TABLE OF CONTENTS
Introduction ....................................................................................3
1. Full-Service Agency.....................................................................4
What is a Full-Service Agency? .................................................... 4
General Types of Services that a Standard/Full-Service
Agency Licensee Can Provide Include: ........................4
Marketing Materials...................................................................... 4
Open Houses .............................................................5
Signage......................................................................5
Negotiation ................................................................5
How Much Do Licensees Make? ................................................... 5
Are Full-Service Licensees Worth the Extra Money?....5
Final Sales Price ........................................................................... 6
How to Get the Top Price............................................6
2. Limited Service Agency ...............................................................9
Purpose of Agent Services Legislation .......................................... 9
Background ...............................................................9
Who Does the Licensee Represent?........................... 10
Differing Levels of Licensee Representation .............. 10
Licensees Engaged by Sellers. .................................. 11
Licensees Engaged by Buyers................................... 12
Disclosure Requirements are a Serious Matter ......... 12
Disclosure Statistics ................................................ 13
Reasons for Deteriorating Disclosure Statistics ........ 13
Disclosure of Agency Relationships .......................... 13
Agent Responsibility ................................................................... 14
Disclosure of Agency Relationship ............................ 15
Misrepresentation/Nondisclosure............................. 15
Virginia Residential Property Disclosure................... 16
The New Changes..................................................... 16
Sample Agency Disclosure Forms............................. 16
Protections............................................................... 17
3. Limited Service Agency Disclosure Legislation ..........................21
Real Estate Board Statutes – Effective date July 1, 2007.......... 21
Condition of Licensure ............................................. 21
Continuing Education Requirements........................ 21
New Definition for Limited Service
Agent/Representative............................................... 21
Purpose of New Legislation ........................................................ 22
Highlights of the New Legislation.............................. 22
About the Legislation ............................................... 24
Obligations of Licensees ........................................... 24
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4. Other Pertinent Information .....................................................28
What is Meant By the Phrase “Agency Relationships?” ............. 28
How the Broker Promotes Client’s Interests.............. 28
Dual Agency............................................................. 28
Who will be Representing the Client? ....................... 28
Designated Representative ....................................... 29
Evolution of Real Estate “Salesperson” ..................... 29
Types of Marketplaces.............................................. 29
Brokerage Commissions ............................................................. 29
Shared commissions with co-operating brokers........ 30
Commissions: Potential Points of Contention for
Agents ..................................................................... 30
Case Examples: MLS Lawsuits .................................................. 31
Open MLS Cases...................................................... 32
Services Provided to Buyers: .................................... 33
Real Estate Brokers / Agents and Continuing
Education ................................................................ 33
Dual agency/Designated agency ........................ 34
Limiting Liability ...................................................... 34
Glossary ........................................................................................38
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Introduction
As a customer, the buyer of real estate in Virginia used to rely upon the professional advice
and services of a licensee, but there was no agency relationship and the buyer was not the
represented party. Most states now require that proper disclosure of this fact be made to the
buyer. Virginia is one of those states with specific disclosure requirements set forth by
legislation regarding limited-service agency disclosure.
The licensee who completes this course will be knowledgeable about limited-service agency
disclosure requirements in Virginia. The licensee will receive the two hours of continuing
education credit needed to meet the requirements for relicensure and can also use this
educational module as a reference while conducting future business in the real estate market.
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1. Full-Service Agency
What is a Full-Service Agency?
A full-service real estate agency handles all aspects of the real estate business
including advertising, planning, design, production, and placement. Today, fullservice generally suggests that the agency also handles other aspects of marketing
communication, such as public relations, sales promotion, Internet and direct
marketing.
General Types of Services that a Standard/Full-Service Agency
Licensee Can Provide Include:
• Comparative Market Analysis - an estimate of the home’s value compared
with others. This differs from an appraisal in that property currently for sale
may be taken into consideration.
•
Exposure - Marketing the property to prospective buyers.
•
Facilitating a Purchase - guiding a buyer through the process.
•
Facilitating a Sale - guiding a seller through the selling process.
•
“For Sale by Owner” document preparation - preparing necessary paperwork
for sellers using “Sale by Owner” method.
•
Home Selling Kits - guides regarding how to market and sell a property.
•
Hourly Consulting for a fee, based on the consumer’s needs.
•
Leasing for a fee or percentage of the gross lease value.
•
Property Management.
•
Exchanging property.
•
Auctioning property.
•
Preparing contracts and leases in some states
Marketing Materials
Full-service agencies tend to project quality, and that may mean four-color flyers
and four-color direct mail pieces. The days of hiring neighborhood kids to toss
photocopies on neighbors’ front steps are gone.
The Full-Service licensees spend considerable time sorting through photos to select
those with the most light, the best angles, the sharpest contrast & best color.
•
Photos are cropped and resized to accentuate positive attributes.
•
Each photograph is entered into MLS with a full-length enticing description.
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Open Houses
Not all homes are right for an open house, but those that are, require skillful
presentation. This means working the potential buyers who come through by
pointing out impressive features of the home without making the buyer feel
exploited or hounded, and that in itself is an art. It requires the service of an
experienced licensee.
In addition, licensees counsel sellers. They find out what made the seller decide to
buy the home and how that moment happened. Then, they employ that knowledge
at open houses. For example, suppose a seller said she knew she wanted to buy the
house when she first stood gazing out at the pool. Good sales people at an open
house would ask buyers to stand in that same spot by the pool. Then, they’d share
the seller’s first experience verbatim.
Signage
Good signage is free advertising. Many full-service firms will advertise the:
•
Main office phone number
•
Licensee’s personal cell phone or voice mail number
•
Web site for more information
•
Virtual tour links
•
Specific information that makes this home different from others in the area
Negotiation
Real estate is an extremely competitive business, and there are many licensees
fighting for the same listings. A full-service licensee who wins the listing needs to be
a good negotiator, a person you want on your side during negotiations.
