How Brokerage Affects Agency
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Questions and Answers

What is the primary role of an agent in an agency relationship?

  • To represent the interests of the brokerage
  • To manage the brokerage's operations
  • To advocate on behalf of their principals (correct)
  • To negotiate solely on behalf of customers

Which of the following accurately describes the term 'broker'?

  • A person holding a broker's license (correct)
  • A type of property
  • An agent representing the buyer only
  • A synonym for a brokerage company

What defines a brokerage?

  • A specific type of property a broker specializes in
  • A collection of real estate agents operating independently
  • An individual act of negotiating properties
  • A physical building and business serving real estate transactions (correct)

What is vicarious liability in the context of agency?

<p>Liability imposed on a broker for actions taken by their agents (D)</p> Signup and view all the answers

Why are disclosures important in agency relationships?

<p>To provide transparency about the agent's actions and affiliations (C)</p> Signup and view all the answers

Which of the following statements correctly describes the term 'brokerage' when used as a verb?

<p>Brokerage does not have a verb form. (B)</p> Signup and view all the answers

What governs the types of agency relationships allowed within a brokerage?

<p>The guidelines outlined in the brokerage's policy manual (B)</p> Signup and view all the answers

In which context is the term 'broker' used as a verb?

<p>To describe the action of completing real estate transactions (C)</p> Signup and view all the answers

When must agency disclosures be made?

<p>When a customer becomes a client (B)</p> Signup and view all the answers

What does informed consent require from a client?

<p>Understanding and agreement to agency actions before implementation (A)</p> Signup and view all the answers

What is categorized as first substantive contact?

<p>A buyer meeting a seller's agent at a showing (B)</p> Signup and view all the answers

If first substantive contact occurs over the phone, how should disclosure be handled?

<p>Verbal disclosure followed by written confirmation (D)</p> Signup and view all the answers

Which of the following is NOT considered first substantive contact?

<p>Fact-based conversation about location details (A)</p> Signup and view all the answers

What action should an agent take if an agency relationship changes?

<p>Seek new informed consent (D)</p> Signup and view all the answers

What does the term 'first substantive contact' signify?

<p>The critical point when agency disclosure is required (D)</p> Signup and view all the answers

During which scenario must an agent disclose their relationship with a property owner?

<p>Before or during first substantive contact with a prospective tenant or buyer (C)</p> Signup and view all the answers

What principle explains Shira's liability for Lenny's actions?

<p>Vicarious liability (B)</p> Signup and view all the answers

In the scenario with Radical Real Estate, who is Miguel in relation to Danielle?

<p>Sponsoring broker (A)</p> Signup and view all the answers

Which action is a licensed agent permitted to perform?

<p>Advise clients about changes in the market (A)</p> Signup and view all the answers

What should agents do if they encounter a question outside their expertise?

<p>Refer the client to their attorney (A)</p> Signup and view all the answers

What is a best practice to mitigate vicarious liability for brokers?

<p>Create a comprehensive office policy manual (C)</p> Signup and view all the answers

Which of the following represents the act of a buyer's agent?

<p>Negotiating on behalf of buyers (A)</p> Signup and view all the answers

What is one of the four major categories of real estate brokerage acts?

<p>Property management (D)</p> Signup and view all the answers

Which term is more commonly used for a listed agent assisting a buyer?

<p>Buyer's agent (B)</p> Signup and view all the answers

What must a listing agreement between a seller and an agent include?

<p>Written contract (C)</p> Signup and view all the answers

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

<p>Represent landlords in property leasing (B)</p> Signup and view all the answers

What relationship does Natalia have with Danielle in the Radical Real Estate scenario?

<p>Listing agent (C)</p> Signup and view all the answers

Which action is considered outside the scope of practice for licensed agents?

<p>Giving legal counsel on contracts (A)</p> Signup and view all the answers

What defines the act of brokerage?

<p>Conducting business on behalf of someone else (D)</p> Signup and view all the answers

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

<p>To represent the landlord’s interests in renting out property. (A)</p> Signup and view all the answers

What type of agreement forms the relationship between a landlord and their agent?

<p>Property Management Agreement (D)</p> Signup and view all the answers

What is the primary role of a real estate brokerage?

<p>To serve as a for-profit business for real estate transactions. (A)</p> Signup and view all the answers

Who is responsible for legal liability in a brokerage?

<p>The principal broker of the brokerage. (A)</p> Signup and view all the answers

How does a tenant become represented by a leasing agent?

<p>Through a written buyer/tenant representation agreement. (B)</p> Signup and view all the answers

What is the brokerage agreement meant to establish?

