Law of Agency Flashcards
What is an ethical dilemma?
- do not know the right course of action
- have difficulty doing what they consider to be right
- find the wrong choice very tempting
Duties of an agent
Obedience- follow instructions of client
Loyalty- put interests of client first
Disclosure disclose information about property and parties
Confidentiality- kept confidential forever
Accounting- funds held in separate trust
Reasonable Care- competence and expertise
General Agency vs. Special Agency
General can represent in particular type of transaction
Special is most limited. Can only follow instructions
Employee
Minimum monthly compensation Broker pays fees Broker can set quotas Mandatory policies Team and not individuals Minimum time in office
Termination of agency relationships
Purpose is completed Expires By mutual agreement Death or incapacity Condemnation or destruction of property Bankruptcy Operation of law Revocation of license Abandonment by agent Revocation of agreement by principal Termination by broker
Sherman Anti-Trust Act and Commission Rates
Commission rates must be negotiable and not set
Cannot limit competition by allocating markets or customers
Duties of the principal and the definitions of those duties
CRIP
Compensation- agent should be paid
Reimbursement- agent should be reimbursed
Indemnification- principal will protect agent from loss
Performance- principal expected to perfom
Elements of a valid listing agreement
Signatures of owners and agent Legal description List price Term commission
Disclosure requirements for the agent to customers and clients
Material facts
Disclosure of agency, property condition and environmental hazards
Requirements for Independent Contractor Status
Must hold license Must have commission Have contract specifying contractor status No mandatory policies Agent pays expenses Cannot be made to attend sales meetings or seminars No set work hours No benefits
Types of deceptive or misleading advertisements or advertisement practices
Inaccurate or misrepresents property Advertising listing without permission or name of broker Failing to remove after it ends Identifies sales agent as broker Created confusion about permitted use
Comparative Market Analysis
Based on properties that have sold that are most similar
Unlicensed assistants and permitted activities
Manage office Accompany license holders Act a on-site apartment manager Assist in arranging financing with direction of license holder Place for sale sign Accompany inspector
TREC rules for advertising and signs
Cannot mislead Appear as if agent is broker Offer to sell or lease property without permission Offer property on different terms Place sign on property without permission False promises Disclose compensation for providers May not rank providers
Setting commission rates – violations
Cannot fix commission prices, limit competition or boycott discount brokers
Sherman Anti-Trust Act
Clayton Act
TREC advertising rules and font requirements
Brokers name at least ½ font of largest contact information
Team names must end in team or group
Agent name and broker name must be on all advertisements
IABS and CN 1-2 on website
Subagency
Broker is assisting with sale of another brokers listing and buyer is unrepresented
The concept of Agency and agency relationships
One person represents and acts for another
Based on trust
Agent is expert
Involves money or property
TREC website requirements for links to the IABS form
Link must be on homepage of website in at least 10 pt font and labeled Texas Real Estate Commission Information about Brokerage Services
How most real estate agents are paid – page 153
Gross check and 199-MISC form
Results of broker death and the effect on sponsored agents
Agents and broker placed on inactive
All listings terminated
Who can legally earn a commission/sue for a commission/share a commission
only broker
Team name registration rules
Cannot imply they are separate from broker
Must end in team or group
Must be registered
Must notify within 30 days of no longer using
Cannot have agent’s name
Brokers name must be 50% of size of font used
Team names – requirements – acceptable and unacceptable words
Must end in team or group
Can use realty
Cannot use company, brokerage or associates
express authority
specific oral instructions
implied authority
the norm
Fiduciaries and the fiduciary relationship
Must put principal interest first and give full disclosure
Trust accounts, commingling and conversion
Must have separate trust account
Cannot commingle funds with personal funds
Conversion- spending client funds without authorization
Stigmatized properties – conditions and disclosure requirements
Physical or psychological stigma
Must disclose unless AIDS/HIV related or death
Intermediary – appointed associates – duties and requirements
Represent both sides but has to remain neutral
Appointments must be done in writing
Give advice to respective parties
Must have authorization from both clients
Deceptive Trade Practices Act
1973
Consumer can sue for damages
Agent has to have knowingly deceived consumer
Texas Real Estate Commission
1949
Enforce and administer License Act
Can suspend/revoke licenses
Defamation – definition/explanation/examples
Harming reputation of another by making false statement
Requires evidence of false statement, statement made to other person and damage caused
type of listings
open
exclusive agency
exclusive right to sell
net listing
open listing
can sell with other brokers or themselves. No commission promised
exclusive agency
can list with only one broker or sell themselves. No commission promised
exclusive right to sell
only broker can sell and owner can sell. Commission promised either way
net listing
seller has minimum amount of proceeds at closing. Commission is the difference from what is made
DTPA best practices
DTPA – steps for an agent to help avoid lawsuits – page 206 Disclose defects Use seller’s disclosure form Give list of 3 inspectors Recommend inspection Have client reinspect after repairs done or written waiver Do not give opinion of property Keep notes
Intermediary with and without appointments – requirements/scenarios
With appointments requires at least 2 agents. Broker cannot represent one
Information About Brokerage Services – IABS – purpose and content
Inform about duties of agent to clients and representation
Canons of Professional Ethics
Fidelity Integrity Competency Consumer Information (must be displayed) Discriminatory Practices
dual agency
represent both sides and negotiate illegal
cooperative sale
two different brokers represent each side
Disclosure of Representation
At first contact
Oral or writing
Advantages of Buyer/Seller Agency Only
No unintentional dual representation
Brokers do not have to act as intermediaries
Agents only responsible for one party
Disadvantages of Buyer/Seller Agency Only
Many buyers do not want to sign agreement or pay commission
Agents can only make commission from one side
Five sources of ethical standards and what each includes
Utilitarian Approach Rights Approach Fairness or Justice Approach Common Good Approach Virtue Approach
Utilitarian Approach
Ethical actions produces greatest balance of good over harm to those affected
Rights Approach
Individuals have the right to have their moral rights protected and
respected, and the right to be told the truth, and not to be injured.
Fairness or Justice Approach
Ethical action is equal for all, or if not, then fair for some,
based on some defensible standard.
Common Good Approach
Ethical standards and actions embrace common conditions
that are important to the welfare (common good) of all.
Virtue Approach
Ethics are habits that enable us to act accordingly as persons who
are truthful, honest, courageous, compassionate, generous, tolerant, and possess integrity,
fairness, self-control, and prudence.
IABS Presentation
first substantive discussion
Duties to customer
Honesty
Disclosure of material facts
Handle funds with care
Be responsible for oral or written statements
Agency by Actual Authority
grants express authority either written or oral
Ostensible Agency
actions lead one to assume one is an agent
Agency by Ratification
does not have authority to act but client accepts if after learning
Agency by Estoppel
client inadequately supervises agent
Agency Coupled with an Interest
broker is owner or interested in property
