Laws of Agency Questions and Answers Rated A+

Laws of Agency Questions and Answers Rated A+ Law of Agency A body of laws that govern the relationship between a principal and his/her agent. It defines the rights and duties of the parties in a real estate transaction. These laws are based on common law. Single Agency The practice of representing either the buyer or the seller, but never both in the same transaction. Dual Agency The practice of representing both the buyer and the seller in the same transaction. Discouraged in many states Real estate agents (special agents) to buyers and sellers. General agents Property managers are generally called general agents. Universal agent can conduct all business the owner himself can conduct. Real estate agents do no act as universal agents for their clients. Expressed Agency An agency created by specific agreement, whether written or oral, between principal and agent. Those specific agreements are the listing agreement and the buyer representation agreement. Implied Agency An agency created by conduct, words, and acts of the agent. It is not an expressed agency (in writing), but leaves the assumption is that the agent is working for the principal. Ostensible Agency An agency created when a principal gives a third party reason to believe that another person is his agent. Think of ostensible as meaning ―for all appearances‖. Agency by Ratification An agency relationship that is established after the fact. Gratuitous Agency This type of agency can be created when an agent offers free advice usually to friends or family. If the person acts on that advice and is damaged, the agent could be liable. Agents An agent is one who acts or has the power to act for another. Licensee A real estate broker or real estate salesperson. Buyer Agent/Buyer Broker A real estate agent or firm who is employed by and works for a buyer in a real estate transaction. A buyer agent owes fiduciary duties to the buyer. Listing Agent/Listing Broker A real estate agent who markets the seller's property and represents the seller during the sale of the seller's property. Also known as the seller's agent Subagent A licensee who represents a principal through cooperation with and consent of a broker representing the principal and who is not sponsored by or associated with the principal's broker. If you do not have an agreement to represent the buyer, you are representing the seller as a subagent. Anytime you represent the client of another broker other than your sponsoring broker, you act as a subagent in the transaction. Creation of Agency and Agency Agreements Agency is always created at the broker level, never at the salesperson level. All the salespersons sponsored by the broker owe the same duties as the broker. The broker-seller relationship is created by the listing agreement and the broker-buyer relationship is created by the buyer representation agreement. These agreements are employment agreements. Fiduciary Responsibilities The creation of the agency relationship creates a duty between a licensee and a principal called a fiduciary duty. The fiduciary duty is a relationship of trust and confidence between principal and agent. The law imposes on the agent duties of obedience, loyalty, disclosure, confidentiality, accounting, and reasonable care and diligence, (REMEMBER—―OLD CAR‖). A real estate agent owes complete fiduciary duties to the principal and must act in the best interests of the principal (the client) while also being competent and treat all parties honestly and fairly (whether the seller or the buyer). Client A buyer or seller who forms an agency relationship with a real estate broker; also called a principal. Customer A buyer who is assisted by an agent who represents the seller or a seller who is assisted by an agent who represents the buyer. A buyer who represents him/herself but is assisted by the seller's agent (sub-agent). Termination of Agency An agency may be terminated by the acts of the parties or by operation of law for any of the following reasons: *Closing of the sale of the property *Destruction of the property *Expiration of the term of the agency *Mutual agreement to terminate the agency (must be written). *Renunciation by the broker (firing the principal) or revocation by the principal (firing the broker) *Bankruptcy of the owner if title transferred to receiver *Death or incapacity of either party (Broker or Principle) Commission and Fees The broker's compensation is specified in the listing agreement and the buyer representation agreement. The payment is usually a percentage of the selling price of the property or it may a flat fee. It is earned once the broker has performed the work for which they were hired. It is paid at closing or upon default of the principals after the commission was earned. Subagent Commissions A subagent is a licensee who represents a principal through cooperation with and consent of a broker representing the principal and who is not sponsored by or associated with the principal's broker. The subagent is a special agent representing a seller rather than a buyer. The commission to be paid or not to be paid is specified in one of the agreements prior—the Listing Agreement. Referral Fees Fees can be paid between brokers for business referrals. Such fees can be paid for broker to broker referrals as well as referrals from relocation companies and financial institutions.