<p>A written relationship between the agent and the broker. (A)</p> Signup and view all the answers

What is the primary distinction between a broker and an agent?

<p>An agent must be sponsored by a broker to practice. (B)</p> Signup and view all the answers

In a real estate transaction, who technically represents the client?

<p>The broker representing the agent. (B)</p> Signup and view all the answers

What title is given to an individual licensed as an associate broker?

<p>Broker Associate (A)</p> Signup and view all the answers

What does a cooperating broker do in a real estate transaction?

<p>Bring a buyer to a transaction without affiliation to the seller's broker. (B)</p> Signup and view all the answers

Which of the following statements describes vicarious liability?

<p>It holds brokers accountable for agents under their supervision. (A)</p> Signup and view all the answers

Which of the following is a duty that both brokers and agents owe to their clients?

<p>Fulfilling fiduciary duties. (D)</p> Signup and view all the answers

Which of the following is true about single agency and dual agency?

<p>Dual agency can create conflicts of interest if not handled properly. (B)</p> Signup and view all the answers

What situation could lead to a broker being held liable?

<p>An agent failing to disclose property defects. (D)</p> Signup and view all the answers

Which property management role is typically responsible for maximizing the landlord's return on investment?

<p>Landlord's Agent (B)</p> Signup and view all the answers

What is a potential risk for brokers when authorizing agents?

<p>Exposure to vicarious liability for agents' actions. (A)</p> Signup and view all the answers

What is the primary function of a brokerage in real estate?

<p>To list properties for sale and facilitate transactions. (A)</p> Signup and view all the answers

Who is liable for the actions of an agent in a brokerage?

<p>The sponsoring broker. (A)</p> Signup and view all the answers

How does a brokerage typically operate regarding its legal structure?

<p>In any of the forms: sole proprietorship, partnership, or corporation. (A)</p> Signup and view all the answers

What is a distinguishing feature of the relationship between an agent and their client?

<p>The agent has a direct fiduciary relationship with the client. (B)</p> Signup and view all the answers

When can brokers not be held liable for incorrect information?

<p>If they were unaware of the information being incorrect. (A)</p> Signup and view all the answers

What is required for agents to represent a client in a real estate transaction?

<p>A brokerage agreement in writing must be established. (C)</p> Signup and view all the answers

In the context of cooperating brokerage, who is considered the customer's agent?

<p>A cooperating broker representing the buyer. (D)</p> Signup and view all the answers

What is true about the compensation of an agent in a brokerage?

<p>Agents are compensated only through their sponsoring broker. (C)</p> Signup and view all the answers

Which of the following categories of agency can limit an agent's practice?

<p>Single agency or dual agency. (D)</p> Signup and view all the answers

Why is it important to have brokerage agreements in writing?

<p>To avoid misunderstandings about verbal promises. (A)</p> Signup and view all the answers

What must license holders disclose regarding agency relationships?

<p>Who is representing them (D)</p> Signup and view all the answers

Why is honesty about a property's condition important?

<p>Material facts can impact a person's decision (D)</p> Signup and view all the answers

What should license holders do with offers made on a property?

<p>Disclose all offers made without delay (A)</p> Signup and view all the answers

How can a buyer's financial condition affect negotiations?

<p>It can signal their ability to complete the purchase (D)</p> Signup and view all the answers

What is required when an agent acts as a dual agent?

<p>They need to disclose their agency status to all parties (C)</p> Signup and view all the answers

What needs to be disclosed regarding multiple incomes?

<p>All sources of income that an agent may receive (D)</p> Signup and view all the answers

Which factor does NOT typically require disclosure?

<p>Agent’s legal background (C)</p> Signup and view all the answers

When should disclosures generally be made?

<p>When a customer becomes a client (D)</p> Signup and view all the answers

What is a primary purpose of agency disclosure laws?

<p>To protect clients and ensure transparency (A)</p> Signup and view all the answers

Which of the following is an example of a conflict of interest?

<p>An agent selling their own property (A)</p> Signup and view all the answers

What factors do brokerage policies help define?

<p>Types of agency relationships allowed (D)</p> Signup and view all the answers

Why is it necessary to disclose agency-specific details?

<p>To maintain client trust and clarity (A)</p> Signup and view all the answers

What duty must a license holder fulfill regarding their clients' financial information?

<p>Keep it confidential and use it ethically (C)</p> Signup and view all the answers

How do material facts influence real estate transactions?

<p>They can alter the value assessment of properties (C)</p> Signup and view all the answers

What is the primary responsibility of a broker in a real estate transaction?

