LESSON 2: BASIC AGENCY RELATIONSHIP Flashcards
What is an agent in a real estate transaction?
An agent represents another (client or principal) in transactions with third parties. The principal delegates authority to the agent, and the relationship between a broker and a client is called special or limited representation.
What type of agency relationship does a broker have with a client?
The relationship is called special or limited representation, and it exists only for one specific transaction. A special agent does not have the authority to make decisions for or sign anything that binds the client.
What fiduciary duties are owed to the principal by the agent?
The fiduciary duties owed by the agent include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care.
How is an agency relationship typically formed in real estate?
An agency relationship is typically formed when the broker and client sign a listing agreement or a buyer’s representation agreement.
How does agency work at the broker level?
Agency exists at the broker level, and all of the broker’s agents have fiduciary duties to the broker’s clients. All associates of a broker represent the same client when the broker becomes the agent for a buyer or seller.
What is the relationship between a real estate salesperson and a broker?
A real estate salesperson is an agent of the broker. This is called a general agency relationship, and it covers many transactions. The salesperson has the same duties to the client as the broker.
What is the difference between general agency and special agency?
General agency is on-going and covers many transactions, while special agency is for a specific transaction and does not authorize the agent to bind the client.
What is implied agency?
Implied agency occurs when an agent’s actions or words create an agency relationship without a written agreement. The agent owes duties to the client but the client owes nothing to the agent unless agreed upon.
Who is a third party in an agency relationship?
A third party is a person not party to the agency contract but may be affected by it. The broker and client are the principals to the agency agreement, and the customer is a third party.
Who is a principal in a real estate transaction?
The principal is the person who hires a real estate license holder to represent them in a specific transaction.
What is a principal broker?
A principal broker is an individual licensed by the state Real Estate Agency to run a real estate brokerage. They handle all listings and buyer representation agreements, and the sales agents are agents of the broker.
What authority does a real estate agent have?
A real estate agent has authority granted by the principal, which can be implied or expressed by actions or agreements. The agent’s authority depends on the type of agency relationship.
What is the difference between a universal agent and a general agent?
A universal agent has broad authority in the principal’s affairs, while a general agent has more limited authority in specific areas, like managing property.
What authority does a property manager have?
A property manager has a general agency relationship with the property owner, allowing them to manage the property, collect rents, hire employees, and procure tenants.
What type of authority does a special agent have?
A special agent has the most limited authority, usually in one specific transaction, and may not sign contracts or bind the principal.
What is apparent authority?
Apparent authority arises when the principal gives the impression that the agent has authority, even if the agent does not have it. Third parties rely on this impression in good faith.
What is express authority?
Express authority is the specific, stated authority granted to the agent to perform certain tasks or exercise certain powers as described in the agency agreement.
What is implied authority?
Implied authority is the authority necessary to fulfill the express authority granted to the agent. It includes customary actions required to complete duties in the business.
What happens when unauthorized actions are ratified by the principal?
Once unauthorized actions are ratified by the principal, they cannot sue the agent for acting outside their authority.
What is the difference between apparent, express, and implied authority?
Apparent authority arises from the principal’s actions giving the impression that the agent has authority, express authority is clearly stated, and implied authority is necessary to perform the duties granted.
What is the Independent Contractor Agreement in real estate?
The Independent Contractor Agreement is the contract between a Broker and Sales Agents, giving the agents the authority to act for the broker.
What does a Listing Agreement involve in Texas real estate?
The Listing Agreement is between a seller and broker to sell the seller’s home. It includes the broker’s right to represent the seller and a buyer, if necessary, and the rules for intermediary transactions, commission payments, and splits with sub-agents or buyer’s agents.
What is a Buyer’s Representation Agreement?
It is the contract between a buyer and broker to assist the buyer in purchasing a home. It may include rules for intermediary transactions and commission splits between the broker and seller if the buyer purchases the broker’s listing.
