(Lesson 4) Real estate agency (Unit #4)

Question 1

define agency

Answer 1

means a relationship in which a real estate broker or licensee, whether directly or through an affiliated licensee, represents a consumer buy the consumers consent, whether express or implied, in a real property transaction. `

Question 2

define agent

Answer 2

an agent is the individual who is authorized and consents to represent the interests of another person. In the real estate business, a firms sponsoring broker is the agent and shares this responsibility with the licensees who work for him.

Question 3

define brokerage agreement

Answer 3

is an agreement, written or oral, between a sponsoring broker and a consumer for licensed activities to be provided to a consumer in return for compensation or the right to receive compensation from another. in Illinois any exclusive brokerage agreement must be in writing.

Question 4

define consumer

Answer 4

a consumer means a person or entity seeking or receiving licensed activities

Question 5

define client

Answer 5

means a person who is being represented by a licensee

Question 6

define a customer

Answer 6

means a consumer who is not being represented by the licensee.

Question 7

Define compensation

Answer 7

means the valuable consideration give by one person or entity to another person or entity in exchange for the performance of some activity or service.

Question 8

Define confidential information

Answer 8

means information obtained by a licensee during the term of a brokerage agreement
I. was made confidential by the written request or written instruction of the client
II. deals with the negotiating position of the client, or
III. is information the disclosure of which could materially harm the negotiating position of the client.

Question 9

Client VS. customer

Answer 9

an agent works for the client and with the customer:

The client is the principal whom the agent gives advice and counsel.

The customer is entitled to factual information and honest dealings as a consumer but never receives advice or counsel or confidential information about the principal.

**the real estate licensee works for the client but cooperates with the customer.

Question 10

Define fiduciary duties (fiduciary is one who is placed in trust and confidence

Answer 10

the agency agreement usually authorizes for the agent to act for the principal. as such the real estate licensee owes the principal certain fiduciary duties:

• care
• obedience
• loyalty
• disclosure
• accounting
• confidentiality

COLD AC

Question 11

The duty of confidentiality

Answer 11

confidentiality is a key element of fiduciary duties.. client information obtained during the term of the brokerage agreement must be kept confidential..
example the if the seller is the principal the agent may not reveal such things as the principals willingness to accept less. if the buyer is the principal the agent may not reveal that they are willing to pay more, or are on a tight moving schedule…

**facts that might harm the principals bargaining position are kept confidential

Question 12

Define material fact

Answer 12

a material fact is any fact, that if known, might reasonably be expected to affect the course of events…

**material facts must always be disclosed.

Question 13

define puffing regarding opinion vs fact

Answer 13

facts must be factual and opinions are permissible as long as they are offered without the intent to deceive.

Puffing is the act of generalizing and exaggerating the benefits of a particular property… while puffing is not illegal licensees must ensure that none of their statements can be interpreted as fraudulent.

Question 14

define fraud regarding opinion vs fact

Answer 14

fraud is the intention misrepresentation of a material fact so as to harm to take advantage of another person….

That includes not only making false statements about a property but also intentionally concealing or failing to disclose important facts.

Question 15

Define negligent misrepresentation

Answer 15

negligent misrepresentation occurs when the licensee should have known that a statement about a material fact was false.

Question 16

Define latent defect

Answer 16

a structural defect that would not normally be uncovered over the course of an ordinary inspection ( due to the placement, for example ) is called a latent defect.

The seller has a duty to disclose any known latent defects that threatens structural soundness or personal safety.

**if the seller refuses to disclose the problem the broker should refuse the listing.

Question 17

what is a stigmatized property

Answer 17

a property that society has branded undesirable because of the events that occurred there. such as homicide, suicide or gang related activity. The licensee have no legal duty to disclose that a property is stigmatized.

Question 18

what is Megans law

Answer 18

megans law refers to a general name for state and federal laws requiring law enforcement authorities to make information available to the general public regarding registered sex offenders.

**listing agents have no legal duty to disclose that a registered sex offender lives near a listed home. The agents should refer their buyers clients to public available sex-offender-location lists if asked.

Question 19

an agents primary responsibility is to the principal however, the agent owes the customer..

