Unit 7 - Real Estate Brokerage and the Law of Agency Flashcards
A real estate transaction involving two or more brokerage firms, one firm representing the seller and the other representing the buyer.
co-brokered sale AKA
co-brokered transaction
A Latin phrase meaning “Let the buyer beware.” Sellers do not have to disclose any facts about their property when selling.
caveat emptor
The basic framework of law that governs the legal responsibilities of the broker to the people the broker represents.
common law of agency
Duties to third party/customers
- Honesty
- Disclosure of material facts
- Fairness
Work for
Clients
Work with
Third party/customers
The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.
agency
The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions.
agency
One who acts or has the power to act for another. A fiduciary relationship is created under 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 the property owner’s agent.
agent
OLD CAR
O bedience
L oyalty
D isclosure of Information
C onfidentiality
A ccounting
R easonable Skill, Care, and Diligence
The fiduciary relationship between the subagent and the principal
Subagency
One who is employed by a person already acting as an agent; typically a reference to a provisional broker licensed under a broker who is employed under the terms of a listing agreement. Has the same duties to the client as an agent.
subagent
A main party to a transaction - the person for whom the agent works
principal AKA
the client
A third party to whom is owed honesty and fairness; not a fiduciary relationship
Customer
One in whom trust and confidence are placed; a reference to a principal-agent relationship
fiduciary
The real estate licensee who assists buyers and sellers in reaching an agreement in a real estate transaction without representing interests of either party. The licensee treats both parties equally as customers.
facilitator AKA
Transaction Broker
An illegal act by licensee who takes advantage of clients by failing to disclose the appropriate value of property
self-dealing AKA
secret profit
Any fact that is important or relevant to the issue at hand; mandatory disclosure by all agents in a transaction to all parties of the transaction.
material fact
The illegal act by a real estate broker of placing consumer funds with personal funds. By law, brokers are required to maintain a separate trust or escrow account for other parties’ funds held temporarily by the broker.
commingling
Exaggerated or superlative comments or opinions: e.g. “This house has the best view in town!”
puffing
An intentional misrepresentation of material fact so as to harm or take advantage of another person.
fraud
Intentionally misinforming any party involved in a transaction about a material fact.
willful misrepresentation
Unintentionally misinforming any party involved in a transaction about material fact.
negligent misrepresentation
Intentionally failing to disclose a material fact to any party involved in a transaction.
willful omission
Unintentionally failing to disclose a material fact to any party involved in a transaction.
negligent omission
Prohibited conduct
- Willful misrepresentation
- Negligent misrepresentation
- Willful omission
- Negligent omission
Property regarded as undesirable because of events that occured there. Some conditions that cause this are murder, gang-related activity, proximity to a nuclear plant, and even the alleged presence of ghosts.
stigmatized property AKA
psychologically impacted property
A wrongful act, injury, or violation of legal right to the person or property of another.
tort
Person empowered to do anything the principal could do personally; unlimited authority; unusual in real estate.
universal agent
One who is authorized to represent the principal in a broad range of matters related to a specific business or activity; a property manager might have this power.
general agent
One who is authorized by a principal to perform a single act or transaction. A real estate broker for the seller is usually authorized to find a ready, willing, and able buyer for a particular property, or a special agent of the buyer to find a specific type of property to purchase. Has limited authority and cannot bind his principal.
special agent
The bringing together of buyers and sellers in the marketplace
brokerage
(1) One who acts as an intermediary on behalf of others for a fee or commission. (2) One who is licensed to list, lease, buy, exchange, auction, negotiate or sell interest in real estate for others for a fee.
broker
Payment to a broker for services rendered, as in the sale or purchase of real property; traditionally a percentage of the gross sales price of the property but can be a flat fee or some other calculation.
commission
The broker/firm in a multiple-listing situation representing the seller, as opposed to the cooperating broker/firm, that brings the buyer to the transaction.
cooperating brokers
A contract under which the agreement of the parties is demonstrated by their conduct
implied agreement/conduct
An agency relationship created when principals and agents, without formally agreeing to the agency, act as if one exists.
implied authority
A method of creating an agency relationship in which the principal accepts/confirms the conduct of someone who acted without prior authorization as the principal’s agent.
ratification AKA
apparent authority
When someone claims to be an agent but there is no express agreement, the principal can establish an agency relationship by performing any act that accepts (ratifies) the conduct of the agent as that of an agent.
apparent authority AKA
ratification
A real estate transaction where the listing firm actually produces the buyer for their listing, as opposed to a co-brokered or cross sale that involves two firms.
in-house sale
Representing both parties to a transaction; must be consensual and reduced to writing prior to presentation of first offer.
dual agency
An illegal agency relationship where buyers and/or sellers are unaware of an individual broker or firm’s conflicting duties to their clients.
undisclosed dual agency
A flexible moment in time when conversation between a licensee and a consumer begins to address confidential needs, desires and abilities; latest moment to legally disclose agency choices to a consumer.
first substantial contact
A non-exclusive verbal agency agreement between a firm and a buyer-client. There is no time limit, but it must be reduced to writing prior to presentation of first offer.
oral buyer agency
Someone who works directly for an employer. Employer is obligated to withhold income taxes and Social Security taxes from compensation.
employee
Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. They pay all expenses and Social Security and income taxes and receive no benefits. MOST real estate licensees
independent contract
Tax form for employee
W2
Tax form for independent contractor
1099
