RE Chapter 4: Real Estate Agency

statutory law

the laws, rules and regulations enacted by legislatures

common law

the rules of a society established by court decisions

agency

a relationship in which a real estate broker or licensee, whether directly or through an affiliated licensee, represents a consumer by the consumer’s consent, whether express or implied in a real property transaction

agent

the individual who is authorized and consents to represent the interests of anther person

• in the real estate business, a firm’s sponsoring broker is the agent and shares the responsibility with the licensees who work for him

• always go to sponsoring broker with transactional information or problems with consumer or else that would be spreading confidential information

brokerage agreement

agreement, written or oral, between a sponsoring broker and a consumer for licensed activities to be provided to a consumer in return for compensation or the right to receive compensation from another

• in IL, these have to be written, non verbal “handshakes” are unenforceable

consumer

means a person or entity seeking or receiving licensed activities

a client

a person who is being represented by a licensee

• need buyer/agency agreement to have a client

• required signed buyer/agency agreement before a showing

customer

a consumer who is not being represented by the licensee

compensation

the valuable consideration given by one person or entity to another person or entity in exchange for the performance of some activity or performance→ commissions

• commissions are no longer disclosed, buyer has commission as part of their closing costs

confidential information

info obtained by a licensee during the term of a brokerage agreement that

• was made confidential by the written request or written instruction of the client

• deals with the negotiating position of a client

• is information the disclosure of which could materially harm the negotiating position of the client

6 common law fiduciary duties

care, obedience, loyalty, disclosure, accountability, confidentiality

care

agent should know all the facts pertinent to the principals affairs

obedience

obligates the agent to act in good faith at all times, obeying the principals instructions in accordance with the contract

• must obey LEGAL direction

loyalty

requires the agent to place the principals interest above those of all others

disclosure

agents duty to keep the principal informed of all facts or information that could affect the transaction. the agent may be held liable for damage for failing to disclose facts that a reasonable person would feel are important in choosing to go forward with a transaction

• disclose everything, STICK TO THE LAW

accountability

IL license law requires agents to report the status of all funds or property received, give accurate copies of all documents to all parties and keep copies on files

confidentiality

agents may not disclose personal and confidential information about their principals, though material facts about a property’s physical condition must always be disclosed

• IL residential property disclosure form- filled out by seller

• buyers are required to see disclosure before writing the offer

material facts

facts that, if known, might be reasonably expected to affect the course of events

fiduciary

one who’s placed in a position of trust and confidence, duties of COLD-AC

puffing

vague exaggeration of a property’s benefits

fraud

intentional misrepresentations of a material fact so as to harm or take advantage of another person

• false statements, intentionally concealing or failing to disclose important facts

negligence/constructive fraud

broker should have known statement about a material fact was false

latent defect

a structural defect that would not normally be uncovered over the course of an ordinary inspection, ex: crack in the foundation

• patent defect- visible defect, ex: hole in the wall

stigmatized properties

properties that society has branded undesirable because of the events that occurred there, ex: homicide, hauntings, illegal drug manufacturing, gang-related)

• never disclosed by listing agent

express agency

written or oral, enter into express contract, intention is specific

• parties formally express their intention to establish an agency relationship and state its terms and conditions

listing agreement

authorizes the sponsoring broker to find a buyer or a tenant for the owners property

buyer agency agreement

express agency relationship between a buyer and a sponsoring broker

implied agency

the actions of the licensee indicate that the licensee has formed an agency relationship with a party, created by actions

termination of agency

• death or incapacity of either party- know this

• destruction of condemnation of the property

• mutual agreement of all parties

• breach

• bankruptcy

  • completion, fulfillment

agency coupled with an interest

agent has an interest in the subject of the agency, such as the property being sold

• you have ownership in the property, broker owned/agent owned written on all documents

universal agent

a person empowered to do anything the principal could do personally, done on behalf of the principal

• licensee and power of attorney→ moving parent into a home

general agent

represents the principal, bind the principal to any contract within the scope of the agents authority

• property manager- authorizes the tasks you do

special agent

represents the principal only for a specific act such as the sale of a house

• real estate licensee→ putting lock box on door, negotiation

designated agent

person authorized by the sponsoring broker to act as the agent for a specific principal

• the only licensee in the company that has the fiduciary responsibility toward that principal

single agency

when an agent or firm represents only one party (buyer, seller, tenant, landlord) exclusively in a real estate transaction (client=principal)

dual agency

agent represents 2 principals at the same transaction, requires equal loyalty to 2 separate principals

• must have consent in written form both

• while legal in IL, your brokerage can say no to dual agency

• in house transactions are not the same

fiduciary responsibilities

licensees are required to deliver copies of all documents to the people who signed them within 24 hours

• all funds entrusted to a sponsoring broker must be deposited in a special escrow account by the next business day following the signing of a sale contract or lease

  • can hire a book keeper for this

commingling

such monies with the sponsoring broker’s personal or general business funds is illegal

conversion

theft of the earnest money

Escrow account

master account log, journal, ledger, bank reconciliation statement

• records of escrow account transactions must be retained for 5 years during which the records must be kept at the sponsoring brokers place of business for the first 2 years

principal

buyer or seller in a transaction

Q. open house and you are a listing agent

you do not need to keep things consumers say confidential

Q. administrative services

giving information- how many bedrooms, bathrooms, what are the taxes

• does NOT create agency, you can answer informative questions from consumer

Q. undisclosed dual agency

ILLEGAL and will result in loss on license, if you host an open house and actively show the buyers the house, this is undisclosed dual agency

Q. discuss working with brokerage

client relationship→ not specified then its a brokerage agreement, if seller comes through, listing agreement

• specific scenario- specific answer, vice versa (broad)

Q. scenario obedience

if seller asks for no sign or lock box, this is legal

Q. disclosure

what is not told to you by the seller and what you can see, you are not liable

Q. form of negligence

client wants boat parking, you sold them a house without a pier and told them they could build one, they were told no, if a pier does not already exist, you cannot build one even if your neighbors have one

Q. partial performance v substantial performance

partial- did some things but not all of things you said you would

substantial- did everything, but did not do it well

• cannot lose you license for this but you will lose clients

q. designated agent

should only answer designated agent when talking about CREATING agency

• have to be a designated agent first before any authority

Q. when talking about fiduciary responsibilities always…

answer 24 hours when talking about time