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Agency Relationships and Contracts
Terms in this set (74)
How is agency created?
Through a written contract or bby actions of the parties, not by an exchange of money or payment for services
WHat are the two types of agency?
Express and Implied
Agency created through words, written or oral, between the principal and the agent, such as a listing agreement.
Based on the actions of the parties that imply that they have mutually consented to an agency relationship
What are the types of agents?
General agent, special agent, and universal agent
when the principal delegates a broad range of powers, and the relationship is expected to be ongoing
when the principal delegates a specific act or business transaction - example: a listing agent or a party with a durable power of attorney or an agent who is entered into a buyer's agency agreement
a party is given full power of attorney to represent another person - example: a guardian of a minor or incompetent person
What are the types of agencies?
Principal vs Agent
principal is the owner and the brokerage is the agent, the principal delegates thee brokerage to act on the principal's behalf
a position of trust and confidence
personal service contract securing the employment of a brokerage firm to find a ready, willing, and able buyer
Types of Listing Agreements
Exclusive Right to Sell
Net Listing (illegal in SC)
Responsibilities of an Agent
COALD (care, obedience, accountability, loyalty, and disclosure)
Care - reasonable care and skill (no tax or legal advice)
Obedience - act in good faith, obey the principal's instructions
Accountability - accountable for all funds or property
Loyalty - principal's interests above the rest
Disclosure - keep principal informed! disclose defects of a property, disclose max amount offers to sellers
Acts performed by a licensed agent for a customer that are informative or clerical in nature and do not rise to the level of active representation
Exaggerated or superlative comments or opinions.
Types of contracts
- unilateral and bilateral
- expressed and implied
- void and voidable
only one person is obligated to perform duties in this contract
both parties are obligated to perform duties in this contract
the parties have specifically agreed, orally or written, to enter into a contract
the parties by their actions or conduct enter into a contract -ex: calling a taxi, buying gas at the station, ordering food at a restaurant
Validity of a contract
to be valid and enforceable:
-parties are legally and mentally competent
-Mutual assent/ meeting of the minds (an offer and acceptance)
-the contract must be in proper legal form (usually in writing)
-created for a legal purpose (illegal purpose is void)
-legal consideration (a promise, or offer of valuables to induce another to enter the contract ex: the selling price of a property)
-reality of consent (contract entered without duress, menace, misrepresentation, or fraud)
Void, Voidable, and Unenforceable Contracts
Void - it is missing an essential element and has no legal force and effect
Voidable - it may be rescinded by a party or both
Unenforceable - when neither party can sue the other to force performance ex: an oral agreement to purchase property
When a broker represents only the buyer or only the seller in the transaction
the agent represents two principals in the same transaction - illegal in GA
Facilitator or Transaction Broker
Does not represent either party in a transaction. Both are customers.
A process that accommodates an in-house sale in which two different agents are involved. The broker designates one agent to represent the seller and one agent to represent the buyer.
Notice of Delivery/Acceptance of a contract
An offer must be accepted to create a contract, and must be unconditional, unambiguous, and in strict conformance with the offer.
The acceptance is not effective until the offeror receives notice, called Delivery.
A contract that has not yet been fully performed.
all parties have fulfilled their duties and responsibilities
Statute of Frauds
A state statute under which certain types of contracts must be in writing to be enforceable. ie deeds, certain leases, real estate sales contracts
Suit for Specific Performance
A lawsuit to hold the defaulting party to his duties under a contract
If the seller breaches a real estate sales contract, the buyer may sue, asking the court to force the seller to go through with the sale and convey the property as previously agreed.
Is an oral contract enforceable by law?
many can be but the statute of frauds requires that certain contracts be made in writing to be enforceable
purchase contract, contract of sale, purchase and sale agreement, offer to purchase
-The seller's agreement to sell and the buyer's agreement to buy.
-Must meet state law guidelines
-An offer is not a contract until there has been a meeting of the minds and a written acceptance by the parties
General principles of a contract
contains terms of an obligation, consists of an offer, an acceptance, and consideration.
