Chapter 5 - Agency Relationships Vocabulary

Question 1

Accounting

Answer 1

In an agency relationship, the agent’s fiduciary duty to the principal to strictly account for all monies received.

Question 2

Accrued Expense

Answer 2

Item on a settlement statement for which the cost has been incurred, but the expense has not yet been paid. Such expenses are considered to be paid in arrears.

Question 3

actual authority

Answer 3

Authority expressly given by the principal or given by the law and not denied by the principal.

Question 4

Agency

Answer 4

A relationship of trust created when one person (the principal) gives another person (the agent) the right to represent the principal in dealings with third parties.

Question 5

Agency Coupled with an Interest

Answer 5

A situation in which the agent has a personal interest in the subject of the agency, as when one co-owner has been authorized by the others to sell their property. An agent acquires an interest in the subject of the agency (the property).

Question 6

agency relationship

Answer 6

A special relationship of trust by which one person (agent) is authorized to conduct business, sign papers, or otherwise act on behalf of another person (principal). This relationship may be created by expressed agreement, ratification, or estoppel.

Question 7

Agent

Answer 7

A licensed broker who represents another (the principal) in a real estate transaction; a person authorized to represent the principal in dealings with third parties (clients or customers).

Question 8

Agreement

Answer 8

A mutual exchange of promises (either written or oral). Although often used as synonymous with contract, technically it denotes mutual promises that fail as a contract for lack of consideration.

Question 9

associate licensee

Answer 9

Another term used for a licensed real estate salesperson employed by a licensed real estate broker.

Question 10

Attorney-In-Fact

Answer 10

A person specifically designated in an instrument (e.g., power of attorney) to do something legally for another in his stead. An attorney-in-fact has a fiduciary relationship with the principal. An attorney-in-fact need not be an attorney-at-law.

Question 11

Attorney’s Opinion of Title

Answer 11

A statement issued by an attorney after analyzing an abstract as to quality of title.

Question 12

Auctioneer

Answer 12

A person licensed or authorized to conduct a public auction of item(s) belonging to someone else. In some states, an auctioneer selling real property must be licensed as a real estate broker, whereas in others he or she must be a licensed auctioneer.

Question 13

bona fide purchaser

Answer 13

Bona fide means good faith (auténtico), so a bona fide purchaser is one who pays fair value for property in good faith, and without notice of adverse claims.

Question 14

Buyer Agency Agreement

Answer 14

A contract between a buyer and a broker that grants the broker the right to represent the buyer in the purchase or lease of property and that makes the buyer responsible for paying commission to the broker. Also called Buyer Broker Agreement.

Question 15

Buyer’s Agent

Answer 15

A licensed agent representing the interests of the buyer of a property. – A broker employed by the buyer to locate a certain kind of real property.

Question 16

COAL

Answer 16

D The mnemonic for the five duties an agent owes a principle: Care, Obedience, Accounting, Loyalty, and Disclosure.

Question 17

Commingling

Answer 17

Illegally mixing personal or business funds with money held in trust on behalf of a client. – The illegal practice of depositing client’s funds in a broker’s personal or general business account.

Question 18

Commission

Answer 18

Compensation paid to a broker for services in a real estate transaction; usually a percentage of the sales price. Commission is negotiable and should be clearly spelled out in a written brokerage agreement. – A fee for services rendered usually based on a certain percentage of the sales price of a property.

Question 19

commission split

Answer 19

The previously agreed upon division of money between a broker and sales-associate when the brokerage has been paid a commission from a sale made by the associate.

Question 20

Compensation

Answer 20

The valuable consideration one person or entity gives to another person or entity in exchange for the performance of some activity or service.

Question 21

Competent Parties

Answer 21

Those who are legally capable of entering into contracts.

Question 22

Confidentiality

Answer 22

The protection of the client’s confidential information. This duty lasts even after the agency relationship has terminated.

Question 23

Cooperating Agent

Answer 23

An agent who works with a listing agent to sell property in a real estate transaction; the selling agent who finds a buyer for the listed property. Also called Cooperating Broker. – A selling agent who assists another broker by finding a buyer.

