Agency Law Overview

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Questions and Answers

Who is primarily concerned with agency law?

  • The principal and third party
  • The agent and third party
  • The agent and principal
  • All of the above (correct)

In the situation where a broker accepts a deposit but mishandles the funds, who bears the risk of loss?

  • The buyer only
  • The broker only
  • The seller only
  • The seller, as the broker acted within his authority (correct)

Which of the following is not necessary for the creation of an agency relationship?

  • Mutual agreement between the principal and agent
  • Written agreement
  • Payment of consideration (correct)
  • A competent principal

If a buyer submits a full price offer through a qualified broker, what happens next?

<p>The seller can reject the offer (C)</p> Signup and view all the answers

Which of the following actions would lead to the termination of an agency agreement?

<p>The death of the broker (B), A mutual agreement between the agent and principal (C), The expiration of the contract term (D)</p> Signup and view all the answers

What happens if the seller or broker dies or becomes incapacitated?

<p>The buyer can reject the seller's offer. (C)</p> Signup and view all the answers

What is the principal's rights concerning the agent's services?

<p>The principal may revoke the contract but will be liable for damages. (C)</p> Signup and view all the answers

Which phrase best describes a real estate agent’s duty to keep her principal informed?

<p>Fiduciary duty (C)</p> Signup and view all the answers

If Broker Larsen finds that a property lacks sewer service after being informed otherwise, which action is expected?

<p>Notify the principal of the discrepancy found. (D)</p> Signup and view all the answers

What is typical regarding a real estate salesperson's employment status?

<p>They are independent contractors earning solely on commission. (B)</p> Signup and view all the answers

Who is liable for the misrepresentation to Burns regarding the sewer service?

<p>Larsen had a duty to disclose all latent defects that he knew about, even though Burns did not ask (A)</p> Signup and view all the answers

What duty does an agent representing a seller owe to the buyer?

<p>The duty of honesty and fair dealing (D)</p> Signup and view all the answers

Under what condition can a real estate agent represent both buyers and sellers in a transaction?

<p>If he has informed each principal that he will be representing each principal (A)</p> Signup and view all the answers

In which situation would an agency relationship not terminate?

<p>Appointment by the principal (C)</p> Signup and view all the answers

When is a broker allowed to fill out the seller's portion of the transfer disclosure statement?

<p>When given express authority to do so by the seller (D)</p> Signup and view all the answers

Flashcards

What is agency law concerned with?

Agency law deals with the rights and responsibilities between a principal (like a property owner), an agent (like a real estate broker), and third parties (like buyers).

Can a broker accept deposits from buyers?

A real estate broker can accept deposits from buyers if they are specifically authorized in the listing agreement by the seller.

Who bears the risk of a lost buyer deposit?

In a real estate transaction, if a buyer's deposit is lost before the sale is finalized, the seller usually bears the risk.

What can terminate an agency agreement?

An agency agreement (listing) can be terminated when a sale is finalized, by mutual agreement between the seller and broker, or by the broker violating the agreement.

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What is required to create an agency relationship in real estate?

An agency agreement (listing) needs a competent principal (the person who hires the agent), mutual agreement between the principal and agent, and a clear understanding about the agency's purpose.

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Dual Agency: Fair Representation

A broker must fairly represent all parties in a transaction, even if it means foregoing a commission. In this case, the broker must reject the double commission to avoid a conflict of interest.

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Revocable Agency

A principal can terminate an agency contract at any time, even if this harms the agent. However, the principal may be liable for damages if they break the contract without a valid reason.

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Broker's Duty of Disclosure

A real estate broker owes their client a duty to keep them informed of all relevant facts and circumstances. This is a legal obligation, beyond just being ethical.

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Real Estate Salesperson as Independent Contractor

Real estate licensees, such as salespeople, usually work as independent contractors and are not considered employees. While they are paid on a commission basis, they are not directly supervised.

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Duty of Good Faith and Loyalty

A real estate agent should always be honest and truthful with their clients, acting in their best interest even if doing so reduces the agent's commission.

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Agent's Duty to Disclose Latent Defects

A real estate agent must disclose known material defects, even if the buyer doesn't inquire. This applies to defects that affect the property's value or usability. The agent's duty is to be transparent and ensure fair dealing in the transaction.

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Dual Agency in Real Estate

A real estate agent can legally represent both buyer and seller in a single transaction, but only with the written informed consent of both parties. This is known as 'dual agency'.

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Agency Relationship Creation

An agency relationship can be formed through explicit written or oral agreement, or by the actions of the parties involved. Implied agency occurs when the actions of the parties suggest an agreement exists.

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Agent's Duty to Buyer (Seller's Agent)

An agent representing a seller is legally required to be honest and fair in their dealings with the buyer. This includes disclosing known material facts about the property and ensuring the transaction is conducted ethically.

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Termination of Agency Relationship

An agency relationship typically ends when the task is complete (like a property sale), both parties agree to terminate, the agent breaches the agreement, or the principal dies or becomes incapacitated.

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Study Notes

Agency Law

  • Agency law governs relationships among agents, principals, and third parties.

Duties and Rights

  • Agents and principals have specific duties and rights.
  • Agents owe fiduciary duties to their principals.
  • Principals have specific rights in dealings with agents.
  • Third parties have rights related to agreements they enter into with agents.

Listing Agreements

  • Brokers may accept buyer deposits.
  • Risk of lost deposits fall on the seller, if the broker acted within authority to accept deposits.

Offer Acceptance

  • Brokers must disclose all offers to the seller.
  • Broker's actions may not be permissible if they fail to disclose all offers.
  • This is due to a fiduciary duty to the seller.

Agency Relationship

  • Agency relationships require mutual agreement.
  • Payment of consideration isn't necessary to form the relationship.
  • Agency relationships are always fiduciary in nature.

Termination of Agency

  • Death or incapacity of the seller or broker will terminate the agency.
  • Seller's rejection of a buyer's offer does not terminate the agency relationship.
  • Principal may unilaterally revoke the agency agreement.
  • Failure to fulfill the terms and conditions in an agency relationship may violate a specific performance requirement.

Fiduciary Duties

  • Brokers owe fiduciary duties to the seller.
  • Brokers owe fiduciary duties to inform the seller about any latent defects.
  • Sellers' agents are obligated to disclose offers.

Dual Agency

  • A broker representing both parties in a transaction must inform both parties in writing.
  • Parties must mutually agree to a dual agency arrangement in writing.

Disclosure Requirements

  • Brokers must disclose all known latent defects to the buyer.

Transfer Disclosure Statement

  • Brokers cannot complete seller portions of transfer disclosure statements.
  • This responsibility of disclosure may not be delegated.

Termination of Relationship by Operation of Law

  • If a seller or broker dies, the agency relationship will be terminated.

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