Term
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Definition
The term agent is actually a term that refers to a very precise legal relationship. In the real estate world, that relationship is between a licensee and one of the following:
A seller
A buyer
A landlord
A tenant
An agent is the person who is authorized to represent and act on the behalf of another person. |
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| The principal is the person who hires the agent and delegates to the agent the responsibility of representing the principal’s interests. |
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| is the relationship of trust or confidence between the agent and the principal. |
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| is the fiduciary relationship between the agent and the principal. |
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| is the third party with whom the agent deals when working on behalf of the principal. |
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| In a universal agency relationship, the principal empowers the agent to perform any and all actions that may be legally delegated to an agency representative. The instrument of authorization is the power of attorney. |
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| In a general agency, the principal delegates to the agent ongoing tasks and duties within a particular business or enterprise. Such delegation may include the authority to enter into contracts. |
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| A special agent is also known as a limited or specific agent. Under a special agency agreement, the principal delegates authority to conduct a specific activity, after which the agency relationship terminates. In most cases, the special agent may not bind the principal to a contract. |
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| true or false: In most instances, real estate brokerage is based on a special agency. The principal hires a licensed broker to procure a ready, willing, and able buyer or seller. When the objective is achieved, the relationship terminates, although certain fiduciary duties survive the relationship. |
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Definition
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Term
| agency coupled with an interest |
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Definition
| is an agency relationship in which the agent has an interest in the property that is being sold. This type of agency cannot be revoked by the principal, nor is it terminated if the principal dies. For example, a broker agrees to finance a condominium development if the developer agrees to give the broker the exclusive right to sell the finished condo units. Since the broker has a special interest in the transactions, the developer would not be able to revoke the listing agreement after the broker has provided the financing. |
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| The duties that the agent owes his or her principal are: |
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Care
Obedience
Accountability
Loyalty
Disclosure or Notice
These are often referred to by the acronym COALD or COALN. |
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| requires that the agent act in good faith and obey the principal's directions as outlined in the contract, as long as they are legal. |
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is an important duty owed to clients. An agent must be able to account for all monies, documents and other property he or she receives from the principal.
Brokers must also give copies of documents to everyone who is affected by them and retain these documents for at least three years. |
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| true or false:a licensee is required to disclose any personal interest he or she has in a property. |
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Definition
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| What actions demonstrate exercising care when representing a buyer? |
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Definition
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 |
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| What exception exists to the duty of obedience when working with a client? |
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Definition
| An agent is not bound by the duty of if the principal's directions are not legal. |
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| An agent's fiduciary responsibilities to a client usually end when the transaction closes. This is not true of which duty? |
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Definition
| 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. |
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| A seller's agent must disclose what kinds of things to the seller? |
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Definition
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 |
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Definition
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| The authority granted to the broker is outlined in the listing agreement, which typically authorizes the broker to perform these actions: |
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Definition
Place a sign on the property
Advertise the property
Show the property
Cooperate with other brokers
Use a multiple listing service (MLS)
Accept earnest money deposits |
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| true or false:As of November 1, 2003, in Oklahoma, registered sex offenders cannot have a residence within 2000 feet of a public or private school, unless already in residence. |
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| is an intentional misrepresentation of a material fact for the purpose of gaining an unfair or dishonest advantage over another person. This results in an injury to the person who is relying on the information. |
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| s 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. |
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| Exaggerated or superlative comments about a property's benefits are called puffing. For example, the statement "This home has the most efficient floor plan of any of the homes in this neighborhood" is puffing. |
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| This occurs when a broker lists the property, decides to buy it for him or herself and then collects the agreed-upon commission. |
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| Violation of a duty owed to a client or customer could result in: |
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Definition
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 |
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| Typically, what actions are not considered to be part of a broker's authority? |
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Such actions as:
Signing contracts for the seller
Initialing changes to an offer
Permitting early occupancy |
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| What obligations do licensees owe to their customers? |
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Definition
Honesty and fair dealing
Reasonable care and skill
Proper disclosure |
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| Describe the difference between active and passive fraud. |
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Definition
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. |
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| What could happen if a licensee violates a duty to a client or customer? |
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Definition
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 |
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Term
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Definition
| Brokerage is the term used to refer to the business of bringing buyers and sellers together to assist them in the negotiations for the sale of a property. Brokerage firms can be owned by one licensed broker or can be owned by a partnership or corporation that has more than one licensed person. Most times, brokerage firms employ other licensees. Sellers enter into listing agreements with the brokerage firm; therefore, the brokerage firm owns the listing agreements. |
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| true or false: When a client enters into a listing agreement with a brokerage firm, the broker is the agent of the client. The licensees that are affiliated with the brokerage firm are the agents of the broker and the subagents of the broker's clients. |
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| According to license law in many states, a broker is vicariously liable for a sales associate's wrongful actions only if "the broker had actual knowledge of such violation or retains the benefits, profits or proceeds of a transaction wrongfully negotiated by his sales associate or employee after notice of the sales associate's or employee's misconduct." |
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| what is an agency relationship? |
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| is created when a person (buyer or seller, landlord or tenant) delegates to another person, the agent, the right to act on his or her behalf in business transactions with third parties (customers). |
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| Three types of agency relationships exist. |
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Express agency
Implied agency
Agency ratification and estoppel (Ostensible agency) |
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Term
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Definition
This most common way of creating an agency relationship is a written agreement in which the parties involved formally express the intention to form an agency relationship and they outline the terms and conditions of that agreement.