Question 24

Dangling Commission

Answer 24

Compensation that licensees may accept from a broker with whom they are no longer associated, assuming they were licensed with that broker at the time the commission was earned and the right to any commission under such circumstances is spelled out in the licensee’s agreement with the broker.

Question 25

DEC

Answer 25

The mnemonic for the three disclosure requirements: Disclose, Elect, and Confirm.

Question 26

Designated Agency

Answer 26

A contractual relationship between a broker and a client available in some states in which one or more licensees associated with the broker are appointed to represent the client in an in-house transaction. Also called Split Agency.

Question 27

Designated Agent

Answer 27

A licensee appointed by a broker as the legal agent of a client. Also called Split Agent.

Question 28

Dual Agency

Answer 28

An agency relationship in which a licensee represents both buyer and seller (or both landlord and tenant) in the same transaction. Usually requires informed written consent from both parties.

Question 29

Dual Agent

Answer 29

A licensee who represents both the buyer and the seller (or both landlord and tenant) in a single real estate transaction.

Question 30

Due Diligence

Answer 30

Investigation to discover facts or liabilities about a property prior to its purchase.

Question 31

Exclusive Agency Buyer Agency Agreement

Answer 31

A contract between a buyer and broker in which the broker earns commission only if he is the broker who finds the property the buyer eventually purchases.

Question 32

Exclusive Agency Listing

Answer 32

An agency contract between a seller and a broker that entitles the broker to a commission if anyone other than the seller finds a buyer for the property during the listing term. -- An exclusive contract where the seller must pay the listing broker a commission if any broker sells the property.

Question 33

Exclusive Buyer Agency Agreement

Answer 33

A contract between a buyer and broker in which the broker earns the negotiated fee even if the buyer purchases property through another broker or finds it on his own.

Question 34

Exclusive Right to Sell Listing

Answer 34

An exclusive contract where the seller must pay the listing broker a commission if any broker sells the property. --An exclusive contract where the seller must pay the listing broker a commission if the property is sold within the time limit by the listing broker, any other person, or even by the owner.

Question 35

express agreement

Answer 35

A written agreement, usually in the form of a listing contract which authorizes the broker to represent the seller in finding a ready, willing, and able buyer.

Question 36

Facilitator

Answer 36

A licensee who assists in the successful completion of a real estate transaction but has no agency relationship with and, therefore, no fiduciary obligation to either party.

Question 37

Fiduciary

Answer 37

A relationship that implies a position of trust or confidence. -- Person in a position of trust, held by law to high standards of good faith and loyalty.

Question 38

Fiduciary Deed

Answer 38

A deed executed by a person in a position of trust, held by law to high standards of good faith and loyalty.

Question 39

fiduciary duty

Answer 39

That duty owned by an agent to act in the highest good faith toward the principal and not to obtain any advantage over the latter by the slightest misrepresentation, concealment, duress of pressure.

Question 40

fiduciary relationship

Answer 40

A relationship that implies a position of trust or confidence.

Question 41

general agent

Answer 41

A person authorized by a principal to perform any and all tasks associated with the continued operation of a particular project. -- A person authorized to handle a principal’s affairs in one area or in specified areas.

Question 42

Good Faith

Answer 42

The general presumption that the parties in a contract or other business transaction will deal with each other honestly and fairly, adhering to the terms of any contract and acting without any intent to defraud, deceive, or otherwise take advantage of the other party.

Question 43

Gratuitous Agency

Answer 43

An agency relationship where a real estate licensee is not compensated for his or her services, but still owes the principal all statutory obligations due to every client.

Question 44

Implied Agency

Answer 44

An agency relationship created through the behavior (actions or words) of one or both parties.

Question 45

Incidental Authority

Answer 45

The authority to do everything reasonably necessary to carry out the principal’s express orders.

Question 46

In-House Transaction

Answer 46

A situation in which a single brokerage represents both the buyer and seller in the same real estate transaction.

Question 47

listing

Answer 47

A contract between an owner of real property and an agent who is authorized to obtain a buyer.

