Agency Relationships in Real Estate
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Questions and Answers

What happens to the commission when one agent lists a property and another agent sells it?

  • The commission is split between the broker and the subagent.
  • The commission is kept entirely by the listing agent.
  • The commission is split between the listing agent and the selling agent. (correct)
  • The commission is kept entirely by the selling agent.

    • What is a referral fee?

  • A payment made by a broker to a salesperson for a successful sale.
  • A payment made by an agent to a broker for referring a client.
  • A payment made by a client to a broker for referring a property.
  • A payment made by a broker to another party for referring a client. (correct)

    • What is the purpose of antitrust laws?

  • To protect trade and commerce from unlawful restraints and unfair business practices. (correct)
  • To protect the interests of real estate brokers.
  • To protect the interests of buyers and sellers.
  • To regulate the amount of commission that real estate agents can charge.

    • What is an example of an illegal business practice in real estate?

    <p>Conspiring with other brokers to fix prices for services. (C)</p> Signup and view all the answers

    What is a tie-in arrangement?

    <p>A contract where one transaction depends upon another. (C)</p> Signup and view all the answers

    What is a designated sales agent?

    <p>An agent who is appointed to represent only the interests of the seller. (A), An agent who is appointed to represent only the interests of the buyer. (C)</p> Signup and view all the answers

    What role does a broker's agent play in a real estate transaction?

    <p>Cooperates with a listing agent or buyer's agent to find a property. (C)</p> Signup and view all the answers

    What is the primary duty of a landlord's agent?

    <p>To manage the property on behalf of the landlord. (B)</p> Signup and view all the answers

    What is the difference between a general agent and a special agent?

    <p>A general agent has full authority over one property of the principal, while a special agent has limited authority to act on behalf of the principal. (B)</p> Signup and view all the answers

    What is the principle of caveat emptor?

    <p>The buyer is responsible for conducting due diligence and discovering any defects in a property. (C)</p> Signup and view all the answers

    What is the principal's duty to an agent?

    <p>To cooperate with the agent and indemnify them for any liabilities incurred while acting on behalf of the principal. (C)</p> Signup and view all the answers

    What is implied agency?

    <p>An agency relationship that is created by the parties' conduct, even if there is no written or oral agreement. (A)</p> Signup and view all the answers

    What is vicarious liability?

    <p>A situation in which the principal is liable for the actions of the agent. (B)</p> Signup and view all the answers

    What is the difference between a single licensed broker and a national broker?

    <p>A single licensed broker can only operate in one state, while a national broker can operate in multiple states. (C)</p> Signup and view all the answers

    What is the role of a subagent in an agency structure?

    <p>A subagent is an employee of the broker who is representing the client. (D)</p> Signup and view all the answers

    What is the difference between expressed agency and agency by ratification?

    <p>Expressed agency is created before the agent acts on behalf of the principal, while agency by ratification is created after the fact. (D)</p> Signup and view all the answers

    Flashcards

    Referral Fees

    Payments made by an agent to others for customer referrals, to be paid to brokers first.

    Antitrust Liability

    Laws protecting trade from unlawful restraints and unfair practices.

    Price Fixing

    Conspiring to set fixed fees or prices for services or products.

    Group Boycott

    An agreement among members to unfairly exclude others from trade.

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    Market Allocation

    An agreement to refrain from competition in specific market areas.

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    Dual Agency

    Representing both buyer and seller in a transaction.

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    Designated Sales Agent

    Agents appointed to represent only sellers or buyers in a firm’s dual agency.

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    Seller's Agent

    An agent who represents the seller of real estate.

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    General Agent

    An agent with full authority over a principal's property.

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    Special Agent

    An agent with limited authority for specific tasks.

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    Informed Consent

    Agreement to allow an action after all facts are disclosed.

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    Misrepresentation

    Intentionally false statement to induce a contract.

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    Vicarious Liability

    When one party is responsible for another’s unlawful actions.

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    Expressed Agency

    Agency created by a written or verbal agreement.

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    Implied Agency

    Agency formed by actions or conduct, not written agreement.

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    Compensation

    Payment received by the agent for their services.

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    Study Notes

    Agency Relationships in Real Estate

    • General Agent: Full authority over a single property (e.g., property manager).
    • Special Agent: Limited authority, typically for a specific transaction (e.g., listing agreement).
    • Informed Consent: Agreement to a transaction after full disclosure of relevant facts.
    • Misrepresentation: Intentionally false statement to induce a contract (fraudulent).
    • Caveat Emptor: "Buyer Beware" - a legal principle that the buyer is responsible for examining the property. The seller has no duty to tell them about problems.

    Principal's Duties

    • Cooperation: Principal must not obstruct the agent.
    • Compensation: Principal must pay the agent for services.
    • Indemnification: Principal must defend the agent if sued while acting on their behalf (include legal fees).

    Types of Agents

    • Subagent: Agent of another agent acting on behalf of the principal.
    • Brokerages: Different types exist: Single Licensed Broker, Independent Broker, National Broker
    • Agency Structure: Client, Broker (client's agent), Subagent (agent of the broker, employee of the brokerage) Salesperson

    Types of Agency

    • Expressed Agency: Formal written or oral agreement between principal and agent.
    • Implied Agency: Agency relationship inferred from conduct of the parties.
    • Agency by Ratification: Existing unauthorized act becoming authorized by the principal's later consent.
    • Estoppel: Prevents a party from denying an agency relationship that was previously implied.

    Compensation

    • Agents are compensated through flat fees or percentages of the transaction price.
    • Commissions are often split between listing and selling agents.
    • Referral fees are paid to the broker, not directly to the salesperson.
    • NYS requires client consent for referral fees.
    • Vicarious Liability: One party held responsible for another's unlawful actions.
    • Antitrust Liability: Laws preventing restraints on trade and unfair business practices.
      • Price Fixing: Illegal agreement on fixed prices
      • Group Boycott: Illegal agreement to exclude competitors.
      • Market Allocation: Illegal agreement to avoid competing in specific areas.
      • Tie-in Arrangement: Illegal tying of one transaction to another.

    Agency in Real Estate Transactions

    • Dual Agency: Representing both buyer and seller; complex and ethically sensitive—requires multiple subagents, or designated representations.
      • Designated Sales Agent: A form of dual agency where different agents within the firm represent the buyer and seller—protects both parties.
    • Seller's Agent: Represents the seller.
    • Buyer's Agent: Represents the buyer.
    • Broker's Agent: A cooperating agent who assists a listing or buyer's agent but does not work for the same firm.
    • Landlord's Agent: Agent acting on behalf of the landlord.

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    Description

    Explore the key concepts of agency relationships in real estate, including the roles of general and special agents, informed consent, and principal duties. Understand how these relationships impact transactions and the responsibilities that come with them.

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