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Real Estate Class > Chapter 11 - Real Estate Agency Important Chapter > Flashcards

Chapter 11 - Real Estate Agency Important Chapter Flashcards

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1
Q

Does IL recognize common law agency?

A

No

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2
Q

Does IL allow sub-agency where the representative of the buyer is also a sub-agent of the seller?

A

No

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3
Q

In IL, the agency of law defines what?

A

It defines the rights and duties of the principal and the agent.

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4
Q

Is IL a statutory agency state?

A

Yes. It replaced common-law duties with statutory duties.

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5
Q

Define agent according to the Statutory (Real Estate License Act of 2000).

A

The person who is authorized and consents to represent the interests of another person. In real estate, a firm’s sponsoring broker is the agent and shares this responsibility with the licensees who work for them.

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6
Q

Define agency according to the Statutory (Real Estate License Act of 2000).

A

A relationship in which a consumer has given consent (express or implied) to a real estate licensee to represent them in a real property transaction. Consent may be given through an affiliated licensee or directly to a licensee.

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7
Q

Define brokerage agreement according to the Statutory (Real Estate License Act of 2000).

A

An agreement made verbally or in writing, for an agent or firm to provide brokerage services to a consumer and to receive compensation for these services.

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8
Q

Define compensation according to the Statutory (Real Estate License Act of 2000).

A

Payment (monetary or otherwise) made to a person or entity for executing services for a client.

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9
Q

Define consumer according to the Statutory (Real Estate License Act of 2000).

A

Just seeking information. They can turn into a client or a customer.

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10
Q

Define confidential information according to the Statutory (Real Estate License Act of 2000).

A

Information given by a client to a licensee during the term of a brokerage agreement that:

  • the client requests in writing or verbally that the licensee keep in confidence
  • relates to the client’s negotiating position
  • could do damage to the client negotiating position is disclosed.
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11
Q

When can confidential information be shared?

A
  • client gives authorization
  • info must be shared by law
  • info is shared by someone other than licensee
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12
Q

Define customer according to the Statutory (Real Estate License Act of 2000).

A

a person or entity for whom a licensee is providing services BUT who is NOT represented by the licensee in an agency relationship.

You are not representing them but you can perform minstrel acts.

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13
Q

Define client according to the Statutory (Real Estate License Act of 2000).

A

the person of entity that a licensee represents in a real property transaction.

You represent them and uphold to your fiduciary duties.

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14
Q

Define ministerial acts according to the Statutory (Real Estate License Act of 2000).

A

They are acts that are informative in nature but do not create any type of form of representation.

Ministerial acts are routine acts that do not require discretion or judgment by the licensee. Examples might be meeting the termite inspector or appraiser, or picking up and delivering papers. An example of a non-ministerial act: If the practice in your area is for the buyer to select the termite inspector, an agent representing the seller would not do it for him because it involves discretion and judgment.

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15
Q

Explain difference between client and customer.

A

You work for the client and with the customer.

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16
Q

Client is also known as…

A

principal

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17
Q

Explain fiduciary/Statutory Responsibilities

A

COLD AC:
Care: A broker must exercise reasonable care and skill as a professional while transacting the business of the principal. This includes, establishing the correct list price, properly representing the property, delivering appropriate forms and docs, marketing property correctly, negotiating the offer, directing buyer to lender and other experts. Basically, doing your best job and not taking short cuts.

Obedience: Must act in good faith and obey the principal’s instuctions given in the contract as long as they are legal instructions.

Loyalty: The agent must be loyal, putting the principal’s interests above others. This includes obtaining the best offer from a buyer when representing the seller, explainging offers to a client, and representing only the interests of the client.

Disclosure: The agent must keep the principal informed, disclosing all facts whether they are favorable or unfavorable. If representing a seller, the agent must disclose if the buyer is willing to offer more for the property. If representing the buyer, an agent needs to disclose all defects and if the seller would take less for the property.

Accountability: The agent is accountable for all funds or property of others that come into the agents possession.

Confidentiality: Don’t tell client’s personal business

*** agents must use resonable care, be honest, and disclose facts that materially affect the value of the property, regardless of whom they are representing.

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18
Q

The IL Residential Real Property Disclosure form performs what?

