Chapter 19
Thomas E.
Gillett
Charles J.
Jacobus
© 2008 by South-Western, Cengage Learning
Georgia Real Estate
An Introduction to the Profession
Seventh Edition
Chapter 19
The Principal-Broker
Relationship: Agency
© 2008 by South-Western, Cengage Learning
Agency
Agency:
is created when one
person (the principal)
delegates to another
person (the agent) the
right to act on the
principal’s behalf.
© 2008 by South-Western, Cengage Learning
3 Levels of Agent Authority
Universal Agent
All matters
General Agent
Particular trade or business
on a continuing basis
Special Agent
Particular act or transaction
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Establishing Agent Authority
Expressed Authority
Contractual agreement
Implied Authority
Acts
Custom, common
usage, & conduct
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Establishing Agent Authority
Agency by estoppel
Principal fails to maintain
due diligence over the
agent & the agent
exercises powers not
granted
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Establishing Agent Authority
Agency by ratification
Established after the fact
Agency coupled with
an interest
Agent holds an interest
in property being
represented
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Brokers Obligations to Principal
Loyalty to the Principal
Trust, confidence,
responsibility
Faithful Performance
Best effort & diligence
Obey legal Instructions
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Brokers Obligations to Principal
Confidentiality
Full Disclosure
Accountability for Actions &
Funds Received
Trust Account
Commingling
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Brokers Obligations to Principal
Reasonable Care
Honesty, Fairness &
Integrity
Doctrine of Fairness
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Obligations to Third Parties
Honesty, Integrity, Care, Accountability, &
Fair Business Dealings
Loss of commission
Loss of license
Suit for damages
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Obligations to Third Parties
Lead-Based Paint
HUD requirements
Red Flags
Possible problems?
Inspections
Home Warranty
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Owner’s Disclosure Statement
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“As Is”
!
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Puffing
.
.
© 2008 by South-Western, Cengage Learning
Buyer Agency
Client is the Buyer
Help make
informed decisions
Lowest price or
“good deal”
No latent defects
© 2008 by South-Western, Cengage Learning
Principal’s Obligations
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Broker’s Sales Staff
Competence
Obedience
Accounting
Loyalty
Full Disclosure
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Broker’s Sales Staff
Compensation
Reimbursement
Indemnification
Performance
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Cooperating Broker
Fiduciary obligation of
cooperating Broker
Theory 1: Agent or
subagent of the Seller
Theory 2: Agent of
neither Seller nor
Buyer
© 2008 by South-Western, Cengage Learning
Cooperating Broker
Complicating Issues
Buyer’s perception
Middleman Principal
Broker represents
no one
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Agency
Dual Agency
Conflict of interest
Designated Agency
One Broker
Two Salespeople
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Agency Disclosure
Ostensible Authority: Agency created without
written agreements
Disclose to all parties who the Broker
represents
First significant contact
Dual Agency
Informed written consent
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Termination of Agency
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Termination of Agency
Act of the Parties
Agreement
Revocation / Renunciation
Operation of Law
Death
Expiration
Incapacity
Extinction
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Interstate Land Sales
Disclosures
provided in a
property report
Not a HUD
approval
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Antitrust Laws
Promote competition & Regulate
activities which endanger completion
Price Fixing
Boycotting
Monopoly
Tie-In Agreement
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Antitrust Laws
Penalties
Up to 3 Years in Prison
Fines:
$350,000 Individual
$10,000,000 Corporation
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Errors & Omissions Insurance
Intentional acts to deceive
Punitive Damages
Negligence
Misrepresentation
© 2008 by South-Western, Cengage Learning
Key Terms
Agent
Boycotting
Commingling
Dual agency
Middleman
Ostensible
authority
Price fixing
Principal
Puffing
Third parties
© 2008 by South-Western, Cengage Learning