©2011 Cengage Learning

©2011 Cengage Learning

1.
Define agency and list the 3 ways an agency may be created.
2.
3.
4.
5.
6.
Discuss the fiduciary relationship that exists between a principal and a licensed real estate agent.
Explain the difference between a single agency and a dual agency.
List and give examples of real estate violations.
Describe the agency differences between salespersons and brokers.
List and give examples of six ways in which real estate agencies are terminated.
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UNIVERSAL
GENERAL
SPECIAL




Examples:
UNIVERSAL – Court-appointed Guardian
GENERAL – Business Manager (Recorded Power of
Attorney)
SPECIAL – Real Estate Broker (appointed by principal to negotiate or conduct business with other parties on behalf of the principal)
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PRINCIPAL (Seller – property owner) appoints
AGENT (Licensed real estate Broker) to find
THIRD PARTY (Buyer)
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PRINCIPAL (Buyer) appoints
AGENT (Licensed real estate broker) to find
THIRD PARTY (Seller – property owner)
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Agency = Authority
•BY A
GREEMENT
(Actual authority)
-Orally
-Written – Express Agency
-Mutual Actions
ARE
•BY R
ATIFICATION (Implied authority)
-OK an unauthorized agents action.
-Principal accepts the acts of the agent.
-Ostensible or Implied Agency.
•BY E stoppel (Relied Authority)
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-Allow an innocent party to believe that you are their agent and rely o that belief.






Capacity of the parties
Lawful objective
Offer and Acceptance
Consideration
Written Compensation Agreement
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•Pool of licensees sharing listings
•Maximizes market exposure for owners
•Association of Realtors affiliation
Most Association of Realtors (AOR) have
Member status
Affiliate status
Seller pays listing broker who pays any cooperating broker
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•Single Agency (One, not both)
-Broker for the seller
-Broker for the buyer
•Dual Agency (Both)
-Broker for BOTH seller and buyer
3 steps required to establish Agency
Relationship ( DEC ):
D isclosure
E lection
C onfirmation (written)
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D E C

1.
Trust Fund Violations
-Example: Agent fails to use proper Accounting Procedures
2.
Misrepresentation
-Incorrect statement
-Withheld information
3. False Promises
-False statement about future events
4. Divided Agency
-Receiving funds from both buyer and seller without disclosing the facts to the parties
5. Commingling
-Mixing one client’s fund with another client’s funds
-Mixing client funds with the funds of the agent
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6. Conversion
-Using client funds for your own personal use
7. Definite termination date
Required on all “exclusive” real estate contracts
8. Secret Profit
-Undisclosed profit without permission of the parties
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


 False advertising
Dishonest dealing
Misuse of trade name
Trust Fund Handling
 Broker must keep record of all client funds



Broker may have up to $200 to cover fees
Broker just handle client funds by:



Give to the proper party (principal)
Deposit into neutral escrow account
Put deposit into trust fund account
Failure to handle trust funds correctly:
 Commingling
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 Finance by license fees
 Reimburses public for uncollectable judgments against licensees
 Licensee must pay fund back before doing business again
 Fees collected and administered by the
California Department of Real Estate
 $50,000 find per individual; $250,000 for multiple claims
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1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Acts of the licensees under them
Obey principal’s lawful instructions
Use due diligence to find a buyer or property
Exercise reasonable care and skill
Have a written contract and agency relationship with each principal
No secret profit. Honest and fair dealing
Account for all funds of the client
Have written contract with each licensee
Discloses all funds, commissions and fees
Disclose agency agreement
Make diligent inspect and disclose
Reasonable skill and care. Good faith
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 TO THE PRINCIPAL
( Fiduciary relationship )
-Disclose Material Facts
-Disclosure of agency relationship
-Loyalty, confidentiality, full disclosure
-Accountability
-Competent, professional care
• TO THIRD PARTIES
-Disclose Material Facts
-No Negligence
-Make ONLY Correct Representations
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OFFICE STAFF
EMPLOYER &
EMPLOYEE
• Broker withholds Social
•
Security taxes
• Broker controls activities
•
May receive employee benefits
OFFICE STAFF
SALESPERSON
INDEPENDENT
CONTRACTOR
•
Pays own taxes & Social Sec.
•
Control over their own activities
• No employee benefits
•
Broker liable to principals &
• 3rd parties for actions of agents
REAL ESTATE SALESPERSON
• Usually and independent contractor for tax purposes
• Always an employee under the real estate law by the
Commissioner
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•
By Acts of the Parties
- Fulfillment/completion of the purpose
- Term Expires
- Mutual agreement or consent of the principal and agent
- Unilateral Action
(Revoke, withdrawal, renounce, cancellation)
•
By Law
- Death of Either Party
- Destruction of Property
- Court Action
DIED IN
ESCROW
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1.
With the permission of the seller, Broker A submits a listing to MLS inviting cooperating brokers to help find a buyer. This could be an offer of: a. Dual agency b. General agency c.
Subagency d. Power of agency
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2. A broker has an agency agreement to represent just the buyer. This is an example of a: a. Dual agency b. Single agency c.
In-house agency d. Listing agency
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3. Which of the following is not correct?
a.
All real estate salespersons must have written employment contracts with their brokers b. Real estate salespersons are able to contract directly in their own name as an agent with the seller c. The recovery fund may be used to reimburse qualified principals and buyers for damages suffered because of certain inappropriate acts by real estate licensees d. Most real estate agency agreements are between sellers and brokers, not buyers and brokers
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4. The Commissioner’s Regulations applies to all
California: a. REALTORS ® b. Realtist c.
Real estate salespersons d. All of the above
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5. A broker receives a deposit from a buyer with no instructions to hold the check uncashed pending the seller’s acceptance of the offer. After the offer is accepted, the broker decides to put the check in a safe in the office for security purposes until the broker can get to the bank next week. The broker is: a. Guilty of conversion b. Innocent of any wrong doing c. Guilty of commingling d. Required to place the deposit into a trust fund
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6. A real estate broker, in order to entice a person to buy, states that the property conforms to all building codes. The agent knows a room was added without a building permit. The agent is guilty of: a. Misrepresentation b. Acting in a legal manner c.
False promise d. Ostensible promise
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7. According to the real estate law, for supervising purposes, the relationship between a salesperson and a broker is: a. Fiduciary b. Independent contractor c. Employer-employee d. ostensible
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8. Receiving a commission from both the buyer and seller without full disclosure and approval is called: a. Dual agency b. Single agency c.
Divided agency d. Implied agency
9. Real estate commissions are: a. Established by the California Association of
Realtors b.
Limited per the Commissioner’s Code of Ethics c. Determined by local Boards of Realtors d. Negotiable
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1. C 6. A
2. B
3. B
4. D
5. C
7. C
8. C
9. D
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