How Much Do Licensees Make?
Full-service agents typically spend more on overhead than their competitors by
refusing to cut costs and seek quality services for the clients. Full-service licensees
may charge more for their services and may receive less due to the higher cost of
quality overhead expenses.
Are Full-Service Licensees Worth the Extra Money?
Consumers are always looking for ways to save money, and paying real estate
commissions can amount to tens of thousands of dollars today. This is not an
insignificant sum to most people. Is it worth it to hire a full-service real estate
licensee over a discount service? This is a reasonable question and one that cannot
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be answered quickly. The answer as to whether a full-service agency is worth the
added cost is that it depends on the needs and desires of the consumer.
Final Sales Price
Sometimes full-service agents lose listings because the seller was promised a higher
price based on a lower commission. It is these listings that often show up in MLS a
month later with reduced prices. The amount of the price reductions, not
surprisingly, tends to exceed the difference in commissions between the opposing
agencies! In these scenarios, sellers received fewer services and ended up losing
money on the sale as well.
If the consumer cannot decide between an agent who charges 1 or 2 percent less
than another, ask the consumer to think about how it would feel if he or she had to
reduce the sales price, say five percent, to get the house sold. The consumer should
be made aware of the need to ask the licensees to show their last 24 months of price
reductions and compare the results.
How to Get the Top Price
Listings that sell at top price are typically those exposed to the most buyers, that are
priced well, marketed well and show well. As the saying goes: It is the house that
offers the most for the least that sells first.
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Chapter One Questions
1) A _____________- _____________ real estate agency handles all aspects of the
advertising process, including planning, design, production, and placement.
2) A _________________ _________________ __________________ is an estimate of
the home’s value compared with others. This differs from an appraisal in that
property currently for sale may be taken into consideration.
3) True / False Paying real estate commissions can amount to tens of thousands
of dollars today. This is an insignificant sum to most people.
4) The answer to the question, “Is a full-service agency worth the added cost”?
depends on the needs and desires of the ___________________________.
5) Property management, exchanging property, and auctioning property are all
services provided by a ______________- _________________
__________________ licensee.
6) True / False Good signage is free advertising.
7) True / False Not all homes are right for an open house, but those that are,
require skillful presentation.
8) Licensees who can persuade you to pay what they feel is reasonable, will
probably persuade a buyer to pay your price. These licensees are said to be good
___________________.
9) Full-service agents typically spend more on _________________________ than
their competitors.
10) Listings that sell at top price are typically those exposed to the most
____________, that are _______________ well, _________________ well and
________________ well.
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Chapter One Answers
1) full-service
2) comparative market analysis
3) False
4) consumer
5) full-service agency
6) True
7) True
8) negotiators
9) overhead
10) buyers, priced, marketed, show
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2. Limited Service Agency
A limited service agent may act only as the agent or representative of the client if a
specific provision is in writing in the brokerage agreement. If the brokerage
agreement does not specify the nature of the relationship, the limited-service
representative is considered to be acting as an independent contractor of the client.
Purpose of Agent Services Legislation
The purpose of the Virginia Association of Realtor’s (VAR’s) Limited-Service
Agency legislation is to:
•
ensure that consumers have a clear understanding of the services they will or
will not receive in a real estate brokerage relationship, while providing real
estate brokers flexibility in their brokerage business models and the variety of
brokerage relationships they may offer consumers.
•
help clients and agents facilitate successful transactions by providing for the
sharing of important information with those who need to know.
Background
The creation of limited-service real estate brokerage models brought about:
•
uncertainty on the part of sellers, in particular, as to what services they will or
will not receive in their brokerage relationship;
•
uncertainty on the part of the selling agent as to exactly who is responsible for
doing what to get the transaction closed; and
•
doubts on everyone’s part as to how limited-service relationships work from
an agency and liability standpoint.
Previously, Virginia agency law allowed for two kinds of
relationships:
1) standard agency, in which clients are owed the full gamut of statutory agency
services/duties by the real estate licensee; and
2) non-agency/independent contractor, in which licensees provide only the
services contracted for, with no disclosure requirement as to services not
provided.
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New limited-services real estate brokerage models anticipate a new
approach:
•
a limited type of agency relationship, in which consumers may choose only
desired brokerage services, and in return pay the broker a flat fee or reduced
commission.
•
unlike in a standard agency relationship, in which the client is due all agency
services, the client in a limited-service agency relationship was often unaware
of which services he or she would not receive in that particular relationship. It
is that situation that VAR’s Agent Services legislation addresses.
Who Does the Licensee Represent?
Homebuyers should understand the role of their real estate licensee in the sales
transaction, and who their agents represent. Licensees require that a disclosure
agreement be signed that describes who the agent represents in the transaction – the
buyer or seller?
Differing Levels of Licensee Representation
There are essentially five different types of real estate agent relationships. The
consumer might want to examine each type for its benefits before deciding which
one is right for the buyer or seller.
•
First, there are seller’s agents. The seller’s agent works directly for the seller
and represents the seller’s interests. The seller’s agent is obligated to fulfill
certain responsibilities such as loyalty to the seller’s interests, confidentiality,
and full disclosure. The seller will want to interview potential licensees to find
out the experience the licensee has in acting as a seller’s agent before deciding
to use a specific licensee.
•
Next on the list are buyer’s agents. As you might guess, a buyer’s agent works
directly for the buyer. Just like the seller’s agent, a buyer’s agent has certain
legal obligations in the relationship with buyers and sellers. Loyalty to the
buyer’s interests, confidentiality, and full disclosure are three of those. Again,
the client will want to interview any potential buyer’s agent before making a
decision.
•
A disclosed dual agent works for the buyer and the seller. This type of
relationship is not possible unless the buyer and seller agree, and they must
both sign a statement to that effect. Disclosed dual agency is walking a fine
line and there are legal repercussions for crossing it.
