Kap Real Estate Chapter 7: Real Estate Brokerage and The Law of Agency Flashcards
(92 cards)
1
Q
Multiple Listing Service (MLS)
A
a comprehensive listing, updated daily, of properties for sale in a given community or metropolitan area; includes a brief description of each property with a photo and its asking price but can be accessed only by realtors who work for an MLS member
2
Q
Co-Brokered Transaction
A
A real estate transaction involving two or more brokerage firms, one firm representing the seller and the other representing the buyer.
3
Q
caveat emptor
A
Latin term for “buyer beware”
4
Q
Common law of agency
A
The basic framework of law that governs the legal responsibilities of the broker to the people the broker represents.
5
Q
broker-in-charge (BIC)
A
Required for each brokerage firm and each branch office, the full broker responsible for displaying all licenses properly, notifying the NCREC of any change of business address or trade name, ensuring that all advertising and agency compliance is done properly, maintaining the trust account and trust account records properly, retaining and maintaining all real estate transactions records properly, and supervising all provisional brokers associated with the firm or office.
6
Q
Agency
A
the fiduciary relationship between the principal/client and the agent
7
Q
Agent
A
the individual who is authorized and consents to represent the interests of another person. In the real estate industry, principals are hiring an entire company and all the company’s affiliated brokers to represent them. Even though the firm is the agent, the broker-in-charge would be personally accountable for agency law compliance.
8
Q
Subagency
A
the fiduciary relationship between the subagent and the principal
9
Q
Subagent
A
one who is employed by a person already acting as an agent (such as a provisional broker licensed under a broker-in-charge who is employed under the terms of a listing agreement). Simply stated, a subagent is an agent of an agent.
10
Q
principal or client
A
the person who hires and delegates to the agent through a brokerage contract the responsibility of representing that person’s best interests. In the real estate business, the principal/client can be the buyer, seller, landlord, or tenant.
11
Q
Customer
A
the third party for whom some level of service is provided by an agent of another party, but who is not represented by the agent.
12
Q
Fiduciary
A
a relationship in which the agent is placed in the position of trust and confidence to the principal.
13
Q
Facilitator/Transaction Broker
1) What is it?
2) Is this allowed in NC?
A
the real estate licensee who assists buyers and sellers in reaching an agreement in a real estate transaction without representing interests of either party. The licensee treats both parties equally as customers.
This nonagency relationship is not allowed in North Carolina.
14
Q
Agent’s Responsibilities to Principal (OLD CAR)
A
OLD CAR
-Obedience
-Loyalty
-Disclosure
-Confidentiality
-Accounting
-Reasonable skill and care
15
Q
Obedience
A
-In good faith at all times
-May not obey any instructions that are unlawful or unethical
-Because illegal acts do not serve the principal’s best interest, obeying such instructions violates the broker’s duty of loyalty, not to mention other laws making the conduct illegal.
-On the other hand, a broker who exceeds the authority assigned in the contract is liable for any losses that the principal suffers as a result.
16
Q
Loyalty
A
-Owes the principal the utmost loyalty even over own interest
-May not disclose financial condition
-When the principal is the seller, the agent may not reveal such things as the principal’s willingness to accept less than the listing price or any anxiousness to sell unless the principal has authorized the disclosure
-If the principal is the buyer, the agent may not disclose, for instance, that the buyer will pay more than the offered price if necessary, or that the buyer is under a tight moving schedule or any other fact that might harm the principal’s bargaining position
-All states forbid brokers to buy property listed with them for their own use or in which they have a personal interest without first disclosing that interest and receiving the principal’s consent.
-Note that commercial brokers have some latitude in these rules: as long as their ownership stake in listed properties is minimal, they may be permitted to represent buyers.
17
Q
Self-Dealing
A
occurs when managers take advantage of their position to further their own private interests rather than those of the firm
18
Q
Disclosure of Information
A
-keep the principal fully informed at all times of all facts or information the broker obtains that could affect the principal’s decision in the transaction.
-A broker must also disclose any personal benefit from the transaction because making a secret profit out of a transaction is prohibited.
19
Q
Disclosure of Information
Must disclose:
-all ________ (See NCREC Rule A.0106)
-the identity of the prospective purchasers, including the agent’s ________, if any, to them (such as a relative of the broker being a participating purchaser);
-the ability of the _________ to complete the sale or offer a higher price
-any ___________ the broker has with the buyer (such as an agreement for the broker to manage the buyer’s property after it is purchased); and
-the _________ intention to resell the property for a profit
-An agent for the buyer must disclose ________ of a property as well as factors that may adversely affect a property’s _______ or desirability. The agent should disclose information that could affect the buyer’s ability to negotiate the lowest purchase price, such as how long a property has been listed or why the seller is selling, if known by the agent.
