Chapter 3-4 Key Concepts Flashcards Preview

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Flashcards in Chapter 3-4 Key Concepts Deck (46):
1

Three types of agents characterized by extent of authority delegated to an agent in general businss dealings

  • Universal agent is authorized by the principal to perform all acts
  • General agent is authorized by the principal to perform acts associated with the continued operations of a particulat job or a certain business of the principal
  • Special agent is authorized to perform a specific act.

2

The 3 brokerage relationship options in Florida

  1. Transaction Broker
  2. Single Agent
  3. No brokerage relationship

3

Transaction broker relationship

  • The broker may work as a transaction broker for the buyer and/or the seller (pressumed relationship)
  • Transaction brokers provide limited representation
  • The buyer or seller is not responsible for the acts of the licensee
  • Parties give up their right to undivided loyalty
  • Allows licensee to facilitate the transaction by assisting both buyer and seller
  • A written disclosure notice is not required for residential real estate transactions when a transaction broker relationship is established

4

Duties of a Transaction broker

  • Deal honestly and fairly
  • Account for all funds
  • Use skill, care, and diligence in the transaction
  • Disclose all known facts that materially affect the value of residential real property and are not readily observable to the buyer
  • Present all offers and counteroffers in a timely manner (Note: Even if a valid contract exists)
  • Exercise limited confidentiality, unless waived in writing by a party
  • Provide any additional duties that are mutually agreed to with a party

5

Single agent relationship

  • The broker may work as a single agent for either the buyer or the seller (but not for both in the same transaction)
  • Dual agency is illegal in Florida
  • Fiduciary relationship
  • Broker agent and seller (or buyer) principal
  • A single agent disclosure notice must be made before, or at the time of, entering into a listing agreement or an agreement for representation, or before the showing of property, whichever occurs first

6

Single agent relationship duties

  • Deal honestly and fairly
  • Loyalty (act solely in the best interest of the principal)
  • Confidentiality
  • Obedience (must obey all lawful instructions of the principal)
  • Full disclosure
  • Account for all funds
  • Use skill, care, and diligence in the transaction
  • Present all offers and counteroffers in a timely manner (Note: Even if a valid contract exists)
  • Disclose all known facts that materially affect the value of residential real property and are not readily observable

7

Subagents are persons authorized to assist and represent the agent

  • A subagent has the same duties as the agent
  • A broker's sales assocaites are general agents of the broker and subagents of the broker's principals
  • In a single agent relationship, the broker is an agent of the principal
  • Because a sales assocaite is an agent of the broker, the sales assocaite is a subagent of the principal
  • Sales associates and brokers assocaites owe the same fiduciary obligations to the principal as does their broker

8

No brokerage relationship

  • The broker may act in a no brokerage relationship (the broker doesn't represent either the buyer or the seller)
  • The no brokerage relationship notice must be disclosed in writing before the showing of property

9

No brokerage relationship duties

  • Deal honestly and fairly
  • Disclose all known facts that materially affect the value of residential property
  • Account for all funds entrusted to a licensee

10

Brokerage relationship limitations

  • If the brokerage firm has a transaction broker relationship with the seller, the brokerage firm can also work with the buyer, in the same transaction, as a transaction broker or in no brokerage relationship. The brokerage firm cannot represent the buyer as a single agent if the firm has a transaction broker relationship with the seller
  • If the brokerage firm is representing the seller as a single agent, the brokerage firm can work with the buyer, in the same transaction, in no brokerage relationship. The brokerage firm cannot represent the buyer as a signle agent or work with the buyer as a transaction broker if the firm is also representing the seller as a single agent
  • The brokerage relationship limitations apply even if the buyer and seller are working with different sales associates in the same brokerage firm

11

Written disclosure requirements for residential transactions

  • The disclosure document may be separate or incorporated into another document
  • Broker must retain all requried disclosure documents for 5 years on residential transactions that result in a written contract to purchase
  • Under Florida law it is presumed that all licensees are operating as transaction brokers unless another brokerage relationship is established. Therefore, there is no requirement to give a written transaction broker disclosure notice to the buyer and/or the seller.

