Real Estate Agency

Question 1

Agency relationships are governed by:

Answer 1

Common law: the rules established by tradition and court decisions

Statutory law: the laws enacted by the legislature

Administrative law: the rules and regulations created by real estate commissions and departments, as authorized by the legislature.

Question 2

Agent

Answer 2

The individual who is authorized and consents to represent the interests of another person in dealings with a third person. Acts as agents of the broker. Hired by principal to act on their behalf.

Question 3

Principle

Answer 3

The individual who hires the agent and delegates to that agents the responsibility of representing their interests.

Question 4

Agency

Answer 4

The fiduciary relationship between the principle and the agents by which the agents is authorized to represent the principal in one or more transactions.
Mud be CONSENSUAL

Question 5

Fiduciary

Answer 5

The relationship in which the agent is held in a position of special trust and confidence by the principal.

Question 6

Client

Answer 6

The principal in a real estate transaction for him a real estate broker acts as agent.

Question 7

Customer

Answer 7

The third party or non-represented consumer who is not a principal but for whom some level of service may be provided and who is entitled to fairness and honesty. They may be represented by a separate agent.
Real estates duties to customers:
-reasonable care and skill in performance
-honest and fair dealings
-disclosure of all facts that the professional knows or should reasonably be expected to know that materially affect the value or desirability of the property

Question 8

Nonagent

Answer 8

Facilitator, intermediary, transactional broker, transaction coordinator, or contract broker. Someone who works with a buyer and seller assisting one or both parties with the transaction with out representing either party’s interests. Subject to statutory responsibilities.

Question 9

Express agency

Answer 9

Oral or written agreement between parties to create agency

Question 10

Implied agency

Answer 10

An agency relationship resulting from the parties behavior

Question 11

Express agreement

Answer 11

Principal and agent enter a contract in which parties formally express their intention to establish an agency and state its terms and condition. Oral or written.

Question 12

Listing agreement

Answer 12

An agency relationship between A real estate seller and a broker created by a written employment contract which authorized the broker to fund a buyer or tenant for a he owners property.

Question 13

Buyer representation agreement

Answer 13

An express agency relationship between a buyer and a broker in which the buyer representation agreement stipulates the activities and responsibilities the buyer expects from the broker.

Question 14

Implied agreement

Answer 14

This occurs when the parties act as though they have mutually consented to an agency, even if they haven’t entered into a formal agency agreement. They can create a relationship unintentionally, inadvertently, or accidentally by their actions.
SOURCE OF COMPENSATION DOES NOT DETERMINE AGENCY.

Question 15

Gratuitous agency

Answer 15

Agency that exists with no fee.

Question 16

Fiduciary relationship

Answer 16

Under common law of agency, an agent owes the principal 6 duties:
-care
-obedience
-loyalty
-disclosure
-accounting
-confidentiality 
COLD-AC

Question 17

Conversion

Answer 17

The illegal use of entrusted client monies.

Question 18

Universal agent

Answer 18

A person empowered to do anything the principal could do personal. Can act on behalf of the principal and is unlimited. I.e.: court appointment guardian etc. Not commonly an agent

Question 19

General agent

Answer 19

May represent the principal in a broad range of matters related to a particular business or activity. Ie: property manager. A real estate sales associate usually is a general agent of the employing broker.

Question 20

Special agent aka limited agent

Answer 20

Authorized to represent the principal in one specific act or business transaction only. Usually real estate broker.

Question 21

Single agency

Answer 21

Agent represents only one party to a transaction. Cannot represent more than the principal.

Question 22

Dual agency

Answer 22

The agent represents two principals in the same transaction. Requires equal loyalty to two different principals at the same time. It is impossible to maintain both confidentially and full disclosure.

Question 23

Designated agency

Answer 23

Assigned or appointed agency
Available in some states to accommodate in house sales. Two agents in the same brokerage are designated to represent each party.

Question 24

Agency terminations

Answer 24

• Completion or fulfillment of duties
• death or incapacity of either party
• destruction or condemnation of property
• expiration of the terms of the agency
• mutual agreement by all parties to cancel contract
• breach by one of the parties
• by operation of law, as in bankruptcy of principal etc

Question 25

Puffing

Answer 25

Exaggeration of a properties benefits. It’s legal, but must not be fraudulent. It’s considered unethical for REALTORS.

Question 26

Fraud

Answer 26

The intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person.

Question 27

Negligent misrepresentation

Answer 27

Occurs when the real estate professional should have known that a statement about a material fact was false.

Question 28

Latent defect

Answer 28

A hidden structural defect that would not be discovered by ordinary inspection. Buyers may cancel the sales contract or receive damages when a seller fails to reveal known latent defects.

Question 29

Megan’s law

Answer 29

Federal legislation promotes the establishment of state registration systems to maintain residential information in every person who kidnaps children, commits sexual crimes against children, or commits sexually violent crimes.
This law affects real estate professionals duty of disclosure.

Question 30

Agency coupled with interest

Answer 30

This cannot be revoked by the principal or terminated upon the principals death.