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RE - KW > Unit 4: Law of Agency > Flashcards

Unit 4: Law of Agency Flashcards

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1
Q

What does agency refer to in real estate?

A

Agency refers to the relationship that a broker, managing broker, or residential leasing agent may have with buyers, sellers, landlords, or tenants.

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2
Q

Who are the clients or principals in an agency relationship?

A

Those who hire are clients, or principals.

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3
Q

Who are the agents in an agency relationship?

A

Those who are hired are agents.

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4
Q

How does a real estate licensee become an agent?

A

A real estate licensee becomes an agent through a contractual agreement, whether expressed or implied, written or oral.

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5
Q

What duty does an agent owe to the client?

A

The agent owes the client, or principal, a duty of loyalty that rises above any personal interests of the agent.

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6
Q

What is the role of a real estate licensee in relation to the principal?

A

The real estate licensee is regarded as an expert on whom the principal can rely for specialized professional advice.

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7
Q

What is a general agency in real estate?

A

The relationship of the broker, managing broker, or residential leasing agent with the sponsoring broker is called a general agency because they represent the sponsoring broker in all daily actions.

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8
Q

How are agency relationships governed in Illinois?

A

Agency relationships in Illinois are governed under statutory law, specifically Article 15 of the Real Estate License Act of 2000.

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9
Q

What does the law of agency define?

A

The law of agency defines the rights and duties of the principal and the agent.

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10
Q

What takes precedence in defining legal real estate agency concepts in Illinois?

A

In Illinois, the Real Estate License Act of 2000 is given precedence.

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11
Q

What is the presumption regarding agency relationships in Illinois?

A

In Illinois, a licensee is presumed to have an agency relationship with the principal unless there is a statement in writing articulating a different relationship.

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12
Q

What is the definition of Agency under Article 15 of the Real Estate License Act of 2000?

A

A relationship in which a real estate broker or licensee represents a consumer by the consumer’s consent, whether express or implied, in a real property transaction.

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13
Q

Who is considered an agent in real estate?

A

The individual who is authorized and consents to represent the interests of another person.

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14
Q

What is a brokerage agreement?

A

An agreement, written or oral, between a sponsoring broker and a consumer for licensed activities to be provided to a consumer in return for compensation.

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15
Q

What does the term ‘consumer’ refer to in real estate?

A

A person or entity seeking or receiving licensed activities.

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16
Q

Define ‘client’ in the context of real estate.

A

A person who is being represented by a licensee.

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17
Q

What is a ‘customer’ in real estate?

A

A consumer who is not being represented by the licensee.

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18
Q

What constitutes ‘compensation’ in real estate?

A

The valuable consideration given in exchange for the performance of some activity or service, including commissions, referral fees, bonuses, etc.

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19
Q

What is considered ‘confidential information’ in a brokerage agreement?

A

Information obtained by a licensee during the term of a brokerage agreement that is made confidential by the client’s request or instruction.

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20
Q

True or False: A customer receives advice and counsel from a licensee.

A

False

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21
Q

What are the principal duties toward the agent?

A
  • Comply with the brokerage agreement
  • Cooperate with the agent
  • Not hinder the agent
  • Deal with the agent in good faith
  • Compensate the agent according to the terms of the brokerage agreement
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22
Q

What is the distinction between the services provided to a client and a customer?

A

The client receives advice and counsel, while the customer is entitled to factual information and honest dealings.

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23
Q

Fill in the blank: The principal has _______ responsibilities toward the agent.

A

[primary]

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24
Q

What are fiduciary responsibilities in the context of agency?

A

Duties the agent owes to the principal, including confidentiality and loyalty.