A
-offers
-relationship
-purchaser
-relationship
-buyers
-deficiencies, value
20
Q
An agent shall not disclose the principal’s _________ condition, ________, or acceptable ________ terms without the client’s permission
A
financial
motivation
contract
21
Q
If the principal is the seller, the agent may not reveal such things as _________ to accept less than the listing price or ________ to sell, unless the principal has _________ the disclosure
A
willingness
urgency
authorized
22
Q
If the principal is the buyer, the agent shall not disclose that the buyer is _______ to pay a higher price, is under a tight moving schedule, or other facts that might affect the principal’s _________
A
willing
bargaining position
23
Q
Some states, however, permit a seller disclaimer—essentially a statement that the property is sold “_____________” with no promises regarding its quality or condition. HOWEVER, most are still _______ to disclose problems of it may affect health and well being
A
as is physical condition
required
24
Q
It is important to remember that anything a real estate agent learns about a client must remain __________. In most states, confidentiality terminates upon __________, expiration, or _________ of the agency relationship
A
confidential
completion
termination
25
Material Facts
important facts that influence the parties' decisions about a contract
26
Accounting
The broker must be able to account for all funds received from, or on behalf of, the principal
North Carolina real estate license laws require that brokers give accurate copies of all documents to all parties affected by them and keep copies of such documents on file for three years
3
27
Commingling
Commingling is a term used to describe when trust funds and the firm/broker's personal/business funds are placed in the same account.
28
Reasonable Skill and Care
-use the broker's skill and knowledge on the principal's behalf
-try to _________ and _______ to the principal all facts that are pertinent to the principal's decision-making process in the transaction. If the broker represents the seller, the broker's duties include helping the seller arrive at an appropriate and _______ listing price, discovering and disclosing facts that affect the seller and properly presenting the contracts that the seller signs
-Skill, care, and diligence also means making reasonable efforts to _______ the property, such as advertising and holding open houses, as well as helping the seller evaluate the terms and conditions of all offers to purchase
A broker who represents the buyer will be expected to help the buyer locate suitable property and evaluate property values, neighborhood and property conditions, and ________ alternatives, as well as to prepare ______ and ________ with the buyer's best interest in mind.
-knowledge
-discover, disclose, realistic
-market
-financing, offers, counteroffers
29
The duties of an agent to a third party come from three sources:
(1) North Carolina license law
(2) the North Carolina Unfair or Deceptive Trade Practices Act, and
(3) common law of agency as interpreted by court opinions
These duties include:
-being honest and fair, and
-complying with North Carolina Real Estate License Law and NCREC rules, including disclosure of material facts relating to a property or transaction about which the agent has knowledge or should reasonably have acquired knowledge
30
puffing
exaggeration of a property's benefits.
Although puffing is legal and a common practice, it must not constitute a misrepresentation of the property. Brokers must ensure that none of their statements can be interpreted as involving fraud
31
Fraud
-is the intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person
-In addition to false statements about a property, the concept of fraud covers intentional concealment or nondisclosure of important facts
32
If a contract to purchase real estate is obtained as a result of fraudulent misstatements made by a seller's agent, the contract is ________ and may be disaffirmed or renounced by the purchaser. In such a case, the client loses a contract and the broker will lose a commission.
voidable
33
NCREC has historically interpreted material facts to be disclosed to any party under the Real Estate License Law to include at least (4):
-facts about the property itself
-facts relating directly to the property (usually factors outside the property that may directly affect value, use, or desirability of the property, such as a pending zoning change or planned highway construction in the immediate vicinity);
-facts relating directly to the ability of the agent's principal to complete the transaction (such as a pending foreclosure sale or buyer's inability to qualify for financing); and
-facts known to be of specific importance to a party (most likely to be items of special interest to a purchaser's intended use of the property, such as zoning allowing home businesses or covenants allowing multiple pets).