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•
A common form of dual agency is the designated agency, or split agency.
When a licensee under a broker acts on behalf of the seller and another
licensee under that same broker represents the buyer, this is designated
agency. Each licensee has the same legal and fiduciary responsibilities as
seller’s agent and buyer’s agent and the broker has all the same
responsibilities of a disclosed dual agent plus he or she must take special care
with regard to confidential information disclosed to the selling agent.
•
A transaction agent may interact with the buyer, seller, or both to assist in the
dimensions of a transaction without representing either party. The transaction
agent simply manages the paperwork and ensures the process goes smoothly.
Licensees Engaged by Sellers.
A. Licensee engaged by a seller shall:
1. Perform in accordance with the terms of the brokerage relationship;
2. Promote the interests of the seller by:
•
Seeking a sale at the price and terms agreed upon in the brokerage
relationship or at a price and terms acceptable to the seller; however, the
licensee shall not be obligated to seek additional offers to purchase the
property while the property is subject to a contract of sale, unless agreed to as
part of the brokerage relationship or as the contract of sale so provides;
•
Presenting in a timely manner all written offers or counteroffers to and from
the seller, even when the property is already subject to a contract of sale;
•
Disclosing to the seller material facts related to the property or concerning the
transaction of which the licensee has actual knowledge; and
•
Accounting for in a timely manner all money and property received in which
the seller has or may have an interest;
3. Maintain confidentiality of all personal and financial information received from
the client during the brokerage relationship and any other information that the
client requests during the brokerage relationship be maintained confidential, unless
otherwise provided by law or the seller consents in writing to the release of such
information;
4. Exercise ordinary care; and
5. Comply with all requirements of the law, all applicable fair housing statutes and
regulations, and all other applicable statutes and regulations.
B. Licensees shall treat all prospective buyers honestly and shall not knowingly give
them false information. A licensee engaged by a seller shall disclose to prospective
buyers all material adverse facts pertaining to the physical condition of the property
which are actually known by the licensee.
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A licensee shall not be liable to a buyer for providing false information to the buyer
if the false information was provided to the licensee by the seller and the licensee
did not
(i) have actual knowledge that the information was false, or
(ii) act in reckless disregard of the truth
No cause of action shall arise against any licensee for revealing information as
required by applicable law. Nothing shall limit in any way the provisions of the
Virginia Residential Property Disclosure Act.
C. A licensee engaged by a seller in a real estate transaction may, unless prohibited
by law or the brokerage relationship, provide assistance to a buyer or potential
buyer by performing ministerial acts. Performing such ministerial acts shall not be
construed to violate the licensee’s brokerage relationship with the seller unless
expressly prohibited by the terms of the brokerage relationship, nor shall
performing such ministerial acts be construed to form a brokerage relationship with
such buyer or potential buyer.
D. A licensee engaged by a seller does not breach any duty or obligation owed to
the seller by showing alternative properties to prospective buyers, whether as clients
or customers, or by representing other sellers who have other properties for sale.
E. Licensees shall disclose brokerage relationships pursuant to the provisions of this
article.
Licensees Engaged by Buyers.
When acting as a buyer’s agent with a signed agreement, the licensee assists buyers
by helping them purchase property for the best possible price under the best terms.
Disclosure Requirements are a Serious Matter
Licensees need to take agency disclosure requirements seriously; it is a critical
element of consumer protection. One of the concerns of consumer organizations like
the U.S. Department of Justice, and the Federal Trade Commission has been over
efforts to prohibit or discriminate against limited-service brokers or agents by
traditional brokers or agents. Discrimination against limited-service agencies has
been well documented in the past.
Licensees need to take agency disclosure requirements seriously because it is a
critical element of consumer protection. It is not good for licensees or consumers
that the trend line is going down. Compliance is worsening and thus legislation and
education are required to improve compliance with disclosure issues.
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Disclosure Statistics
The use of disclosure requirements are designed to avoid confusion and/or protect
the interests of consumers in real estate transactions.
Although agency disclosure is required by state law that homebuyers are told the
role of their real estate agent in the sales process, and most importantly, whom the
agent represents, less than one-third of real estate agents comply, according to the
National Association of Realtors’ 2005 Profile of Home Buyers and Sellers.
•
Agency disclosure compliance has been on a downward trend since 2000,
when 38 percent of homebuyers were disclosed at first meeting, 28 percent
when the contract was written, and nineteen percent weren’t disclosed at all.
•
One out of five buyers were not sure whether they had been disclosed or not.
•
By 2002, compliance was worse. According to the National Association of
Realtors Profile of Home Buyers and Sellers in 2002, the NAR found that 35
percent of all buyers were disclosed at first meeting, 26 percent when the
contract for purchase was written, and 18 percent weren’t disclosed at all.
•
Twenty-one percent were unsure whether or not they had been disclosed.
Reasons for Deteriorating Disclosure Statistics
1. Since 2000, the population of real estate professionals has doubled, with NAR
memberships climbing from approximately 750,000 in 2001 to nearly 1.5 million by
the end of 2005. It is speculated that there may not have been enough training of
these new licensees.
2. The NAR points out that disclosure laws by the states are “all over the place.”
Iverson Moore, senior associate in public affairs for the NAR says, “There are a lot of
newcomers, and in most cases they should be trained to disclose as early as possible,
but not all state laws require it.” Virginia has clarified its position on disclosure with
House Bill 316 that will be discussed in detail in Chapter Three.
Disclosure of Agency Relationships
Almost all states, including Virginia, now require disclosure of agency relationships.
With new disclosure requirements the numbers regarding compliance with agency
disclosures should be increasing annually as agents become accustomed to making
them on a regular basis.
With greater emphasis in licensee training about the benefits of agency disclosure,
improvements should further be seen in the statistics regarding disclosure by
licensees to clients. Agency disclosure benefits everyone. It helps avoid any
confusion among buyers and sellers as to whom the agent represents. It also helps
the agents avoid creating unintended agency relationships with consumers.