Answer 19

an agent owes a customer the duties of reasonable care and skill, honest and fair dealing, and disclosure of known facts.

Question 20

what must licensees disclose?

Answer 20

licensees must disclose all material facts about the physical condition of the property to the customer that are actually known by the licensee and that could not be discovered by a reasonably diligent inspection of the property by the customer.

Question 21

define express agency, express contract, express agreement

Answer 21

the principal and the agent may enter an express contract aka express agreement… the parties formally express their intention to establish an agency relationship and state its terms and conditions..

Question 22

define listing agreement

Answer 22

once an express agency has formally happened… an agency relationship between a seller and a sponsoring broker is generally created by an employment contract, commonly called a listing agreement.

**this authorizes the licensee to look for a buyer or tenant for the property owner

Question 23

define buyer agency agreement

Answer 23

is an express agency relationship between a buyer and sponsoring broker.. similar to a express agreement.. it stipulates the activities and responsibilities the buyer expects from the sponsoring broker… in finding the appropriate property for purchase or rent.

Question 24

define implied contract

Answer 24

an implied agency occurs when the actions of the licensee indicate that the licensee has formed an agency relationship with a party. Even though the licensee may not have consciously planned to create an agency relationship, the parties can create one unintentionally, or accidentally by their actions.

Question 25

define gratuitous agency

Answer 25

the source of compensation does not determine agency. a real estate agent does not necessarily represent the person who pays her commission. In fact, agency can exist even if no fee is involved; it is called a gratuitous agency.

Question 26

define cooperative commission

Answer 26

in illinois, the compensation does not determine the agency relationship… both the buyers and the sellers agents are often paid by the seller in a cooperative commission arrangement. the seller first pays the listing sponsoring broker, and the listing sponsoring broker cuts a check to the cooperating sponsoring broker or directs commission to be paid out of proceeds at the closing.

Question 27

define agency couple with an interest

Answer 27

the agent has an interest in the subject of the agency. such as the property being sold.

**an agency coupled with an interest cannot be revoked by the principal or be terminated on the principals death

Question 28

define universal agent

Answer 28

a universal agent is a person empowered to do anything the principal could do personally. The universal agents authority to act on behalf of the principal is virtually unlimited…
**in Illinois a written power of attorney is required to create a universal agency.

Question 29

define a general agent

Answer 29

may represent the principal in a broad range of matters related to a particular business or activity. the general agent may, for example, bind the principal to any contract within the scope of the agents authority.

**a property manager is generally considered a general agent to the property owner. brokers and managing brokers are general agents to their sponsoring broker.

Question 30

define special agent

Answer 30

a special agent is authorized to represent the principal in one specific act or business transaction only, under detailed instructions.

**as a special agent the licensee, may not bind the principal to a contract. the principal makes all contractually related decisions and will sign on their own.

Question 31

define designated agent

Answer 31

a designated agent, is a person authorized by the sponsoring broker to act as the agent of a specific principal. a designated agent is the only licensee in the company who has a fiduciary responsibility toward that principal.

Question 32

Define single agency

Answer 32

single agency is: when an agent represents only one part in a transaction… (buyer, seller, landlord, tenant)… this relationship is called single agency.

Question 33

Define Buyer agency

Answer 33

represents buyers

Question 34

define property management

Answer 34

an owner may employ a sponsoring broker to market, lease, maintain, or manage the owners property.

Question 35

Define dual agency

Answer 35

in dual agency, the agent represents two principals in the same transaction.

**the challenge is to fulfill the fiduciary obligations of one principal without compromising the interests of the other, especially when the parties interests may not only be separate but even opposite.

Question 36

Define disclosed dual agency

Answer 36

real estate licensing laws permit dual agency only if the buyer and the seller are informed and consent to the licensees representation of both in the same transaction.

Question 37

what does Illinois confirmation of consent to dual agency require

Answer 37

in Illinois, all parties must give consent and confirmation to the arrangement in writing.

Question 38

define substantive contact

Answer 38

substantive contact is when the dialogue between a licensee and consumer moves from casual conversation to the consumers motives, objectives, financial qualifications, and other confidential information that, if disclosed, could harm the consumers bargaining position