34
Prohibited Conduct (4)
-Willful misrepresentation: intentionally misinforming any party involved in a transaction about a material fact
-Negligent misrepresentation: unintentionally misinforming any party involved in a transaction about a material fact
-Willful omission: intentionally failing to disclose a material fact to any party involved in a transaction
-Negligent omission: unintentionally failing to disclose a material fact to any party involved in a transaction
35
Willful misrepresentation
-takes place when brokers who have actual knowledge of a material fact deliberately misinform a buyer, seller, tenant, or landlord concerning such fact
-Willful misrepresentation also takes place when a broker who does not have actual knowledge of a matter material to the transaction intentionally provides information concerning such matter to a buyer, seller, tenant, or landlord without regard for the truthfulness of the information.
36
Negligent misrepresentation
-takes place when brokers unintentionally misinform a buyer, seller, tenant, or landlord concerning a material fact because they do not have actual knowledge of the fact, because they have incorrect information, or because of a mistake by the agent
37
willful omission
-takes place when brokers have actual knowledge of a material fact and a duty to disclose such fact to a buyer, seller, tenant, or landlord, but deliberately fail to disclose such fact
38
negligent omission
-takes place when brokers do not have actual knowledge of a material fact but should reasonably have known of such fact. If they fail to disclose this fact to a buyer, seller, tenant, or landlord, they may be guilty of negligent omission, even though they acted in good faith in the transaction.
39
Stigmatized Properties
-those properties branded by society as undesirable because of events that occurred there
40
Stigmatized Property Exemption
The one exception to this rule is if the death or illness is AIDS-related. Because persons with AIDS (or HIV infection) are considered legally handicapped under fair housing laws, an agent cannot disclose this condition, even if asked. Instead, the agent should tell the person who asked the question that the agent is prohibited by law from answering the question.
41
Sex offender disclosure
Not protected, answer truthfully if known
42
additional duties
-avoid making any false promises to the principal;
-avoid any undisclosed conflict of interest;
-properly account for funds held in trust for the principal;
-act competently in the performance of services required by the agency relationship;
-avoid improper conduct and to be honest in all dealings with the principal (as well as in dealings with other parties);
-deliver all offers and contracts to the principal; and
-disclose any commission, referral fees, kickbacks and similar payments from third parties.
43
Liabilities and Consequences of Breach of Duty
Disciplinary action by NCREC—any violation of a duty owed to the principal or third parties is grounds for disciplinary action by NCREC. If the Commission finds that the agent did in fact violate the license law, that agent's license may be revoked or suspended.
44
Liabilities and Consequences of Breach of Duty
A ________ action in court brought by the injured party—if the breach of duty harms either the ______ or a third party, the ________ may be sued and found liable for the damages caused by the breach. Note that if the agent's improper behavior is deemed to be within the scope of the agent's duties, the agent's principal also may be held liable for the damages caused by the agent. The principal can in turn sue the agent for ______________ for those damages.
-civil
-principal
-agent
-reinbursement
45
Liabilities and Consequences of Breach of Duty
Criminal prosecution brought by the district attorney—a violation of a provision of the real estate license law is also a misdemeanor (see G.S. 93A-8). If the agent's breach of duty also is a criminal act, such as fraud or embezzlement, the district attorney may bring a criminal action against the agent.
-misdemeanor
46
Duties to Agent (2)
-To act in good faith (to cooperate with the agent and refrain from hindering the agent's efforts)—for example, if the seller-client refuses to let the agent show the property, this is a breach of good faith
-To pay the agent the agreed-on compensation when the agent finds a ready, willing, and able buyer—once the agent brings the seller a buyer who is ready, willing, and able to purchase the property on the seller's terms, the agent has earned a commission, whether or not the seller decides to sell the home. Similarly, the principal/client is a buyer, the buyer is obligated to make sure that his or her agent is compensated for the agent's efforts to find the appropriate property.
47
Tort
a wrongful act or an infringement of a right (other than under contract) leading to civil legal liability.
which is a wrongful act by an agent while representing the principal and acting within the scope of the employment agreement that created the agency.
48
Unfair or Deceptive Trade Practices Act
North Carolina's G. S. 75-1.1, which says that agents who engage in breach of duty, or tort, may find themselves liable for treble (triple) damages and attorney's fees under certain circumstances.
49
Universal Agent
-is a person who is empowered to do anything the principal could do personally
-An unlimited power of attorney would be an example of universal agency. This type of agency is seldom practiced by a real estate broker in a typical real estate transaction
50
General Agent
-may represent the principal in a broad range of matters related to a particular business or activity. The general agent may, for example, bind the principal to any contracts within the scope of the agent's authority
-Brokers usually serve as general agents of their real estate brokerage firms. A more typical example of a general agent would be a property manager hired as a general agent for the landlord in the management of certain properties.