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Adequate disclosure
Any disclosure that substantially complies with the disclosure samples presented
later in this chapter will be considered legally sufficient. Such written consent and
disclosure shall be presumed to have been given as against any client who signs a
disclosure as provided in this section.
Licensees need to keep in mind, however, that proper disclosure and written
consent are only half the battle. All subsequent actions and words must be
consistent with the disclosure in order to avoid creating an unintended, illegal
brokerage relationship with another party.
Buyer/seller customers must be informed that the licensee has a brokerage
relationship with another party, either orally or in writing, upon having a
substantive discussion about a specific property or properties, however, full written
disclosure must be given to customers at the earliest practical time, but in no event
later than the time when specific real estate assistance is first provided. There are no
exceptions.
Lessor/lessee customers must be informed that the licensee has a brokerage
relationship with another party in writing in all lease applications or in the lease
itself, whichever occurs first. An exception is made for lease terms of less than two
months.
Agent Responsibility
Licensees have no responsibility concerning the contents of the form, but they are
responsible for informing their clients of the need to fill it out and present it to the
buyer. Licensees are also responsible for informing both buyer and seller of
information which is reasonably available and is material to the condition of the real
property.
Disclosure Exemptions (not required):
An occupant of the property is or was HIV positive.
The property was the site of an act or occurrence which had no effect on the physical
structure of the real property, its physical environment, or the improvement(s).
The property was the site of a homicide, felony, or suicide.
Time for disclosure – The residential homeowner must deliver the written
disclosure or disclaimer statement prior to acceptance of a purchase contract. The
statement may be in a separate document or may be included in the purchase
contract. If the disclosure/disclaimer is delivered to the purchaser after the
acceptance of the contract, then the purchaser’s sole remedy shall be to terminate the
contract without penalty.
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Disclosure of Agency Relationship
A licensee must disclose any brokerage relationship the licensee has with another
party to the transaction, upon having a substantive discussion about a specific
property with an actual or prospective buyer or seller, who is NOT the client of the
licensee. Timely disclosure that is presented clearly and explicitly with signatures of
all parties is the key.
If disclosure is presented to a customer or client in combination with other
documents “the disclosure must be conspicuous, bold, all caps, underlined, or
within a separate box”.
If a licensee’s relationship to a client or customer changes, the licensee must disclose
this fact in writing to all clients and customers to the transaction.
Misrepresentation/Nondisclosure
An agent must disclose all material facts in a real estate transaction. A material fact
is a fact that is sufficiently significant to influence an individual into acting in a
certain way, such as entering into a real estate contract.
An agent can be liable for:
•
fraudulent or intentional misrepresentation - intentionally making a false
statement.
•
negligent misrepresentation - unintentionally making a false statement, if the
agent failed to use reasonable care in obtaining the information.
•
innocent misrepresentation - unknowingly making a false statement.
•
nondisclosure or concealment – not disclosing a defect that the agent is aware
of.
Common law duties of disclosure.
The Real Estate Board can suspend or revoke a license for misrepresentation/
nondisclosure. Facts related to whether a death or felony occurred on property, or
whether a property occupant ever had a disease listed by the Public Health
Commissioner, is not considered to be material and not required to be disclosed
unless specifically asked for in writing.
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Virginia Residential Property Disclosure
In 2006, HB 286 required changes to be made to the Residential Property Disclosure
Statement.
The New Changes
The disclosure and disclaimer forms shall contain a notice to purchasers that the
owner agrees there are no pending enforcement actions pursuant to the Uniform
Statewide Building Code that affect the safe, decent, and sanitary living conditions
of the property with notification in writing by the locality. The Disclosure and
Disclaimer Statements have also been revised.
The disclosure/disclaimer form must include the following
statements:
Note to Owner(s): Complete and sign this statement only if you elect to disclose
defects in the condition of the property actually known by you; otherwise, sign the
Residential Property Disclaimer Statement. You may wish to obtain professional
advice or inspections of the property, but you are not required to undertake or
provide any independent investigation or inspection of the property in order to
make the disclosures set forth below.
Note to Purchaser(s): This statement is based upon the owner’s actual knowledge of
the condition of the property as of the date noted. You may wish to obtain
professional advice or inspections of the property. The information contained in this
statement is the representation of the owner and not the representation of the broker
or salesperson, if any.
All homeowners must comply with the provisions of this law regardless of whether
an agent is involved.
Sample Agency Disclosure Forms
Any disclosures that generally comply with the examples shown here shall be
deemed in compliance with the disclosures as required by Virginia law.
Disclosure of Brokerage Relationship
The undersigned do hereby acknowledge disclosure that the licensee
__________________________________ (Name of Firm) represents
The following party in a real estate transaction:
_______________________________ Seller(s) or _______________________________ Buyer(s)
_____________________________ Landlord(s) or _____________________________ Tenant(s)
Date ___________________ Name __________________________________________________
Date ___________________ Name __________________________________________________
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Disclosure of Dual Representation
The undersigned do hereby acknowledge disclosure that the licensee
__________________________________ Name of Broker, Firm or Salesperson as applicable
represents more than one party in this real estate transaction as indicated below:
____________________ Seller(s) and Buyer(s) ___________________ Landlord(s) & Tenant(s)
The undersigned understands that the foregoing dual representative may not disclose to either client or
such client’s designated representative any information that has been given to the dual representative by
the other client within the confidence and trust of the brokerage relationship except for that information
which otherwise required or permitted by Article 3 (54.1-2130 et. Seq.) of Chapter 21 of Title 54.1 of the
Code of Virginia to be disclosed. The undersigned by signing this notice do hereby acknowledge their
informed consent to the disclosed dual representation by the licensee.
