Unit 4: Real Estate Brokerage and Law of Agency

Question 1

agency

Answer 1

The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.

Question 2

agency by ratification

Answer 2

An agency relationship that is established after the fact.

Question 3

agent

Answer 3

one who acts or has the power to act for another. A fiduciary relationship is created under the the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be their agent.

Question 4

antitrust laws

Answer 4

Laws designed to preserve the free enterprise of the open marketplace by making illegal certain private conspiracies and combinations formed to minimize competition. Violations of antitrust laws in the real estate business generally involve price-fixing, allocation of customers to markets, or agreement to boycott competitors.

Question 5

appointed license holder

Answer 5

A license holder associated with and appointed by an intermediary broker to communicate with, carry out instructions of, and provide opinions and advice to whom the license holder is appointed.

Question 6

brokerage

Answer 6

for a commission or fee, bringing together parties interested in buying, selling, exchanging, or leasing real property

Question 7

buyer representation agreement

Answer 7

A contract that establishes a broker-buyer agency relationship.

Question 8

caveat emptor

Answer 8

“let the buyer beware”

Question 9

client

Answer 9

aka principal, the person who employs an agent to perform a service for a fee, may be a buyer, a seller, an owner, or a person seeking a property to rent

Question 10

commingle

Answer 10

mixing funds from a real estate transaction with personal monies. this is illegal.

Question 11

commission

Answer 11

Payment to a broker for services rendered, such as in the sale or purchase of real property; usually a percentage of the selling price of the property.

Question 12

consumer

Question 13

customer

Answer 13

A prospective buyer, seller, lessor, or lessee.

Question 14

employee

Answer 14

• Must have income tax and Social Security tax withheld from wages by the broker.
• May receive “employee benefits” from broker.

Question 15

express agency

Answer 15

An agency created by specific agreement, whether written or oral, of principal and agent, for example, written listing agreements or buyer representation agreements.

Question 16

fiduciary relationship

Answer 16

A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

Question 17

fraud

Answer 17

The intentional misstatement of fact made with intent to deceive or made with reckless disregard of the truth, and that actually does deceive.

Question 18

general agent

Answer 18

One authorized by the principal to represent the principal in a broad range of matters, for example, a property manager.

Question 19

implied agency

Answer 19

An agency created by acts or words of principal and agent, an agency inferred by circumstances.

Question 20

independent contractor

Answer 20

• Assumes responsibility for paying own income tax and Social Security tax.
• Cannot receive any “employee benefits” from broker.
• Must have a written contract.
• Must be compensated on production.

Most real estate agents are independent contractors.

Question 21

Information About Brokerage Services (IABS)

Answer 21

The law requires that “at the time of a license holder’s first substantive communication with a party,” a license holder is required to provide a “written notice,” IABS.

Question 22

intermediary broker

Answer 22

A broker who is employed to negotiate a transaction between both parties and who for that purpose may be an agent of both parties to the transaction, acting fairly so as not to favor one party over the other.

Question 23

law of agency

Answer 23

defines the rights and duties of the parties in a real estate transaction—the principal, agent, and customer

Question 24

listing agreement

Answer 24

A contract between a landowner (as principal) and a licensed real estate broker (as agent) by which the broker is employed to sell real estate on the owner’s terms within a given time, for which service the landowner agrees to pay a commission.

Question 25

misrepresentation

Answer 25

An unintentional misstatement of fact; incorrect or misleading representation

Question 26

principal

Answer 26

aka client, the person who employs the broker

Question 27

procuring cause

Answer 27

The effort that brings about the desired result. Under an open listing, the broker who is the procuring cause of the sale receives the commission.

Question 28

puffing

Answer 28

making exaggerated or unsubstantiated statements of value when selling real estate

Question 29

ready, willing, and able buyer

Answer 29

One who is prepared to buy property on the seller’s terms and is ready to take positive steps to consummate the transaction.

Question 30

special agenct

Answer 30

One authorized by a principal to perform a single act or transaction; a special agent for a seller is authorized to find a ready, willing, and able buyer for a particular property; a special agent for a buyer is authorized to assist a buyer in locating and negotiating the purchase of a property.

Question 31

subagent

Answer 31

A license holder who represents a principal through cooperation with and consent of a broker representing the principal and who is not sponsored by or associated with the principal’s broker.

Question 32

Texas Deceptive Trade Practices—Consumer Protection Act

Answer 32

Makes it illegal to use false, misleading, or deceptive acts or practices in the advertising, offering for sale, selling, or leasing of any real or personal property.

Question 33

primary ingredients in creation of agency

Answer 33

1. delegation of authority by the principal;
2. acceptance of such by the agent;
3. reliance on the agent by the principal, and
4. control of the agent by the principal

Question 34

agent’s responsibilities to principal (OLD CAR)

Answer 34

Obedience, Loyalty, Disclosure, Confidentiality, Accounting, Reasonable care and responsibility