Agency

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brahyam
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Agency
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2013-10-17 23:44:25
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Chapter 04 Review/Materials
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  1. Define: Agency
    - The relationship between the principal and an agent wherein the agent is authorized to represent the principal in certain transactions.

    - The word used to describe the relationship between a real estate licensee and the parties involved in a real estate transaction.
  2. Define: Agent
    - The individual who is authorized and consents to represent the interests of another person. In the real estate business, a firm's broker is the agent and shares this responsibility with the licensees who work for the firm. 

    - A person authorized to act on behalf of the client.

    - One who acts or has the power to act for another. A fiduciary relationship is created under the law of agency when a property owner, as the principal, executes a listing agreement or management contract authorizing a licensed real estate broker to be his or her agent.
  3. Define: Buyer's Agent
    - A residential real estate broker or salesperson who represents the prospective purchaser in a transaction. The buyer's agent owes the buyer-principal the common-law or statutory agency duties.
  4. Define: Client
    - The principal.
  5. Define: Customer
    - The third party or non-represented consumer for whom some level of service is provided and who is entitled to fairness and honesty.

    - The customer is the party not represented by the agent.
  6. Define: Designated Agent
    - A licensee authorized by a broker to act as the agent for a specific principal in a particular transaction.
  7. Define: Designated Agency
    - A process that accommodates an in-house sale in which two different agents are involved. The broker designates one agent to represent the seller and one agent to represent the buyer.
  8. Define: Dual Agency
    - Representing both parties to a transaction. This is unethical unless both parties agree to it, and it is illegal in many states.
  9. Define: Express Agency
    - An agency relationship based on a formal agreement between the parties.
  10. Define: Express Agreement
    - An oral or written contract in which the parties state the contract's terms and express their intentions in words.
  11. Define: Fiduciary
    - The relationship in which the agent is held in a position of special trust and confidence by the principal. 

    - One in whom trust and confidence is placed; a reference to a broker employed under the terms of a listing contract or buyer agency agreement.
  12. Define: Fiduciary Relationship
    - A relationship of trust and confidence, as between trustee and beneficiary, attorney and client, or principal and agent.

    - Means that the real estate broker owes the principal certain duties and they are not simply moral or ethical, they are the law. Under the common law of agency, an agent owes the principal the six duties of care, obedience, loyalty, disclosure, accounting, and confidentiality.
  13. Define: Fraud
    - Intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person. That includes not only making false statements about a property but also intentionally concealing or failing to disclose important facts. 

    - Deception intended to cause a person to give up property or a lawful right.
  14. Define: General Agent
    - One who is authorized by a principal to represent the principal in a specific range of matters.

    - May represent the principal in a broad range of matters related to a particular business or activity. The general agent may, for example, bind the principal to any contract within the scope of the agent's authority. A property manager is typically a general agent for the owner. Most real estate salespeople are general agents of their broker. 

  15. Define: Implied Agency
    - Based on the actions of the parties that imply that they have mutually consented to an agency relationship, an implied agency relationship is formed.
  16. Define: Implied Agreement
    - A contract under which the agreement of the parties is demonstrated by their acts and conduct.
  17. Define: Latent Defect
    - A hidden structural defect that could not be discovered by ordinary inspection and that threatens the property's soundness or the safety of its inhabitants. Some states impose on sellers and licensees a duty to inspect for an disclose latent defects.
  18. Define: Law of Agency
    - Defines the rights and duties of the parties in a real estate transaction - the principal, the agent, and the customer.
  19. Define: Listing Agreement
    - A contract between an owner (as principal) and a real estate broker (as agent) by which the broker is employed as agent to find a buyer for the owner's real estate on the owner's terms, for which service the owner agrees to pay a commission.

    - Authorizes the broker to find a buyer or a tenant for the owner's property.
  20. Define: Negligent Misrepresentation
    • - Occurs when the broker should have known that a statement about a material fact was false. A broker's lack of awareness of an issue is no excuse. 
  21. Define: Nonagent
    - A middleman between a buyer and a seller, (or a landlord and a tenant), who assists one or both parties with the transaction without representing either party's interest. Also known as a facilitator, intermediary, transactional broker, transactional coordinator, and contract broker.
  22. Define: Principal
    - The individual who hires the agent and delegates to the that agent the responsibility of representing the principal's interests. In the real estate business, the principal is the buyer or seller or the landlord or tenant. 

    - The person for whom the agent works.
  23. Define: Puffing
    - Exaggeration of a property's benefits. While puffing is legal, real estate licensees must ensure that none of their statements can be interpreted as fraudulent. 