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25
What is the Duty of Care in real estate transactions?
Agents must exercise a reasonable degree of care while transacting business for the principal.
26
What are the expectations of a principal regarding an agent's expertise?
Principals expect the agent’s skill and expertise in real estate matters to be superior to that of the average person.
27
What are the responsibilities of an agent representing the seller?
* Helping the seller arrive at an appropriate listing price * Discovering and disclosing facts that affect the seller * Properly presenting contracts * Marketing the property * Evaluating offers to purchase
28
What is expected of an agent representing the buyer?
* Helping locate suitable property * Evaluating property values and conditions * Considering financing alternatives * Managing offers and counteroffers
29
What is the Duty of Obedience?
The agent must act in good faith and obey the principal's instructions according to the contract.
30
Can an agent obey unlawful instructions from the principal?
No, the agent may not obey instructions that are unlawful or unethical.
31
What should an agent do if a seller provides illegal instructions?
The agent must not follow the instructions and should withdraw from the agency relationship.
32
What is the Duty of Loyalty?
The principal’s interests come first, even above the self-interest of the agent.
33
What does the Duty of Disclosure entail?
The agent must keep the principal informed of all facts or information that could affect a transaction.
34
What must an agent disclose regardless of the nature of the facts?
All material defects known to the agent, including those that may be unfavorable to the principal's position.
35
What is the role of disclosure forms in real estate transactions?
Sellers complete disclosure forms revealing material defects before signing the listing agreement.
36
What happens if a disclosure form is delivered after an offer is accepted?
The buyer has three business days to cancel the contract if there are negative disclosures.
37
What is the Duty of Accounting?
Agents must periodically report the status of all funds or property received from or on behalf of the principal.
38
What is required of agents regarding document copies?
Agents must provide accurate copies of all documents to affected parties and keep copies on file.
39
Fill in the blank: The Illinois license law prohibits a licensee from serving as a _______ in any transaction where they have an ownership interest.
dual agent
40
True or False: The Duty of Loyalty allows agents to prioritize their own interests over the principal's.
False
41
What must be disclosed if a seller learns of a new problem after a contract is signed?
The seller must disclose the problem in writing to the buyer.
42
What is the purpose of the Illinois Association of REALTORS' Residential Real Property Disclosure Report?
It shifts the responsibility for full disclosure from the real estate agent to the seller.
43
What is the time frame for Illinois licensees to deliver true copies of executed documents?
Within 24 hours ## Footnote This requirement ensures transparency and accountability in real estate transactions.
44
What must be done with funds entrusted to a licensee in Illinois after a sales contract or lease is signed?
Deposited in a special escrow account by the next business day ## Footnote Unless the contract specifies a different time frame.
45
Is commingling escrow funds with a licensee's personal funds legal in Illinois?
No, it is illegal ## Footnote Commingling refers to mixing client funds with personal or business funds.
46
What is conversion in the context of escrow funds?
Using escrow funds as the licensee's own money ## Footnote This practice is illegal.
47
How long must records of escrow account transactions be kept on file in Illinois?
At least five years ## Footnote This is to ensure compliance and accountability.
48
What is a key element of fiduciary duties in real estate?
Confidentiality ## Footnote Protecting client information is essential during the brokerage agreement.
49
What must an agent not disclose about a seller's willingness to accept a lower price?
The seller's willingness to accept less than the listing price ## Footnote This is confidential information unless authorized by the principal.
50
What is a material fact in real estate?
Any fact that might reasonably be expected to affect the course of events ## Footnote Agents must disclose known material facts about the property.
51
What are the fiduciary duties set forth in Article 15 of the Real Estate License Act of 2000?
Perform the terms of the brokerage agreement, promote the client's best interests, disclose material facts, timely account for money, obey client directions, exercise reasonable skill and care, keep information confidential, and comply with all applicable laws ## Footnote These duties ensure ethical conduct by agents.
52
What must an agent do regarding offers to and from the client?
Timely present all offers unless waived by the client ## Footnote This duty is crucial for maintaining client trust and satisfaction.
53
True or False: An agent can disclose a buyer's urgency to sell if it benefits the seller.
False ## Footnote Such disclosures may harm the buyer's bargaining position.
54
Fill in the blank: An agent must keep _______ all confidential information received from the client.
Confidential ## Footnote This is part of the agent's fiduciary duties.
55
What must an agent disclose to the client concerning the transaction?
Material facts of which the licensee has actual knowledge ## Footnote However, this does not include confidential information.
56
What is the consequence of not complying with the Real Estate License Act in Illinois?
Legal repercussions, including potential loss of license ## Footnote Compliance is essential for maintaining professional standards.
57
What is the primary goal of an agent's fiduciary duties?
To promote the best interests of the client ## Footnote This includes acting in a manner consistent with the client's needs.
58
What is required of a licensee when acting on behalf of a client?
Exercise reasonable skill and care ## Footnote This ensures that clients receive competent brokerage services.
59
What must real estate licensees ensure about their statements?
Consumers understand whether the statement is opinion or fact.
60
What is permissible regarding statements of opinion?
Offered as opinions without any intention to deceive.
61
What is puffing in real estate?
Generalized, vague exaggeration of a property’s benefits.
62
Is puffing illegal?
No, but statements must not be interpreted as fraudulent.
63
Define fraud in the context of real estate.
Intentional misrepresentation of a material fact to harm or take advantage of another person.
64
What constitutes negligent misrepresentation?
When the licensee should have known a statement about a material fact was false.