Date _______________ Name (One Party) ___________________________________________
Date _______________ Name (One Party) ___________________________________________
Disclosure of the Use of Designated Representatives
The undersigned do hereby acknowledge disclosure that the licensee
_________________________________________________________ Name of Broker and Firm
represents more than one party in this real estate transaction as indicated below:
___________________________________ Seller(s) and Buyer(s)
___________________________________ Landlord(s) and Tenant(s)
The undersigned understands that the foregoing dual representative may not disclose to either client or
the client’s designated representative any information that has been given to the dual representative by
the other client within the confidence and trust of the brokerage relationship except for the information
that is otherwise required or permitted by Article 3 (54.1-2130 et seq.) of Chapter 21 of Title 54.1 of the
Code of Virginia to be disclosed. By signing this notice the undersigned acknowledges informed consent
to the disclosed dual representation by the licensee. The principal or supervising broker has assigned
_________________________________ to act as Designated Representative (Licensee/Sales
Associate) for the one party as indicated below:
_______________________________ Seller(s) or _______________________________ Buyer(s)
_____________________________ Landlord(s) or _____________________________ Tenant(s)
and, to act as Designated Representative ______________________________ (Licensee/Sales
Associate) for the other party as indicated below:
_______________________________ Seller(s) or _______________________________ Buyer(s)
_____________________________ Landlord(s) or _____________________________ Tenant(s)
Date _______________ Name (One Party) ___________________________________________
Date _______________ Name (One Party) ___________________________________________
Protections
This new law contains language designed to protect licensees when they make
required disclosures and perform certain duties. The following may be performed
without violating the brokerage relationship between licensee and client:
•
Information was supplied to the licensee by his client, provided the licensee
did not know that the information was false and he did not act in reckless
disregard of the truth.
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•
No cause of action may be brought against a licensee for revealing information
as required by law.
•
Licensees may perform ministerial acts for customers unless such acts are
expressly prohibited by the terms of the brokerage relationship, and
performing such acts shall not be construed as establishing a brokerage
relationship with the customer.
•
When an agent representing a seller/landlord shows alternate properties to
customers he does not breach any duty or obligation to that seller/landlord;
when an agent represents a buyer/tenant he breaches no duty or obligation
when he shows properties that the buyer/tenant is interested in to others.
•
A buyer’s agent may disclose to a seller the buyer’s intent to occupy the
property as a principal residence.
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Chapter Two Questions
1) The disclosure/disclaimer form must include the following statements:
Note to ______________________ and Note to ____________________________.
2) A __________________ _______________ is a fact that is sufficiently significant to
influence an individual into acting in a certain way, such as entering into a real
estate contract.
3) Licensees need to take agency disclosure requirements seriously because it is a
critical element of _____________________ _______________________.
4) There are certain situations that are exempt from disclosure requirements. These
include:
An occupant of the property is or was _______ positive
The property was the site of an act or occurrence that had no effect on the
_____________ structure, physical ____________, or the site of a homicide, felony or
________________
5) When a licensee under a broker acts on behalf of the seller and another licensee
under that same broker represents the buyer, this is called a
___________________________ agency.
6) True / False The Real Estate Commission can suspend or revoke a license for
misrepresentation/ nondisclosure.
7) ___________________ _________________ is unintentionally making a false
statement.
8) True / False A licensee must disclose any brokerage relationship the licensee
has with another party to the transaction upon having a substantive discussion
about a specific property with an actual or prospective buyer or seller who is not
the client of the licensee.
9) True / False The residential homeowner must deliver the written disclosure or
disclaimer statement after acceptance of a purchase contract.
10) True / False No cause of action may be brought against a licensee for revealing
information as required by law.
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Chapter Two Answers
1) Owner; Purchaser
2) material fact
3) consumer protection
4) HIV; physical; environment; suicide
5) designated
6) True
7) Negligent misrepresentation
8) True
9) False
10) True
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3. Limited Service Agency Disclosure
Legislation
Real Estate Board Statutes – Effective date July 1, 2007
The current real estate statutes address the 2006 General Assembly legislation
requirements for condition of licensure plus continuing education hours regarding
limited service agency.
Condition of Licensure
In accordance with Section 54.1-2105(E) of the Code of Virginia, “every applicant for
relicensure as an active salesperson or broker shall complete at a minimum one twohour continuing education course on limited service agency prior to renewal or
reinstatement of his or her licensure.
Continuing Education Requirements
As of July 1, 2007, the Virginia Real Estate Board requires this course as a one time
only requirement for all active licensees renewing their license between July 1, 2007
and June 30, 2009.
New Definition for Limited Service Agent/Representative
The Virginia Real Estate Board has a new requirement regarding limited service
agency. The new requirement becomes effective on July 1, 2007. In accordance with
Section 54.1-2105(E) of the Code of Virginia, “every applicant for relicensure as an
active salesperson or broker shall complete at a minimum one two-hour continuing
education course on limited-service agency prior to renewal or reinstatement of his
or her licensure.
The following definition for limited-service agency has been added to Section 54.12130 of the Code of Virginia:
“Limited service representative” means a licensee who acts for or represents a client
with respect to real property containing from one to four residential units, pursuant
to a brokerage agreement that provides that the limited-service representative will
not provide one or more of the duties set forth in subdivision A 2 of §§ 54.1-2131,
54.1-2132, 54.1-2133, and 54.1-2134, inclusive. A limited-service representative shall
have the obligations set out in the brokerage agreement, except that a limitedservice representative shall provide the client, at the time of entering the brokerage
agreement, copies of any and all disclosures required by federal or state law, or local
disclosures expressly authorized by state law, and shall disclose to the client the
following in writing:
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•
the rights and obligations of the client under the Virginia Residential Property
Disclosure Act (§ 55-517 et seq.);
•
if the client is selling a condominium, the rights and obligations of the
client to deliver to the purchasers, or to receive as purchaser, the
condominium resale certificate required by § 55-79.97; and
•
if the client is selling a property subject to the Property Owners’
Association Act (§ 55-508 et seq.), the rights and obligations of the client
to deliver to the purchasers, or to receive as purchaser, the association
disclosure packet required by § 55-512.
