Unit 10 - part 2

Question 1

Fiduciary Relationship

Answer 1

The agent’s fiduciary relationship of trust and confidence means that the real estate broker owes the principal certain duties.

Under the common law of agency, an agent owes the principal the six duties of, which can be remembered as COLD-AC.

1. care
2. obedience
3. loyalty
4. disclosure
5. accounting
6. confidentiality

Question 2

Disclosure

Answer 2

The duty of disclosure includes relevant information or material facts that the agent knows or in some cases what the agent should have known.

In turn, the buyer’s agent must disclose deficiencies of a property and the sales contract provisions and financing that may affect the buyer’s decision to purchase.

Question 3

Universal Agent

Answer 3

A universal agent is a person empowered to do anything the principal could do personally. The universal agent’s authority to act on behalf of the principal is virtually unlimited.

A real estate professional typically does not have this scope of authority in a real estate transaction.

Question 4

General Agent

Answer 4

A general agent may represent the principal in a broad range of matters related to a particular business or activity.

Question 5

Special Agent

Answer 5

A special agent, or limited agent, is authorized to represent the principal in one specific act or business transaction only. A real estate broker is usually a special agent.

Question 6

Single Agency and Dual Agency

Answer 6

In single agency, the agent represents only one party to a transaction.

ln dual agency, the agent represents two principals in the same transaction.

Question 7

Nonagency

Answer 7

A nonagent (also called a transaction broker or contract broker) is not an agent of either party.

A nonagent’s job is simply to help both the buyer and the seller with the necessary paperwork and formalities involved in transferring ownership of real property.

Question 8

Termination of Agency

Answer 8

An agency may be terminated for any of the following reasons:

• Completion, performance, or fulfillment of the purpose for which the agency was created
• Death or incapacity of either party
• Destruction or condemnation of the property
• Expiration of the terms of the agency
• Mutual agreement by all parties to cancel the contract
• Breach by one of the parties
• By operation of law, as in bankruptcy of the principal

Question 9

Puffing and Fraud

Answer 9

Exaggeration of a property’s benefits is called puffing.

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

Question 10

Latent Defects

Answer 10

A latent defect is 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 11

Stigmatized Properties

Answer 11

Stigmatized properties are those that society has found undesirable because of events chat occurred there.

A common stigma is a criminal event, such as a homicide, illegal drug manufacturing, gang-related activity, or a suicide.

Question 12

Megan’s Law

Answer 12

The federal legislation known as Megan’s Law promotes the establishment of state registration systems to maintain residential information on every person who kidnaps children, commits sexual crimes against children, or commies sexually violent crimes.