    - Exaggerated or superlative comments or opinions.
  24. Define: Special Agent (or Limited Agent)
    - Authorized to represent the principal in a specific act or business transaction only. 

    - A real estate broker is usually a special agent. If hired by a seller, the broker is limited to finding a ready, willing, and able buyer for the property. A special agent for a buyer would have the limited responsibility of finding the property that fits the buyer's criteria. As a special agent, the real estate broker may not bind the principal to any contract. 
  25. Define: Universal Agent
    - A person empowered to do anything the principal could do personally.

    - The universal agent's authority to act on behalf of the principal is virtually unlimited. A real estate licensee typically does not have this scope of authority in a real estate transaction. 

  26. Fill in the blank:
    Agency is governed by _____ law, the rules of a society established by tradition and court decisions; and _____ law, the laws, rules, and regulations enacted by legislatures and other governing bodies.
    - Common; Statutory
  27. Is there a difference in the level of services that an agent provides to a client as apposed to those services that the agent provides to a customer?
    Yes;

    The client is the principal to whom the agent gives advice and counsel. The agent is entrusted with certain confidential information and has fiduciary responsibilities to the principal. In contrast, the customer is entitled to factual information and fair and honest dealings as a consumer but does not receive advice and counsel or confidential information about the principal. Any third party is a customer. The agent works for the principal and with the customer.
  28. True or False:
    The source of compensation determines agency.
    False;

    • The source of compensation does not determine agency.
  29. What is it called when agency exists even if no fee is involved?

    - For instance, a seller might agree to pay a commission to the buyer's agent, even though the agent is representing the buyer. 
    - Gratuitous Agency 


  30. Name the six common-law fiduciary duties:
    • - Care
    • - Obedience
    • - Loyalty
    • - Disclosure
    • - Accounting
    • - Confidentiality
  31. Similar to malpractice insurance in the medical and legal fields, this type of insurance covers liability errors and negligence in the listing and selling activities of a real estate licensee. What is the name of this insurance?
    - Errors and Omissions Insurance (E&O Insurance)

  32. In a real estate transaction, the term fiduciary typically refers to the:

    a. sale of real property
    b. person who gives someone else the legal power to act on his or her behalf.
    c. person who has legal power to act on behalf of another.
    d. agent's relationship to the principal.
    d. agent's relationship to the principal.
  33. The relationship between broker and seller is generally what type of agency?

    a. Special
    b. General
    c. Implied
    d. Universal
    a. Special
  34. Which statement is TRUE of a real estate broker acting as the agent of the seller?

    a. The broker is obligated to render loyalty to the seller.
    b. The broker can disclose confidential information about the seller to a buyer if it increases the likelihood of a sale.
    c. The broker can agree to a change in price without the seller's approval.
    d. The broker can accept a commission from the buyer without the seller's approval.
    a. The broker is obligated to render loyalty to the seller.
  35. A real estate broker lists a woman's home for $189,500. Later that same day, a man comes into the broker's office and asks for general information about homes for sale in the $130,000 to $140,000 price range but refuses representation by the broker's company at this time. Based on these facts, which statement is TRUE?

    a. Both the woman and the man are the broker's customers.
    b. The woman is the broker's client; the man is a customer.
    c. The broker owes fiduciary duties to both the woman and the man.
    d. If the man later asks for buyer representation by the broker's firm, he cannot have it because of the firm's earlier agreement with the woman.
    b. The woman is the broker's client; the man is a customer.
  36. In a dual agency situation, a broker may represent both the seller and the buyer if:

    a. the broker informs either the buyer or the seller of this fact.
    b. the buyer and the seller are related by blood or marriage.
    c. both parties give their informed consent, usually in writing, to the dual agency.
    d. both parties are represented by attorneys.
    c. both parties give their informed consent, usually in writing, to the dual agency.
  37. Which event will terminate an agency in a broker-seller relationship?

    a. The broker discovers that the market value of the property is such that an adequate commission will not be earned.
    b. The owner declares personal bankruptcy.
    c. The owner abandons the property.
    d. The broker appoints other brokers to help sell the property.
    b. The owner declares personal bankruptcy.
  38. Designated agency is MOST likely to occur when:

    a. there is a client-buyer and a customer-seller.
    b. the seller and the buyer are represented by different companies.
    c. both the buyer and the seller are customers.
    d. the buyer and the seller are represented by the same company.
    d. the buyer and the seller are represented by the same company.
  39. A real estate broker hired by an owner to sell a parcel of real estate must comply with:

    a. the common law of agency, even if a state agency statute exists.
    b. dual agency requirements.
    c. the concept of caveat emptor.
    d. all lawful instructions of the owner.
    d. all lawful instructions of the owner.
  40. A licensee is hired as a buyer's agent by a first time buyer to help the buyer purchase a home. The buyer confides that being approved for a mortgage loan may be complicated by the fact that the buyer filed for bankruptcy two years ago. The buyer would like to find a seller who will accept an installment sale. In this situation, a correct statement about the licensee's responsibility regarding the information during the presentation of an offer to purchase a property is that the licensee is:

    a. required to disclose it under the Fair Credit Registry Act.
    b. required to disclose it because it is a material fact-information important to the seller's evaluation of the offer.
    c. not required to disclose it because the seller might reject the offer.
    d. not required to disclose it because the licensee has no agency relationship with the seller.
    b. required to disclose it because it is a material fact-information important to the seller's evaluation of the offer.
  41. A licensee lists a residence. For various reasons, the owner must sell the house quickly and confides to the licensee that a lower price would probably be acceptable, although the asking price is reasonable. To expedite the sale, the licensee tells a prospective purchaser that the seller will accept up to $5,000 less than the asking price for the property. Based on these facts, which statement is TRUE?

    a. The licensee has not violated any agency responsibilities to the seller.
    b. The licensee should have disclosed this information, regardless of its accuracy.
    c. The disclosure was improper-and possibly illegal-regardless of the licensee's motive.
    d. The relationship between the licensee and the seller ends automatically if the purchaser submits an offer.
    c. The disclosure was improper-and possibly illegal-regardless of the licensee's motive.
  42. A buyer who is a client of the broker wants to purchase a house that the broker has listed for sale. Which statement is TRUE?

    a. The broker may proceed to write an offer on the property and submit it.
    b. The broker should refer the buyer to another broker to negotiate the sale.
    c. The seller and the buyer must be informed of the situation and agree, usually in writing, to the broker's representing both of them.
    d. The buyer should not have been shown a house listed by the broker.
    c. The seller and the buyer must be informed of the situation and agree, usually in writing, to the broker's representing both of them.
  43. What does the phrase the law of agency is a common-law doctrine mean?

    a. It is a legal doctrine that is not unusual.
    b. It is one of the rules of society enacted by legislatures and other governing bodies.
    c. It is part of a body of law established by tradition and court decisions.
    d. It may not be superseded by statutory law.
    c. It is part of a body of law established by tradition and court decisions.
  44. A broker helps a buyer and a seller with paperwork but does not represent either party. This is:

    a. dual agency
    b. prohibited in all states because a broker must always represent one part.
    c. transactional brokerage.
    d. designated agency
    c. transactional brokerage.
  45. A real estate licensee was representing a buyer. At their first meeting, the buyer revealed plans to operate a dog-grooming business out of the purchased house. The licensee did not check the local zoning ordinances to determine in which parts of town such a business could be conducted. Which common-law duty did the licensee violate?

    a. Care
    b. Obedience
    c. Loyalty
    d. Disclosure
    a. Care
  46. A broker tells a prospective buyer, "This property has the most beautiful river view. In fact, the view includes the river and the back of a shopping center." Which statement is TRUE?

    a. The broker has committed fraud.
    b. The broker is guilty of negligent misrepresentation.
    c. The broker is guilty of intentional misrepresentation.
    d. The broker is merely puffing.
    d. The broker is merely puffing.
  47. A real estate broker's responsibility to keep the principal informed of all the facts that could affect a transaction is the duty of:

    a. Care
    b. Disclosure
    c. Obedience
    d. Accounting
    b. Disclosure
  48. Which of the following would be considered dual agency?

    a. A broker acting for both the buyer and the seller in the same transaction.
    b. Two brokerage companies cooperating with each other.
    c. A broker representing more than one principal.
    d. A broker listing and then selling the same property.
    a. A broker acting for both the buyer and the seller in the same transaction.
  49. The relationship of broker to client is that of a(n):

    a. trustee
    b. subagent
    c. fiduciary
    d. attorney-in-fact
    c. fiduciary
  50. A real estate broker acting as the agent of the seller:

    a. must promote and safeguard the seller's best interest.
    b. can disclose the seller's minimum price. 
    c. should present to the seller only the highest offer for the property.
    d. can accept an offer on behalf of the seller.
    a. must promote and safeguard the seller's best interest.
  51. A broker is permitted to represent both the seller and the buyer in the same transaction when:

    a. the principals are not aware of such action.
    b. the broker is a subagent rather than the agent of the seller.
    c. commissions are collected from both parties.
    d. both parties have been informed and agree to the dual representation.
    d. both parties have been informed and agree to the dual representation.

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