A listing agreement is the common form of express written agency agreement between a seller and a broker, authorizing the broker to find a ready, willing and able buyer for the property.
A buyer's agency agreement is the common form of express written agency agreement between a buyer and a broker, authorizing the broker to find a suitable property to purchase or rent. |
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Term
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Definition
A written agreement is not necessary to create an agency relationship – the relationship can be implied.
This relationship is formed when the actions of the parties indicate that they have mutually consented to an agency. In fact, the persons involved may not have consciously planned to form an agency relationship. However, their actions may unintentionally, inadvertently or accidentally form the relationship.
For example, Buyer Mary calls sales associate Jim to show her a home. She assumes then that he is her agent. In reality, Jim is the listing agent for the home he showed. An implied agency could be created if Jim does not correct Mary's assumption that he is now her agent. And in this example, an unintended dual agency relationship could be formed – causing conflict for all parties. (We'll talk more about dual agency in the next chapter.) |
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| Agency Ratification and Estoppel |
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Definition
This agency relationship arises by the actions of the parties involved, rather than by a written agreement.
For example, Charles is the owner of a vacant property he is selling himself. He knows that broker Hal is showing the property to prospective buyers without the authority to do so. If Charles doesn't stop Hal from doing the showings, the law considers that the prospective buyers have the right to believe that Hal is Charles' agent.
This agency is also known as ostensible agency because on the surface an agency relationship appears to exist. In the example above, once this type of agency is created, Charles is prevented by estoppel* from denying its existence. |
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| what is constructive notice? |
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Definition
| Constructive notice is the legal presumption that information is available and can be obtained through due diligence (care and activity). This is also referred to as legal notice. |
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Definition
On the other hand, actual notice means that not only is the information available, but someone has been given the information and actually knows it.
If the prospective buyer (or his or her agent) has searched the public record and inspected the property, that buyer has actual notice, also called direct knowledge. |
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Definition
A third type of legal notice is known as imputed notice. This means that what an agent knows is binding on the principal because of the agency relationship they have entered into.
For example, if the buyer's agent receives notice that the seller has accepted the buyer's offer, the buyer could not then withdraw the offer, even though the buyer does not yet have actual notice of the contract acceptance. |
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| The compensation or commission the broker will receive is usually spelled out in one of the following: |
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Definition
Listing agreement
Buyer's agency agreement
Management agreement
This commission can be computed in any of these ways.
Percentage of the transaction amount
Flat fee
Fee for service
Hourly rate |
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true or false: ommission is usually paid after the transaction has been consummated. However, 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 the offer.
Both buyer and seller have received signed copies of the agreement.
However, if for some reason the transaction does not complete, the seller may still be responsible for paying a commission to the broker. This can happen if the seller:
Changes his or her mind and refuses to sell
Has a spouse who won't sign the deed
Has a title with uncorrected defects
Commits fraud with regard to the transaction
Cannot deliver possession
Insists on terms that were not in the listing agreement
Mutually agrees with the buyer to cancel the sale
What this means is that the broker is still entitled to receive the commission if the transaction does not complete due to the seller's default. |
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Definition
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| What principles govern an agency relationship? |
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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. |
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Term
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Definition
| 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. |
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| If a transaction doesn't complete, under what circumstances would the broker still be entitled to a commission? |
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Definition
| The broker is still entitled to receive the commission if the transaction does not complete due to the seller's default. |
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| Describe the difference between constructive notice and actual notice. |
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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. |
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| The act of creating an agency relationship in which the principal accepts the conduct of someone who acted without prior authorization is called what? |
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