<p>To enter into an agency relationship with clients (C)</p> Signup and view all the answers

Which of the following is NOT a responsibility of a real estate agent?

<p>Provide legal advice to clients (A)</p> Signup and view all the answers

Why is disclosure considered one of the most important responsibilities of a brokerage?

<p>It ensures transparency throughout a transaction (A)</p> Signup and view all the answers

An agent is required to disclose which of the following details?

<p>Conflicts of interest that may arise (B)</p> Signup and view all the answers

What does it mean to have dual agency in real estate?

<p>When the same brokerage represents both the buyer and seller (B)</p> Signup and view all the answers

What is a key duty of a sales agent in relation to their broker?

<p>They must consistently disclose material facts (D)</p> Signup and view all the answers

Which statement reflects a misunderstanding of the role of agents and brokers?

<p>Agents can work independently of brokers (C)</p> Signup and view all the answers

What must an agent do if they receive offers on a property?

<p>Disclose every offer received (B)</p> Signup and view all the answers

When should an agent disclose changes in agency relationships?

<p>As soon as they are aware of the changes (C)</p> Signup and view all the answers

Which of these is a legal requirement for an agent regarding property disclosures?

<p>To disclose estimated property value based on market analysis (C)</p> Signup and view all the answers

What should agents do regarding the sources of their compensation?

<p>Proactively disclose all sources of compensation (B)</p> Signup and view all the answers

Which of the following is an example of a material fact that must be disclosed?

<p>The property's structural issues (D)</p> Signup and view all the answers

What is the obligation of an agent in case of multiple income sources?

<p>To disclose when known to the clients (D)</p> Signup and view all the answers

What does 'fiduciary duty' refer to in the context of real estate?

<p>The responsibility to act in the best interest of clients (B)</p> Signup and view all the answers

Flashcards

Broker (Noun)

An individual who holds a broker's license.

Brokerage (Noun)

A business that serves real estate transactions.

Broker (Verb)

The act of bringing real estate transactions to completion.

Agency

Relationship where agents advocate on behalf of their principals.

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Agent

A person who represents another in real estate transactions.

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Principal

The person or entity that an agent represents.

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Broker (in Brokerage)

The person who holds a broker's license and oversees a brokerage.

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Brokerage Policy Manual

A set of guidelines and restrictions for licensees.

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Vicarious Liability

When a broker is liable for the actions of their agents because they are responsible for their actions, even if they didn't directly participate.

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Office Policy Manual

A written document that outlines the scope of authority and responsibilities of sponsored salespersons within a brokerage.

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Real Estate Agent

A licensed professional who acts as a middleman between buyers and sellers in real estate transactions, facilitating the buying and selling process.

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Sponsoring Broker

A licensed professional who oversees a brokerage and is directly responsible for the actions of the sponsored salespersons working under them.

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Agency Relationship

The relationship between a broker and their client, where the broker represents the client's best interests in real estate transactions.

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Listing Agreement

A legal document outlining the terms of an agreement between a seller and a real estate agent to sell a property.

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Buyer-Broker Agreement

A legal document outlining the terms of an agreement between a buyer and a real estate agent to purchase a property.

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Listing Agent

The act of representing a seller in a real estate transaction, working to maximize the sale price and navigate the selling process efficiently.

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Buyer's Agent

The act of representing a buyer in a real estate transaction, helping find the right property, negotiating the purchase price, and ensuring the transaction is smooth.

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Brokerage

The act of bringing buyers and sellers together in real estate transactions, facilitating the exchange of property.

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Broker

A licensed individual who performs the acts of brokerage, representing clients and managing the transaction process.

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Real Estate Agency

The act of representing the best interests of a client in real estate transactions, including negotiating and advocating on their behalf.

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Teaching

The process of providing information and guidance to clients, without offering legal advice or exceeding the scope of expertise.

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Telling

The process of giving instructions or directives to clients, which can be problematic if it goes beyond the scope of the agent's expertise.

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Advising

The act of instructing or guiding clients on real estate matters, ensuring they have the information needed to make informed decisions.

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What is a brokerage?

The business entity responsible for real estate transactions.

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What is a brokerage agreement?

A written agreement establishing a brokerage relationship between an agent and their broker. It outlines essential details like compensation and responsibilities.

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What is single agency?

A type of agency where a brokerage represents either the buyer or seller exclusively, not both simultaneously.

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What is vicarious liability?

A legal concept where a broker is responsible for the actions of their sponsored licensees, like sales agents.

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Who is a designated broker?

