Ch.4 - Real Estate Brokerage and Law of Agency Flashcards
(108 cards)
1
Q
Licensee
A
The person who is authorized to represent an act on behalf of another person
2
Q
Principal
A
The seller, buyer, landlord, or tenant. A client to an agency
The person who hires the licensee and delegates to them the responsibility of representing the principles interest
3
Q
Fiduciary
A
The relationship of trust or confidence between the licensee and the principal
4
Q
Agency
A
The fiduciary relationship between the licensee and the principal
5
Q
Client
A
The principal
6
Q
Customer
A
The third-party with whom the licensee deals when working on behalf of the principal.
7
Q
What is the difference between a customer and a client?
A
The difference is that a customer is not represented.
8
Q
Universal agency
A
In this relationship, the principal empowers them to perform any and all actions that may be legally delegated to an agency representative
9
Q
What is the instrument of authorization called in a universal agency?
A
The power of attorney
10
Q
General agency
A
The relationship that the principal delegates to them ongoing task and duties within a particular business or enterprise.
11
Q
What can a principal delegate to a general agency?
A
This delegation may include authority to enter into contracts.
*in what kind of agency?
12
Q
Special agent
A
Also known as specific agent
Under this agreement, the principal delegate authority to conduct a specific activity. Then the relationship is terminated.
In most cases, there may not be a contract that binds to the principal
13
Q
COALD
A
An acronym for the agents fiduciary duties to a principal
14
Q
What does COALD stand for?
A
C- care (reasonable care) O- obedience A- Accountable L- Loyalty D- Disclosure or notice
15
Q
Express agency
A
This is the most common way of creating an agency relationship through a written agreement.
16
Q
What is expressed in a written agreement in an expressed agency?
A
The formally involved parties expressed the intention to form an agency relationship
The outline the terms and conditions of that agreement
17
Q
Listing agreement
A
This is the common form of express written agency agreement between a seller and a broker.
18
Q
What does a listing agreement authorize?
A
It authorizes the broker to find a ready, willing, and able buyer for the property.
19
Q
The listing agreement is part of what type of agency
A
The common form of express written agency
20
Q
Buyer/tenant representation agreement
A
This is a common form of express written agency agreement between a buyer and a broker.
21
Q
What does the buyer/tenant representation agreement authorize?
A
It authorizes the broker to find a suitable property to purchase or rent.
22
Q
What are the types of agreements in express agency?
A
Listing agreement- Broker and seller relationships
Tenant/buyer representation agreement- Broker and buyer relationship
23
Q
Implied agency
A
Does not need to be in written form the relationship can be implied and formed when the actions of the parties indicate that they have mutually consented to an agency.
It is possible to be unaware that a relationship has been formed due to actions that were unintentional, inadvertently, or accidental.
24
Q
Estoppel
A
A legal doctrine that prevents a person from asserting rights or facts that are inconsistent with a previous position or representation made by act, conduct, or silence
25
Ratification
The adoption or confirmation of an act someone already performed on behalf of a person without prior authorization
26
Single agency
Is when a licensee represents either a seller/landlord or buyer/tenant directly and exclusively as an agent
27
A single agency is normally bound by what type of agreement?
A relationship is normally bound by a written agency agreement like a listing or a buyer/tenant representation agreement
28
Sub-agency
This is practice between brokerage firms where cooperating licensees, or other firms, our sub agents of the listing supervising broker of the principal.
29
Is sub agency legal in Texas?
Yes
30
Intermediary agency
This is where a licensee represents both sides of the transaction in a agent-client capacity
31
Transaction broker
They provide third-party real estate services to buyers and sellers and can be described as a professional assistant.
32
Is a transaction broker recognized in Texas?
No
33
Commingling
The act of mixing the brokers personal or business funds with escrow funds.
34
What is the broader definition of commingling?
A broader definition includes the failure to deposit earnest money into escrow in a timely manner
35
Conversion
This is more serious than near commingling and is effectively an active theft where the broker is using money that does not belong to them
36
Market allocation
This occurs when competing firms agreed to split up an area and they agreed to refrain from doing business in each others territory
37
Co-brokerage
A transaction involving a cooperating sub agent.
38
How is the commission split in a co-broker transaction?
The listing broker sports the commission with the co-broker typically on a 50-50 basis
39
Listings
The traditional source of the brokers income
40
Antitrust laws
Why do they exist?
State and federal laws designed to maintain and preserve business competition
Law is based on the believe that free enterprise and healthy competition are good for individual consumers and the economy
41
Sherman Antitrust Act of 1890
This is the principal federal statue that covers competition and is one of the most important pieces of antitrust legislation
42
Agency relationship is created when
A person delegates to a licensee the right to act on his or her behalf in a business transaction
43
Which agency representation is illegal in Texas?