Question 48

listing agent

Answer 48

A broker who obtains a listing from a seller to act as an agent for compensation.

Question 49

Listing Agreement

Answer 49

A written agency contract between a seller and a broker, stating that the broker earns a commission for finding (or attempting to find) a buyer for the seller’s real property. A listing is a personal services contract. -- A written contract by which a principal, or seller, employs a broker to sell real estate.

Question 50

Loyalty

Answer 50

A fiduciary duty that requires a real estate licensee to put the principal’s interests above all others’ interests, including her own.

Question 51

Material Fact

Answer 51

A condition or occurrence that significantly and adversely affects the value of the real estate, reduces the structural integrity of improvements to real estate, or presents a significant health risk to occupants of the real estate; or information that indicates that a party to a transaction is not able to or does not intend to meet an obligation under a contract or agreement made concerning the transaction. -- Any fact that would seem likely to affect the judgment of the principal in giving consent to the agent to enter into the particular transaction on the specified terms.

Question 52

Multiple Listing Service (MLS)

Answer 52

A listing service whereby member brokers agree to share listings and commissions on properties sold jointly. The MLS generally consists of an online database that is updated regularly to include new listings. -- A cooperative listing service conducted by a group of brokers (usually members of a real estate association) to provide an inventory of all available properties in the area.

Question 53

Mutual Assent

Answer 53

An offer and acceptance which together form the terms of a contract. -- (1) An agreement between the parties in a contract. (2) The offer and acceptance of a contract.

Question 54

Net Listing

Answer 54

A compensation strategy in which the seller sets a net amount that is acceptable for the property; if the actual selling price exceeds that amount, the broker is entitled to keep the excess as commission. Net listings are illegal in many states and discouraged in others. --An employment contract in which the commission is not definite. The broker receives all the money from the sale of the property that is in excess of the selling price set by the seller. The broker must disclose the selling price to both buyer and seller within 30 days after the transaction.

Question 55

Nonexclusive Buyer Agency

Answer 55

Agreement An agreement between a buyer and any number of brokers where a broker earns a commission only if he is the one who introduces the buyer to the property she purchases.

Question 56

Obedience

Answer 56

A fiduciary duty that requires a licensee to follow the (legal) instructions of the principal, obey the parameters of the agency relationship, and not stray beyond the scope of authority.

Question 57

Offer of Cooperation

Answer 57

Usually published in a multiple listing service that includes the amount (most frequently a percentage of the sales price or a flat fee) offered as compensation to another brokerage for participating in a property transaction, for example, as a selling agent, buyer’s agent, or leasing agent.

Question 58

Open Listing

Answer 58

A nonexclusive listing, given by a seller to as many brokers as he chooses. If the property sells, only the broker who is the procuring cause is entitled to commission.

Question 59

Ostensible Agent

Answer 59

An agency relationship created by the actions of the parties rather than by an express agreement. -- A person who has been given the appearance of being an employee or acting (an agent) for another (principal), which would lead anyone dealing with the ostensible agent to reasonably believe he or she was an employee or agent.

Question 60

Pocket Listing

Answer 60

A property for which a broker holds a signed listing agreement with a seller that is not entered into the multiple listing service (MLS). -- A list that is kept by the listing broker or salesperson, and is not shared with other brokers in the office or other multiple listing service members. This is discouraged by the real estate profession and is prohibited by many broker’s offices.

Question 61

Power of Attorney

Answer 61

An instrument authorizing one person (called an attorney-in-fact) to act as another’s agent, to the extent stated in the instrument. A legal document that gives another person the legal authority to act on his or her behalf.

Question 62

Procuring Cause

Answer 62

An uninterrupted series of events leading to the creation of a contract; the party whose efforts resulted in the creation of a binding contract for sale; for example, a broker whose efforts resulted in an executed contract, thus entitling the broker to a commission. A broker who produces a buyer ready, willing and able to purchase the property for the price and on the terms specified by the seller, regardless of whether the sale is completed.

