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Unit 9

Terms in this set (42)

Agent
A real estate professional can represent a client
Agency relationships in real estate transactions are governed by three kinds of law
Common law = the rules established by tradition and court decisions

Statutory law = the laws enacted by the legislature

Administrative law = the rules and regulations created by real estate commissions and departments, as authorized by the legislature.
The law of agency
The law that governs the relationship between a principal and his or her agent.
Agent
The individual who is authorized and consents to represent the interests of another person in dealing with a third party
Principal
The individual who hires the agent and delegates to that agent the responsibility of representing the principal's interests

A broker is the principal in dealing with sales associates
Agency
the fiduciary relationship between the principal and the agent by which the agent is authorized to represent the principal in one or more transactions
Fiduciary
The relationship in which the agent is held in a position of special trust and confidence by the principal
Client
The principal in a real estate transaction for whom a real estate broker acts as agent
Customer
The third party or nonrepresented consumer for whom some level of service is provided.
Non agent
someone who works with a buyer and a seller, assisting one or both parties with the transaction without representing either party's interests
principal-agent relationship
It must be consensual

Express Agency - An agency relationship may be created by an oral or written agreement between the parties

Implied Agency - An agency relationship may also result from the parties' behavior.
Express Agreement
The parties formally express their intention to establish an agency and state its terms and conditions. The agreement may either be oral or written, unless a written agreement is required by law.
Listing Agreement
An agency relationship between a real estate seller and a broker is generally created by a written employment contract. It authorizes the broker to find a buyer or a tenant for the owner's property.
Buyer Representation Agreement
an express agency relationship between a buyer and a broker. The buyer representation agreement stipulates the activities and responsibilities the buyer expects from the broker in finding the appropriate property for purchase or rent
Implied Agreement
when the parties act as though they have mutually consented to an agency, even if they have not entered into a formal agency agreement.
Buyer's Agent
A real estate professional who is under contract to locate property for a buyer and represent the buyer's interests in a transaction.

Could instead be paid directly by the buyer, which is common in commercial, but not residential, real estate transactions.

Any written agency agreement (with seller or buyer) should state how the agent is to be compensated, after all alternatives are discussed with the client.
Fiduciary Relationship
A relationship of trust and confidence, means that the real estate broker owes the principal certain duties.

Under common law of agency, an agent owes the principal the six duties of care, obedience, loyalty, disclosure, accounting, and confidentiality, which can be remembered as COLD-AC
Care
Agents must exercise a reasonable degree of care while transacting the business entrusted to them by principals.

The most fundamental way in which an agent exercises care is to use that skill and knowledge on a principal's behalf.
Errors and Omissions (E&O) Insurance
Covers liability for errors and negligence in the listing and selling activities of a real estate broker and often the broker's sales associates.
Obedience
The fiduciary relationship obligates an agent to act in good faith at all times, obeying the principal's lawful instructions in accordance with the contract.
Loyalty
The duty of loyalty requires that the agent place the principal's interests above those of all others, including the agent's own self-interest.

Neither real estate brokers nor real estate sales associates may sell property in which they have a personal interest without informing the purchaser of that interest
Disclosure
It is the agent's duty to keep the principal informed of all facts or information that might affect a transaction. The duty of disclosure includes relevant information or material facts that the agent knows or in some cases should have known.

A seller's real estate agent is also expected to disclose information about known material defects in the property to prospective buyers. This may appear to violate the agent's duty of loyalty to the seller, but this requirement falls under the broader duty to serve the general public and can protect the agent from claims of misrepresentation.

The buyer's agent must disclose deficiencies of a property and the sales contract provisions and financing that may affect the buyer's decision to purchase.
Accounting
The agent must be able to report the status of all funds received from or on behalf of the principal
Confidentiality
An agent may not disclose the principal's personal information - for example, the principal's financial condition

A seller's agent also represents the buyer is called Dual Agent

Anything a REALTOR learns about a client that can be considered confidential must remain confidential forever
Universal Agent
A person empowered to do anything the principal could do personally...... virtually unlimited
General agent
May represent the principal in a broad range of matters related to a particular business or activity

Ex.) A property manager hired by the owner of income-producing property is typically a general agent for the owner
Special Agent
is authorized to represent the principal in one specific act or business transaction only. A real estate broker is usually a special agent.
Disclosure of Agency
These laws stipulate when, how, and to whom disclosures must be made..... Learn your state's real estate agency disclosure requirements
Single Agency
The agent represents only one party at a transaction
Seller Representation
If a seller enters a listing agreement with a broker to market the seller's real estate, the broker becomes an agent of the seller; the seller is the principal, the broker's client
Buyer Representation
A buyer who contracts with a broker to locate property and represent the buyer's interests in a transaction is the principal - the broker's client. The broker, as agent, is strictly accountable to the buyer.
Dual Agency
The agent represents two principals in the same transaction. Dual agency requires equal loyalty to two different principals at the same time - a high burden that means neither principal has the full, undivided loyalty of the agent
Implied Agency
an agency that occurs when a principal and an agent do not expressly create an agency, but it is inferred from the conduct of the parties
Designated agency
also called assigned agency or appointed agency, is available in some states to accommodate an in-house sale in which two sales associates of the same broker are involved.
Designated Agent
is the only sales associate in the company who has a fiduciary responsibility toward the principal
Non-agent / Transaction Broker
is not an agent of either party. A non agent's job is simply to help both the buyer and the seller with the necessary paperwork and formalities involved in transferring ownership of real property, what may be referred to as ministerial acts.
Puffing
Exaggeration of a property's benefits
Fraud
the intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person.
Negligent Misrepresentation
occurs when the real estate professional should have known that a statement about a material fact was false.
Latent Defect
A hidden structural defect that would not be discovered by ordinary inspection
Stigmatized properties
Properties that society has found undesirable because of events that occurred there or because of proximity of the property to a known nuisance. A common stigma is a criminal event, such as a homicide, illegal drug manufacturing, gang-related activity, or a suicide.
Megan Law
the establishment of state registration systems to maintain residential information on every person who kidnaps children, commits sexual crimes against children, or commits sexually violent crimes.
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