Undisclosed intermediary agency
44
Intermediary agency is when a licensee represents both sides of the transaction in an?
Agent- client Capacity
45
By regulation, if an agent initially represents a buyer, the disclosure to the seller must occur _______.
At first contact
46
If confidentiality conflicts with the agents legal requirements to disclose material fax, the agent must__________.
Inform the client of this obligation and make the required disclosures
47
An agent who procures both the listing and the customer...
Receives a share of the brokers listing side of the commission and selling side of the commission
48
A broker is not authorized by the client to perform such action as...
Initialing changes to an offer
49
True or false:
An agency relationship can only be created by written agreement
False - implied agency does not need a written agreement
50
What duty requires a licensee to inform the client of all facts that might affect the clients interest in the transaction?
Disclosure (the D in COALD)
51
To whom are licensees allowed to offer advice and counsel?
Their principal
52
What obligations do licensees owe to their customers?
Honesty and fair dealing- An agent may not deceive the fraud or take advantage
Reasonable care/skill- holds standards of knowledge, expertise, and ethics
Disclosure- Of agency property condition, and environmental hazard
53
What principles governing an agency relationship?
Consent, agreement, and fiduciary
Both parties consent and agree to the form of the relationship.
The relationship is fiduciary meaning that agent oh certain duties to the principal
54
What’s an example of intermediary agency?
The supervising broker or a single sales person representing both parties
55
Agency disclosure uses what form?
Information about brokerage services (IABS)
56
What type of agency is not permitted in Texas?
Dual agency
57
When does the sellers licensee provide a written statement about brokerage services to a party?
At the time of the first substantive dialogue with the party, unless the parties already represented by another licensee
58
Buying, selling, and leasing real estate for once on account is viewed as ______
Trading
59
What duties can a licensee carry out?
Only the ones the broker may legitimately delegate
60
In order to generate business, a broker must be proficient in four skill areas. What are they?
- Obtain a client listing,
- marketing a listing,
- facilitating the closing of the transaction,
- and managing market information
61
What activity is designed to generate a listing of potential clients?
Prospecting
62
A licensee relies on what to suggest fair market value?
An analysis of comparable properties
63
Why is it important to get listings rather than work only with buyers?
By obtaining a listing, a broker obtains a share of the commission generated whenever a cooperating broker finds a buyer.
-It’s not certain that working with a buyer will provide income
64
Why is a listing presentation important?
It’s a licensees opportunity to meet with the seller and present the merits of their marketing plan, personal expertise, and Company strengths
- Point out their knowledge and the provisions of the listing agreement
65
What three parameters constitute an anti-trust violation when present in a business activity that unreasonably restrict competition and functions against the public interest?
- Monopoly, contract, or conspiracy
- restraint of trade
- Unreasonableness
66
What’s the penalty for violating the Sherman antitrust act?
Violators can be fined up to $350,000 and sentenced talk to three years in federal prison for each offense.
If it is a corporation they could be fined up to $10 million
67
What is the act called that increases the maximum criminal penalty for violating the Sherman antitrust act?
Criminal anti-trust penalty enhancement and reform act of 2004
Increases individual penalty to 10 years in prison and $1 million fine and corporations up to $100 million fine
68
What is market allocation and an example of it?
Market allocation is the division of markets by location or price
- ex. Two companies getting together and deciding that one company would take one part of the town while the other takes the other part
69
Broker Jed tells buyer Sam that when he signs his purchase agreement, he must also purchase a subscription to Jed’s monthly newsletter. What would you say about this?
This is a tie in agreement which is prohibited by the Sherman antitrust act because it requires a buyer to purchase additional or unrelated products and services
70
What is a tie-in agreement?
An agreement that requires a buyer to agree to something in exchange for the sale.
However this is prohibited and violates the Sherman anti trust act.
71
The action of misrepresenting the authority of a sales person to negotiate the final terms of the transaction as a violation of what law?
Texas Deceptive Trade Practices Consumer Protection Act (DTPA)
72
Knowingly making false statements concerning the needs for parts, replacements, or repair services is a violation of what law?
Texas Deceptive Trade Practices Consumer Protection Act (DTPA)
73
How long does a consumer have to bring a DTP a suit?
The consumer must commence the suit
- within two years after the deceptive act occurred or
- within two years after the consumer discover, or should have discovered the deceptive act
74
Why did Texas legislator assert that the DTPA did not apply to licensees in claims that arise from the act of omission by the licensee?
In order to reduce the number of frivolous lawsuits brought against licensing brokers
75
In most cases, real estate brokerages Is based on what type of agency?
Special agency aka specific agency
76
When an agency relationship is formed it puts in place what type of duties?