A broker who holds a broker's license and oversees a brokerage, assuming full legal liability for it.

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Who is ultimately liable for an agent's mistake?

The principle that the broker, not the agent, is responsible for the actions of agents working at a brokerage.

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Whose interests do brokers and sales agents represent?

A real estate broker represents their clients, and all sales agents represent their single broker and not the client directly.

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What is agency in real estate?

The legal relationship between an agent and their principal, where the agent acts on behalf of the principal. In real estate, this typically involves brokers representing sellers, buyers, or landlords.

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Who are sales agents?

Licensed individuals who work under a broker and perform tasks related to real estate transactions, like listing properties or finding buyers.

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What is dual agency?

A type of agency where a brokerage represents both the buyer and seller in the same transaction, requiring full disclosure and consent from both parties.

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When can a broker avoid liability for providing incorrect information?

A broker is not held liable for providing incorrect information if they genuinely believed the information was accurate, even if it later turns out to be false.

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How are agents' actions considered under a brokerage?

Working with a brokerage, you're technically working on behalf of your sponsoring broker, and your actions reflect back to them.

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How does authorizing licensees affect a broker's legal standing?

When a broker authorizes licensees to act on their behalf, they assume the responsibility for their actions, a concept called vicarious liability.

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How does the law view a broker's responsibility for their agents' actions?

The broker, as the principal, is responsible for the actions of their agents, including sales agents, even if the agent makes a mistake or violates the law.

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When does vicarious liability become particularly relevant?

A broker's responsibility for their agents' actions is a larger concern when dealing with cooperating brokers and subagents, as there are more layers of agency involved.

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Sales Agent (or Agent)

Sales agents acting on behalf of a broker in real estate transactions. They are not allowed to directly represent clients themselves; they only represent the broker.

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Landlord's Agent

A licensed real estate professional who represents a landlord (property owner) in finding tenants and managing the property.

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Property Management Agreement

A written agreement outlining the duties and responsibilities of a landlord's agent.

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Leasing Agent

A licensed real estate professional who represents tenants in finding and renting properties.

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Buyer/Tenant Representation Agreement

A written agreement outlining the duties and responsibilities of a leasing agent.

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Real Estate Salespersons (Agents)

Licensed real estate professionals who work under a sponsoring broker and represent clients.

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Associate Broker

A licensed real estate professional who works under a sponsoring broker but holds a specialized license.

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Cooperating Broker

A broker who is not affiliated with the brokerage representing the seller in a transaction.

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Cooperating Brokerage

An agency arrangement where two brokerages collaborate to achieve a real estate transaction.

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Buyer's Broker

A real estate professional who works for a brokerage that is not representing the seller in a transaction.

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Customer

When a cooperating broker represents a buyer in a transaction, the seller becomes the cooperating broker's customer.

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Sponsorship (in Real Estate)

The relationship between a broker and their sponsored agents (salespersons) where the broker is responsible for the actions of their agents.

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Fiduciary Duties

The ethical and legal obligations that agents owe to their clients, such as loyalty, confidentiality, and disclosure.

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Informed Consent

A client must understand and agree to an agency relationship or action before it begins. This is like signing a contract before you start working on a project.

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First Substantive Contact

The first interaction between an agent and a client where confidential information is shared or action is taken about a property. This is like the moment you start working on a project.

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First Substantive Contact Examples

Examples of first substantive contact include: A buyer expressing interest in buying property, A buyer meeting a seller's agent at a house showing or open house, A seller sharing their financial situation or reasons for selling.

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Agency Disclosure for Listing Agents

An agent representing a property owner MUST disclose their agency relationship before or during first substantive contact with a prospective tenant or buyer. This means disclosing the agency before the first meeting or when the client is showing interest in the property.

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What is NOT First Substantive Contact

A non-confidential interaction at an open house, a fact-based conversation about details like location or style, and factually answering questions about an advertisement are NOT first substantive contact. These are general conversations, not specific to one client.

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Agency Disclosure Over Phone

An agent must verbally disclose their agency relationship over the phone and then confirm it in writing as soon as possible. This is like sending a follow-up email after a phone call.

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Listing Agent's Disclosure Timeline

A listing agent needs to inform prospective tenants or buyers of their relationship with the property owner BEFORE or DURING the first substantive contact. This keeps everything clear and honest.

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Disclosing Known Information

An agent's agency relationship must be disclosed even if the client is already aware of it. It's about fulfilling legal requirements and ensuring everyone understands their roles in a real estate transaction.

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Material Facts

Details that might influence a person's decision to buy or sell a property and must be disclosed to the client.

