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NC Real Estate Exam Prep > Level 8 Agency Fundamentals > Flashcards

Level 8 Agency Fundamentals Flashcards

1
Q

Common Law of Agency

A

the body of laws affecting agency
that are the result of custom and/or case law, as opposed to statutory law introduced at the state or federal level.

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2
Q

In addition to the
common law of agency, real estate practice in
North Carolina is regulated by:

A

Contract law: the body of laws affecting
contracts
State license law: North Carolina’s laws
affecting real estate licensing as defined
in G.S. 93A
North Carolina Real Estate
Commission (NCREC) rules: NCREC’s
rules affecting real estate licensing and licensee conduct.

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3
Q

The Principal/Client

A

Although many in the industry use the terms client and principal interchangeably, a client is not simply a principal. A client is your principal.

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4
Q

agency

A

the relationship in which an individual is authorized to act on behalf of another

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5
Q

agent

A

an individual with authority to act on behalf of another; a state license is
required to operate as an agent in real estate

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6
Q

broker

A

“full” broker who has graduated from provisional broker status after passing
90 hours of post-licensing education; does not need to be supervised by a
broker-in-charge, but in practice, often chooses to work for another broker or
brokerage firm

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7
Q

customer

A

an individual with whom a license holder has no agency relationship nor owes
fiduciary duties but to whom fairness and honesty are still required

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8
Q

facilitator/transactional broker

A

an individual who represents neither party in a transaction and treats both
parties as customers; this is NOT ALLOWED in North Carolina

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9
Q

fiduciary

A

an individual upon whom is placed the highest levels of trust and confidence
when acting on behalf of another

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10
Q

general agent

A

an agent who is authorized to manage all of a principal’s affairs within certain
specified areas; enjoys broader authority than that of a special agent but less
than that of a universal agent

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11
Q

principal/client

A

the client of a broker in an agency relationship; the parties to a contract in a
real estate transaction (as opposed to lenders, escrow agents, etc.)

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12
Q

special agent

A

an agent with a limited scope of authority to act on behalf of their principal;
usually towards a single, specific objective, end, or goal that is not ongoing

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13
Q

subagent

A

the agent of the agent who owes the agent’s client the same fiduciary duties

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14
Q

third party

A

any person involved in a real estate transaction who is not your client; includes
not only customers (the non-client principal in a transaction) but also all
other non-client participants in a transaction such as title officers, lenders,
appraisers, etc.

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15
Q

universal agent

A

agent with the power to act AND make decisions on behalf of the principal in
all business matters of concern; often granted via a power of attorney

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16
Q

Agency Creation (3 ways)

A
  1. Express
  2. Implied
  3. Agency by ratification
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17
Q

Express agency

A

created by explicit
appointment of the agent by the principle
in oral or written form

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18
Q

Implied agency

A

created by actions,
conduct, and words (as opposed to
explicit expression)

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19
Q

Agency by ratification

A

created
when an individual claims to be an
agent despite there being no express
agreement, and the principal accepts the
conduct of the agent afterward

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20
Q

The only acceptable way to create agency
in North Carolina real estate

A

is with an
explicit, oral or written agreement

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21
Q

Termination of Agency

A

Performance: fulfillment of purpose
* Expiration: agreement reaches its
expiration date
* Mutual agreement: both parties agree
to terminate
* Breach of agreement: either party fails
to uphold their duties
* Destruction or condemnation: property
is destroyed or condemned
* Death or incapacitation: firm or client
dies or becomes incapacitated
* Operation of law: either party faces
bankruptcy

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22
Q

Express authority

A

derived from an agency relationship that is created
either orally or in writing where the principal explicitly appoints the agent to
act on their behalf

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23
Q

implied authority

A

derived from an agency relationship that is created by the actions, conduct, and words of either or both parties without ever being
expressly requested

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24
Q

apparent authority

A

derived when an agent takes an unauthorized action on behalf of a principal which the principal then accepts after the fact

