the seller at closing of the home sale transaction
Junk fees added on to the commission from the home sale
53
Here are some examples of proof of broker employment:
Profile Sheet: pre-printed listing form for the local MLS
Buyer representation agreements
Seller listing agreements
Documentation from property owners sent to broker for property to be listed, such as emails or letters
54
In-House Sale:
When a brokerage handles both sides of a real estate transaction, that transaction is considered an in-house sale.
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Syndicate:
A financial services group formed to handle large transactions that would be too hard or impossible for an individual person or entity to handle
56
Undisclosed Dual Agency:
An action taken by unscrupulous agents in order to take advantage of under-informed clients where the agent treats both parties like clients, but without the proper notice
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Mutual rescission
When the license holder (agent) and the principal (client) mutually agree to end the agency relationship
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Unilateral termination
One party makes the decision to terminate the contract without permission from the other party
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Revocation
The termination of an agreement by the person who granted it, such as when as when a principal terminates an agency relationship
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Renunciation
The rejection of an agreement by the person who accepted it, such as when an agent terminates an agency relationship
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Abandonment
When the license holder ceases to perform their duties of the agency relationship.
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Operation of law
When a change in law affects the property at the center of the agency relationship.
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once a principal expresses a desire to end an agency relationship, the agent must immediately comply. Failure to do these things in a timely fashion goes against
The Real Estate License Act (TRELA).
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In terms of termination:
Texas Association of REALTORS® (TAR) has two forms available to their members expressly for such occasions:
Termination of Listing (TAR - 1410)
Termination of Buyer/Tenant Representation Agreement (TAR - 1503)
65
A great deal of confusion could be eliminated if license holders practiced the “Four D’s”:
Decide whom they represent
Disclose to all parties whom they represent
Document that sufficient disclosure was made in a timely manner
Do your duties based on the representation and disclosures you have made
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Q: What are the agency disclosure requirements for a real estate license holder?
A: A license holder must disclose the fact that they represent a party upon the first contact with another party or a license holder representing another party. This disclosure may be oral or in writing.
67
Q: Is a license holder required to provide a party with written information relating to agency?
A: Yes. At the time of first substantive communication with a party relating to a proposed transaction regarding specific real property, a license holder must provide a written notice regarding agency, commonly referred to as Information About Brokerage Services or IABS Notice. TREC publishes the form, which license holders must use to comply with the statute.
68
Q: Are there exceptions when the statutory written statement is not required?
A: Yes. The statement is not required when:
A transaction is for a residential lease less than one year and a sale is not being considered
A meeting is with a party currently known to be represented by another license holder
The communication is at an open house and the communication concerns that same property.
69
Q: Is the license holder required to provide the "written statement" (IABS Notice) to buyer prospects at an open house?
A: No. A license holder is not required to provide the statutory written statement at the open house [per TRELA §1101.558(c)(3)].
70
Q: Is a link to the IABS Notice required on my website?
A: Yes. Rule 531.20(b)(1) states that each broker and sales agent must provide a link on its homepage to the IABS Notice labeled "Texas Real Estate Commission Information About Brokerage Services." The link must be in at least a 12-point font and in a readily noticeable place on the homepage of the business website of the broker and sales agent.