12

When disclosure requirements do not apply

  • Nonresidential transactions
  • Rental or leasing of real property, unless there is an option to purchase property improved with 4 or fewer residential units
  • Auctions
  • Appraisals
  • Business enterprises or business oportunities unless improved with 4 or fewer residential units

13

Transaction to another relationship

  • Accomplished with the Consent to Transition to Transaction Broker Notice
  • Buyer's or seller's signature (or initials) required before the licensee may change from one brokerage relationship to another
  • If the principal refuses to sign or initial the consent to transition notice, the broker must continue to act as a single agent

14

What type of real estate transation does the duties and obligations of the brokerage relationship law apply?

Duties and obligations of the brokerage relationship law apply to ALL real estate transactions

15

Desginated sales associates

  • This applies to nonresidential sales only
  • Buyer and seller must each have assets of at least $1 million
  • Broker designates one sales associate to work with buyer as a single agent to another to work with seller as a single agent
  • Broker facilitates and advises designated sales associates
  • Buyer and seller must request the arrangement
  • Buyer and seller must sign disclosure notice

16

Record Keeping

  • Brokers must retain agreements that engage the services of a broker
  • Retain brokerage relationship disclosure documents and buyer broker agreements for 5 years
  • Retention of documents applies to residential transactions that result in a written contract and nonresidential transactions that utilize designated sales associates

17

Ways to terminate a brokerage relationship

  • Fulfillment of brokerage relationship's purpose (performance)
  • Mutual agreement
  • Expiration of terms of the agreement
  • Broker renouncing relationship by giving notice (resignation)
  • Principal or customer revokes by giving notice
  • Death of either party
  • Destruction or condemnation of the property
  • Bankruptcy of the principal or customer

18

Elements for a cause of action for fraud

  • The licensee made a misstatement or failed to disclose a material fact
  • The licensee either knew or should have known that the statement was not accurate or that the undisclosed information should have been disclosed
  • The party to whom the statement was made relied on the misstatement
  • The party to whom the statement was made was damaged as a result

19

Brokerage offices

  • Active brokers required to have an office and to register the office with the DBPR
  • Must be at least one enclosed room in a building of stationary construction
  • The brokers books, records, and real estate transaction files must be kept in the office
  • Brokers are not required by law to have a telephone, desk, business checking account. or an escrow account
  • Office may be in broker's residence provided the entrance sign is displyed and local zoning permits business in residence
  • Sales associates must be registered and work out of the broker's office or branch office and may not open their own office

20

Branch office

  • Each branch office must be registered (two-year period)
  • A temporary shelter in a subdivision being sold by a broker is not a branch office if the shelter is intended only for the protection of customers and sales associates (if business records are maintained at location and sales associates are assigned to location, then it must be registered as a branch office)
  • Branch office registration are not transferable to another location
  • A broker may reopen a branch office in the same location during the same license period by requesting a reissue of the branch office license

21

Active real estate brokers must display an official entrance office sign with what information?

  • Name of the broker
  • Trade name (if any)
  • Words "Licensed (or Lic.) Real Estate Broker"
  • Name of the business and the name of at least one active broker (if business entity)
  • Name of sales associates (if included) separate from broker's name and identified as sales associates or brokers associates

22

Advertising

  • Advertining real estate service is a broker activity
  • Advertising must be in the name of the brokerage and under the supervision of the broker
  • Sales assocaites may not advertise real estate services in their own names
  • Advertising must be worded so that reasonable people will know that they are dealing with a licensee
  • Blind advertisment is an ad that fails to disclose the name of the brokerage firm
  • Internet advertising must include point of contact information
  • Internet advertising must include the brokerage firm's name adjacent to, above, or below the point of contact information
  • If licensees include their personal name in the advertisement, they must use their last name as registered with the DBPR
  • FREC does not require that the brokerage firm's phone number or address be included in ads
  • Yard signs, classified ads, and promotional advertising must include name or real estate brokerage firm
  • False advertising is a second-degree misdemeanor

