unit 1 Flashcards
What actions demonstrate exercising care when representing a buyer?
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
What exception exists to the duty of obedience when working with a client?
An agent is not bound by the duty if the principal’s directions are not legal.
An agent’s fiduciary responsibilities to a client usually end when the transaction closes. This is not true of which duty?
Confidentiality. This duty extends beyond the termination of the relationship. No personal information gained during the term of the agreement can ever be disclosed to another party.
A seller’s agent must disclose what kinds of things to the seller?
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
Typically, what actions are not considered to be part of a broker’s authority?
Such actions as:
Signing contracts for the seller
Initialing changes to an offer
Permitting early occupancy
What obligations do licensees owe to their customers?
Honesty and fair dealing
Reasonable care and skill
Proper disclosure
Describe the difference between active and passive fraud.
Active fraud is an intentional misrepresentation of a material fact for the purpose of gaining an unfair or dishonest advantage over another person.
Passive fraud is an intentional nondisclosure of a material fact.
What could happen if a licensee violates a duty to a client or customer?
Rescission of the listing agreement (causing a loss of a potential commission)
Forfeiture of any compensation that may have already been earned
Disciplinary action by the state license law authorities, including license suspension or revocation
Suit for damages in court
What principles govern an agency relationship?
Both parties must consent to the relationship.
Both parties must agree to form the relationship.
The relationship is fiduciary—meaning the agent owes certain duties to the principal as we have previously discussed.
Define implied agency.
An implied agency is formed when the actions of the parties indicate that they have mutually consented to an agency. The persons involved may not have consciously planned to form an agency relationship. However, their actions may unintentionally, inadvertently, or accidentally form the relationship.
If a transaction doesn’t complete, under what circumstances would the broker still be entitled to a commission?
The broker is still entitled to receive the commission if the transaction does not complete due to the seller’s default.
Describe the difference between constructive notice and actual notice.
Constructive notice is the legal presumption that information is available and can be obtained through due diligence.
Actual notice means that not only is the information available, but someone has been given the information and actually knows it.
What is market allocation? Give an example.
Market allocation is the division of markets by location or price. An example would be two companies getting together and deciding that one company would take one part of town, while the other company takes the other part.
What’s the penalty for violating the Sherman Antitrust Act?
Individual violators of the Sherman Act can be fined up to $1 million and up to 10 years in federal prison for each offense; corporations can be fined up to $10 million for each offense.
The Criminal Antitrust Penalty Enhancement and Reform Act of 2004 increased the maximum criminal penalty for individuals to 10 years’ imprisonment and $1 million fine; and the maximum penalty for corporations to $100 million fine.
What does the Clayton Act allow private individuals to do?
Under the Clayton Act, private individuals are permitted to sue antitrust violators. If the suits are successful, the individuals can recover three times the damages incurred plus court costs and attorneys’ fees.
What kinds of discussions about commission rates are brokers allowed to have that would not violate the Sherman Act?
Brokers may discuss how the commission would be split between the listing broker and the selling broker, in a cooperative transaction. They may also discuss commission rates with their affiliated licensees or with potential employees during an interview.
the term __ is a term that refers to a very precise legal relationship between a licensee and a seller, a buyer, a landlord or a tenant
agent
Agency Law
is a body of law that governs these relationships in very specific ways
An agentis a person who is empowered by contract to represent the interests of a ___, also known as the principal
client
The principal can be a …
seller, a buyer, a landlord, or a tenant
the agent represents the principal in dealings with third parties, who are known as ____
customers
the agency relationship established between the agent and the principal puts in place a set of _____ that an agent owes to the principal
fiduciary duties
A fiduciary relationship is one of…
the utmost trust
Agents ___ have certain duties to customers even though they do not represent them
do
the law expects an agent to:
- do their job with a reasonable degree of care, skill and diligence
- obey the principal’s direction as outlined in the contract, as long as they are legal
- account for all monies, documents and other property they receive from the principal
- be loyal by placing the clients interests above those of all others, including their own
The duty of confidentiality extends….
beyond the termination of the relationship
an agent is bound to inform the client of all facts that might affect the clients interest in transaction. this includes both the facts that the agent …. and those that the agent ….
