Chapter 4 - Real Estate

Common Law

Unwritten law that is derived from court decisions that tend to reflect the attitudes of the community 

Compensatory Damages

Penalty imposed by civil courts that is typically determine by measurable loss

Punitive Damages

Penalty imposed by civil courts that imposes addition damages to punish the party whose actions gave cause for the suit

Statutory Law

Law, enforceable in court that is based on written statutes that have been enacted by a unit of government 

Administrative Law

Law that gives the FREC the ability to levy monetary fines for violation of Commission rules

Statutory Law (F.S 475)

Law enacted by the Florida legislature that is intended to protect the public by the regulation real estate and appraisal licensees

Agency Law

Law the addresses the rights, duties, and related obligations that arise from an individual the is authorized and entrusted to work on behalf of his or her employer and represents the best interests of that employer 

Principal

Agent’s employers in an agency relationship 

Special Agent 

Agent authorized by the principal to perform a single act defined in the employment contract 

Universal Agent

Agent authorized by power of attorney to act for and represent the principal in all matters, without limitation

General Agent 

Agent with the principal’s authority to act for him or her on a continuing basis, but with authority limited to a specific trade or business

Subagent

Party who has been granted authority to act on behalf of another agent and has the same duties to the principal as the agent who was employed by the principal 

The broker is a Special Agent of the owner for the single act of locating a purchaser

Agency that exists when a broker is employed under a single agency listing for the for the sale of a property and is authorized to locate a purchaser on behalf of the owner.

Relationship that exists when a broker gives permission to a sales associate to transact real estate on the broker’s behalf

Subagent of the broker’s principal and has the same duties to the principal as the broker

Brokerage Relationship Disclosure Act (BRDA)

The Act (legislation) that specifies and defined the relationship between a broker and the broker’s employer and disclosure requirements in residential real estate transactions. 

Customer

A member of the public who is NOT represented in a single agency relationship 

Single Agent

A broker who represents, as a fiduciary, either the buyer or seller, but not both in the same transaction

Principal

The party with whom a real estate licensee has entered into a single agent relationship with 

Transaction Broker

A broker who provides limited representation to a buyer, a seller, or both, in a real estate transaction

(Illegal) Dual Agency 

Agency relationship created by a broker who represents both the buyer and seller in a transaction as a single agent 

Residential Sales Transaction

Sale or improved residential property of 4 units or fewer, Sale of unimproved property intended for 4 units of fewer, Sale of agricultural properties of ten acers or fewer. 

Transition from Single Agent to Transaction Broker

Purpose of the “Consent to Transition to Transaction Broker” disclosure notice

Written disclosure notices required

Consent to Transition to Transaction Broker, No Brokerage Relationship(Notice of Non-representation), and Single Agent 

Consent to Transition to Transaction Broker

The only disclosure notice the must be signed by the principal

Five years from the date of execution (regardless of whether the transaction closes or not) 

Time period required to keep copies of disclosure documents for residential sales transactions that result in a written sales contract 

Three authorized forms of representation

1) Transaction Broker, 2) Single Agent, 3) Non-representation (no brokerage relationship)

How the relationship between the broker and the potential customer is determined 

By agreement between the broker and the buyer or seller 

Duties the ALL licensees must perform in any type of customer or agency relationship 

Dealing honestly and fairly, Disclosing all known facts that affect value that aren’t readily observable, Accounting for all funds

Additional duties required for licensees in a transaction broker or single agent relationship

Using skill, care, and diligence in the transaction, Presenting all offers and counteroffers in a timely manner 

Types of offers that must be presented

All offers must be presented, whether written or oral, with or without a binder deposit 

Concealment or Breach of Trust

Possible consequence(s) of failure to present an offer to the employer

Condition(s) under which a broker may be authorized to accept an offer on behalf of his or her employer 

When the broker has been authorized by power of attorney by the employer of by terms specified in the listing contract 

Transaction Broker

The presumed relationship between the broker and the employer when no representation has been established in writing 

Role of a transaction broker

Provide limited representation to a buyer, a seller, or both in a real estate transaction

Transaction broker duties

Dealing honestly and fairly, Disclosing all known facts, Accounting for all funds, Accounting for all funds, Using skill, care, and diligence, Presenting all offers, Providing limited confidentiality, Performing additional agreed upon duties 