Fiduciary duties
77
What does care mean in COALD?
It includes reasonable care, skill, diligence
78
What does obedience mean in COALD?
Within the realm of legal activity
79
What does accountability mean in COALD?
Retaining documents for at least four years
80
What does loyalty mean in COALD?
Has an emphasis on confidentiality
81
What does Disclosure mean in COALD?
Can also be considered Notice.
includes facts that the agent knows in those that the agent should have known such as things that pertain
- to deficiencies in the property,
- contract provisions of financing terms,
- how long the property has been listed,
- why the seller is selling
82
What is the law of agency?
The agency relationship that the agent and the principal establish put in place instead of fiduciary duties that an agent owes to the principal.
COALD duties
83
What are the three types of agency relationships that exist?
1. Express agency (written)
2. Implied agency (mutual consent)
3. Agency ratification and estoppel (ostensible agency) -Relationship arises by the actions of the parties involved
84
Can an agency relationship be Formed either through an oral or written agreement?
Yes
85
When does an agency relationship terminate?
When one of the following occurs..
- contract performance
- Expiration of the agreement term
- Termination of the relationship by mutual agreement
- Termination of the relationship by one party
86
What are some reasons where an agency relationship can be involuntarily terminated?
- Death,
- agent abandonment,
- contamination of the property,
- destruction of the property,
- renunciation by the client,
- breach of contract,
- bankruptcy,
- revocation of the agents license
87
What can happen if an agency relationship is involuntarily terminated?
It’s possible that there may be legal and financial ramifications for the party defaulted or cancel
88
According to the Texas Real Estate License Act, what are the four positions a broker might take with a seller, buyer, landlord, or tenant?
- Seller’s agent (single agent)
- Sub-agent
- buyers agent (single agent)
- intermediary
89
What is the form called provided by Texas that allows the seller agents to meet the requirement of a written statement about the real estate transaction during the first substantive dialogue?
TREC IABS1-0 Information About Brokerage Services
90
Substantive dialogue
A meeting or written communication that involves a substantive discussion relating to specific real property
91
True or false
Buyer/tenant agents, in a single agency real estate transaction, must disclose their agency relationship at first contact with the seller, the landlord, or either party agent
True
92
What is the core activity a real estate brokerage?
Procuring property on behalf of the client for the purpose of completing the transaction
- If successful the broker is usually paid a negotiated percentage of the purchase price
93
Brokerage
Is distinct from the practice of rendering real estate advisory services
94
Examples of advisory services are...
- Providing an estimate of value
- Performing market analysis
- Managing property
95
Can a licensed sales person work for more than one broker?
No
They cannot work for or receive direct compensation from any other broker and can only be sponsored by one broker that has an active brokers license
96
How can a broker hire a sales agent?
As an employee or independent contractor.
97
What are somethings that an agent employee of a broker may receive?
- wages / salary
- additional commission
- expense reimbursements
- benefit plans
If you’re an independent contractor usually commission is your compensation and you may be providing free office support.
98
What is the traditional source of a brokers income?
Listings
99
What are the three steps of marketing a list of property?
1. Initiating a marketing plan: A plan combined of promotional and selling activities
2. Selling the prospect: The offering in counter offering process continues until meaning of the minds result in a sales contract
3. Performing pre-closing activities: However broker must avoid commingling and conversion to not be in violation of escrow regulations
100
When is there an anti-trust law violation? What three parameters apply?
- There’s a monopoly, a contract, a conspiracy or a combination of such
- creates a restraint of trade
- The resistance of trade and reasonably restrict competition and functions against the public interest
101
What are the four things that the state and federal anti-trust laws prohibit brokers to do?
- Price fixing: maintain a price
- Group boycott: group that prevents others from fair participation
- Market allocation: splitting specific areas
- Tie in agreements
102
Clayton Antitrust Act of 1914
Design to cover restraints on interstate trade or commerce that aren’t covered under the Sherman antitrust act.
This includes preventing individuals from serving us directors at competing companies
103
Texas Deceptive Trade Practices-Consumer Protection Act (DTPA)
Protects consumers from any falls, misleading, or deceptive acts or practices by brokers and other providers of goods and services
104
Sellers disclosure notice
| Part of the DTPA
Documents with the sellers know about the property and provides a list of Appliances and whether or not they are working
105
Real estate license act
| Part of the DTPA
Obligates licensees to disclose any known or latent defects in a property
106
Fraud in real estate and stock transaction statue, article 27.01, business and commerce code
States that anyone who stands to gain from a real estate transaction is assumed to have known all aspects related to the transaction
107
Fraud
The intent to deceive
Protected by the DTPA
108
Statutory fraud
Includes misrepresentation as well as an fulfilled promises
Protected by the DTPA
