Agency - Part 2 - Chapters 4-6 Flashcards
What types of arrangements, situations, and relationships give rise to conflicts of interest in RE transactions
A conflict of interest arises when a broker/agent, acting on behalf of a client, has a competing professional or personal bias which hinders their ability to fulfill their fiduciary duties on behalf of their client. Fees and benefits from the following must be disclosed:
- professional courtesies
- familial favors
- preferential treatment by others toward the broker and their agents.
What kinds of relationship and interest present a potential conflict of interest?
A conflict of interest arises and must be disclosed when the broker:
- has a PRE-EXISTING RELATIONSHIP with another person due to kinship, employment, partnership, common membership, religious, civic ties, or any other socio-economic context
- that relationship might hinder their ABILITY TO FULLY REPRESENT the needs of their client.
How do you mitigate potential conflicts resulting from familial and investment relationships?
To mitigate potential Conflicts of Interest, a broker or agent must DISCLOSE the information to the client with the Conflict of Interest Form 527.
Or in the case with a business, the referral of a client to a financially controlled business, owned or co-owned by the broker, needs to be disclosed by use of the Affiliated Business Arrangement (ABA) disclosure Form 519.
Affiliated Business Arrangement (ABA)
An Affiliated Business Arrangement (ABA) Form (205 and 519) is used when a broker or agent refers a client to a financially controlled business whose earnings are shared with the broker/agent. This is a written disclosure.
conflict of interest
A conflict of interest arises when a broker or agent has a positive or negative bias toward a party in a transaction which is incompatible with the fiduciary duties owed to their client. Conflicts of Interest MUST be disclosed at the time time the conflicts arise, typically prior to providing a buyer with property info, or taking a listing from a seller.
dual agency
A dual agency relationship results when a broker/agent represents both the buyer and the seller in a RE transaction. A broker can’t do this without disclosing their dual agency and obtaining the client’s consent at the time the conflict arises.
What is the difference between agency and fee sharing?
The agency relationship of the buyer’s broker/agent is determined by the conduct of the broker/agents, NOT by the sellers payment of a broker fee to the broker, nor is it determined by splitting the fee received by the seller’s broker. Fee sharing is decided by the brokers at the time when contracts are established.
Identify situations in which a dual agency and subagency is established and managed.
A DUAL agency has always been proper brokerage practice and it occurs naturally when representing buyers and sellers. However, that dual agency MUST be promptly disclosed to each client. Failure to disclose a dual agency relationship can result in:
- loss of brokerage fee
- liability for money losses incurred by the clients
- disciplinary action by DRE on a complaint
A SUB agency is established when a provision in the listing agreement authorizes the seller’s broker to create subagency between their seller and another broker. Basically, the sellers broker hires another broker to help with the marketing of a property.
dual agent
A dual agent is a broker to simultaneously represents the best interest of OPPOSING PARTIES in a transaction, ie. both the buyer and the seller.
Confidential pricing info needs to remain the UNDISCLOSED knowledge of the dual agent unless they are authorized to release the info to the other party.
subagent
A sub agent is an individual who has been delegated agency duties by the primary agent of the client, not the client themselves. Basically, a broker hires another broker for help, not the home-owner.
multiple listing service (MLS)
The Multiple Listing Services (MLS) is an association of real estate agents pooling and publishing the availability of their listing properties.
What are the general laws and regulations governing broker-held trust funds?
The safekeeping of trust funds is ensured by the imposition of recordkeeping and accounting requirements on brokers when they receive, transfer or disburse trust funds.
Explain how to manage, receive, deposit, hold and disburse trust funds.
Brokers set up a Trust Account to handle all trust funds given to them by clients. Funds received in the form of Cash or Check trust funds are to be:
- deposited into broker’s trust account
- held undeposited as instructed
- endorsed and handed to other entitled to the funds
Broker must SECURE TRUST FUNDS that are gems, coins, notes or other personal property in a safe or safe-deposit box.
Understanding trust fund recordkeeping and accounting procedures
The broker is required to keep a OWNER’S STATEMENT which regularly accounts to the owner on the status, expenditure, and location of the negotiable trust funds.
conversion
Conversion is the unlawful appropriation of another’s property. Example, trust funds are illegally commingled when a broker deposits the funds into an account other than a dedicated trust fund account. A brokers unlawful use of trust funds for any reason other then client’s wishes constitutes CONVERSION of the client’s funds for broker’s own use. Not good.