23

Licensee selling property "by owner"

  • A licensee who owns property and is selling the property "by owner" may place a classified ad
  • Licensees are not required to indicate in the ad that they are licensees
  • Licensees should disclose to prospective buyers that they are licensed prior to entering into serious negotiations

24

A telephone solicitation is the initiation of a phone call for the purpose of selling property, goods, or service

rules & regulations

  • Telemarketers must seach the National Do Not Call Registry before making telemarketing calls
  • Violators of the federal Telepone Consumer Protection Act may be fined up to $11,000 per call
  • Florida also maintains a no-sales-solicitation calls list
  • Florida Telemarketing Act allows real restate licensees to call For-Sale-by-Owner or Expired Listings (provided the numner is not on the national call list)
  • Violators of Florida Telemarketing Act may be fine $10,000 per call
  • Business that use telemarketing must develp and adhere to written procedures regarding the firms' calling policies
  • It is unlawful to send unsolicited advertisements to a residential or business fax machine without the recipient's prior express permission

25

Escrow or Trust accounts

  • Brokers are not required to keep earnest moeny deposits separate from rental deposits
  • Sales associates must deliver earnest money deposits to their broker no later than the end of the next business day
  • Brokers must place deposits into their escrow account no later than the end of the 3rd business day
  • The date the buyer gives the funds to the brokerage is not included in the broker's time period
  • The broker's 3 business day time period always begins on the business day after the check is given to the brokerage company
  • Broker must obtain seller's approval before accepting a postdated check
  • Broker is not held responsible for the nonpayment of an escrow check provided the broker timely deposits the check
  • Escrow account may be an interest-bearing or non-interest-bearing account;of  interest-bearing, must secure the written permission of all interested parties and broker must get written authorization from the buyer and seller as to who is entitled to interest earned
  • Broker's escrow accounts are maintained at Florida commercial banks, savings associations, and credit unions
  • Alternatively attorneys and title companies with trust powers may hold the funds instead of the broker (but not in stock or bond brokerage house)
  • If an attorney or title-closing agent will hold the deposit, the broker is still required to deliver the funds to the escrow agent within the same time frame requried for depositing funds into a broker's escrow account

26

Title company and attorney escrow accounts

  • Licensee who prepared or presented the sales contract must indicate on the contract the title company's name (or attorney's name if applicable), address, and telephone number
  • No later than 10 business days after the deposit is due under the contract, the licensee's broker must make a written request to the escrow holder for written verification of reeipt of the deposit
  • If the deposit is held by a title company or by an attorney nominated in writing by the seller or the seller's agent, the verification is waived
  • No later than 10 business days after the date the broker made the written request for verification of the deposit, the broker must provide the seller's broker with a copy of the written verification
  • If the title company or attorney failed to provide the written verification, this information must be conveyed to the seller's broker no later than 10 business days after making the request for veritication of the deposit
  • The same proacedure must be followed for each deposit required in the sale contract

27

Broker's escrow accounts

  • Brokers may not commingle (mix) escrow deposits with business funds or presonal funds
  • Broker must be a signatory on broker's escrow account
  • Broker must reconcile escrow account each month
  • Broker must review, sign, and date montly reconciliation
  • Broker is allowed to place up to $1,000 of personal funds in sales escrow accounts
  • Broker is allowed to place up to $5,000 of personal funds in property management escrow account
  • Brokers who maitain sales escrow funds and property management escrow funds in a single escrow account may place up to $5,000 of personal funds into the accoun
  • Broker is accountable for reviewing the brokerage's escrow accounting procedures to ensure compliance with Florida law

