Legal Aspects of Real Estate Chapter 5

What is the definition of agency?

A relationship established between a principal and a real estate agent

What do we call a relationship in which one party places special trust, confidence, and reliance in another?

Fiduciary relationship

Real estate brokerage is based on what kind of agency?

Special agency

Under what circumstances would a client be responsible for misrepresentation committed by his or her real estate agent?

If the client actually knew of the misrepresentation

What gives consumers the idea that real estate professionals have a high level of expertise in real estate?

he state requires them to be licensed.

In a home sale involving 2 licensees, absent a buyer representation agreement, who do the brokers represent?

Contrary to what the buyer may think, absent a buyer representation agreement, both the listing broker and the selling broker represent the seller.

A general agency exists between the broker and the salesperson. If the salesperson violates the licensing act, who besides the salesperson would also be held responsible?

The salesperson’s broker would also be held responsible for the violation.

If a licensee leaves his or her broker, how many listing agreements and buyer agency agreements is the salesperson allowed to take to the next broker?

Because the broker owns all agency agreements, the salesperson would not be allowed to take any of these agreements to the next broker.

If a broker has a multitude of tasks to perform for a client, the broker would be considered which type of agent?

In this situation, the broker would be a general agent.

Name the three components of written agreements that create agency.

1. They are clear, concise, and understandable.

What is the broker’s responsibility to a client?

The broker is responsible for meeting the needs of the client above the needs of everyone else, including him or herself.

What is a licensee’s responsibility to a client?

Since the licensee is representing the broker, he or she has the same responsibility to the client that the broker does. 

What types of things is a broker NOT authorized to do for a client?

The broker does not have the authority to do certain things such as:

• Accepting an offer on a listing even if it is for the full purchase price. Only the owner can decide whether or not to accept an offer

• Allowing the buyer to move into the property before the closing without the owner’s permission

• Proposing an offer on a property on behalf of a buyer client without the client’s permission

Under what conditions might a broker be responsible for something someone else in a transaction stated to a client or customer?

1. The broker would be responsible for that information if he or she should have known the information because a reasonable person would have known it.

What are the five fiduciary duties an agent has to his or her principal?

The five fiduciary duties are reasonable care, obedience, accountability, loyalty, and disclosure. 

What actions demonstrate exercising care when representing a buyer?

• Helping the buyer locate appropriate housing

• Evaluating property values and property conditions

• Determining financing alternatives

• Presenting offers and counteroffers with the buyer’s interests in mind
  

What exception exists to the duty of obedience when working with a client?

An agent is not bound by the duty of if the principal’s directions are not legal. 

An agent’s fiduciary responsibilities to a client usually end when the transaction closes. This is not true of which duty?

1. Confidentiality. This duty extends beyond the termination of the relationship. No personal information gained during the term of the agreement can ever be disclosed to another party.

What is a customer?

A customer is someone the licensee is not representing. 

What can a licensee not provide to a customer?

Advice and counsel

What is a material fact?

A material fact is anything that a customer may not be able to discover on his or her own that would change the customer’s approach on whether or not to continue with the transaction. 

Why should a customer be told to be careful what he or she says around the listing agent?

1. Because the seller will be told information that could enhance the seller’s negotiating position. 

What is the best way to end agency?

By successfully closing the deal

Generally, is it possible to collect a commission after the listing expires?

After the listing expires, if no extension is given, the listing broker would not be able to collect a commission.

What might sellers do if they are not happy with the progress the agent is making in showing and selling their home?

They can request the listing be revoked.

With the death of the owner, what happens to the listing agreement? 

It dies as well, canceling the agency agreement.

What should an agent do if he or she realizes there is agency that has not been properly disclosed to someone?

The agent should immediately provide property disclosure and/or end agency with one or both clients to show sincerity in fixing the disclosure that should have taken place. 

Although legal in California, why is dual agency not encouraged?

It is not encouraged due to the obvious conflict of interests it creates between parties in a real estate transaction since it limits the ability of brokers and agents to perform their fiduciary responsibilities.

What informational disclosure form must be provided to both sellers and buyers before they sign agency agreements with a broker?

C.A.R Standard Form AD - “Disclosure Regarding Real Estate Agency Relationships”

How must confirmation of agency relationships be done?

Agency relationships must be must be confirmed in writing in either the purchase contract or in C.A.R Standard Form AC-6.