Question 63

Puffing

Answer 63

Superlative statements about the quality of a property that should not be considered assertions of fact. (1) A statement of opinion about property that is not factual. (2) Exaggerated comments or opinions not made as representations of fact, thus not grounds for misrepresentation.

Question 64

Ratification

Answer 64

The approval of a previously authorized act, performed on behalf of a person, which makes the act valid and legally binding.

Question 65

Ratified

Answer 65

Approved after the fact.

Question 66

ready, willing, and able buyer

Answer 66

A person who is prepared to enter into a purchase contract, really wants to buy, and meets the financing requirements of purchase.

Question 67

real estate agent

Answer 67

A broker licensed by the Bureau of Real Estate who negotiates sales for other people.

Question 68

Reasonable Skill and Care

Answer 68

A fiduciary duty that requires agents to protect clients from foreseeable harm, act in accordance with the high standards set by their profession, and perform their duties as promised.

Question 69

Referral

Answer 69

For the purposes of RESPA, any oral or written action directed to a person that has the effect of affirmatively influencing the selection of a provider of a settlement service or business.

Question 70

Referral Fee

Answer 70

Consideration of any kind paid or demanded for the referral of a potential or actual buyer, seller, lessor, or lessee of real estate.

Question 71

Renunciation

Answer 71

When someone who has been granted something or has accepted something later gives it up or rejects it, as when a broker withdraws from an agency relationship with a client.

Question 72

safety clause

Answer 72

Protects the listing broker’s commission, if the owner personally sells the property to someone who was show the property or made an offer during the term of the listing.

Question 73

sales associate

Answer 73

(1) A licensed real estate salesperson or broker whose license is held by an employing licensed broker. (2) Also known as associate licensee.

Question 74

Salesperson

Answer 74

Generically speaking, a real estate licensee who is associated with a licensed broker and as such may perform most of the acts a broker can on behalf of the broker. Also called Sales Associate.

Question 75

Self-Dealing

Answer 75

The conduct of a fiduciary that consists of taking advantage of his position in a transaction and acting in his own interests rather than in the interests of his clients.

Question 76

Seller’s Agent

Answer 76

A licensee representing the interests of the seller of a property. Also called Listing Agent.

Question 77

Selling Agent

Answer 77

The licensee who secures a buyer for a property; may also be the buyer’s agent if an agency relationship was created. The broker who finds a buyer and obtains an offer for the real property.

Question 78

single agency

Answer 78

The representation of only one party in a real estate transaction.

Question 79

special power of attorney

Answer 79

A written instrument where a principal confers limited authority upon an agent to perform certain prescribed acts on behalf of the principal.

Question 80

Subagent

Answer 80

A broker delegated by the listing agent (if authorized by the seller) who represents the seller in finding a buyer for the listed property.

Question 81

Subagent

Answer 81

A real estate licensee who acts as a representative of his or her broker’s client, providing the same duties and responsibilities of that broker.

Question 82

third party

Answer 82

A person who may be affected by the terms of an agreement but who is not a party to the agreement.

Question 83

Tort

Answer 83

A violation of a legal right, or a civil wrong such as negligence, libel, or nuisance.

Question 84

Tortious Interference

Answer 84

The causing of harm by disrupting something that belongs to someone else, for example, interfering with a contractual relationship so that one party fails to execute the promises made.

Question 85

Traditional Agency

Answer 85

An agency relationship where the seller is the only client and the buyer has no representation.

Question 86

Transactional Brokerage

Answer 86

A brokerage relationship in which a licensee provides only administrative services to buyers and sellers to assist in a transaction, remaining neutral and having no fiduciary responsibility toward either party. Also called Facilitational Brokerage, Transaction Broker, or Non-Agency.

Question 87

Undisclosed Dual Agency

Answer 87

A situation where one licensee represents both buyer and seller in a single transaction without the informed consent of both parties; very often may be practiced unintentionally, possibly by implying to one party that he is represented when, in fact, there is no agency agreement.

Question 88

Vicarious Liability

Answer 88

Liability that is created because of the relationship between someone and the actions of the person who is actually liable, such as a broker who has vicarious liability for the actions of her affiliated agents even though the broker may have done nothing wrong.