Items a transaction broker may NOT discuss under the duty of limited confidentiality 

May not discuss: Price (other than listing price), Motivation, Terms, Other confidential information that may harm that party’s bargaining position 

Fiduciary Duties

Confidentiality of harmful information (other than material defects), Obedience to all legal instructions, Loyalty to act in the principal’s best interest of the principal, Full Disclosure of facts or rumors 

Type of brokerage relationship that establishes a fiduciary relationship

Single Agency (Single Agent) - the only brokerage relationship with fiduciary duties 

Single agent duties

Honest and fair, Disclosure all known facts, Account for all funds, Skill, care, and diligence, Present all offers, Confidentiality, Obedience, Loyalty, Full Disclosure 

The individual(s) that a single agent may represent in a sales transaction 

A seller or a buyer, but never both

Principal

Single agent’s employer

His or her employing broker, not an agent of the principal

Individual that the sales associate has an agency relationship with

Individuals who owe a fiduciary relationship to the principal in a transaction

The broker and the sales associate( or broker associate) who is an agent of the broker

Method by which a single agency relationship must be disclosed

Fully described and disclosed in writing and completed before, or at the time of, entering into a listing agreement of showing property

Arm’s Length Relationship (Also caveat emptor or buyer beware)

Parties acting in their own best interest in an adversarial relationship

Buyer and Seller

Parties that typically operate at an arm’s length relationship

The opposite of an arm’s length relationship

Fiduciary relationship, where the broker is acting in the principal’s best interest

The reason that a broker may need to transition from a single agent to a transaction broker

To avoid an illegal dual agency since a broker cannot be an agent for both parties in a transaction

Typical reason for a written No Brokerage Relationship notice

A For Sale By Owner (FSBO)

Designated Sales Associate

Broker designates one sales associate to represent buyer and another to represent the seller in the same nonresidential transaction. Buyer and seller must have $1M or more, request single agency representation in a nonresidential transaction

Point in time when the broker is entitled to compensation

In Florida when a sales contract is signed by all parties (find a purchaser State)

Listing Contract

Employment contract between the broker and the seller (owner)

Broker is entitled to compensation when employed by an owner to find a purchaser

When the broker provides ready, willing, and able buyer and the contract is signed by all parties

The broker is entitled to compensation when employed by an owner to effect a sale

When the transaction closes

Method by which sales commissions are determined

By agreement between the broker and the party of parties paying commission

Basis of a real estate sales commission

A percentage of the purchase price

Amount of compensation if the compensation has not been specified by terms of an employment contract

A customary commission rate based on the type of property and fee the broker would normally charge

Failure to Account, which is a form of fraud

Criminal penalty that can be charged against a broker for refusing to pay commission or compensation to another broker or sales associate as agreed

The broker who earns the commission when two or more brokers are competing for a sale

Procuring cause (the one who produced “a continuous and uninterrupted series of events that resulted in the conclusion of a sale”)

Price fixing or Uniform commission rates

Illegal action of competing brokers who discuss or establish a uniform price of fee for services

Condition under which a broker may collect a commission from both parties in a transaction

With knowledge and consent of both parties in the transaction

Overage, Secret Profit, of Unjust Commission

Illegal act of manipulation a transaction so as to profit at the expense of the employer without the knowledge of the employer

Real Estate Settlement Procedures Act (RESPA)

Legislation that prohibits a broker from giving or accepting a fee, kickback, or anything of value in exchange for the referral of real estate services unless the broker performs that service, is licensed to perform the service, and discloses and receives consent from the parties

Florida broker may pay a referral fee to, or share a commission with, a broker licensed or registered by another state or foreign country

Out-of-state broker may accompany customer to Florida but may NOT participate in the transaction in any manner

Florida broker may pay compensation, fees, or share a commission with unlicensed individuals in exchange for soliciting or referring business

Under NO conditions (this also includes gifts or reimbursement of expenses)

Fiduciary duty

A legal duty to act in the best interest of another. Parties owing this duty are called fiduciaries. The individuals to whom they owe a duty are called principals.

Compensatory damages

Those that can be determined from a measurable loss

Punitive damages

Additional damages to punish the party whose actions gave cause for the suit

Common laws

Based on common societal understandings

Statutory law

Based on written statutes