Unit 4: Authorized Relationships, Duties, and Disclosures

Question 1

Administrative Law

Answer 1

The body of law created by administrative agencies in the form of rules, regulations, orders and decisions.

Question 2

Agent

Answer 2

A representative; one who is authorized to act on behalf of another.

Question 3

At Arm’s Length

Answer 3

An arm’s length transaction refers to a business deal in which buyers and sellers act independently without one party influencing the other.

Arm’s length transactions are commonly used in real estate deals because the sale affects not only those directly involved in the deal but other parties as well, including lenders.

If two strangers are involved in the sale and purchase of a house, the final agreed-upon price is likely close to fair market value, assuming that both parties have equal bargaining power and equal information about the property. The seller would want a price that’s as high as possible, and the buyer would want a price that is as low as possible. Otherwise, the agreed-upon price is likely to differ from the actual fair market value of the property.

Whether the parties are dealing at arm’s length in a real estate transaction has a direct impact on financing by a bank of the transaction and municipal or local taxes, as well as the influence the transaction could have on setting comparable prices in the market.

Question 4

Caveat Emptor

Answer 4

The principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.

Question 5

Common Law

Answer 5

Common law is a body of unwritten law established by the court. Unusual cases that cannot be determined based on existing written laws will be influenced by common law in order to make a decision. For example, in real estate very often you will hear about the common law property system, which is a system used to determine ownership of property during marriage. This is fairly important in distributing wealth after one of the spouses passed away or during a divorce.

Question 6

Consent to Transition

Answer 6

Transition to transaction broker disclosure.—A single agent relationship may be changed to a transaction broker relationship at any time during the relationship between an agent and principal, provided the agent first obtains the principal’s written consent to the change in relationship. This disclosure must be in writing to the principal either as a separate and distinct document or included as part of other documents such as a listing agreement or other agreements for representation. When incorporated into other documents, the required notice must be of the same size type, or larger, as other provisions of the document and must be conspicuous in its placement so as to advise customers of the duties of limited representation, except that the first sentence of the information identified in subparagraph (c)2. must be printed in uppercase and bold type.

Question 7

Customer

Answer 7

A customer uses the services of a real estate licensee but has not signed an agreement with an agent.

Question 8

Designated Sales Associates

Answer 8

Two real estate licensees assigned to represent the buyer and seller as single agents in a nonresidential transaction. The buyer and seller must have assets of $1 million or more and sign disclosures declaring their assets meet the mandatory threshold.

Question 9

Dual Agency

Answer 9

When a single agent represents both the buyer and seller in a real estate transaction. This brokerage relationship is illegal in the state of Florida

Question 10

Fiduciary

Answer 10

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person.

Question 11

General Agent

Answer 11

A representative authorized to by the principal to perform only acts related to a business or to employment of a particular nature

Question 12

Limited Representation

Answer 12

Transaction brokers provide a limited form of nonfiduciary representation to a buyer, or seller or both in a real estate transaction

Question 13

No Brokerage Relationship

Answer 13

A seller or a buyer can choose not to be represented by a real estate broker. Florida law does not require a buyer or seller to be represented. A broker working in a no broker relationship may enter into a listing agreement with a seller and be paid a commission.

Question 14

Nonrepresentation

Answer 14

A legal brokerage relationship in which brokers do not represent either buyers or sellers in a transaction. Under Florida law all brokers are presumed to be transaction brokers unless the client or customer requests in writing to have another form of representation; that is, single agent or non-representative broker.

Question 15

Principal

Answer 15

A principal is any person involved in a contract, such as a seller, buyer, principal broker, or an owner who has hired an agent as a property manager.

Question 16

ADD

Answer 16

Mnemonic device to remember the duties in all three brokerage relationships - No Brokerage Relationship, Transactional Broker and Single Agent
A- Account for all funds
D- Deal honestly and fairly
D- Disclose all material facts related to the value of residential property.

Question 17

COLD

Answer 17

Mnemonic device to remember the duties of a single agent brokerage relationship.  In addition to ADD in all three brokerage relationships, single agents are held to 
C - Confidentiality
O - Obedience
L - Loyalty
D - Disclosure (full)

Question 18

Residential Sale

Answer 18

The sale of improved residential property of four or fewer units , the sale of unimproved residential property intended for use as for or fewer units, or the sale of agricultural property of 10 or fewer acres

Question 19

Single Agent

Answer 19

An agent who is in a fiduciary relationship with either the buyer or seller of a real estate transaction, but not of both parties

Question 20

Special Agent

Answer 20

A special agent in real estate is an agent hired to perform a specific duty for a client. The agent’s authority is limited to the specific job for the client. … The agent only has the authority to act as the client’s listing agent; once the home is sold, the relationship between the agent and the client ends.

Question 21

Transactional Broker

Answer 21

A transaction broker provides limited representation to a buyer, seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent. Limited representation allows a licensee to facilitate a real estate transaction by assisting both the buyer and the seller, but a licensee will not work to represent one party to the detriment of the other party when acting as a transaction broker to both parties.