A limited service representative may act as the agent or representative of the client
only by so providing in writing in the brokerage agreement. If the brokerage
agreement does not so state, the limited-service representative shall be deemed as
acting as an independent contractor of the client.
Purpose of New Legislation
The purpose of this legislation was to:
1) specifically outline an agent’s duty to his or her client; and
2) to clarify for consumers the level of service that should be expected from a real estate
licensee.
Highlights of the New Legislation
• The new legislation adds a definition of “limited service agent or
representative” to current agency law. Agency law will now include
representation of a client as either a standard agent or limited-service agent.
•
For those acting as a standard agent, the legislation clarifies the
responsibilities of a licensee to his client.
•
Allows a licensee to act as a limited-service agent or representative by entering
into a separate brokerage agreement outlining specifically which services he
will or will not provide.
•
Requires that a limited-service agent provide copies of any disclosures
provided by law.
•
Clarifies that an MLS may require as a condition of participation that licensees
disclose the nature of a brokerage relationship. (Therefore, an agent will know
the extent of representation offered to the buyer or seller.)
The Virginia Agent Services Legislation (House Bill 316) requires agents and other
non-agent real estate service providers to disclose the services they provide. Some
other states have prohibited alternative real estate service practices that provide
consumers with lower-cost alternatives. Virginia’s legislation more appropriately
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addresses this issue through disclosure. Virginia sets an example that can be
followed by other states.
HB 316 addresses potential consumer confusion that might arise from the diversity
of services provided by fee-for-service real estate brokers. HB 316 addresses this
issue by means of disclosure, distinguishing services required by a “standard agent”
from those required of a “limited service agent” or “limited service representative.”
The bill requires that a limited service representative must disclose in writing
services that he or she will and will not provide.
The U.S. Department of Justice has commented on competition issues raised by
legislative and regulatory proposals regarding real estate brokerage services in a
number of other states. It was recommended that the state study carefully the need
for any governmental restrictions and, if a need is shown, that any restriction be as
narrowly tailored as possible.
The Department has not seen any empirical evidence indicating that fee-for-service
brokers have created any significant consumer confusion. Nevertheless, the
Commonwealth of Virginia decided to address this potential concern. HB 316 was
tailored to address this concern while preserving consumer choice and competition.
In particular, the bill does not require brokers to provide a minimum level of
services. Rather, it requires real estate brokers to disclose the services that they will
and will not offer while preserving consumers’ ability to purchase a limited set of
services.
More generally, HB 316 does not make illegal any type of limited-service, flat-fee, or
other brokerage models, or otherwise appear likely to displace competition in the
real estate market. In addition, HB 316 includes a provision stating that “Nothing in
this Article shall be construed to limit, modify, impair, or supersede the applicability
of any of the federal or state antitrust laws,” an important confirmation that HB 316
does not manifest an intent to eliminate competition in the market for the provision
of real estate brokerage services.
Under HB 316, a “limited service representative” does not become an “agent” as
defined under Virginia law unless he or she so specifies in writing. Unless a limited
service representative agrees to become an agent, such an individual is an
independent contractor and must provide only those services agreed to by the
parties to the brokerage agreement.
The Virginia Association of Realtors has made every effort to preserve consumer
choice in real estate brokerage services. Continuing to allow Virginia consumers to
choose the specific services that they want to buy can help save consumers
thousands of dollars in one of the most important and costly transactions of their
lives.
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About the Legislation
The “Agent Services” bill provides a three-fold focus:
1) To sharpen the law’s descriptions of duties owed by standard agents to their
clients, and legislatively introduces the concept of the limited-service
representative as a broker who enters into an agreement with the consumer
by which it is agreed that some of the services required by law of standard
agents will not be performed. The legislation does not assume that limitedservice brokers are all alike in the services they provide, or that the model is
limited to seller representation. The proposed statutory approach is across
the board, and should help in whatever form the model appears.
2) To require broad disclosures of three types:
a) The limited-service representative must disclose, in writing in the
brokerage agreement, the unique nature of the brokerage relationship
and must set forth specifically which of the services required of a
standard agent will not be provided.
b) Limited-service brokers must provide sellers with those disclosures the
law requires of the client (lead paint, disclosure/disclaimer, information
about condo and POA disclosures, etc.), as well as information about
fulfilling these important seller obligations.
c) Multiple listing services would be allowed to require the limited-service
broker to make a similar disclosure to the MLS that the MLS could then
publish to all participants.
3) To clarify the functions, if any, of the agent working with the client of the
limited-service broker. It limits liability of the cooperating agent performing
uncompensated services for the limited-service broker’s client to those
instances of gross negligence. It also makes clear that doing these things or
accepting a fee for doing these things does not render the cooperating agent
the agent of the other broker’s client (although accepting compensation
renders the agent subject to the standard of ordinary care).
This legislation also takes the opportunity to clarify the disclosure obligations of
licensees, and to extend the safeguards and protections of selling agents to those
dealing with Full-Service Agencies, that present many of the same kinds of
challenges to selling agents.
Obligations of Licensees
The bill also clarifies the obligations of licensees toward their clients, whether the
clients are a buyer, seller, landlord, or tenant. The bill also allows a common source
information company to require, as a condition of participation in or use of such
common source information, that a licensee providing information through such
company disclose the nature of the brokerage relationship with the client of the
licensee. The bill requires the Real Estate Board to promulgate regulations to
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implement the provisions of this bill to be effective on July 1, 2007. Further, the Real
Estate Board is required to establish a continuing education curriculum of not less
than two hours and, as of July 1, 2007, every applicant for re-licensure as an active
salesperson or broker shall complete, at a minimum, one two-hour continuing
education course on the amendments to the real estate agency laws prior to each
renewal or reinstatement of his license. If the licensee submits a notarized affidavit
to the Real Estate Board which certifies that he does not practice residential real
estate and shall not do so during the licensing term, training in limited service
agency shall not be required. The bill has a delayed effective date of July 1, 2007.
