Level 8 - Brokerage Relationships: Law & Practice

Question 1

Real Estate Practice is regulated by what in NC?

Answer 1

• common law of agency
• contract law
• state licensing law
• North Carolina Real Estate Commission (NCREC) rules.

Question 2

What the difference between client and customer?

Answer 2

an agent works for a client; an agent works with a customer.

Question 3

agency

Answer 3

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

Question 4

agent

Answer 4

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

Question 5

broker

Answer 5

“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 choose to work for another broker or brokerage firm.

Question 6

common law of agency

Answer 6

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

Question 7

contract law

Answer 7

the body of laws affecting contracts

Question 8

customer

Answer 8

an individual with whom a license holder has no agency relationship now owed fiduciary duties but to whom fairness and honesty are still required.

Question 9

facilitator/transactional broker

Answer 9

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

Question 10

fiduciary

Answer 10

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

Question 11

general agent

Answer 11

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.

Question 12

principal/client

Answer 12

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.)

Question 13

special agent

Answer 13

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.

Question 14

subagent

Answer 14

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

Question 15

third party

Answer 15

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.)

Question 16

universal agent

Answer 16

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.

Question 17

what are the three ways agency can be created?

Answer 17

• express, implied & agency by ratification.

Question 18

what are the three types of agent authority?

Answer 18

• express, implied & apparent.

Question 19

apparent authority

Answer 19

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

Question 20

express authority

Answer 20

authority 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.

Question 21

implied authority

Answer 21

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

Question 22

Single agency - seller agency only

Answer 22

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.

Question 23

Single agency - buyer agency only

Answer 23

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.

Question 24

Seller Subagency

Answer 24

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

Question 25

Dual Agency

Answer 25

both principals to a real estate transaction are represented by the same brokerage.

Question 26

Designated Dual Agency

Answer 26

both buyer and seller are represented by the appointed licensees of the same brokerage.

Question 27

What are the fiduciary duties to a client?

Answer 27

O (obedience)
L (loyalty)
D (disclosure)
C (confidentiality)
A (accounting)
R (reasonable care and skill)

Question 28

first substantial contact

Answer 28

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.

Question 29

informed consent

Answer 29

the principle that a client or customer must understand and agree to certain actions or agency relationship prior to implementation

Question 30

self-dealing

Answer 30

actions taken by an agent wherein their own best interests take priority over those of customers or clients.

Question 31

caveat emptor

Answer 31

the concept that the buyer is responsible for verifying the quality and value of the goods prior to the purchase.

Question 32

fraud

Answer 32

wrongful or criminal deception intended to result in financial or personal gain

Question 33

latent defect

Answer 33

any structural defect that cannot be detected by ordinary inspection.

Question 34

material fact

Answer 34

any fact that is significant or essential to the transaction; information that could impact the buyer’s decision to purchase the property.

Question 35

misrepresentation

Answer 35

a statement, written or spoken, that is false or misleading

Question 36

omission

Answer 36

occurs when the licensee fails to disclose a material fact in a transaction

Question 37

patent defect

Answer 37

any structural defect that is easily discoverable upon inspection

Question 38

puffing

Answer 38

the making of exaggerated claims (technically opinions) in order to achieve a sale or some other objective.

Question 39

stigmatized property

Answer 39

property with suppressed market value unrelated to its physical condition or features; frequently as a result of death of an occupant, murder, suicide, or suspected paranormal activity.

Question 40

treble damages

Answer 40

liability that results in three times the damages.

Question 41

tort

Answer 41

an act, injury, or violation of another’s person or property.