11. Agency

Question 1

What is the agency relationship in real estate?

Answer 1

The agency relationship is the legal relationship between a broker (agent) and a client (principal) in real estate transactions.

Question 2

Who are the parties involved in an agency relationship?

Answer 2

The parties are the principal (client), the agent (broker), and the customer (third party).

Question 3

What is the essence of the agency relationship?

Answer 3

The essence is trust, confidence, and mutual good faith.

Question 4

What are the basic roles in an agency relationship?

Answer 4

The principal hires an agent as a fiduciary to perform a desired service on the principal’s behalf.

Question 5

What are the three types of agency?

Answer 5

The three types are universal agency, general agency, and special agency.

Question 6

What is universal agency?

Answer 6

In universal agency, the principal empowers the agent to perform any and all actions that may be legally delegated.

Question 7

What is general agency?

Answer 7

In general agency, the principal delegates ongoing tasks and duties within a particular business or enterprise.

Question 8

What is special agency?

Answer 8

In special agency, the principal delegates authority for a specific activity, after which the agency relationship terminates.

Question 9

How can an agency relationship be created?

Answer 9

An agency relationship can be created through an express agreement or by the actions of the parties by implication.

Question 10

What is an implied agency?

Answer 10

An implied agency arises when the parties act as if there were an agreement, even without a specific agreement.

Question 11

How can an agency relationship be terminated?

Answer 11

An agency relationship can be terminated by full performance, mutual agreement, expiration, or involuntary termination.

Question 12

What are the fiduciary duties of an agent to the client?

Answer 12

The agent’s duties include skill, care, loyalty, obedience, confidentiality, accounting, and full disclosure.

Question 13

What is the duty of loyalty in an agency relationship?

Answer 13

The duty of loyalty requires the agent to place the interests of the client above all others.

Question 14

What is the agent’s duty of confidentiality?

Answer 14

The agent must hold in confidence any personal or business information received from the client.

Question 15

What are the principal’s duties in an agency relationship?

Answer 15

The principal must be available, provide information, and compensate the agent if agreed.

Question 16

What is single agency?

Answer 16

Single agency means the agent represents one party in a transaction, either the seller or the buyer.

Question 17

What is subagency?

Answer 17

In subagency, a broker works as the agent of another broker who is the agent of a client.

Question 18

What is dual agency?

Answer 18

Dual agency means representing both principal parties to a transaction, such as both buyer and seller.

Question 19

What is transaction brokerage?

Answer 19

Transaction brokerage is a form where no agency relationship exists in the transaction.

Question 20

What is the role of a broker’s salespersons?

Answer 20

The broker’s salespersons are subagents of the listing broker and owe fiduciary duties to the broker and the broker’s client.

Question 21

What does dual agency mean?

Answer 21

Dual agency means representing both principal parties to a transaction, such as both the buyer and seller.

Question 22

How can dual agency arise?

Answer 22

Dual agency may arise from a voluntary agreement between the principal parties or from the parties’ actions, similar to implied single agency.

Question 23

What is a conflict of interest in dual agency?

Answer 23

Dual agency contains an inherent conflict of interest as many fiduciary duties can only be rendered to one party.

Question 24

What is required for written, informed consent in dual agency?

Answer 24

In states that permit dual agency, the agent must meet strict disclosure requirements, and principals must agree in writing.

Question 25

What is disclosed (voluntary) dual agency?

Answer 25

Disclosed dual agency is created when parties give written consent in disclosure forms, confirming the agent's relationship with both principals.

Question 26

What is implied and undisclosed dual agency?

Answer 26

Implied dual agency occurs when an agent's actions lead a customer to believe they are being represented, potentially creating a dual agency situation.

Question 27

What are the duties of a disclosed dual agent?

Answer 27

A dual agent must disclose the agency relationship to both parties and obtain their written consent.

Question 28

What is the role of a transaction broker?

Answer 28

A transaction broker acts as a facilitator and does not represent either the buyer or seller.

Question 29

What are the duties of a transaction broker?

Answer 29

Duties include accounting for money, exercising reasonable skill and care, providing honesty, and keeping parties informed.

Question 30

What duties are not imposed on the transaction broker?

Answer 30

Transaction brokers are not bound by fiduciary duties and are held to standards for dealing with customers.

Question 31

What is the no subagency approach?

Answer 31

Some states disallow subagency, requiring agents to represent either the buyer or seller directly.

Question 32

What are the objectives of agency disclosure?

Answer 32

Objectives include notifying clients about representation, informing them of fiduciary duties, and obtaining acknowledgment of disclosure.

Question 33

What is required for seller agent disclosures?

Answer 33

An agent must disclose the agency relationship in writing before executing the listing agreement.

Question 34

What constitutes substantive contact?

Answer 34

Substantive contact occurs when an agent shows a property, elicits confidential information, or executes a contractual offer.

Question 35

What must a buyer agent disclose?

Answer 35

A buyer agent must disclose the agency relationship to the seller or seller's agent on first contact.

Question 36

What is required for dual agent disclosures?

Answer 36

A dual agent must obtain informed written consent from all parties and confirm disclosure in subsequent contracts.

Question 37

What disclosures are prohibited for a dual agent?

Answer 37

A dual agent cannot disclose certain information, such as a seller's willingness to accept less than the listed price.

Question 38

What are facilitator disclosures?

Answer 38

Facilitators must provide written notice of their non-agency status to all parties on first substantive contact.