Chapter 2: Real Estate Agency Disclosure

Question 1

Principal / Client

Answer 1

The person who selects the agent on his behalf

Question 2

Customer

Answer 2

The party whom the agent brings to the principal as a seller or a buyer of the property.

Question 3

General Agent

Answer 3

Someone authorized to handle all affairs of the principal concerning a certain matter or property, usually with some limited power to enter into contracts. Ex: A person who is appointed property manager of an apartment complex by its owner. He can collect rent, evict, enter into leases, repair the premises, etc.

Question 4

Special Agent

Answer 4

Someone who has the narrow authorization to act on behalf of the principal. Ex: A real estate broker who has a property listing. He can market the property, but can’t make decisions about anything else. This agent cannot bind a principal to a contract.

Question 5

Fiduciary

Answer 5

A position of trust. These responsibilities should not be taken lightly by licensees. A breach in these duties can jeopardize an agent’s commission as well as render the agent liable for his acts or omissions.

Question 6

Fiduciary Duties

Answer 6

Responsibilities include obedience, loyalty, disclosure of information, confidentiality accountability and reasonable care, skill and diligence.

Question 7

Buyer Agent

Answer 7

A real estate agent who works in the best interest of the buyer.

Question 8

Agent’s Fiduciary Responsibilities to the Principal

Answer 8

OLD CAR
Obedience
Loyalty
Disclosure of Information
Confidentiality
Accountability
Reasonable Care, Skill and Diligence

Question 9

Illegal Self-Dealing

Answer 9

All agent activities in which the broker has an interest, including listing the property, buying the property and collecting the commission.

Question 10

Positive Misrepresentation

Answer 10

When a seller broker conceals a defect in the property or misrepresents to the buyer the existence of a defect. This occurs even if the buyer does not ask.

Question 11

Unintentional misrepresentation

Answer 11

When the seller broker makes a false statement to the buyer about the property and the broker does not know if the statement is true or false. The broker is still liable even if he wasn’t deliberately lying.

Question 12

Latent Defect

Answer 12

Structural problems that a seller may know about but are not obvious to the purchaser.

Question 13

Common-Law Duty of Disclosure and Fairness

Answer 13

The principal has to reveal all information that affects the agency agreement. Ex: Brokers may encounter hidden defects that can be problematic, especially if not disclosed. The seller’s duty to disclose hidden defects runs to any buyer brokers, prospective buyers and subagents of the listing broker.

Question 14

Vicarious liability

Answer 14

One person is responsible or liable for the actions of the other.

Question 15

Section 442c of New York Real Property Law

Answer 15

A broker is vicariously liable for a salesperson’s actions only if “the broker had actual knowledge” of such violations or if “the broker retains the benefits from the transaction after he knows that the salesperson has engaged in some wrongdoing.”

Question 16

Agency and Brokerage

Answer 16

The foundation of the brokerage firm is the agency relationships between the broker and the salespersons. Therefore, agency and brokerage are synonymous.

Question 17

Flat Fee

Answer 17

Also known as an up front fee. The broker is entitled to retain this fee for efforts to market the property. Can also be used for buyer brokers, something clients may prefer since brokers won’t just show them listings that are much more expensive.

Question 18

Express Agency

Answer 18

An agency relationship created by an oral or a written agreement between the principal and agent. Ex: A written listing agreement between the seller of real estate and the broker.

Question 19

Implied Agency

Answer 19

When an agency is created by the words or actions of the principal and agent indicating that they have an agreement. Ex: Juanita doesn’t have anything in writing, but advertises her friend Savannah’s property.

Question 20

Agency by Estoppel

Answer 20

When a principal does not stop an individual from representing his interests, thus creating an agency relationship between the two.

Question 21

Single Agent

Answer 21

An agent that represents the buyer or the seller, but never represents both.

Question 22

Cooperating Agent

Answer 22

An agent who’s representation includes seller agents, subagents, buyer agents and broker’s agents. These agents work to assist the listing broker in the sale of a property. These agents may or may not work through MLS.

Question 23

Broker’s Agent

Answer 23

An agent that cooperates or is engaged by a listing agent, buyer’s agent or tenant’s agent; however this agent does not work for the same firm as the agents. This agent’s job is to assist the agents in locating a property to sell, buy or lease.

