Part 3 & 4: agency and RE brokerage commission, math and purchase contracts

Relationships in which one person acts on behalf of another is called an

Agency

The parties to an agency are

Principal and the agent

The agent represents who, in dealings with a third-party

The principal(s)

Who authorize the agent/broker to act on their behalf

The principal/client

True or false the principle can be either the buyer or the seller (lease or leasee)

True

The employing brokerage the broker is an agent of who

The client / principal

What kind of duties does the agent have to the principal?

Fiduciary duties

Who has obligations to fairness honesty, disclosure of defects and material facts

Agent or principal

Agent

What is the difference between a client or a customer?

Client/principal is the person who your company works for the duty is to advise

Customer is the person your company does not work for or represent, but our duty is to inform

Any listing who is the client? Buyer or seller

Seller

And property management agreements who is the client

The lease or the lessor

The lessor the owner or property is who we represent

And dual agency who is the client buyer or seller?

Both

Define fiduciary duties

(Hint: OLDCAR)

Obedient

Loyalty

Disclosure

Confidentiality

Accounting

Reasonable skill and care/diligence

Under fiduciary duties what does follow legal instruction fall under?

Obedience

Under fiduciary duties for obedience, what are the legal instructions included?

Cannot violate fair housing or laws

You cannot be instructed to disclose material defects

Under fiduciary duties loyalty means

Place the clients interest above all others, including the agents

Avoiding conflict of interest falls under what fiduciary duty

Loyalty

Define disclosure under fiduciary duty

To disclose anything that affects the client

Conflict of interest, material defects legal requirements other offers agency relationships. Buyer seller, any information that benefit benefits the client’s negotiation.

Under fiduciary duties confidentiality remains in effect until when

Forever, even after agency terminate

Two account four and safeguard The client’s money falls under what fiduciary duty

Accounting

Protecting the client from foreseeable risk and harm acting professionally performing all duties as promised advice on what you know and should know and be skilled in contract prep, marketing price and market condition and meeting deadlines falls under what fiduciary duty

Reasonable skill, and care

Does an agent have fiduciary duty to customer rather than client?

No

But must act in fairness, honesty, good faith, competency, and disclosure of defects

What is the difference between physical material defect and stigmatize property?

Stigmatize property is the reputation

Stigmatize property law in Arizona the licensee is not liable for disclosing that a property was

The site of a death, murder, suicide or felon

Owned by or occupied a person with aid/HIV

Located near sex offender

Does a client have duties to an agent?

Yes, but not fiduciary duties

What are the duties of a client to an agent?

Compensation performance and indemnification

(protect liability against agent)

How is the creation of agency authorized?

Writing or verbal

All listings buyer brokerage agreements property management must be in writing true or false

True

To comply with Arizona law and collect commission or fee in court, the contract of an agency relationship must

Be in writing

What are the two types of agency relationships?

Expressed -Written or verbal from principal client with specific authorization

Implied agency created by the act or conduct of a party

Who is appointed by the broker or agent to perform action on behalf of the client?

(The agents agent)

Sub agent

If the broker is the agent of the client, the sales person is an agent of

The broker

If the broker is an agent of the client, the sales person is an agent of the broker. The sales person is a sub agent of who.

The client

What type of agency is common in new sales (seller/builder)

Single agency- Agent represents one client one party

What type of agency is when two clients are represented by one brokerage in the same transaction

Dual agency

True or false when one or more licensees Of employing brokerage is representing the buyer and the seller. This is considered dual agency.

True

What is required in dual agency?

Written consent from both parties

What is the type of written consent from both parties and dual agency called?

Consent to limited representation

Can an agent provide insight on offers/counter offers and dual agency

No

When must disclosure be made for service being provided and in writing in regards to agency relationships?

At first substantive discussion or prior to any substantial service

What’s the name of the form for disclosure of agency relationship?

Real estate agency disclosure and election form

READE form

For sale by owner sellers when representing the buyer listing the property creates what type of agency

Dual agency

When must you use? “ Unrepresented seller compensation agreement”

For sale by owner

When using unrepresented seller compensation agreement that maintains single agency with who

With a buyer only

And an unrepresented seller compensation agreement this discloses that the licensee doesn’t represent the seller, but the seller agrees to

Pay compensation

Specific/special agency is

Limited to specific things or acts on behalf of the client

(One time like buying or selling a house)

General agency:

Authorizes, various ongoing and personal and in business

(Property management)

Property management is an example of what type of agency

Specific

General

Universal

General

Universal agency means

Unlimited authority to represent the principle in all matter matters

Usually created through power of attorney

What type of agency is created through power of attorney?

