Real Estate Agency & Transaction Fundamentals

Vocabulary flashcards cover key real-estate agency, brokerage, property-management, and settlement terms discussed in the lecture. Use them to review definitions and core concepts for the exam.

Agency

A relationship in which a broker represents a party in a real-estate transaction.

Agent

One authorized to act on behalf of another (the principal) in a transaction.

Special Agent

Represents a principal one time in one specific matter, e.g., listing a single property for sale.

Single Agency

A brokerage arrangement in which the broker represents only one party (buyer or seller) in a transaction.

General Agent

Represents a principal on an ongoing basis in several areas, e.g., salesperson to broker or property manager to owner.

Attorney-in-Fact

The person authorized by a written power of attorney to sign or act for another.

Power of Attorney

The written document granting authority to another person to sign or act on one’s behalf.

Express Agency

An agency relationship created by clearly stated, written or spoken agreement (e.g., listing contract).

Implied Agency

An agency relationship formed by the actions of the parties rather than a written agreement.

Ostensible Agency

Agency that ‘appears to be’ created by conduct; essentially the same as implied agency.

Fiduciary

The highest duty of loyalty and trust owed by an agent to a client/principal.

Principal (Client)

The party who hires the agent and to whom fiduciary duties are owed.

Customer

A party who receives limited services and has no agency agreement with the brokerage.

Subagency

Two different brokerages both represent the seller; the co-op broker is a subagent of the listing broker.

Dual Agency

A broker represents both buyer and seller in the same transaction with informed consent from both.

Duty of Care

Agent’s obligation to use skill and diligence in protecting the client’s interests.

Duty of Obedience

Agent must follow all lawful instructions of the client.

Duty of Accounting

Agent must properly account for all funds and documents entrusted to them.

Duty of Loyalty

Agent must place the client’s interests above the agent’s own.

Duty of Disclosure

Agent must reveal all material facts that could influence the client’s decisions.

Duty of Confidentiality

Agent must keep the client’s confidential information private forever.

Fair (Customer Duty)

Treat all customers impartially and without discrimination.

Honest (Customer Duty)

Provide truthful information; never misrepresent or conceal facts.

Accurate (Customer Duty)

Disclose known material facts and latent defects correctly.

Stigmatized Property

Real estate associated with events like murder or suicide; disclosure requirements vary by state law.

National Do Not Call Registry

Federal list that restricts unsolicited telemarketing calls, including by real-estate licensees.

CAN-SPAM Act

Federal law governing commercial email; requires an opt-out option in marketing emails.

Brokerage Commission

Negotiable compensation paid to the listing broker, usually a percentage of sale price.

Independent Contractor (Salesperson)

Licensee who sets own hours, pays own taxes, and receives a Form 1099 from the broker.

Form 1099

Year-end IRS form showing income paid to an independent contractor.

Employee (Salesperson)

Licensee whose broker sets hours and withholds taxes; receives a W-2 form.

W-2 Form

Year-end wage statement provided to employees for tax purposes.

Sherman Antitrust Act

Federal law prohibiting price-fixing; brokers cannot agree to charge uniform commission rates.

Ready, Willing, and Able Buyer

A purchaser who meets all terms and can obtain financing; producing one earns the broker’s commission.

Errors and Omissions Insurance

Liability policy that protects brokerage, agents, and staff against claims of negligence or mistakes.

Property Management Agreement

Contract outlining duties, compensation, and authority of a property manager for an owner.

Vacancy Rate

Percentage of unoccupied units; determined in annual budgeting, not specified in the management contract.

Surety (Fidelity) Bond

Insurance that protects an owner against a property manager’s embezzlement of funds.

Operating Budget (Property Mgmt)

Annual forecast covering routine expenses like utilities, maintenance, taxes, and insurance.

Reserve Account

Savings fund set aside for major replacements such as roofs or parking lots.

Accrued Expenses

Costs that have built up but are unpaid, e.g., real-estate taxes owed in arrears.

Prepaid Expenses

Items paid in advance but not yet used, e.g., insurance premiums.

Purchase Money Mortgage

Owner financing where seller takes back a mortgage from the buyer; credited to buyer and debited to seller.

Proration

Allocation of annual costs between buyer and seller based on time of ownership.

Loan Origination Fee

Charge by a lender for processing a new loan; typically a debit to the buyer.

Discount Points

Prepaid interest buyers (or sellers) pay to obtain a lower loan rate; usually a buyer debit.

Closing Statement

Final accounting of debits and credits for buyer and seller at settlement.

Debits and Credits

Debits indicate money owed; credits indicate money received on the closing statement.

Earnest Money

Buyer’s deposit showing good faith; credited to buyer at closing.

Prorated Taxes

Seller reimburses buyer for seller’s share of taxes when taxes are paid in arrears.

Prepaid Interest

Buyer’s interest from closing date to month-end, paid at settlement.

Accrued Interest

Seller’s interest owed on existing loan from last payment to closing date; debited to seller.