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Chapter 8

Real Estate Brokerage and the Law of Agency

TermDefinition
agency The relationship between a principal and an agent wherein the agent is authorized to represent the principal in certain transactions
agent 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 the
broker 1) one who acts as an intermediary on behalf of others for a fee or commission. 2) one who is licensed to list, lease, buy, exchange, auction, negotiate or sell interest in real estate for others for a fee
brokerage the bringing together of buyers and sellers in the marketplace
broker in charge (BIC) Required for each brokerage firm and each branch office, the full broker responsible for displaying all licenses properly, notifying the ncrec of any changes of business addr or trade name, ensuring that all adverstising and agency compliance is done prop
caveat emptor A Latin phrase meaning "let the buyer beware" In a caveat emptor state, sellers do not have to disclose any facts about their property when selling
client Principle
commingling The illegal act by a real estate broker of placing consumer funds with personal funds. By law brokers are required to maintain a separate trust or escrow account for other parties funds held temporarily by the broker
commission Payment to a broker for services rendered as in the sale or purchase of real property; traditionally a percentage of the gross sales price of the property but can be a flat fee or some other calculation
cooperation broker Listing broker
dual agency Representing both parties to a transaction; must be consensual and reduced to writing prior to presentation of the first offer
employee someone who works as a direct employee of an employer and has employee status. The employer is obligated to withhold income taxes and social security taxes from the compensation of the employee
express agreement contracts An oral or written contract in which the parties state the contracts terms and express their in words
fiduciary One in whom trust and confidence are placed; a reference to a principal agent relationship
first substantial contact A flexible moment in time when conversation between a licensee and a consumer begins to address confidential needs, desires and abilities; latest moment to legally disclose agency choices to a consumer
fraud An intentional misrepresentation of material fact so as to harm or take advantage of another person
general agent One who is authorized to represent the principal in a broad range of matters related to a specific business or activity; a property manager might have this power
implied agreement contract A contract under which the agreement of the parties is demonstrated by their conduct
independent contractor Someone who is retained to perform a certain act but who is subject to the control and direction of another only as to the end result and not as to the way in which the act is performed. Unlike an employee, an independent contractor pays all expenses an
in house sale A real estate transaction where the listing firm actually produces the buyer for their listings as opposed to a co brokered or cross sale that involves two firms
LOADS A mneumonic to remember the fiduciary duties of an agent to the principal; loyalty, obedience accountability, disclosure of information, skill care and diligence
material facts Any fact that is important or relevant to the issue at hand; mandatory disclosure by all agents in a transaction to all parties of the transaction
multiple listing service (MLS) A marketing organization composed of member brokers who agree to share their listing agreement with one another in the hope of procuring ready willing and able buyers for their properties more quickly than they could on their own. Most MLS accept only ex
negligent misrepresentation Unintentionally misinforming any party involved in a transaction about a material fact
negligent omission Unintentionally failing to disclose a material fact to any party involved in a transaction
oral buyer agency A non exclusive verbal agency agreement between a firm and a buyer client. There can be no time limit on oral agency, but it must be reduced to writing prior to presentation of first offer
principal Main party to a transaction the person for whom the agent works, the client
provisional broker A real estate licensee who performs real estate activities under the supervision of a licensed real estate broker in charge. Must complete post licensing courses to remove the provisional license status
puffing Exaggerated or superlative comments or opinions
ratification A method of creating an agency relationship in which the principal accepts
special agent One who is authorized by a principal to perform a single act or transaction. A real estate broker is usually a special agent of the seller authorized to find a ready, willing and able buyer for a particular property or a special agent of the buyer to fin
stigmatized properties Property regarded as undesirable because of events that occurred there, also called psychologically impacted property. Some conditions that typically stigmatize a property are murder, gang related activity, proximity to a nuclear plant and even the alleg
subagent one who is employed by a person already acting as an agent. Typically a reference to a provisional broker licensed under a broker who is employed under the terms of a listing agreement. A subagent has the same duties to the client as the agent
tort A wrongful act, injury or violation of legal right to the person or property of another
universal agent Person empowered to do anything the principal could do personally, unlimited authority, unusual in real estate
willful misrepresentation Intentionally misinforming any party involved in a transaction about a material fact
willful omission intentionally failing to disclose a material fact to any party involved in a transaction
working with real estate agents A mandatory agency information brochure that a licensee must give to and review with consumer in all real estate sales transactions no later than first substantial contact, it does not create agency
Created by: feefee830