28

Conflicting demands and good-faith doubt

  • Broker must notify the FREC, in writing, within 15 business days
  • Broker must institute one of 4 settlement procedures within 30 business days from the time the broker received the conflicting demands

29

Thee exceptions to notice requirements

  • Sale of HUD-owned property using a HUD contract
  • If buyer of residential condominium unit gives written notice of buyer's intent to cancel the contract as authorized by the Condominium Act
  • If buyer in good faith fails to satisfy the terms specified in the financing clause of a contract

30

4 setllement procedures

MALE

  • M  Mediation (nonbinding)
  • A  Arbitration (binding)
  • L  Litigation 
  • E  Escrow Disbursement Order (EDO)

31

Litigation can involve either of 2 court procedures

  • Interpleader is used when the broker does not have a financial claim to the disputed escrow funds and deposits the fund with the cour registry
  • Declaratory judgment is used when the broker believes that he or she is entitled to a portion of the disputed funds

32

Requesting an EDO

  • FREC makes a determination as who is entitled to the disputed funds
  • Applicable only if the fund are held in a broker's escrow account (not applicable if escrow funds are held by an attorney or a title company)
  • Broker must notify the FREC within 10 business days if the dispute is settled or the matter goes to court before the EDO is issued

33

Requirements concerning rental lists

  • Rental list must include a notice to prospective tenant concerning repayment
  • If rental information is in erro: 100% refund
  • If unable to find a suiable renta: 75% refund
  • Demand for refund must be made within 30 days following the day of purchase
  • Violation is a first degree misdemeanor

34

Liens on residential real property

  • Broker must be authorized in the contract to place a lien on residential real property for nonpayment of commission
  • Broker's license may be suspended or revoked for the unauthorized recording of lis pendens or a lien that affects the title of residential real property

35

Commercial Real Estate Lien Act

  • Part III of Chapter 475 giver broker lien rights on commercial property for earned commission
  • Lien is against owner's net proceeds from the sale (personal property) and does not apply to the real property

36

Commercial Real Estate Leasing Commission Lien Act

  • Part IV of Chapter 475 gives brokers lien rights for earned commission associated with a brokerage agreement to lease commercial real estate
  • If the landlord is the person obligated to pay the leasing commission, broker's lien attaches to the landlord's interest
  • If the tenant is the person obligated to pay the leasing commission, broker's lien attaches to the tenant's leasehold estate

37

Broker may not pay a commission or refferal fee to an unlicensed person

  • Broker-associate employer may pay a salary to an unlicensed employee for administrative activities, but the broker must pay all fees and commissions for license required real estate services
  • Finder's fee exception - A property management firm or an owner of an apartment complex may pay a finder's fee (referral fee) of up to $50 to an unlicensed person who is a tenant of the apartment complex
  • Broker may pay a licensed foreign broker a fee so long as the foreign broker has a current and valid license and does not violate Florida law
  • All deposits and other funds must be collected in the name of the broker/employer with the express consent of the broker/employer
  • Closing may give a sales associate a check at the closing provided the broker has given the closing agent written authorization and instructions regarding the specific amount of commission the assocaite is to be paid for the transaction

38

Facts regarding kickbacks

  • A kickback is an unearned fee paid to a licensee asccoiated with a real estate transaction for non-real estate services
  • Prior to the payment and receipt of the kickback, the buyer and seller must be fully informed of facts regarding the kickback
  • Kickbacks must not violate RESPA
  • Kickbacks are not allowed for title and casualty insurance transactions
  • Person receiving the kickback must be properly licensed if a license is required to perform the service (In Florida, real estate licensees must also be licensed as mortgage loan originators to be legally paid a fee for referring prospects to a mortgage lender)
  • Licensees are prohibited from sharing commission with an unlicensed person (Exception if sharing commission with a buyer or seller in a real estate transaction)