knows; should have known
the agent can…
offer advice and counsel to their principal
the agent works…
works for the principal and WITH the customer
licenses owe their customers:
- honesty and fair dealing - an agent may not deceive, defraud, or otherwise take advantage of a customer
- reasonable care and skill - an agent will be held to the standards of knowledge, expertise, and ethics that are commonly maintained by other agents in the area
- proper disclosure - disclosure of agency, property condition, and environmental hazards
___ fraud is an intentional misrepresentation of a material fact for the purpose of gaining unfair or dishonest advantage over another person
active
___ fraud is an intentional nondisclosure of a material fact. this can happen if a person intentionally fails to disclose a fact or actively attempts to hide the fact
passive
violation of a duty owned to a client or customer could result in:
- rescission of the listing agreement (causing a loss of a potential commission)
- forfeiture of any compensation that may have already been earned
- disciplinary action by the authors, including license suspension or revocation
- suit for damages in court
an —– is created when a person (buyer or seller, landlord or tenant) delegates to another person. - the agent - the right to act on their behalf in business transactions with third parties (customers)
agency relationship
several principles govern a agency relationship:
- both parties must consent to the relationship
- both parties must agree to form the relationship
- the relationship is fiduciary - meaning the agent owes certain duties to the principal
an agency relationship can be created…
by either an oral or written agreement between principal and the agent.
three types of agency relationships exist:
- express agency
- implied agency
- agency ratification and estoppel (ostensible agency)
an agency relationship is based on…
authorization and mutual consent. NOT compensation
the agency relationship is NOT determined by who…
pays the commission. it is usually spelled out in the listing agreement, or the management agreement
commission is usually paid….
after the transaction has been consummated.
the commission is earned when the following activities have occurred:
- the broker has produced a ready, willing, and able buyer
- the buyer has signed an offer to purchase
- the seller has accepted an offer
- both buyer and seller have received signed copies of the agreement
The Sherman Antitrust Act of 1890 is….
the principal federal statute that covers competition and is one of the most important pieces of antitrust legislation
Antitrust laws prohibit:
pricing fixing, group boycotts, market allocation, tie-in arrangements
price fixing
collusion between or among members of a particular trade to maintain prices at a set level
group boycotts
agreements between or among members of a particular trade that would prevent other members from fair participation in the trade’s activities
market allocation
agreements between or among members of a trade to avoid doing business in specific market areas
tie-in arrangements
arrangements that requires a buyer to purchase additional or unrelated products or services when making a product purchaseThe
Clayton Antitrust Act of 1914…
madeboth substantive and procedural modifications to federal trust law. Private individuals are permitted to sue antitrust violates, if the suits are successful, the individuals can recover 3 times the damage incurred, plus court costs and attorney fees
The Federal trade Commission (FTC) also has the power to judge…
whether particular trade practices are unfair. They can enforce compliance with the Sherman Act and some sections of the Clayton Act
Matt Bower is a developer. Will Jones is a builder. Matt agrees to sell Will a lot, but he conditions the sale by insisting that Will agree to list the property with him after the home is built. What is this called?
Tie-in arrangement
An agent is
One who represents and acts for another.
Agent Sam told a buyer that the fence line also marked the property line. Agent Sam knew that the property line did not extend to the fence line. Agent Sam’s actions are an example of what?
Active fraud
Puffing is best characterized as which of the following?
Subjective opinion
Which of the following is NOT a form of agency?
Closed agency
What is a form of implied agency relationship created by the actions of the parties involved rather than by written agreement?
Ostensible agency
Which of the following statements best defines agency?
The fiduciary relationship between the agent and the principal.
When a home is listed, what is the most limited agency that can be created?
Special agency
“Everyone charges the same so you might as well list with me,” is an example of what?
Price fixing
After listing a home with a broker, the seller told the broker NOT to disclose a major structural defect in the house. What should the broker do?
Tell the buyer of the defect prior to the writing of an offer or refuse the listing.
A person who hires an agent to represent their interests is known as what?
Principal
What are the two forms of fraud?
Active and passive
The Criminal Antitrust Penalty Enhancement and Reform Act increased the maximum criminal penalty for individuals to what amount?
$1 million
Broker Freehand and Broker Getrich make a deal that Broker Freehand will take all the listings on the north side of town, which are located near his office, and Broker Getrich will take all the listings on the south side near his office. They have agreed not to cross into each other’s territories or allow their salespeople to do this. They have also agreed to set their rates at 7% so that the sellers will all pay the same fee. Is this acceptable?
No, this is violation of Sherman Antitrust.
An agent fails to discover flood marks on the walls in the basement of a property. The agent sells the property, and the buyer later sues the agent for failing to mention the problem. Which statement best describes what can happen in this case?
The agent has an exposure to a charge of negligent misrepresentation.
Which of these is not a violation of Sherman Antitrust laws?
Redlining
Agent Paul is bound to inform his client of all facts that might affect the client’s interests—both what Paul knows and what he “should have known.” Which of these situations would not be something Paul “should know”?
The owner of the property is HIV positive.
A contract in which an owner hires a broker to market the property creates an agency relationship between
Broker and seller.