A

It shifts the responsibility for full disclosure from the real estate agent to the seller. Only applies to residential, co-op and 4 stories.
The sellers are required to disclose any material defects. Completed forms should be given to buyer BEFORE an offer is made.
IF the disclosure form is delivered after an offer has been accepted and the form contains negative information then the buyer has 3 days to cancel the contract. Agents of the buyer MUST disclose information as well.

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19
Q

IL licensees are required to deliver true copies of executed sales contracts to the people who signed in what time frame?

A

IL licensees are required to deliver them within 24 hours.

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20
Q

In IL, when must a licensee deposit funds that they have received into an escrow account after the sales contract or lease has been signed?

A

By the next business day

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21
Q

What is commingling?

A

Mixing a client’s escrow money with your own person or business funds.

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22
Q

What is conversion?

A

using escrow money for personal use

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23
Q

How long must a licensee keep transactions and reconciliations of escrow accounts?

A

at least 5 years

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24
Q

What is puffing?

A

exaggeration of a property’s benefits

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25
Is puffing legal?
Yes
26
What is a latent defect?
a defect that can not be found through ordinary inspection
27
Who is responsible for disclosing latent defects?
the seller
28
What is a material fact?
something that would cause a person to make a decision or not make a decision. Example: termites, knowledge of property taxes doubling,
29
Is the licensee responsible for disclosing material material facts?
yes
30
If the seller asks the agent not to disclose known material facts, should the agent comply with his request?
No, it is the licensee responsilbilty to disclose material facts.
31
What is a stigmatized property?
Bad shit happened there. Murder, etc
32
Are agents required to disclose stigmas associated with properties?
No as long as it does not affect the physical condition of the property - haunting -- don't have to disclose - water damage- yes i have to disclose Ask sponsoring broker if you should disclose to decide if they want to disclose
33
What is Megan's Law?
Also known as the Sex Offender's Act of 1994. Agents do not have to disclose information about sex offenders BUT agents should refer them to a list so that the potential buyer can see for themselves if a sex offender is located nearby.
34
Name the 4 types of agency relationships
Universal General Special Designated
35
What is a universal agent?
The person can do anything the principal can do personally. Powers are virtually unlimited.
36
What is required in IL for a person to become a universal agent?
power of attorney
37
What is a general agent?
When the principal delegates a broad range of powers, and the relationship is expected to be ongoing. Example: real estate agent with the agent's broker or a property manager.
38
What is a special agent?
Hired to do one thing and one thing only. Example: a seller hired you to sell their home. You have one job. Sell the home. Once property is sold, the relationship is terminated. Same goes for buyers.
39
What is a single agency?
When an agent represents one party (buyer, seller, landlord, or tenant) exclusively in a real estate transaction.
40
What are the 4 types of agency under the license act in IL?
- Single: - Dual: - designated - no agency
41
What is a dual agency?
represent buyer and seller. IL requires that you have both parties consent.
42
What is a designated agency?
Created when an agent is appointed by a broker to act for a specific principal or client. This is used when one agent with the company listed the proeperty and another agent within the company secured the buyer for the property. The listing agent is the designated agent for the seller, and the buyer's agent is the designated agent for the buyer.
43
What is required for dual agency to take place?
a disclosure in writing to both parties.
44
Is designated agency allowed in IL?
Yes
45
What is non-agency?
the buyer or seller do not want to be represented.
46
If a person chooses non-agency, what is the name of the form that they must complete?
Notice of No Agency Relationship
47
What is required for a contract to be vaild?
It must meet all the essential elements and is enforcable. - must be at least 18 or authorized - must be offer and acceptance (aka mutal assent or meeting of the minds). - must be in writing - legal purpose. Cannot promise to perform any illegal acts - legal consideration. a promise to provide something of value to have another party enter a contract. In a sales contract the considertation is the selling price of the property; therefore earnest money is not neccessary to create a binding contract. - reality of consent: contract was entered into without duress, menace, misrepresentation, or fraud - signatures
48
What is a void contract?
It is missing an essential element and has no legal force
49
What is a voidable contract?