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Dual Agency

An agent representing both the buyer and seller in a transaction, requiring full disclosure and consent from both parties.

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Offer Disclosure

Agents must disclose any offers made on a property promptly, even if they don't seem like good offers.

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Fiduciary Duty

A broker's obligation to act in the best interests of their clients, which can involve disclosing information that could be detrimental to their client's interests.

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Multiple Income Disclosure

A real estate agent must disclose if they are receiving compensation from multiple sources during a transaction.

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Brokerage Policy

A brokerage's policies dictate the types of agency relationships they allow, such as single agency, dual agency, or designated agency.

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Conflict of Interest Disclosure

An agent must disclose any conflicts of interest they have, such as dual agency, confidentiality issues, or compensation.

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Disclosure Timing

The disclosure timeline varies based on the type of agency and situation, but a general rule is to disclose when a customer becomes a client.

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Brokerage Agreement

A written agreement between a broker and their client outlining the terms of their relationship, including compensation, responsibilities, and agency type.

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Disclosure Requirements

A broker's legal obligation to inform their clients of all relevant information, including potential drawbacks or risks, so clients can make informed decisions.

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Authorizing Licensees

A broker's decision to allow their agents to act on behalf of the brokerage, making the broker accountable for their actions.

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Agency Disclosure

The act of a broker disclosing their agency relationship to a client, outlining who they represent and the extent of that representation.

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Single Agency

A type of agency where a brokerage represents only the buyer or the seller exclusively, not both.

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Study Notes

Agency and Brokerage

  • Agency: Refers to relationships where agents act on behalf of their principals.
  • Brokerage: A for-profit business for real estate transactions.
  • Broker: A licensed person who runs a brokerage, or brokers transactions.
  • The word "brokerage" can be a noun or a verb.
    • As a noun, it's the business itself. -As a verb, it refers to the actions completing the transaction.
  • Brokerage policies dictate the types of agency relationships allowed.
  • Agency is created between the client and the broker, though agents handle the transaction's steps.
  • Brokerage agreements are between the agent and the broker.

Vicarious Liability

  • Vicarious liability: A broker is legally responsible for their agents' actions.
  • The employing broker (principal broker) is the one who can be held liable, not individual agents.
  • Scope Of Practice: Brokers cannot give advice outside their expertise. Agents are liable if they exceed boundaries.
  • Agents can advise on market changes, reasonable offers, real estate processes.
  • Agents cannot dictate where clients can or cannot live, guarantee a price, calculate taxes for a client.

Broker Responsibilities

  • Brokers are responsible for agents' actions, even if the mistake is unintentional.
  • Agents act on behalf of their broker, and the liability flows upward.
  • Mitigation strategies for liability include comprehensive office policy manuals listing agent authority, which protect all involved.

Brokerage Acts

  • Listing: Seller's/listing agent represents the seller. This relationship begins with a listing agreement.
  • Buying: Buyer's/selling agent represents the buyer. Helps sell the property by representing a buyer.
  • Property Management: Landlord's agent represents the landlord in renting a property. Done through a property management agreement.
  • Leasing: Tenant's agent represents the tenant in leasing a property. Done with a buyer/tenant representation agreement.

Brokerage People

  • Broker: Designated to assume liability for the firm.
  • Agent (Licensee): Must be sponsored by a broker to engage in real estate business.
  • Associate Broker: Like a broker but works under sponsorship of another broker.
  • Cooperating Broker: Is not affiliated but works with the broker to complete a transaction. They represent the other party (usually the buyer)

Disclosure

  • Disclosure: All offers and relevant information need to be disclosed and disclosed promptly, whether the agent believes the principal would be interested.
  • Disclosure Timeline:
    • Agency disclosures (who represents whom) are crucial in the beginning.
    • Material property facts must be disclosed regarding the property.
    • Property value needs to be disclosed honestly for fairness.
    • All offers, even unattractive ones, must be disclosed.
    • Buyer's financial condition can be disclosed (within limitations of sensitivity).
    • Dual agency needs disclosure.
    • Multiple compensation sources must be disclosed.
    • Conflicts of Interest must be disclosed.
  • First Substantive Contact: Agency disclosure is required when the first substantial contact to the customer.
  • Informed consent is needed for any client or customer in respect to disclosed actions or agency relationships before any action is taken.

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Description

This quiz covers fundamental concepts in real estate agency and brokerage, including the roles of agents and brokers, the nature of brokerage agreements, and the principles of vicarious liability. Test your understanding of these essential topics related to real estate transactions.

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