Session 3: Agency Duties to Client/Intro to Real Estate Brokerage Flashcards
Agency
A relationship created when a person (the principal), delegates to another (the agent), the right to act on their behalf in business transactions and to exercise some degree of discretion
Agent
the individual who is authorized to act and consents to represent the interests of another person
Does the agent have a fiduciary duty to the client?
Yes
Customer
a third party in the transaction. Not the person you are representing
Client/Principal
the person you are representing
Non-agent
an intermediary who assists one or both parties in a transaction but does not represent either party.
Are non-agents recognized in AZ?
No
Meaning of fiduciary (COLDAC)
Care Obedience Loyalty Disclosure Accounting Confidentiality
What does the agent owe the customer?
Fair and honest dealing, with all material facts being disclosed
express agency
created when the parties formally state their intentions to create agency either in writing or verbally
implied agency
created by the actions (conduct) of the parties and not by any formal agreement
agency by estoppel
ostensible agency, created when a principal, through all his statements or action, leads the third party to believe someone is his agent and the third person relies on it
Does compensation source determine agency?
No
Statute of Frauds
All real estate contracts need to be in writing to be enforceable except leases of a year or less and broker to broker agreements
Law of agency
Defines the rights and duties of all parties to a transaction which include the rights of the agent, client, and customer
Statutory Law
Enacted by legislation and other governing authorities
Common-Law
Created by rules of society and decisions handed down by the courts
universal agent
power of attorney
general agent
one who is authorized by the principal to act in a wide range of on-going business activities
What is the relationship between a broker and their agents?
General agency
What is the relationship between a broker and an owner in property management?
General agency
special agent
represents principal in just one business activity
What type of agency is a listing agent to the seller?
Special agency
Designated agent
broker allows one of their agents to act as the agent to one of the principals
Does AZ allow designated agency?
No
Subagency
an agent of an agent (the licensee is a subagent to their own broker
Single agent
Representing one principal in a transaction
Dual agent
One broker representing two principals in the same transaction.
Do all parties need to agree to a dual agency?
Yes
Power of attorney
document signed giving someone to act on your behalf
Attorney in fact
a person who has the power to act on your behalf
Fraud
Misrepresentation with the intent to harm someone.
Innocent misrepresentation
an error or misunderstanding that may not be caused intentionally
Will innocent misrepresentation cancel out the contract?
Not usually
Puffing
an exaggeration of the facts and are usually considered legal
Latent defects
hidden structural defects not been by the naked eye
stigmatized properties
properties that are regarded as having psychologically impacted defects
What may be included in stigmatized properties?
- site of a natural death, suicide, homicide or any other felony
- Owned or occupied by a person exposed to HIV or any other disease not known to be transmitted through normal occupancy
- Located in the vicinity of a sex offender
Are agents obligated to disclose stigmatized defects?
No
Megan’s Law
requires convicted sex offenders to register and let their community know
procuring cause
unbroken chain of events that led to the completion of the transaction
commingling
mixing trust funds with a brokers operating account
vicarious liability
liability created not because of a person’s actions but because of the relationship between the liable person and other parties
imputed notice
an agents knowledge that is binding on the principal because of the agency relationship between them
in order for a real estate agent to be entitled to a commission they must…
- have a current real estate license at the time of sale
- must be a written employment agreement between the broker and principal
- agent must be the procuring cause in the transaction
Antitrust Laws (Sherman Antitrust)
- Commissions are negotiable
- Price-Fixing
- Group Boycotting
- Allocation of customers/markets
- Tie-in agreements
What happens if you violate Sherman Antitrust laws?
fined a maximum $350,000 and serve up to 3 years in prison. Corporations can be fined up to $100 million dollars
In AZ are all licensees considered to be employees?
Yes
A salesperson employed by a real estate broker to show and sell property listed with the broker is Best describes as an
a. agent of the broker, who is an agent for the principal
b. agent of the principal
c. principal party to the transaction
d. independent contractor, not an agent
agent of the broker, who is an agent for the principal
According to the laws of agency
a. a broker must always charge a commission and put the amount on the listing form
b. a broker may sue and collect a commission even though he had an expired license when the commission was earned
c. the commission will be based on the list price
d. the principal and the client are the same person
The principal and the client are the same person
A seller’s agent owes a duty to the buyer of:
a. loyalty and obedience
b. confidentiality and accounting
c. fair and honest dealing
d. disclosure and do care
fair and honest dealing
A salesperson may be compensated for real estate service by:
a. the owner
b. another broker
c. another salesperson
d. the salesperson’s employing broker
the salesperson’s employing broker
All of the following are violations of the federal antitrust laws Except
a. group boycotting
b. allocation of customers
c. commission splitting
d. tie-in agreements
commission splitting
Two cooperating brokers split equally the 6% commission on the sale. Broker A paid her salesperson $3,950 which was 40% of her broker’s share. What did the house sell for?
a. $164,583
b. $329,167
c. $475,250
d. $525,200
3950/0.4 = 9875 9875/0.03 = 329166.67
An agent’s sales commission is set by:
a. state law
b. professional rules and regulations
c. the MLS
d. negotiation
Negotiation
What is the appropriate remedy for a broker against a seller who wrongfully refuses to pay an earned commission?