51
Special Agent
-is authorized to represent the principal in only one specific act or business transaction, and under limited, detailed instructions with no power to bind the principal.
-A special agent for a buyer has the limited responsibility of finding a property that fits the buyer's criteria. As a special agent, the broker cannot bind the principal to any contract. It is important to remember that a special agency relationship provides only limited authority.
52
A real estate broker is usually a ______ agent. If hired by a seller, the broker's duty is limited to finding a "ready, willing, and able buyer" for the property.
special
53
Brokerage
The bringing together of parties interested in making a real estate transaction.
54
broker
is defined as a person who is licensed to list, lease, buy, exchange, auction, negotiate, or sell interest in real property for others and to charge a fee for services
55
commission
An amount paid to an employee based on a percentage of the employee's sales
56
Creation of Agency
Official agreement between parties, either Listing Agreement or Buyer's Agent Agreement
57
Creation of Agency
With a written listing contract where a seller employs an agent to produce a buyer for the property; the ________ is the principal; the firm/broker is the ________ agent
-seller
-seller's
58
Creation of Agency
With a buyer agency contract where a prospective buyer hires a firm/broker to locate properties for the buyer with buyer representation; the _______ is the principal; the _________ is the buyer's agent
-buyer
-firm/broker
59
Creation of Agency
With a dual-agency contract where the agent legally represents _____ parties; both seller and buyer are __________, firm/broker is agent to both, but ____________ consent from both parties is required
-both
-principals
-written informed
60
Creation of Agency
With a property management contract where the owner of rental properties engages the services of an agent to rent and manage the property; the ________ is the principal, and the firm/broker is the property manager/agent
-owner
-property manager/agent
61
Creation of Agency
-With an in-house brokerage employment contract where a broker signs an employment agreement with a firm/broker that defines the legal and agency relationship between them; the firm/broker is the _________ and the broker is the _________
-principal
-agent
62
Creation of Agency
With a tenant representation agreement where a tenant employs an agent find properties for the tenant; the tenant is the ___________, and the firm/broker is the ________.
-principal
-tenenats agent
63
express agreement
An oral or written contract in which the parties state the contract's terms and express their intentions in words.
64
implied agreement
1) What is it?
2) Is this allowed in NC?
1) A contract under which the agreement of the parties is demonstrated by their acts and conduct.
2) North Carolina requires all agency agreements be in writing.
65
Implied Authority
an agent's authority to do things not specifically authorized in order to carry out express authority
66
Apparent Authority
The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created
67
Termination of Agency
-Completion or fulfillment of the purpose for which the agency was created
-Expiration of the terms of the agency
-Mutual agreement to terminate the agency
-Breach by one of the parties, such as abandonment by the agent or revocation by the principal (The breaching party might be liable for damages.)
-By operation of law, as in a bankruptcy of the principal (because title to the property would be transferred to a court-appointed receiver)
-Destruction or condemnation of the property
-Death or incapacity of either party (Notice of death is not necessary. Note that if a property is listed with a brokerage firm, the firm must dissolve to "die." If the individual listing agent dies, the listing would not be terminated because the listing belongs to the brokerage firm rather than to the deceased listing agent.)
68
How are real estate agency relationships created?
Real estate agency relationships typically are created with a listing agreement, a property management agreement, a buyer-agency or buyer representation agreement, or a tenant-agency agreement.
69
Exclusive Seller Agency
Seller is the client; buyer is the customer
**Most common form of brokerage entity before the Edina lawsuit.
70
Exclusive buyer agency
Buyer is the client; seller is the customer
71
Single agency
Either the buyer or the seller is the client, but not both in the same transaction
72
Dual agency
Both the buyer and the seller are the clients in the same transaction
73
Facilitation/transaction brokerage
1) Who is the client and who is the customer?
2) Allowed in NC?
1) Neither the buyer nor the seller are clients; both are customers
2) not permitted in North Carolina
74
Vicarious Liability
is a legal concept that might allow a consumer to successfully sue the seller and/or the listing firm for illegal or inept actions performed by the subagent firm and/or its brokers
75
In-house sale
a sale in which both the selling agent and the listing agent are from the same firm.
76
Dual Agency
1) Define
2) Who is the agent loyal to?
3) How is this allowed?
A situation in which a person or firm has an agency and fiduciary relationship to both parties—seller and buyer—of a transaction.
Dual agency requires that the agent be equally loyal to both.
A real estate firm/broker representing one party in a transaction shall not undertake to represent another party in the same transaction without the express approval of both parties.