65
What are the consequences of a consumer relying on a licensee's false statement?
The licensee is liable for any resulting damages.
66
Provide an example of puffing.
Describing a plain house's features as 'charming' and 'beautiful.'
67
What is an example of fraudulent misrepresentation?
Failing to disclose that a neighboring lot is a toxic dump.
68
What does the Illinois Real Estate License Act state about false information provided by customers?
Licensee is not liable if they did not know or should have known the information was false.
69
What is the liability of a licensee when false information is provided by their client?
Not liable if they did not have actual knowledge that the information was false.
70
What must licensees do regarding the treatment of customers?
Treat all customers honestly and not provide false information.
71
Fill in the blank: Fraud is the ______ of a material fact to harm or take advantage of another person.
[intentional misrepresentation]
72
True or False: Puffing is considered illegal in real estate.
False.
73
What is a latent defect?
A structural defect that would not normally be uncovered over the course of an ordinary inspection.
74
What duty does a seller have regarding latent defects?
To disclose any known latent defects that threaten structural soundness or personal safety.
75
What can buyers do if a seller fails to reveal known latent defects?
Buyers can either rescind the sales contract or receive monetary damages.
76
What have courts ruled regarding violations of zoning or building codes?
Courts have ruled in favor of the buyer when the seller neglected to reveal such violations.
77
What is the licensee's duty concerning material facts?
To disclose any material facts that may affect the property's value or desirability.
78
What happens if a licensee discovers a substantial defect after the sale?
The licensee may be liable to the buyer for any damages resulting from that defect.
79
In the example provided, what did the listing broker know?
The house had been built on a landfill.
80
What did another broker notice about the property?
The living room floor was uneven and sagging in places.
81
What duty might both brokers have in some states regarding the structural soundness?
To conduct further investigations into the structural soundness of the property.
82
What must the listing broker do if the seller refuses to disclose a problem?
The broker should refuse the listing.
83
Fill in the blank: A licensee must disclose any material facts discovered by the _______.
[licensee]
84
True or False: A seller can ignore known issues with the property and does not need to inform the buyer.
False
85
What should a broker do if they notice structural issues?
Discuss the issue with the seller and advise the buyer to have an inspection performed.
86
What are stigmatized properties?
Properties branded undesirable due to negative events such as homicide, gang-related activity, or tragedies like suicide ## Footnote Stigmatized properties may also be rumored to be haunted.
87
What is stigma in real estate?
The continuing negative association or feeling about a property ## Footnote Stigma often arises from criminal events or tragedies related to the property.
88
What should licensees do when dealing with a stigmatized property?
Seek legal counsel regarding the research and disclosure of material facts ## Footnote This is important to avoid potential liability.
89
Do licensees in Illinois have a legal duty to disclose if a property is stigmatized?
No ## Footnote Licensees have no obligation to disclose that a property is stigmatized.
90
What is Megan's Law?
Laws requiring law enforcement to make information about registered sex offenders available to the public ## Footnote This includes notifying authorities of address or employment changes for those convicted of sex crimes against children.
91
Do listing agents have a legal duty to disclose the presence of a registered sex offender near a listed home?
No ## Footnote Listing agents are not required to disclose this information.
92
What should buyer's agents do if asked about registered sex offenders?
Refer clients to publicly available sex-offender-location lists ## Footnote This ensures clients can access necessary information.
93
What does Article 15 of the Real Estate License Act of 2000 state about disclosure?
No cause of action arises against a licensee for failure to disclose facts on property not involved in the transaction ## Footnote This includes physical conditions that do not substantially affect the value of the real estate.
94
What medical conditions are licensees not required to disclose under Article 15?
HIV or any other medical condition of an occupant ## Footnote Also, acts or occurrences that do not affect the physical condition or environment of the property.
95
What is the time limit for actions brought under Article 15?
Must commence within two years of knowledge of the act or omission, and no more than five years after the occurrence ## Footnote This statute of limitations is crucial for legal actions.
96
What is an agent's primary responsibility?
To the principal
97
What must a licensee adhere to when working with third parties?
State and federal consumer protection laws and ethical requirements
98
In Illinois, what gives the seller or buyer a cause of action against a licensee?
The contractual principal-agent relationship defined in a listing agreement or buyer agency agreement
99
What duties do Illinois licensees owe to third-party customers?
Treat all customers honestly and cannot give false information
100
What must licensees disclose to customers?
All adverse material facts about the physical condition of the property that are known by the licensee
101
What can happen if a licensee misrepresents material facts about a property?
The licensee may be held liable to the seller or buyer for monetary loss
102
Is a licensee's loyalty to the principal a defense against liability for misrepresentation?
No
103
What duty do licensees have to prospective sellers and buyers?
To disclose all material information within their knowledge
104
When can a licensee be held liable for false statements?
If the licensee knowingly makes untrue statements
105
What should a licensee do if they suspect a statement made by the seller is untrue?
Attempt to ascertain the truth and pass the correct information to the buyer
106
Under what condition will a licensee not be held liable for false information provided by a client?
If the licensee did not have knowledge that the information was false or has not acted negligently
107
What is the likelihood of success for licensees using a waiver or exculpatory clause to avoid liability?
Probably unsuccessful
108
What have Illinois courts ruled regarding contracts that eliminate consumer rights?
A contract cannot eliminate the rights given to a consumer via the law

RE - KW (12 decks)

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