a. file an attachment
b. file a lawsuit
c. file a lien against the property
d. file a lis pendens
File a lawsuit
Mrs. Baldwin sold her lot for $75,000 and the total commission was 6% of that amount. The broker received three-fourths of the commission and the salesperson received one-fourth. How much was the salesperson’s commission?
a. $18,750
b. $11,500
c. $3,925
d. $1,125
75000 x 0.06 = 4500
4500/4 = 1125
What is the type of insurance coverage that protects brokers from loss due to errors, mistakes, and negligence?
a. Title insurance
b. Errors and omissions insurance
c. The ALTA policy
d. Casualty insurance
Errors and omissions insurance
The term used when a broker is exaggerating his statement to a client
a. misrepresentation
b. delusional
c. puffing
d. fraud
puffing
An illegal practice in which brokers agree to divide the market among themselves and not compete in each other’s areas
a. price-fixing
b. market allocation
c. territorial partitioning
d. procuring cause
Market allocation
The broker receives a check for earnest money from a buyer and deposits it into the real estate office’s general operating account. This is called?
a. greed
b. conversion
c. commission splitting
d. commingling
commingling
The amount of commission is determined by:
a. negotiation
b. the department of real estate
c. the MLS
d. Local custom
Negotiation
A broker has a single agency with a seller. Nevertheless, the broker has a duty to:
a. disclose to a buyer material facts about the property
b. obtain the best possible deal for the buyer
c. tell a buyer why the seller is selling
d. tell a buyer about any previous offers received that failed to close
Disclose to a buyer material facts about the property
Megan’s law is concerned with:
a. elder abuse
b. information regarding child molesters
c. buyer damages
d. title protection
information regarding child molesters
In a buyer brokerage situation, who pays the salesperson’s commission?
a. the buyer only
b. the seller only
c. the buyer and seller
d. the salesperson’s broker
the salesperson’s broker
One of the requirements for a real estate salesperson to be considered an independent contractor by the IRS is that the
a. salesperson by paid salary
b. salesperson is not responsible to a broker
c. broker-salesperson contract states that the salesperson shall be treated as an independent contractor for tax purposes
d. salesperson not be supervised by a broker
the broker-salesperson contract states that the salesperson shall be treated as an independent contractor for tax purposes
By agreement, one party to a contract was discharged and another party took her place, an act known as a(n)
a. rescission
b. reformation
c. novation
d. accord and satisfaction
Novation
A broker helps a buyer and a seller with paperwork but does not represent one party. This is
a. dual agency
b. prohibited in all states because a broker has to represent at least one party
c. transactional brokerage
d. designated agency
transactional brokerage
The National Do Not Call Registry is managed by
a. Arizona Department of Real Estate
b. Federal Do Not Call Commission
c. Telephone Consumer Protection Act
d. Fair Trade Commission
Fair Trade Commission
Mary is a Designated Broker, and James is one of the salesperson’s who work for the brokerage. James committed an illegal act but now Mary is liable. This is known as
a. vicarious liability
b. imputed liability
c. plain nasty
d. cease & desist
vicarious liability
Power of attorney is the document signed giving someone the right to act on your behalf. The person who has that right is called
a. legal representative
b. spouse
c. designated agent
d. attorney in fact
attorney in fact
An agent’s knowledge that is binding on the principal because of the agency relationship between them is called
a. Megan’s law
b. Imputed notice
c. Implied agency
d. Dual agency
imputed notice
A crime where a thief steals your personal information, such as your social security number is called
a. cybercrime
b. fraud
c. identity theft
d. procedural damage
identity theft
When would a broker not be in violation if one of his agents violated the commissioner’s rules?
a. the broker issues a letter of reprimand to the agent
b. notify the commissioner immediately
c. notify the commissioner within 10 days of occurrence
d. fire the agent immediately
Notify the commissioner immediately
How often is the assessed valuation of real estate adjusted by the county assessor?
a. quarterly
b. annually
c. bi-annually
d. every three years
annually
The broker and his salesperson have a few deals already in escrow, however, the broker’s license is now suspended. What happens to the commissions?
a. only the salesperson will receive commission
b. only the broker will receive commission
c. neither the broker or salesperson will receive commission
d. both salesperson and broker will receive commission
both salesperson and broker will receive commission
A real estate licensee renews her license but two weeks later the ADRE notified her that she did not complete the renewal requirements. Since her renewal, the agent has a couple of transactions in escrow. Will she be entitled to commissions on these transactions?
a. Yes, but only if she agrees to pay a penalty to the ADRE
b. No, because her license is now terminated
c. Yes, she is entitled to a commission on transactions before her notification of termination from the ADRE
d. Yes, if she is paid outside of escrow
Yes, she is entitled to a commission on transactions before her notification of termination from the ADRE
The seller is selling his/her house, what needs to be disclosed to the buyers?
a. home is located in a superfund site
b. a sex offender is living next door
c. school in the community
d. church in the neighborhood
home is located in a superfund site