77
Undisclosed Dual Agency
An illegal agency relationship where buyers and/or sellers are unaware of an individual broker or firm's conflicting duties to their clients.
78
3 Examples of how a Dual Agency can be created:
1) one individual broker represents both the buyer and the seller in the same transaction
2) two brokers working for Roomy Manor at the same office location, but one broker works with the seller and one broker works with the buyer
3) two brokers working for Roomy Manor, but one works at the Markdale branch location and works with the seller, and the other works at the Sunnydate branch location and works with the buyer.
**Perhaps, however, the situation that is most difficult for the firm to handle is the first one where one agent represents both parties and potentially knows too much about both clients to act lawfully and ethically.
79
Key to lawful dual agency in North Carolina
that all parties (seller/buyer, lessor/lessee) must be informed and must consent to the broker representing both of them in the same transaction.
80
The agent and subagents are generally restricted by the dual agency agreement from disclosing what?
-Willingness to accept any terms of sale other than those offered
-Motivation for participating in the transaction (unless required by statute)
-Any confidential information unless disclosure is mandated by statute
Consequently, a dual agent is required by law to disclose all material facts about the property to both principals but is absolved from disclosing confidential information about either principal by the terms of the dual agency agreement.
81
Designated dual agency
-An agency option under dual agency that allows the firm, with both clients' permission, to appoint one or more licensees to exclusively represent the seller-client and one or more licensees to exclusively represent the buyer-client; also called designated agency.
-designated agency must be done with prior express approval of both the seller and the buyer
-The major advantage of designated dual agency is that both of the firm's clients (the seller and the buyer) receive a fuller and direct representation from their respective designated agent.
82
Some important points about dual and designated dual agency include the following:
-To become a dual agent, the same firm must have a client relationship with both the seller and the buyer.
-There cannot be designated dual agency unless dual agency exists first.
-The firm owes the same fiduciary duties to both parties which has the effect of neutralizing the firm and its agents when acting as dual agents, but designated dual agents owe their fiduciary duties exclusively to the party they are designated to represent, even though the firm has an equal obligation to both parties.
-Designated dual agency is a form of dual agency that is optional, but it has the potential to result in both of the firm's clients receiving better representation.
-To practice dual or designated dual agency, the firm's policy must authorize it and both parties must give their written consent.
83
First substantial contact
First substantial contact occurs when conversation between a broker and a consumer shifts from facts about the property to possible confidential information about the consumer's needs, wishes, and abilities or when the consumer or broker begins to act as if there is a fiduciary relationship.
84
First Substantial Contact
The broker must review the form with the buyer or seller and make a determination if the broker will act as the agent of the seller or the agent of the buyer. An _______ relationship cannot be formed without this review. The nature and obligations of an agency relationship must be clearly ________ to the consumer so that the consumer understands that an agent owes all client-level _______ duties ______ to the client/principal. The purpose of the agency disclosure form is informed _______ by the consumer as to the best agency relationship for them. A broker should always make agency disclosure prior to showing property to a buyer consumer; first substantial contact with a prospective buyer occurs no later than the time information is gathered to use in the selection of properties for viewing.
-agency
-explained
-fiduciary
-only
-consent
85
1) How long must agency files be kept on file in NC?
2) What is first substantial contact? Is it a contract?
-must keep on file for 3 years
-not a contract; meant to inform about their choices they have in regard to their relationships with North Carolina brokers
86
oral buyer agency
1) What is it?
2) Is the exclusive?
3) What is the duration of this agreement and how is it terminated?
-is an agency option a firm may use when the consumer is unwilling to commit to a written buyer agency relationship.
-All oral buyer agency agreements must be nonexclusive.
-An oral agreement is considered to be of indefinite duration and can be terminated at the will of either party at any time.
87
Five-point checklist to properly follow disclosure rules:
1. The agency disclosure form must be given to prospective sellers and buyers no later than first substantial contact in all real estate sales transactions.
2. The broker must review the form and a determination of agency status must take place. The buyer/seller can acknowledge receipt by signing the form.
3. Listing agreements are required to be in writing from the start of the agency relationship.
4. The rule allows for an agent to act as a buyer's agent, a dual agent, or a designated dual agent under an oral agreement, until such time as the agreements must be put in writing, which is not later than the time the first offer is going to be presented.
5. Any buyer agency agreement that sets forth agency exclusivity or a definite period of time must be in writing from the start of the agency relationship.
