Nat'l Chapter 5 - Nat'l Brokerage

Question 1

Agent, Principal, Fiduciary, Agency, Client, Customer

Answer 1

Agent: is the person who is authorized to represent and act on the behalf of another person.
Principal: is the person who hires the agent and delegates to the agent the responsibility of representing the principal’s interests.
Fiduciary: is the relationship of trust or confidence between the agent and the principal.
Agency: is the fiduciary relationship between the agent and the principal.
Client: is the principal.
Customer: is the third party with whom the agent deals when working on behalf of the principal.

Question 2

Universal Agent

Answer 2

the principal empowers the agent to perform any and all actions that may be legally delegated to an agency representative. The instrument of authorization is the power of attorney.

Question 3

General Agent

Answer 3

the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts.

Question 4

Special Agent

Answer 4

AKA limited or specific agent.
Under a special agency agreement, the principal delegate’s authority to conduct a specific activity, after which the agency relationship terminates. In most cases, the special agent may not bind the principal to a contract.

Question 5

Agency coupled with an interest

Answer 5

An agency relationship in which the agent has an interest in the property that is being sold. This type of agency cannot be revoked by the principal, nor is it terminated if the principal dies.
For example, a broker agrees to finance a condominium development if the developer agrees to give the broker the exclusive right to sell the finished condo units. Since the broker has a special interest in the transactions, the developer would not be able to revoke the listing agreement after the broker has provided the financing.

Question 6

Duties and agent own their principal (5) - COALD or COALN

Answer 6

Care
Obedience
Accountability
Loyalty
Disclosure or Notice

Question 7

Care

Answer 7

The law expects an agent to do his or her job with a reasonable degree of care, skill, and diligence.
An agent is liable to the principal for any loss that results from carelessness or negligence.

Question 8

If the agent represents the seller, exercising care and skill includes: (5)

Answer 8

Helping the seller set a realistic asking price.
Discovering and disclosing facts that affect the seller.
Presenting contracts properly.
Marketing the property effectively.
Helping the seller evaluate purchase offers.

Question 9

If the agent represents the buyer, exercising care and skill includes: (4)

Answer 9

Helping the buyer locate appropriate housing.
Evaluating property values and property conditions.
Determining financing alternatives.
Presenting offers and counteroffers with the buyer’s interests in mind.

Question 10

Obedience

Answer 10

Requires that the agent acts in good faith and obey the principal’s directions as outlined in the contract, as long as they are legal.
For example, an agent may follow the principal’s instructions stating that the home may not be shown on Sundays. However, an agent may not follow any directives that violate Fair Housing laws or that instruct the agent to conceal a defect in the property.

Question 11

Accountability

Answer 11

An agent must be able to account for all monies, documents and other property he or she receives from the principal.

Brokers must also give copies of documents to everyone who is affected by them and retain these documents for at least three years.

Question 12

Loyalty

Answer 12

Requires the agent to place the client’s interests above those of all others, including his or her own.
An agent must negotiate agreements without considering the amount of compensation he or she will receive. In addition, a licensee is required to disclose any personal interest he or she has in a property.
Includes confidentiality, unless given expressed consent from seller/buyer.
No personal information gained during or after the term of the agreement can ever be disclosed to another party.

Question 13

Disclosure

Answer 13

An agent is bound to inform the client of all facts that might affect the client’s interests in the transaction. This includes both the facts that the agent knows and those that the agent should have known.
An example of a “should have known” would be a crack in a basement wall that the agent failed to notice. If the basement wall ultimately springs a leak, the agent could be held liable for failing to disclose a material fact if the court believes that the typical agent would have noticed the crack.

Question 14

An agent for a seller has a duty to disclose such things as: (5)

Answer 14

Purchase offers.
Who the prospective purchasers are and if the agent has a relationship with them in any way.
Ability of the purchaser to complete the transaction.
Ability of the purchaser to offer a higher price.
Purchaser’s intention to resell the property for a profit.

Question 15

An agent for the buyer has a duty to disclose such things as: (4)

Answer 15

Deficiencies in the property.
Any contract provision of financing terms that don’t suit the buyer’s interests.
How long the property has been listed.
Why the seller is selling.

Question 16

A broker is authorized by the client to find a ready, willing and able buyer, but this authorization usually does not include the authority to perform such actions as: (3)

Answer 16

Signing contracts for the seller
Initialing changes to an offer
Permitting early occupancy

Question 17

The authority granted to the broker is outlined in the listing agreement, which typically authorizes the broker to perform these actions: (6)

Answer 17

Place a sign on the property
Advertise the property
Show the property
Cooperate with other brokers
Use a multiple listing service (MLS)
Accept earnest money deposits 

Brokers are also often given authority to perform some tasks that are not explicitly spelled out in the agreement, but which are customary in order to accomplish the goal of the agreement – namely to find a buyer for the property. An example of this would be using a salesperson to hold an open house.