It may rescinded by one or both parties. A contract with contingency that cannot be met may be voidable. Also includes contracts that were entered into under duress, under the influence, via misrepresentation, minor, or imcompent person.
50
What is an unenforacble contract?
When neither party can sue the other party to force performance. Ex. an oral agreement is unenforcable
51
Is an offer considered a contract?
No, an offer is not a contract. The acceptance of an offer creates a contract.
52
What is another word for a conditional acceptance?
It is called a counteroffer. It is a rejection coupled with a new offer.
53
What is an executory contract?
One or both parties have duties to perform. A sales contract is an executory contract.
54
What is an executed contract?
All parties have fulfilled their duties. A sales contract is fully executed at closing when the deed has been conveyd and the buyer has paid the purchase price.
55
What does execute mean?
To sign a document. Remember this is different from an executed contract.
56
What are 3 synonoms for a sales contract?
contract of sale, sale agreement, and offer to purchase.
57
What is a forfeiture clause?
Means that under certain circumstances, one party must forfeit or give something to the other party. Ex. earnest money must be given to the seller if the buyer breaches the contract. Ex. In a land contract, if the buyer fails to make payments, then the seller can keep all of the previous payments and take possession of the house back.
58
What is an indemnification clause?
An indemnification clause is a contractual promise by one person or business to reimburse or pay for the monetary losses or damages incurred by another person or business.
59
What are liquidated damages?
Are damages that have been preauthorized by the contract. A liquidated damages clause sets in advance -- at the time of contract formation -- what the monetary value of damages shall be in the event of contract breach by one of the parties. Often, a liquidated damages clause will include a recitation that the parties are agreeing ahead of time, because it would likely be difficult to determine the actual damages should a breach occur. But such a statement is not necessary. A liquidated damages clause could be directed toward both parties. For example, "If either of us fails to perform, he will owe the other $10,000." But it need not do so. Commonly, a liquidated damages clause will be directed towards only one. E.G., "If the commercial landlord doesn't deliver the property within fifteen days of the date promised, he will owe the tenant $10,000.". Earnest money may serve as liquated damage and seller may not sue for any futher damage.
60
What is actual damage?
Actual damage compensates for the cost of a lost. As it pertains to a seller's damages when a buyer has breached...the actual damages are the lost profit suffered by the seller if he has to sell the property to a third person for less than the price agreed to by the first buyer who refused to close. As it pertains to a buyer's damages if a seller refuses to close, it is the additional amount the buyer has to pay for a comparable house MORE than the purchase price specified in the contract with the breaching seller. Keep in mind that with respect to real property contracts, buyer or seller can sue the breaching other party for specific performance...an order forcing them to close as opposed to and in certain cases in addition to certain damages. Example: Able agrees to purchase Baker's house. As a result of that contract, Baker agrees to buy a new condo under construction and pays a nonrefundable $5,000 reservation fee. Able then defaults and refuses to purchase Baker's house, even though Able has no justifiable reason for doing so. Two weeks later the stock market crashes, and Baker counts himself lucky when he is able to sell his house for $40,000 less than the original contract price. But, Baker is now unable to purchase the condo and loses his $5,000. Under the right circumstances, Able could be liable to Baker for actual damages consisting of the $40,000 difference in the two sale prices (direct damages) and for the loss of the $5,000 earnest money (consequential damages—more indirect and less predictable) and for punitive damages.
61
What is punitive damage?
are unrelated to the cost of the loss and are merely awarded to punish the wrongdoer.
62
What can terminate an offer?
notice of revocation by the offeree, death of either party, insainty of either party, or a counter offer.
63
Can an offer be revoked before accecptance ?
yes. it can be revoked any time before it is accepted
64
who is the offeree?
the party receiving the offer
65
who is the offeror?
the party making the offer
66
If someone makes a change to an offer is it considered void, voidable, or unenforable?
If there are any changes made to the terms of an offer, that offer is considered void and a counteroffer is made.
67
Can an offer be ignored?
Yes. An offer can be rejected, countered, or ignored.
68
What is absorption rate?
is an estimate of how quickly homes have sold in the neighborhood within the past year.
69
What is another word for depreciation?
cost recovery
70
Can land be depreciated?
No. Only the improvements on the land can be depreciated.
71
For investment property purchased after 1987, what depreciation method is used?
The straight-line method. Residential investment property is depreciated 27.5 years Commerical investment property is depreciated 39 years.
