Unit 9: Agency

Question 1

What is the definition of Agency?

Answer 1

Agency is the word used to describe the relationship between a licensee and the person he or she represents.

Question 2

_____ is the word used to describe the relationship between a licensee and the person he or she represents.

Answer 2

Agency

Question 3

What is the Law of Agency

Answer 3

The law of agency is a common law concept that defines the rights and duties of the principal and the agent in a real estate transaction.

Question 4

Creation of an Agency Relationship:

The two types of formal agreements

Answer 4

A formal agreement (Express Agency) or by the actions of the licensee (Implied Agency)

Question 5

What is Express Agency:

Answer 5

In an express agency relationship, the parties have formally executed a written listing agreement or buyer agreement that defines the terms of the agreement.

Question 6

In a(n) express __________ relationship, the parties have formally executed a written listing agreement or buyer agreement that defines the terms of the agreement.

Answer 6

Express agency

Question 7

What is Implied Agency:

Answer 7

An implied agency agreement exists when the parties actions indicate that they have an agency relationship.

Question 8

A(n) _________ agreement exists when the parties actions indicate that they have an agency relationship.

Answer 8

Implied Agency

Question 9

Legal Terms:

Agent

Answer 9

Relationship in which a real estate brokers owes fiduciary duties to a Principle.

The agent advocates and negotiates on behalf of the Principle (buyer or seller).

Such a relationship requires a written agency agreement

Question 10

Legal Terms:

Advocate

Answer 10

To promote the interests or negotiate on behalf of a buyer or seller

Question 11

Legal Terms:

Dual Agency

Answer 11

Relationship in which a real estate broker is an agent for and provides agency duties on behalf of both the buyer and the seller in a real estate transaction.

Dual Agency was abolished in Colorado with the enactment of the Designated Brokerage in Real Estate Act in Jan. 2003

Question 12

Legal Terms:

Fiduciary Duty

Answer 12

Set of legal duties which are put in place when an agency relationship between a real estate broker and a buyer or seller is established.

These responsibilities include:
Loyalty and Obedience

Question 13

Legal Terms:

Loyalty

Answer 13

A real estate broker is obligated to act at all time in the best interests of the Principle, and place the interests of the buyer or seller above those of the real estate broker.

Question 14

Legal Terms:

Obedience

Answer 14

A real estate broker is obligated to efficiently and promptly obey all lawful instructions from the Principal that conform to the purpose of the agency agreement.

Question 15

Legal Terms:

Disclosure:

Answer 15

A real estate broker is obligated to disclose to the principal all relevant and material information known by the broker with respect to the property, its value and desirability, and information about the transaction including the bargaining position of the other party and their willingness to accept terms other than those offered.

Question 16

Legal Terms:

Confidentiality:

Answer 16

A real estate broker is obligated to safeguard the confidential secrets of the principal which includes all information regarding the Principal’s motivations and willingness to accept terms other than those offered. This confidentiality does not include material information about the property or the buyer’s ability to financially perform on the contract.

Question 17

Legal Terms:

Reasonable Care and Diligence:

Answer 17

An agent is to use superior skill and expertise when attending to the affairs of the principal. This duty does not include those matters which are outside the knowledge or expertise of the real estate agent.

Question 18

Legal Terms:

Accounting:

Answer 18

The real estate agent is obligated to properly account for all monies, property, and documents entrusted to the agent.

Question 19

Legal Terms:

Imputed Knowledge:

Answer 19

Premise that confidential information conveyed by the Principal to his/her agent is known by all others in the Agent’s real restate brokerage.

Question 20

Legal Terms:

Informed Consent:

Answer 20

Consent by a buyer or seller in real estate transactions which it’s clear that the buyer/seller understands all potential consequences (negative and positive), which consent impies

The seller allows a seller agent to tell a potential buyer that they are in the middle of a divorce.

Question 21

Legal Terms:

Principal:

Answer 21

A party in real estate transactions to whom the Agent owes fiduciary duties.

Question 22

Legal Terms:

Sub-agency:

Answer 22

A brokerage relationship in which the seller agency relationship was extended to other brokers, including those of other brokerages.
e.g. a broker shows a Legal Terms:
listed by another broker to a buyer with whom he has no buyer agency relationship.

In this case, the agent showing the property was a sub agent and was not working on behalf of the buyer.

This form of agency was abolished in the Designated Brokerage Relationships in Real Estate Act.

Question 23

Legal Terms:

Vicarious Liability:

Answer 23

In an agency relationship, the Principal is legally responsible for the acts, misrepresentations or omissions of his/her Agent when acting in the context of the agency relationship.

