Law of agency prep

Agency

An agency relationship exists when one person acts for or on behalf of another person.

Principal

Also known as the client this relationship is fiduciary.

Fiduciary

Meaning that it is a relationship based on trust “the agent must always remain loyal to the principal”

The real estate license act (TRELA)

The purpose of the act is to protect the public against unscrupulous brokers and sales agents.

Cooperative broker

A broker selling the listing of another broker

Indemnification

Means that the principal will protect the agent from suffering a loss due to the agents reliance on information received from the principal

Express authority

In real estate, this comes from a listing agreement or buyer representation agreement that spells out exactly what the broker can do on behalf of the client.

Implied authority

Authority that is not written or spoken, but is assumed to exist because it is necessary, customary, or expected to carry out the broker’s express authority.

General agency

A type of agency where the agent can perform many acts for the client, but only in one area of business.

Where does sub agency take place?

Rural parts of Texas.

Obedience

An agent must follow all of the clients lawful instructions

Shortest period of time for a buyer representation is

One day

How is agency terminated?

A. The expiration of the period stated in the listing contract

B. At any time by mutual agreement.

What words in your brokerage (TEAM) can you use

Team

Group

(Realty followed by group or team)

What can you not use in your team name?

Company

Brokerage

Associates

TREC requires that the brokers name be at least

½ the size of the largest contract information on the advertisement

Who fills out the sellers disclosure notice

THE Seller

What stigmatizes properties?

Murder

Suicide

Death due to violent crime

What does not stigmatize properties

Someone with aids who died in the house

A person who died to natural causes

Requirements of a valid listing agreement include

The signatures of all of the owners and the listing agent

A legal description of the property including the street address

The list price of the property set by the seller

A definite starting (commencement) and ending (termination date)

The agreement to pay a stated commission (compensation to the broker usually a percentage of the sales price)

Exclusive right to sell

The broker receives a commission even if the owner sells the property

From what period of time should comparable sales be used in a CMA?

6 months

Buyers broker disclosures

Regardless of representation all buyers should be provided with an oral or written disclosure of representation at first contact.

Suit for commission

Only a broker may earn a commission and only a broker may sue to collect a commission.

Disclosure of all material facts

A material fact = any fact that could influence a buyer’s or seller’s decision in a real estate transaction.

Property condition and environmental hazards etc

Price fixing (Violates Sherman anti trust act)

Brokers from different companies agreeing to charge the same commission rates.
Ex: “All brokerages in town will charge 6%.” ❌ Illegal.

Intermediary no appointments

One agent (or broker alone) works with both the buyer and seller.

Must remain completely neutral.

Can only give facts — no advice, no opinions, no negotiating tips.

Intermediary with appointments

The broker appoints two different sales agents → one to the buyer, one to the seller.

Those agents can give advice, opinions, and negotiate for their respective clients.

The broker still stays neutral in the middle.

Who can appoint agents?

ONLY THE BROKER (intermediary)

Commingle

Commingling is the illegal mixing of a client’s money (like earnest money or security deposits) with the broker’s personal or business funds.

Conversion

Conversion is the illegal use of a client’s money by a broker or agent for personal or business purposes.

It goes beyond mixing funds (commingling).

It means the broker actually spends or takes the client’s money.