71
A sponsored agent owes all of the duties to their broker that the broker owes to their
Clients
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Reprimand and assessment of an administrative penalty of $4,000 for the following violations:
Failing to advise a sponsored salesperson of the scope of the salesperson’s authorized activities (two counts) [TREC Rules §535.2(a)]
Failing to ensure that a sponsored salesperson’s advertising complies with TREC Rule 535.154 (two counts) [TREC Rules §535.2(g)]
Failing to maintain on a current basis required written policies and procedures (two counts) [TREC Rules §535.2(i)]
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Reprimand and assessment of an administrative penalty of $1,000 for the following violations:
Failing to advise a sponsored salesperson of the scope of the salesperson’s authorized activities [TREC Rules §535.2(a)]
Failing to maintain on a current basis required written policies and procedures [TREC Rules §535.2(i)]
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Reprimand and assessment of an administrative penalty of $1,000 for the following violations:
Failing to maintain on a current basis required written policies and procedures [TREC Rules §535.2(i)]
Placing an advertisement that in any way causes a member of the public to believe that a person not authorized to conduct real estate brokerage is personally engaged in real estate brokerage [TREC Rules §535.154(g)(2)]
75
Independent Contractor:
Someone who is bound by contract to perform a certain job, but who is not considered an employee for federal or state income tax purposes
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Safe harbor
Refers to effort made by Congress in 1978 to put a halt to what it deemed as overly aggressive attempts to reclassify independent contractors as employees
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Safe Harbor was initially viewed as a temporary truce between employers and the IRS. It was then extended several times and eventually became a permanent part of the
Tax Equity and Fiscal Responsibility Act (TEFRA) in 1982.
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The three OLD CAR duties exclusive to the broker-principal agency relationship are
obedience, loyalty, and confidentiality.
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Direct activities
Activities (that usually require a license) in which a person directly helps another buy, sell or lease real property
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Indirect activities
Day-to-day activities that are influential, but more difficult to classify as to whether a license is required
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Foreign Broker:
A broker licensed outside of Texas
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Quarterly taxes
Quarterly estimated taxes used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax for individuals or entities who do not have taxes withheld from their income
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Security
A tradable financial asset of any kind
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Collusion
A secret agreement or cooperation for an illegal or deceitful purpose
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The elements of an antitrust violation are:
An agreement
Between competitors
Imposes a restraint
Restraint is unreasonable
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Disparate Treatment:
When someone is treated differently than other people who don't share the same protected characteristic
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Mediation
A resolution procedure where an impartial person (the mediator) is used to facilitate communication between parties and to promote reconciliation, settlement or understanding
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Arbitration
A forum where parties and counsel present their positions before an impartial third party who renders a specific award
89
The agent-customer relationship does not require the agent to perform fiduciary duties, but instead ministerial duties, which means
they must perform the duties of honesty and fairness for their customers.
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Tort reform
A judicial movement that tries to limit the amount of recourse and awards that can go to a complainant
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Texas Deceptive Trade Practices Act (DTPA):
The primary consumer protection law in Texas, which protects against false and misleading statements, unconscionable actions, and breaches of warranty
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Unconscionable actions
An act or practice which, to a consumer's detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree
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caveat emptor
Let buyer beware
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caveat venditor
Let seller beware
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Public remedies
Remedies enforced by the Texas Attorney General's Office, specifically the Consumer Protection Division
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Private remedies
Civil lawsuits brought by consumers against the alleged violators
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Damages
An award paid to someone to compensate them for economic or non-economic loss
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Treble damages
Damages that are three times the amount
99
Reasonable person standard
Judicial standard for determining liability in which the court would decide that if a reasonable person would have known about the defect in question, the license holder should have, too
100
REO:
Real estate owned; describes property that is owned by a lender as result of a failure to find a third-party buyer at a foreclosure auction
101
Geographic farming refers to the act of
marketing in a specific territory or neighborhood.
102
Demographic farming consists of the efforts a real estate professional will make to focus on a
specific target market based on things like age, family makeup, lifestyle, etc., as the needs and desires of these segments of society can be starkly different.
103
Net sheet
One of several names given to a worksheet that provides a seller with an idea of what they would net from the sale on their home if they accepted an offer as presented; a tool for comparing multiple offers
104
Contingency
A provision within a contract that makes performance conditional upon the occurrence of a stated event
105
Backup offers
Offers made on a property already under contract
106
Equitable title
Also known as "equitable interest;" the contractual right of the purchaser to conveyance of a property once all terms and conditions of the contract are met
107
Tortious interferences
Intentionally causing damage in someone else's contractual relationship
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Vicariously liability
Liability for others by mandate of law or by express agreement
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moral turpitude
conduct that is considered contrary to community standards of justice, honesty or good morals