The Designated Brokerage Relationship in Real Estate Act has limited the Principal’s vicarious liability to those acts or omissions in which the Principal has directed/instructed

Question 24

Legal Foundations:

What is the Brokerage Relationships in Real Estate Act of 1994 (SB 223):

Answer 24

Codified much of agency law with respect to real estate.

Defined Buyer Agency, Seller Agency and Transaction Brokerage

Established general duties, obligations and responsibilities of real estate brokers in a real estate transaction.

Question 25

What is the Designated Brokerage Relationships in Real Estate Act (SB 196)

Answer 25

Amended the Real Estate Brokerage Relationship Act of 1994 Went into effect January 1, 2003 Abolished Sub-Agency and Dual Agency Limited vicarious liability of a buyer or seller for misrepresentations or omissions by the real estate broker to those items in which the Principal specifically instructed the agent or knew of the misrepresentation or omission and did nothing. Allowed for those circumstances where we can have one real estate broker working as a selling agent for a seller and another broker working as a buyer agent. The real estate broker(s) designated maintains the motivational information of the seller or buyer as confidential and this information is not shared with anyone in the office with the exception of managing broker for the purpose of supervision.

Question 26

Duties of Agents and Transaction Brokers: The Exclusive Right to Buy Contract Sections 4 and 5 The Exclusive Rights to Sell Listing Agreements Sections 4 and 5 Assist the buyer, seller, or both throughout a real estate transaction by:

Answer 26

1. Performing the terms of a contract 2. Fully informing the parties throughout the transaction. 3. Presenting all offers and assisting with any contracts including the closing of a transaction 4. Accounting for monies and properties received in a timely fashion. 5. Advising the parties to seek expert advice regarding matters which are known by the broker but the specifics are beyond expertise of the broker (Example: A property has a heaving basement slab)

Question 27

Buyer Agents Duties:

Answer 27

1. Advocates for and negotiates on behalf of the buyer to obtain more favorable pricing and terms for the buyer. 2. Has fiduciary duties to the buyer including to promote the interests of the buyer with the utmost good faith, loyalty and fidelity. 3. Relationship is exclusive during the priod in which is the Exclusive Right to Buy Contract is in Effect 4. Limited vicarious liability

Question 28

Seller Agents Duties:

Answer 28

1. Advocates for and negotiates on behalf of the seller to obtain more favorable pricing and terms for the seller. 2. Has fiduciary duties to the seller including to promote the intersts of the seller with the utmost good faithm loyalty and fidelity. 3. The relationship is exclusive during hte priod in which the Exclusive Right to Buy Contract is in effect. 4. Limited vicarious liability

Question 29

Transaction Broker Duties:

Answer 29

1. Transaction Broker is not an advocate or agent for the parties. 2. Relationship is NOT exclusive unless an Exclusive Right to Buy (Sell) Transaction Broker contract is in writing and is in effect for the defined period of time 3. NO viarious Liability NOTE: While you may begin working wiht a buyer as a Transaction Broker, it is possible to later become a Buyer Agent for that buyer.

Question 30

Differences between Buyer and Seller Agents and Transaction Brokers

Answer 30

Advocates does not equal Bully- You can advocate for your Principle in a positive and professional manner. Use finesse and diplomacy and remember: The Buyer wants to Buy and the Seller wants to Sell.

Question 31

Disclosure Requirements:

Answer 31

1. Prior to, or at the same time that a Seller/Buyer begins discussing their needs (willing to spend, etc) the broker has to disclose to seller/buyer the various ways a broker can work with a buyer/seller 2. Disclosure from commonly used is the Definitions of Working Relationships form approved by the Colorado Real Estate Commission 3. The Buyer/Seller should sign the acknowledge receipt. 4. The definitions of working relationships form is NOT a contract. 5. If the buyer is unwilling to sign the Definitions of Working Relationships form, the agent should note that fact and date. The document should then be filed for future reference. 6. A signed Buyer Agency, Seller Agency, or Transaction Broker Agreement can be substituted for the Definitions of Working Relationships form. 7. Buyers and Sellers may choose how they want to work with the Real Estate Broker.

Question 32

A Real Estate Broker Must/Should Act As an Agent for:

Answer 32

1. Yourself 2. Immediate Family 3. Close Business Associates and Partners 4. Very Close Friends Reason: There is an expectation that you would advocate for anyone with a close relationship. Check your Errors and Omissions Insurance to determine coverage on the purchase of your own property.