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25
A broker-in-charge is responsible for:
Supervising all provisional brokers associated with or engaged on behalf of the firm at such office in accordance with NCREC's rules. Supervising all brokers affiliated with the brokerage to ensure they follow agency agreement and disclosure requirements.
26
The provisional broker is
licensed to engage in the business of real estate only under the guidance and supervision of their sponsoring broker-in-charge.
27
In Writing
All agency relationships should be documented in writing with either a listing agreement or a buyer representation agreement.
28
North Carolina Agent Types (5)
Single agency - seller agency only Single agency - buyer agency only Seller subagency Dual agency Designated Dual Agency
29
Single agency - seller agency only
The brokerage firm represents only the seller in a transaction, and all its affiliated brokers are subagents of the seller-client. All brokers interact with buyers as customers
30
Single agency - buyer agency only
: The brokerage firm represents only the buyer in the transaction, and all its affiliated brokers are subagents of the buyer-client. The properties that the brokers show to the client are either listed with another brokerage firm that they work with or with sellers who are selling their home without the assistance of a broker (this is known as for sale by owner).
31
Seller subagency
An unaffiliated (meaning from another brokerage) cooperating broker and/or their licensees help a listing broker find a buyer for the listing broker's seller-client
32
Dual agency
Both principals to a real estate transaction are represented by the same brokerage.
33
Designated dual agency
Both buyer and seller are represented by the appointed licensees of the same brokerage.
34
Agency Disclosure (2 main types)
1. Agency disclosure 2. Disclosure of material facts
35
In North Carolina, agency disclosure must be documented with the
Working With Real Estate Agents Disclosure form.
36
Disclosure of Material Facts
The disclosure of material facts is a key component of the general duty of disclosure and the common law of agency
37
Material fact
A material fact is one that, if known, could cause a buyer or seller of real estate to take a different course of action
38
Duties to Customers and Third Parties
Disclosure of material facts Honesty and fairness
39
fiduciary duties
the full sum of obligations owed to the client in an agency relationship that ensures that the agent always acts in the best interest of the client
40
first substantial contact
the critical point at which agency disclosure is required by a license holder; generally occurs at the first face-to-face meeting with the customer and prior to the sharing of any confidential information or initiation of any action in regards to a specific property
41
informed consent
the principle that a client or customer must understand and agree to certain actions or agency relationships prior to implementation
42
self-dealing
actions taken by an agent wherein their own best interests take priority over those of customers or clients
43
The North Carolina Residential Property Disclosure Act
The law requires sellers to complete and sign the required disclosure statements. These statements are: Residential Property and Owners' Association Disclosure Statement (RPOADS) Mineral and Oil and Gas Rights Mandatory (MOG) Disclosure
44
RPOADS and MOG disclosure forms must be delivered...
to the buyer before they submit their first offer to purchase. The buyer will also sign the disclosure to acknowledge receiving it.
45
Licensee Responsibilities
disclose all material facts not only to their client but to all the impacted parties in the transaction. This could include sellers, buyers, landlords, tenants, and lenders.
46
A licensee can be found liable if they
Knowingly make a false representation of a material fact Omit known material facts Purposely conceal a material fact Fail to discover and disclose a material fact they'd reasonably be expected to know about Engage in false advertising
47
Misrepresentation
Misrepresentation is a statement, written or spoken, that is false or misleading. There's willful misrepresentation (aka fraudulent misrepresentation) where an agent purposely says something false, and negligent misrepresentation where an agent accidentally says something that's not true
48
omission
occurs when an agent should disclose a material fact, but does not. There is willful omission and negligent omission.
49
Puffing
occurs when an agent makes statements of opinion about a property.
50
Material Facts Categories
Facts about the property itself (property condition) Facts related to the property (outside factors that could impact the property's value or use) Facts related to the principal's ability to complete the transaction Facts the agent knows are important to a party in the transaction
51
Stigmatized Properties
License holders are not obligated to disclose the psychological stigma of a property so long as it has no material effect on the condition of the property. The death of an occupant is only considered a material fact if the condition of the property caused the death.
52
Megan's Law
Authorities must make information available to the public regarding registered sex offenders. As a licensee, you are NOT required by law to disclose or investigate the presence of sex offenders. You will not be held liable for failing to disclose info on the Sex Offenders Registry.
53
caveat emptor
the concept that a buyer is responsible for verifying the quality and value of the goods prior to the purchase
54
fraud
wrongful or criminal deception intended to result in financial or personal gain
55
latent defect
any structural defect that cannot be detected by ordinary inspection
56
patent defect
any structural defect that can be detected by ordinary inspection
57
treble damages
liability that results in three times the damages
58
Consequences for an Agent's Breach of Duties
Disciplinary action from NCREC: Throughout this chapter you've seen references to the license laws that relate closely to an agent's OLDCAR duties. If an agent violates those duties, the license laws, or rules set by NCREC, they could face a public reprimand or have their license suspended or revoked. Civil liability: If an agent's breach of duty harms a principal or a customer, they could sue the agent or their affiliated brokerage firm. The agent would then be liable for the damages caused by their improper actions. Criminal liability: If an agent violates the license law, it is also a Class 1 misdemeanor. For higher crimes, like fraud or embezzlement, an agent could face fines and/or imprisonment.
59
Principal's Duties to Agent
Good faith: cooperate with the agent in their efforts to fulfill the fiduciary duties they owe the principal Compensation: follow the terms in the agency agreement between the principal and the agent to compensate the agent when they earn it
60
Principal's Duties to Client
Disclosure: provide the required disclosure forms (RPOADS and MOG), disclose known material facts, and do not misrepresent material facts Contract performance: perform the duties as laid out in any contracts they sign
61
Consequences for a Principal's Breach of Duties
Principals who breach their duties to their agent or to a third party can be liable for the damages caused by their actions. The penalties could include a civil lawsuit and/or criminal prosecution, depending on their actions. In some cases, a principal can be held liable for an agent's improper actions.
62
tort
an act, injury, or violation of another's person or property

NC Real Estate Exam Prep (3 decks)

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