Question 24

Dual Agency

Answer 24

Exists when a real estate firm or agent attempts to represent both the buyer and seller in the same transaction. Ex: Even if it’s two different people, this still falls under this category if they work for the same company.

Question 25

Single License Dual Agency

Answer 25

When a sales agent attempts to represent the interests of both a seller client and buyer customer in the same transaction. A licensee may not engage in any form of dual agency without the informed consent of the listing broker and of all other parties to the transaction.

Question 26

Broker Dual Agency

Answer 26

If the agents of the broker represent both buyer and seller in the same transaction or offers services to the other party such as negotiating a mortgage or purchase agreement.

Question 27

Intended Dual Agency

Answer 27

When a listing broker acts as a buyer broker and shows an in-house listing with the seller’s full knowledge and consent.

Question 28

Unintended Dual Agency

Answer 28

When the buyer believes by the agent’s actions and representations that the buyer is being represented by that broker. Ex: If a broker gives the buyer advice on negotiations or suggestions of what price to offer or if the seller sells the apartment and enters the market as a buyer and assumes the agent automatically represents him; however this isn’t the case unless a new agency relationship is formed.

Question 29

Undisclosed dual agency

Answer 29

When a subagent or seller agent is working with a buyer customer and agrees to negotiate for that buyer customer rather than working in the best interests of the other client, the seller.

Question 30

Disclosure and informed consent

Answer 30

Explanation by a real estate agent of his position in the agency relationship and the verbal and written consent of the relationship by the client or customer.

Question 31

Undivided Loyalty

Answer 31

The portion of the fiduciary agent relationship.

Question 32

Designated Agent

Answer 32

A salesperson or associate broker, supervised by a broker, who is assigned to represent a client when a different client is also represented by such real estate broker in the same transaction.

Question 33

Working with Dual Agency

Answer 33

Buyers and sellers cannot sign blank designation forms for dual agency, “just in case” it should occur later. In addition, a broker cannot force the parties to accept dual agency. If either principal refuses, then dual agency cannot be used.

Question 34

Consequences of Undisclosed Dual Agency

Answer 34

Can result in a violation of the Real Property Law and regulations. May be guilty of a misdemeanor and punishable and may result in a rescission of any contracts involving the real estate transaction.

Question 35

Section 443 of the Real Property Law

Answer 35

Provides for informed consent and written acknowledgement of dual agency by a prospective buyer or tenant and seller or landlord. The dual agency relationship applies to only one single transaction at a time.

Question 36

Conditional Release from Exclusive Listing Agreement

Answer 36

When the owner decides to withdraw his property from the market before the expiration or fulfillment of the exclusive listing contract.

Question 37

Unconditional Release from Exclusive Listing Agreement

Answer 37

May be used when the parties to a contract mutually agree to end their contractual obligations.

Question 38

Buyer Brokerage

Answer 38

When an agency relationship exists between the buyer and the broker. The buyer is the principal and the broker is the agent.

Question 39

Exclusive right to sell

Answer 39

The property is listed with one broker only. The broker is paid commission no matter who sells the property.

Question 40

Exclusive agency agreement

Answer 40

The property is listed with one broker only as the agent. The broker receives no commission if the owner sells the property.

Question 41

Open Listing Agreement

Answer 41

The seller allows a property to be shown by one or more brokers. The broker effecting the sale is entitled to the commission. If the owner sells it on his own, he doesn’t pay anyone.

Question 42

Exclusive Right to Rent Agreement

Answer 42

A contract between an owner or a lessor and an agent in the rental of residential property. The rental fee is paid regardless of who rents the property.

Question 43

Agency Disclosure Form

Answer 43

Details consumer choices about representation at the first substantive contact with a prospective seller or buyer.

Question 44

First Substantive Contact

Answer 44

When some detail and information about the property is shared with interested parties.

Question 45

When does the Disclosure Form Apply?

Answer 45

When there is involvement with a sale or rental of one- to four-unit residential properties.

Question 46

Article 443-a of the Real Property Law

Answer 46

Deals with stigmatized property disclosure. The law covers all residential property for sale or lease and addresses properties that have: (1) occupants who have AIDS or other illnesses not transmitted through occupancy or (2) properties that were a site of death due to natural causes, accidents, suicide, homicide or other crime, and other reasons. Under this law, sellers and seller agents do not have to disclose this information. A seller agent can only disclose with permission of the seller.

Question 47

Agent

Answer 47

The person hired on another’s behalf.