CREL Unit 2

Agency

A relationship of trust and confidence where one party hires another to transact business on their behalf.

Principal/Client

The person who hires the agent.

Agent

Authorized to act on the principal's behalf.

Customer

The third party the agent deals with, not represented.

Broker

The agent of the principal.

Salesperson/Associate Broker

Agent of the broker, subagent of the broker's principal.

Universal agent

Handles all matters that can be delegated, requires a signed and notarized power of attorney.

General agent

Handles an agreed-upon range of responsibilities.

Special agent

Handles a specific task under detailed instructions.

Agency coupled with an interest

Agent has ownership/interest in the transaction and cannot be terminated.

Scope of Authority

The authority a broker is granted by the client to perform specific activities.

Express agency

Created through an oral or written agreement.

Implied agency

Created from actions of the parties.

Ratification

Created after the fact when the principal accepts the agent's prior unauthorized acts.

Estoppel

Occurs when someone relies on a representation that an agency exists.

Listing Agreements in Writing (NY)

NY's statute of frauds requires listing agreements lasting more than 1 year to be in writing.

Agency vs. Brokerage

Agency is the legal relationship; brokerage is the business activity of bringing buyers and sellers together.

Subagency

A salesperson is a subagent of the broker's principal.

Fiduciary Duties

Care, Confidentiality, Loyalty, Obedience, Accounting, Disclosure (CCLOAD).

Exceptions to Confidentiality

Law requires disclosure, information becomes public, client permits disclosure.

Duties to Customers

Includes reasonable skill and care, fair and honest dealing, disclosure of material facts.

Dual Agency

Representing both parties in the same transaction with full disclosure and informed consent.

Self-Dealing

A broker lists a property then tries to buy it for themselves, creating undisclosed dual agency.

Disclosure of Personal Relationships

Agents must disclose relationships to the other party.

Commission Basics

Always negotiable; usually a percentage of sales price.

Commission Earned

Broker must be licensed, authorized by the client, the procuring cause of the sale.

How Agency Relationships Are Terminated

Completion of purpose, expiration of time period, mutual agreement, etc.

Misrepresentation

Giving wrong info intentionally or not, stating an opinion as if it were fact.

Antitrust Laws

Sherman Antitrust Act prohibits monopolies and restraint of trade.

Prohibited Activities

Includes price-fixing, group boycotting, market allocation, tie-in arrangements.

Antitrust Rules for Brokers

Establish fees independently, don't discuss commission rates with other licensees.

Professional Organizations

NAR (National Association of REALTORS®), REBNY (Real Estate Board of New York).

Accountability

Fiduciary duty to account for all activities, money, paperwork, and property handled for a client.

NAR

National Association of REALTORS®; REALTOR® is a registered trademark; only NAR members may use it.

REBNY

Real Estate Board of New York; NYC professional organization with 600+ companies; financial advisors and consultants.

Agency disclosure

Requirement that an agent make clear which party they are representing in a transaction.

Broker's agent

A licensee working not as a subagent but simply as a cooperating broker in a non-sub-agency transaction.

Brokerage

The business of bringing buyers and sellers together in the marketplace.

Buyer's agent

A broker who has entered into an agreement to represent a buyer in finding a suitable property.

Care

An agent's fiduciary duty to use reasonable care and diligence on behalf of the client.

Client

The person who hires and delegates an agent to represent their interest; synonymous with principal.

Commission

A broker's compensation for performing the service for which they were employed; usually a percentage of the purchase price or rent.

Confidentiality

An agent's fiduciary duty to keep a client's information confidential; does not expire.

Cooperating broker

A licensee from another company working with a broker representing a seller; may act as agent of the listing broker or as agent for the buyer.

Disclosure

An agent's fiduciary duty to disclose all relevant facts to the client; also the duty to disclose material facts to both customers and clients.

Fiduciary

One in whom trust and confidence are placed; reference to a broker employed under a listing contract or buyer-agency agreement.

Fiduciary relationship

A relationship of trust and confidence between an agent and her principal.

Fraud

The intentional misrepresentation of a material fact to harm or take advantage of another person.

Group boycott

Agreement among members of a trade to exclude others from fair participation.

Informed consent

Agreement based on full and fair disclosure of all facts necessary to make a rational decision.

Kickbacks

The return of part of a commission as gifts or money to unlicensed parties involved in a real estate transaction; illegal.

Latent defects

Hidden defects that are not discoverable by ordinary inspection.

Law of agency

The law that governs the relationships and duties of agents, clients, and customers, as defined in Article 12-A.

Listing agreement

A written or oral agreement that creates an agency relationship between a client (usually the seller or landlord) and a broker.

Loyalty

The fiduciary duty under which an agent puts the principal's interest above all others; critical in dual-agency situations.

Market allocation

Agreement among members of a trade to refrain from competition in specific market areas.

Material fact

Matters that must be disclosed to customers and clients, such as structural soundness, true value, and ability of the parties to close.

Meeting of the minds

The agreement by the parties to a transaction on essential terms.

Obedience

An agent's fiduciary duty to obey all of a client's lawful instructions.

Power of attorney

A written instrument authorizing a person (the attorney-in-fact) to act as agent for another.

Price-fixing

Agreement between members of a trade to artificially maintain prices at a set level.

Principal

The person who hires and delegates an agent to represent their interest; synonymous with client.

Procuring cause of sale

The status of a broker who produces a ready, willing, and able buyer and brings about a meeting of the minds with an uninterrupted chain of events.

Property condition disclosure

The 48-question form NYS law requires the seller of one-to-four-family residential property to complete and provide to the buyer at contract signing.

Puffing

Statements of opinion that exaggerate a property's benefits; legal.

Ready, willing, and able buyer

A person who is prepared to buy on the seller's terms, financially capable, and ready to take positive steps toward consummation.

Rebate

Returning a portion of the commission by the broker to a seller or buyer client; legal in NYS.

Restraint of trade

The unreasonable restriction of business activities as the result of cooperation or conspiracy of trade members.

Seller's agent

An individual employed or authorized to transact business on behalf of the seller.

Subagent

A third-party licensee working on behalf of another's client.

Tie-in arrangement

Occurs when a selling party conditions the sale of an item on the buyer purchasing another unrelated item.

Undisclosed dual agency

The act of representing both principal parties in the same transaction without providing full written disclosure to the parties and receiving their consent; illegal.

Offers and responses kept on file

3 years.

Sherman Antitrust Act passed

1890.

Clayton Act passed and FTC created

1914.

Statute of frauds

Listings over 1 year must be in writing.

Property condition disclosure failure penalty

$500 credit to buyer.

Property condition disclosure form

48 questions.

Fiduciary duties acronym

CCLOAD (6 duties — Care, Confidentiality, Loyalty, Obedience, Accounting, Disclosure).

Dual agency legality in NY

Legal only with written informed consent; undisclosed is illegal.

Source of compensation

Does not equal who you represent; a buyer's agent can be paid by the seller.

Salesperson duties

Subagent of the broker's principal; owes the same duties as the broker.

Puffing vs. misrepresentation

Puffing is legal; misrepresentation is not.

Confidentiality after transaction

Survives the transaction; does not expire when the deal closes.

Agency coupled with an interest termination

Cannot be terminated, even by the principal.

Real estate agents type

Usually special agents (one specific task), not general or universal.

Kickbacks legality

Illegal to unlicensed parties; rebates to your own client are legal.

Cooperating brokers roles

May be buyer's agents, not subagents; brokerage can exist without subagency.

Antitrust discussions

With competitors can be an invitation to conspire; avoid the conversation entirely.