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Chapter Three Questions
1) 2006 General Assembly legislation requirements for condition of licensure,
continuing education hours, and post-license education requirements regarding
limited service agency will go into effect on ________________ _______,
_____________.
2) In accordance with Section 54.1-2105(E) of the Code of Virginia, “every applicant
for relicensure as an active salesperson or broker shall complete at a minimum
one _________-hour continuing education course on limited service agency prior
to renewal or reinstatement of his or her licensure.
3) True / False As of July 1, 2007, the Virginia Real Estate Board requires this
course as an annual requirement for all active licensees renewing their license
between July 1, 2007 and June 30, 2009.
4) ________________ - _______________ ________________ means a licensee who
acts for or represents a client with respect to real property containing from one to
four residential units, pursuant to a brokerage agreement that provides that the
limited service representative will not provide one or more of the duties
specified in HB 316.
5) The purpose of HB 316 legislation was to:
a) specifically outline ____ _____________ ____________ to his or her client; and
b) to clarify for consumers the level of _____________________ that should be expected
from a real estate licensee
6) True / False The Virginia Agent Services Legislation (House Bill 316) requires
agents and other non-agent real estate service providers to disclose the services
they provide.
7) HB 316 addresses the issue of Limited-Service Agency
________________________.
8) True / False If the licensee submits a notarized affidavit to the Real Estate
Board that certifies that he does not practice residential real estate and shall not
do so during the licensing term, training in limited service agency shall not be
required.
9) HB 316 includes a provision stating that “Nothing in this Article shall be
construed to ______________, ________________, ________________, or
____________________ the applicability of any of the federal or state antitrust
laws,” an important confirmation that HB 316 does not manifest an intent to
eliminate competition in the market for the provision of real estate brokerage
services.
10) Real estate licensees in Virginia are required to disclose the
_______________________ that they will and will not offer while preserving
consumers’ ability to purchase a limited set of services.
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Chapter Three Answers
1) July 1, 2007
2) two
3) False
4) Limited-service representative
5) an agent’s duty; service
6) True
7) Disclosure
8) True
9) limit; modify; impair; supersede
10) services
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4. Other Pertinent Information
What is Meant By the Phrase “Agency Relationships?”
It is the relationship resulting from mutual consent between the client and the real
estate licensee. That the agent will act upon your behalf during the course of the real
estate transaction. To begin this relationship, you will be asked to enter into a legal
agreement.
How the Broker Promotes Client’s Interests
If a brokerage firm (“Broker”) has a contractual obligation to represent the buyer or
the seller, then the Broker shall promote the interests of the client by:
1. Performing the terms of their contractual agreement;
2. Obtaining a transaction at a price and terms acceptable to the client;
3. Present in a timely manner all written offers or counteroffers to and from the
client;
4. Disclosing to the client all material facts related to the property of which they
have actual knowledge;
5. Accounting for in a timely manner all money and property received in which the
client has or may have an interest.
Dual Agency
Because of the relationship that is formed with the clients from the property that the
agent has listed, it creates a dual agency capacity for that agent. In all cases, the
agent must have the informed consent of both the seller and the buyer in order to
perform this service. The agent is obligated to make certain that all material facts
relating to the property’s condition are disclosed; however, they must exercise care
with negotiating information. Because in any instance, this form of agency limits the
agent’s ability to represent both parties fully, it is required by law (in states where
Dual Agency is legal) that all parties enter into this agreement in writing. Laws
governing agency relationships differ from state to state. Therefore, it is extremely
important that a consumer make a wise decision when selecting the real estate
licensee. The client should make sure a true professional is chosen, who willingly
describes the various forms of agency relationships.
Who will be Representing the Client?
If there is a limited fiduciary responsibility provided to both the buyer and the seller
in either a Dual Agency or Sub-Agency transaction, it is difficult, if not impossible to
have an allegiance to one client or the other. If a licensee is hired by the client to sell
a home, the licensee will use expertise in marketing the property to the target
market with the highest probability of finding a buyer…the Buyer’s Agent! If the
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licensee had information on a buyer that was interested in the client’s home, the
licensee would pre-qualify the buyer for the purchase and refer the buyer to a
colleague who could represent them fully in the transaction. Real Estate is about
fairness, loyalty, and confidentiality. When one agent represents both sides of a
transaction, someone’s rights and privileges may very well be compromised in the
process. A licensee should never be willing to jeopardize anyone’s rights in a
transaction!
Designated Representative
A principal or supervising broker may assign different licensees affiliated with the
broker as designated representatives to represent different clients in the same
transaction to the exclusion of all other licensees in the firm.
In these situations the firm and the principal or supervising broker are a dual
representative, but the designated representatives are not. “Use of such designated
representatives shall not constitute dual representation if a designated
representative is not representing more than one client in a particular real estate
transaction”. The dual representative (principal or supervising broker) must
maintain a neutral posture and may not disclose confidential information, but the
designated representatives are advocates for their clients and are required to pass on
all known information to their client.
Evolution of Real Estate “Salesperson”
In the past, when licensees only represented sellers, the term ‘‘real estate
salesperson’’ may have been more appropriate than it is today, given the different
ways that licensees can help a buyer through the process rather than simply “sell’’
him or her a property. Today the real estate licensee may also represent a buyer and
is thus required to disclose to prospective buyers and sellers who represents whom.
This is the case in the state of Virginia.
Types of Marketplaces
• If the current market is a seller’s market, many homes are selling the minute
they hit the multiple listing service. Will it be the highest price the consumer
can get?
•
Buyer’s markets exist when inventory exceeds the supply of buyers. In these
markets, some homes aren’t selling at all.
