Chapter 4
Agency
Real estate is an industry about
property, but it’s also an industry about
people. The concept of agency is
entirely about people, and relationships
between and among them.
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Agency
• Learning objectives
– Identify the various types of agency relationships
common in the real estate profession and the
characteristics of each
– Describe the fiduciary duties involved in an agency
relationship
– Explain the process by which agency is created and
terminated and the role of disclosure in agency
relationships
– Distinguish the duties owed by an agent to clients from
those owed to customers
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Agency
Introduction and history of agency
Law of Agency and Definitions
• Law of agency
• Definitions
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Agent
Principal
Fiduciary
Client
Customer
Nonagent
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Agency
• Definitions in Georgia’s Brokerage Relationships in Real Estate
Transactions Act (BRRETA) definitions
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Agency
Broker
Brokerage engagement
Brokerage relationship
Client
Common source information companies
Customer
Designated agent
Dual agent
Material facts
Ministerial acts
Transaction broker
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4
Agency
Creation of agency
• Express agency
• Implied agency
• Compensation
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Agency
The six common-law fiduciary duties:
1. Care
2. Obedience
3. Loyalty
4. Disclosure
5. Accounting
6. Confidentiality
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Agency
Obligations to Buyer
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Responsibilities
Earnest Money Deposit
Seller Financing
Property Condition
Documents
Negotiation
Showing
Property Goals
Offers
Possession Dates
Default
Efficiency
Negotiation
Appraisal
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Agency
• Duties and responsibilities of an agent under
Georgia’s BRRETA
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broker engaged by seller
broker engaged by buyer
broker engaged by landlord
broker engaged by tenant
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4 Agency
Termination of Agency
• Completion, performance, or fulfillment of the purpose for
which the agency was created
• Death or incapacity of either party
• Destruction or condemnation of the property
• Expiration of the terms of the agency
• Mutual agreement by all parties to cancel the contract
• Breach by one of the parties
• By operation of law, as in bankruptcy of the principal
(bankruptcy terminates the agency contract and title to the
property transfers to a court-appointed receiver)
• Georgia specifics about termination
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4
Agency
• Types of agency relationships
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Universal agent
General agent
Special agent
Designated agent
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Agency
Limitations on Authority
Universal Agent General Agent
Special Agent
Empowered to
do anything the
principle could
do personally
Authorized to
represent the
principal in one
specific act or
business
transaction
under detailed
instructions
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Represents the
principal in a
broad range of
matters related
to a particular
business or
activity
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4
Agency
• Types of agency relationships
– Single agency
– Seller representation
– Buyer representation
– Owner as principal
– Dual agency
• Disclosed dual agency
• Undisclosed dual agency
• Georgia’s specifics about
dual agency
– Nonagency
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Agency
Single Agency
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Agency
Dual Agency
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Agency
• Customer-level services
– Reasonable care and skill in performance
– Honest and fair dealing
– Disclosure of all facts the licensee knows that materially
affect the value or desirability of the property
– State law may require additional services or disclosures
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4
Agency
Customer-level services
– Environmental hazards
– Opinion versus fact (puffing, misrepresentation, fraud)
Property conditions—Georgia specifics
– Latent defect (A hidden structural defect that would not
be discovered by ordinary inspection)
Stigmatized properties—Georgia specifics
• Properties branded undesirable because of actual or
rumored criminal, tragic, or scandalous events that
occurred on the property
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Agency
• Puffing
– Exaggeration of a
property’s benefits
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• Misrepresentation
– Fraud: Intentional
misrepresentation of a
material fact to harm or
take advantage or
another
– Negligent
Misrepresentation:
Broker should have
known a statement was
false
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