To have a binding contract the agreement must be bilateral, express, in writing. The parties must be competent and must be valuable consideration, reality of consent, acceptance, and delivery.
What is an option contract
An optionor (seller) agrees to keep an offer to sell or lease real property in return for option money. The optionee (buyer) doesn't have to buy, the optionor has to sell if the optionee exercised the option.
What does an option contract contain
names and addresses of all parties
identification of the property
terms of sale
date option expires
method of notice
provisions for disbursement of option money should the option not be exercised
A lease under which the tenant has the right to purchase the property either during the lease term or at its end.
The seller accepts a down payment on a parcel of land but title to the property does not pass until the last principal payment has been received. This is referred to as an installment sales contract or a contract for a deed.
a transfer of rights, duties, or both from one contract/person to another contract/person
The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. It is a release of liability from the original contract
statements or events whose meanings are unclear or confusing
In a contract requires the completion of a certain act or promise before the contract is binding or it may cancel contract obligations
in an executory contract the buyer's interest in the property is called equitable title interest. Legal title is held by another, the buyer has the right of possession and an insurable interest in the property
Under certain circumstances one party must forfeit or give something
eg. earnest money given if contract breached
right of first refusal
the right to match or better an offer before the property is sold to someone else
let the buyer beware
let the seller beware
A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.
A clause in which one party agrees to compensate another for a loss or damage that is sustained.
Cancellation / Termination clause
allows one or both parties to annul their obligations under certain conditions
breach of contract
The failure, without legal excuse, of a promisor to perform the obligations of a contract.
damages that parties to a contract agree in advance should be paid if the contract is breached
Damages DIRECTLY related to breach.
Damages that compensate for the cost of that which has been lost
Punitive damages (exemplary damages)
compensation awarded to a plaintiff that goes beyond reimbursement for actual losses and is imposed to punish the defendant and deter such conduct in the future
time is of the essence
A phrase included in contracts to require punctual performance of all obligation. Usually sets a specific date/time for contract to be performed
Buyer Agency Relationship
When a real estate broker enters into a contract with a buyer
the statistical study of the population in reference to size, density, and distribution in a give area
estimate of how quickly homes have sold in the neighborhood within the past year
difference between the purchase price plus capital improvements and the price when sold
the taxable profit realized from the sale or exchange of an asset
Depreciation or cost recovery
income tax deduction that allows a tax payer to recover the cost or other basis of property over the assets' useful life. An annual allowance for the wear and tear, deterioration of the property. LAND DOES NOT DEPRECIATE, only the improvements on it can
residential vs commercial investment depreciation rates
residential - 27.5 years
commercial - 39 years
Any improvement that extends the life or increases the value of a piece of property.
listings may be terminated by
fulfillment of the contract
mutual consent or a rescission
abandonment by either party
death of broker or seller
destruction of premises
buyer agency agreements may be terminated by
fulfillment of the contract
mutual consent or rescission
abandonment by either party
death of the broker or buyer
Exclusive right to sell listing
Under this listing arrangement, the broker employed is entitled to a commission no matter who sells the property during the listing period. (Even the Seller)
exclusive agency listing
1) Only one broker is authorized to sell
2) If the owner finds a buyer, no commission is owed
An agreement between an owner and many brokers. If a broker produces a ready willing, and able buyer, a commission is due. However, the owner still has the right to sell his/her property and is not obligated to pay a commission to anyone.
The broker agrees to sell the property in order to achieve a net price to the owner, and anything which is received above the net price is the broker's commission. A net listing is prohibited by the licensing law in many states.
Exclusive buyer agency
buyer is obligated to compensate the agent whenever the buyer purchases a property of the type agreed upon in the contract
exclusive-agency buyer agency
Broker is entitled to payment only if he or she locates the property the buyer purchases
Open buyer agency agreement
An agreement that permits the buyer to enter into multiple agreements with an unlimited number of sponsoring brokers, and the sponsoring broker receives compensation only if she locates the property the buyer ultimately purchases; also called a non exclusive buyer agency agreement.
Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).
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