Universal agency

Under typical property listing agreements, buyer broker agreements the broker is what kind of agency

Special agency meaning the broker has limited authority

When does a special/specific agency terminate

Terminate our end of performance or end of duty

What type of agency is typically ongoing?

General and universal

Notice to the agent is noticed to the client “as good as” is known as

Imputed notice

Vicarious Liability Means the principal is liable for the act of the agent. Another term for this is.

Indemnification

Three types of broker business liability insurance

Errors and omissions Insurance e&o

General liability insurance

Umbrella, Insurance

What type of insurance ensures the license against misrepresentation made a material facts the license failed to disclose- Similar to malpractice

Errors and omission Insurance

What type of insurance covers the brokerage and licensee against claims made when a third-party is injured or has loss?

General liability insurance

What best describes umbrella Insurance

Extra liability designed to protect the insured from claims

A sales person or associate broker always represents their employment broker they are what type of agent to the broker

General agent of broker

True or false the completion of performance terminate the agency

True

Under termination of agency, what is the difference between revocation and renunciation?

Revocation is when the principal or client terminates agency

Renunciation Is when the agent broker backs out

True or false destruction, or condemnation of the property will terminate an agency

True

True or false bankruptcy will terminate an agency

True

Death or imcapacity of principle or agent terminates an agency true or false

True

True or false death of parties does not terminate purchase or lease agreement

True

Commission is typically

A percentage

When calculating commission, what is the formula?

(Memory t circle)

Commission = sales price x commission rate

Defined the sales price what is the Formula?

Sales price= commission / by commission rate

What is the formula for finding the commission rate?

Commission Rate = commission / sales Price

What are the two steps Leading to a contract

Letter of intent: Expressing the intention without being legally binding

Offer: Not a contract typically followed by a counter offer

Is an offer legally binding contract

No

Is a letter of intent a legally binding contract

No

What is not a contract but an invitation to enter into one once accepted it becomes legally binding

The offer

The Arizona Department of real estate requires all offers to be presented to the client true or false

True

Define a bona fide purchaser

Someone ready willing and able to perform

Parties to a contract are

Offeror: Makes the offer (buyer)

Offeree: Received the offer (seller)

Who makes the counter offer?

The offeree- Once a counter offers made it reject the original offer

True or false once the contract is accepted, it becomes legally binding

True

If a licensee wants to buy or sell a property for themselves, they must disclose that they are a licensed agent true or false

True

What does it mean that the original offer is null and void once a counter offers made

When a counter offers made, if there’s any changes, no matter how minor it is no longer bound to the terms of the original offer

After acceptance, the buyer has what

Equitable title

Ownership

Equitable title

Once an offer is accepted, the contract is what

Voidable

Liable

Executory

Executory- Not fully finished, but in the process of

Purchase agreements terminate if the Property is condemned or destroyed true or false

True

Assignment of contract means

To transfer rights from one party to another

An assignment of contract the parties are

The assignee and assignor

Are both purchase agreements and leases assignable

Yes, purchase agreements and leases are both assignable contracts

How many unit units is residential considered?

1 to 4 units

How many units is considered wholesale buyer and sellers?

More than four units

Wholesale buyers and sellers must disclose

What does “or nominee” mean in reference to contracts?

The purchase contractors lease may have another person or entity who’s completing the contract on their behalf

If there’s multiple offers on a property, the listing agent must

Submit all offers from buyers

Can the seller make multiple counter offers at the same time?

Yes

What is offered to show good faith/intention In a purchase agreement

Earnest money

Is Ernest money

No earnest money is negotiable

Forfeiture Of earnest moneyis in the event of a breach by the buyer

True or false

True

In Arizona earnest money requires a licensee to state the form of the earnest money in the contract

What are the forms of earnest money?

Cash check or note

Arizona law requires the broker to place the earnest money into ____ or ___ IMMEDIATELY

A trust account or escrow immediately

If earnest money is given to the sales person, the sales person must

Give to the broker promptly

What is the difference between commingling and conversion?

Commingling is mixing the money with personal

Conversion is using for another purpose than what it’s intended for

If recision of contract occurs, can the broker keep any portion of the earnest money as commission

No