72
What is an exclusive right-to- sell listing?
One broker lists the property and other brokers have the right to sell the property, If there is a cobrokerage arrangement. The listing broker is paid no matter who sells the property.
73
What is an exclusive agency listing?
One broker lists the property and the seller retains the right to sell the property. Other brokers may sell the property through a cobrokerage agrangement. If the seller sells the property without the services of the broker, a commission is due.
74
What is an open listing?
In this agreement, the seller enters into listing agreements with any number of brokerage firms and retains the right to sell the property. The broker that sells the property is paid a commission; but if the seller sells the proerty, no commission is due to any broker.
75
What is a net listing?
This listing does not contain a specified sales price or commission. Net listings are illegal in most states.
76
Whose responsilbilty is it to inspect the property to make sure the housing systems are working correctly?
It is the buyer's responsiblity to conduct a property inspection.
77
What type of insurance policy can be purchased to repair or replace appliances, electrical, plumbing, heating, air conditioning, and other systems within the property? And who is responsible to buy it?
Home protection (warranty) plans? The policy can be purcahsed by the agent, seller, or buyer. Plans are typically good for 1 year.
78
What type of insurance policy do lenders require? And who is responsible to purchase it?
a homeowners insurance policy. must be purchased prior to closing. The sales contract should state who is responsible for purchasing the plan.
79
What is the Comprehensive Loss Underwriting Exchange (CLUE)?
It is a database that contains property insurance claims for up to 5 years. It also contains loss history from the prior owner of the property.
80
What is an exclusive buyer agency?
The buyer is legally bound to pay the agent when the buyer purchases the property. This is true even if the buyer found a home.
81
What is an exclusive-agency buyer agency agreement?
The broker is entitled to payment ONLY if the broker locates the property purchased by the buyer. The buyer can find a suitable property without the obiligation to pay agent.
82
What is an open buyer agency agreement?
The buyer can enter into similar agreements with any number of agents. The agent who finds the sutiable property will be compensated.
83
According tothe IRS, what are the 3 requirments to be considered an independent contractor?
- real estate license - written contract with broker that contains the following clause, "the salesperson will not be treated as an employee with respect to the services performed by such salesperson as a real estate agent for federal tax purposes." - 90% or more of individual's income as a licensee must be based on sales production, not number of hours worked.
84
What is another name for trust accounts?
impound accounts or escrow accounts
85
Who sets up a trust account and for what purpose?
The sponering broker sets it up and it is used to hold money of others until a transaction is closed. Includes earnest money checks and security deposits
86
What is commingling?
when the broker deposits money into their own personal account
87
what is embezzlment?
when the broker spends the client's money
88
what form must be filled out if you received more than 10k in cash?
irs form 8300
89
Does illinois allow the use of sub-agency in real estate transactions?
No.
90
In Illinois, the law of agency defines what?
the rights and duties of the principal and the agent.
91
What is the purpose of the Illinois Residential Real Property Disclosure?
It shifts the responsibility from the agent to the seller for full disclosure. It requires that sellers of 1 to 4 unit residential properties fill out property disclosure forms revealing any material defects they are aware of in the real estate sale. The completed form should be given to buyers before the offer is made.
92
What happens if the seller has completed the form, signs the contract but learns of a new material defect?
Up until closing, if the seller learns of a new defect, he must disclose it to the buyer in writing. It is important to remember that the seller cannot simply cancel the contract. Compensation would have to be negotiatied.
93
When are disclosure forms to be completed?
BEFORE they sign the listing agreement and by the seller.
94
When must an Illinois licensee deliver true copies of an executed sales contract to the ppl who signed it?
within 24 hours
95
In illinois, must funds be deposited into a special escrow account?
by the NEXT BUSINESS DAY following the signing of the sales contract or lease. (next business day is not the same as 24 hours)
96
How long must records be kept?
5 years
97
what is a latent defect?
a defect that is not obvious
98
How can an agency be terminated?
death of either party destruction or condemnation of property expiration of the terms of agency mutal agreement breach by one party
99
What is a non-distrubance clause?
A non-disturbance clause is a statement by the lender that, if forced to foreclose, the lender will allow the tenants to stay in the property. Large tenants usually request this before spending money on a leased unit.

Real Estate Class (11 decks)

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