88
A broker properly reviewed real estate agency relationships to a prospective buyer using the Working with Real Estate Agents form. The buyer chose to enter into a written buyer agency agreement with the broker without authorizing dual agency. After the broker showed the prospective buyer several properties listed by other companies, the buyer asked to see one of broker's listings. Given these circumstances, what kind of approval or authority to act as a dual agent must the broker obtain in order to proceed with the transaction?
A) Oral approval for dual agency from both the buyer and the seller before showing the property
B) Written authority to act as a dual agent from both the seller and the buyer before showing the property.
C) Written authority from the buyer for the agent to act as a dual agent and oral approval of dual agency from the seller before helping the buyer write an offer on the property.
D) Written authority to act as a dual agent from both the seller and the buyer no later than the time the agent presents an offer from the buyer to the seller.
The answer is B.
In this situation, because both the listing agreement and the buyer agency agreement already are in writing, oral consent to dual agency will not be sufficient. The buyer client must first authorize the company in writing to act as a dual agent, at least for this property, before the buyer may be shown the property. If the written buyer agency agreement had already authorized dual agency, then there would not have been any impediments to either showing the property or preparing and presenting an offer.
89
A broker reviews the Working with Real Estate Agents form with prospective a buyer. The buyer is reluctant to enter into a written buyer agency agreement with the broker's firm, so the broker and buyer agree that the broker's firm will represent the buyer for the time being under an oral buyer agency agreement. Dual agency is not mentioned. After the broker shows the buyer several properties listed with the broker's competitors, the buyer expresses a particular interest in seeing a properly listed with the broker's firm. The broker's firm had previously executed a written listing agreement with the seller, but that agreement did not specifically authorize the firm to act as a dual agent when selling the owner's property. At this point, can the broker proceed to show the buyer the listed properly in question without a written dual agency agreement from the buyer and the seller?
A) Yes, but only if the broker first obtains oral permission of both the buyer and seller to represent them as a dual agent and obtains a written dual agency agreement with both before any offer is presented.
B) Yes, because a written dual agency agreement with the buyer and seller is not required for in-house sales.
C) No, because a written dual agency agreement with both buyer and seller is required before any showing of a firm's listing to a buyer client of the firm.
D) No, because having not authorized dual agency in the written listing agreement, the seller may not now orally authorize dual agency.
The answer is A.
If the oral buyer agency agreement does not already authorize dual agency, the broker first must explain dual agency to the buyer and obtain the buyer's consent. Then before the broker may show the property, the broker first must contact its other principal, the seller, explain dual agency and obtain the seller's consent at least orally. If the seller refuses to consent, then the property may not be shown to the buyer client.
Note: Even though the listing agreement already is in writing and does not authorize dual agency, the seller's oral consent to dual agency as to that buyer is sufficient only because the buyer agency agreement is still oral.
If after viewing the property, the buyer wishes to make an offer, the buyer agency agreement first must be reduced to writing and must contain authorization for dual and/or designated agency before any offer is presented. Further, the seller's written consent to dual/designated agency, as least for this buyer, must be obtained before the offer may be presented. This may be done as an amendment to the listing agreement or as an addendum to the listing agreement, but it must be in writing before the offer is presented. Brokers are strongly advised to first obtain all necessary agency authorizations in writing before they prepare an offer. Otherwise, they may waste time preparing an offer they cannot present.
90
A broker is free to _______ or _______ agency relationships with principals.
accept or reject
This is an important characteristic of the brokerage business: a broker has the right to reject agency contracts that, in the broker's judgment, violate the ethics or high standards of the office. However, once a brokerage relationship has been established, the broker represents the principal and owes that person the duty to exercise care, skill, and integrity in carrying out instructions.
91
Provisional Broker
a real estate licensee who performs real estate activities under the supervision of a licensed broker-in-charger B618
The broker-in-charge is fully responsible for the actions performed in the course of the real estate business by all persons affiliated with the brokerage firm. In turn, all of a provisional broker's activities must be performed in the name of the broker-in-charge (see NCREC Rule A.0506).
92
three requirements can establish independent contractor status:
(1) The individual must have a current real estate license.
(2) The individual must have a written contract with the broker containing 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."
(3) Ninety percent or more of the individual's income as a broker must be based on sales production and not on the number of hours worked. The broker should have a standardized agreement drawn up or reviewed by a lawyer to ensure its compliance with these federal dictates. The broker should also be aware that written agreements mean little to an IRS auditor if the actions of the parties are contrary to the document's provisions.