39

Licensees may not represent themselves as members of a professional trade organization or use the term REALTOR®  unless entitled to do so by membership and payment of dues

  • Licensees may be fined $300 for representing themselves as REALTORS® when they are not current members
  • Sales associates may be fined $500 for operating as a sales associate without a registed employer due to failure to properly register

40

Business Entities that may register as a broker entity

  • Sole proprietorship: features unlimited liability and no formal requirement to create
  • General partnership: each partner is resposible for all business debts
  • Limited partnership: created by filing agreement with the state, and features unlimited liability for general partners and limited liability for limited partners; word "limited" or abbreviation must be used in name, and limited partners make cash or property investment but not managerial services
  • Limited liability partnership: protection from personal liability for acts of another partner or employee
  • Corporation: features separate legal entity from the owners and is formed by filing Articles of Incorporation and must include "company" or "incorporated" or abbreviation in name (Note: Sales assocaites and broker associates may not be officers or directors of a brokerage corporation; broker associate must change status to broker before becoming an officer or directo
  • Limilted liability company: protection from business debts

41

Real estate brokerage general partnership

  • The partnership must register with DBPR under the partnership name
  • At least one partner must be licensed as an active broker
  • Partners who deal with the public and perform real estate services must be licensed as active brokers
  • All partners not licensed as brokers must register with the DBPR for identifcation purpose
  • Sales associates and brokers associates may not be general partners in a real estate brokerage partnership
  • If the partnership has only 1 active broker and he or she dies, resigns, or is removed from office, the broker of record must be replaced within 14 calendar days
  • It is the responsibility of every active broker in the partnership to see that the partnership and all of its partners and sales associates have current and appropriate registration and licenses

42

Real estate brokerage limited partnerships

  • The limited partnership must be registered with the DBPR under the limited partnership name
  • General partners who deal with the public and perform real estate services must be licensed as active brokers
  • All other general partners must register with the DBPR for identification purposes 
  • Sales associates and brokers associates may not be general partners in a real estate brokerage limited partnership
  • Sales associates and brokers associates may be limited partners in a real estate brokerage limited partnership (regarded in same light as stockholders in a corporation)
  • Limited partners are not required to register with the DBPR

43

Real estate brokerage corporations

  • The corporation must register with the DBPR under the corporation mae
  • At least one officer or director must be licensed as an active broker
  • active Florida brokers, inactive Florida brokers, and unlicensed people may serve as officers and directors of a real estate brokerage
  • Officers and directors who deal with the public and perform real estate services must be licensed as active brokers
  • All officers and directors who are not licensed must be registered with the DBPR for identifcation purpose
  • Sales associates and brokers associates may not be an officer or director in a real estate brokerage corporation
  • Sales associates and broker associates may be shareholders of a real estate brokerage corporation

44

An ostensible partnership (or quasi partnership) is created when the actions of 2 or more person create the appearance that a partnership exists

  • Fraudulent and deceitful if the public is deceived into believing that a partnership exists
  • Parties may be held liable for each other's debt and torts
  • Licensees may be subject to license suspension
  • Brokers in the same office building doing business separately must each have their own office sign, use separate telephone numbers, register their own business name and indicate the brokerage name on separate letterhead and business cards

45

A trade name is a business name other than the legal name of the person doing business

  • Fictitious name regers to the name registered with the Department of State
  • A broker or brokerage entity may use a trade name after it is registered with the DBPR
  • If a brokerage corporation or partnership conducts business under a fictitious name, the business must comply with the Florida Fictitious Name Act
  • A brokerage entity cannot be registered or operate under more than one trade name

46

Business entity that may not register

  • Corporation sole (churches)
  • Joint Venture (an agreement to participate in one or a limited number of transactions)
  • If 2 parties form a joint venture to provide real estate services for compensation, both parties must be licensed real estate brokers
  • Business trust (for example Real Estate Investment Trust - REIT)
  • Cooperative association
  • Unincorporated association