Brokerage Commissions
In the U.S., a commission in the 5% to 7% range is considered “standard” for
residential real estate and is typically paid by the seller at the closing of the
transaction. Commissions are negotiable between seller and broker. The commission
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could also be paid as flat fee or some combination of flat fee and percentage,
particularly in the case of lower-priced properties, vacant lots, or other unusual real
estate. The details are determined by the listing contract.
However, some brokers charge as much as 10% while others will offer services for
1%. Fee-for-service or flat-fee real estate brokerages are also increasing in popularity.
Out of the commission received from the seller, the broker will typically pay any
expenses incurred to do the work of trying to sell the listed properties, such as
advertisements, etc.
Shared commissions with co-operating brokers
If any buyer’s broker (or any of his/her agents) brings the buyer for the property,
the buyer’s broker would typically be compensated with a shared commission
coming from the total offered to the listing broker, often about half of the full
commission from the seller. If an agent or salesperson working for the buyer’s
broker brings the buyer for the property, then the buyer’s broker would commonly
compensate his agent with a fraction of the shared commission, again as determined
in a separate agreement. A discount brokerage may offer a reduced commission in
the event no other brokerage firm is involved and no shared commission is paid out.
If there is no shared commission to pay to another brokerage, the listing brokerage
receives the full amount of the commission minus any other types of expenses.
Commissions: Potential Points of Contention for Agents
1. Real estate commissions are becoming a point of controversy. Home values in
many areas have quadrupled over the past 20 years. This may be contributing to
the increased number of licensees and growing competition between them. The
number of real estate licensees in areas tends to rise when home values do, and
the productivity of existing agents goes down. The rewards have increased, but
so have the demands of clients and business risks faced by agents. In North
America, agents have had to become familiar with marketing through the
internet as well as traditional print and other media. Additionally the law is
complicated with issues such as defects in housing and other issues of which the
agent is the front line defense for his client. There is more liability than ever in
advising buyers and sellers.
2. Another controversy exists for the commissions to real estate agents. If a listing
agent sells a property for any amount above the listed price, he in turn will make
additional income. In theory, this will motivate him/her to get top dollar price
for his client, the seller. However, if the agent representing the buyer attempts to
obtain a lower sales price for his client, then he/she would make a lower
commission. Thus, it could be considered to be in the agent’s best interest to
advise his client to purchase the property at a higher price.
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3. In practical terms, there is rarely a great enough difference between the listing
(asking) price and the negotiated selling price to make a significant difference
between the commissions generated on each side, and certainly hardly enough
to justify an agent failing in his fiduciary duty to obtain the best terms for
his/her client.
4. Another potential conflict of interest exists when a listing agent in a very active
real estate market has incentive to sell properties quickly at unnecessarily low
prices in order to benefit from a high volume of sales.
In any case, agents who create satisfied clients and develop subsequent referrals are
likely to do far better in the long run.
Case Example: Broker in Texas Sues to Stop State-mandated
Negotiation Assistance Rule
A new rule by the Texas Real Estate Commission seeks to define the boundaries of
real estate brokerage by adopting an amendment to “define the minimum level of
service to a consumer in a real estate transaction.” The new rule requires all brokers
to include helping clients with negotiations as part of their services to consumers.
That prompted Austin discount broker Aaron Farmer to file a lawsuit against the
Commission, claiming the Commission was trying to help full-service brokers hold
on to their six percent commissions by cutting discount brokers out of the industry.
Farmer’s attorney was able to obtain a temporary restraining order last week from
the courts, blocking the new rule from going into effect at least until a hearing is
held, or the restraining order runs out.
Discount brokers and traditional brokers are in conflict over this
issue.
Texas Discount Realty charges a flat fee of $495 to put a seller’s home in the MLS. A
full service broker may charge about six percent and pocket all of the fee, or split
that fee with an agent, and the broker and agent representing the other side of the
transaction.
But the differences don’t end there. Once the home is listed, Texas Discount Realty
performs no further services, while the work just begins for a full-service brokerage
to get the home sold. If more consumers take advantage of discount models, that
could put more pressure on the already slim profits traditional brokers yield for fullservice.
Case Examples: MLS Lawsuits
In defiance of several court decisions, over 800 MLSs in America illegally force MLS
users to pay dues to Realtor Associations on top of MLS charges.
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Four cases across the United States have been initiated that seek triple damages for
four years of Realtor dues, amounting to about $5,000 for each MLS user who would
not have joined a Realtor Association if they had not been forced to join.
These four suits will only benefit the MLS users in these small MLSs. These four
cases are briefly described below.
Open MLS Cases
1. Buyer’s Corner v. Northern Kentucky Assn. of Realtors (Northern
Kentucky)
This Open MLS case was filed Feb. 20, 2004. The case is not a class action, and seeks
damages for only one MLS user. The parties filed summary judgment motions in
early May 2005. Trial will be scheduled depending on the order on the motions for
summary judgment.
2. Prencipe v. Spokane Board of Realtors (Spokane, WA)
This Open MLS case was filed Aug. 25, 2004. The case seeks triple damages of about
$5,000 per MLS user on a class action basis against the realtor association, its
separately incorporated MLS, and MLS directors. Based on about 1,400 MLS users
and an estimated 30% non-join rate, a judgment for plaintiffs would amount to
about $2 million.
3. Hekker v. Sarasota Assn. of Realtors (Sarasota, FL)
This Open MLS case was filed Nov. 30, 2004. The case challenges the evasion
common in Florida, Georgia, and Alabama of offering MLS services to realty agents
without requiring realtor association membership, but requiring realtor association
membership to obtain lockboxes or comparable data. The case seeks triple damages
of about $5,000 per lockbox/comparable data user on a class action basis against the
realtor association and directors. Based on about 3,000 MLS users and an estimated
30% non-join rate, a judgment for plaintiffs would amount to about $4.5 million.
4. Reifert v. South Central Wisconsin MLS (Madison, WI)
This Open MLS case was filed Dec. 21, 2004. The case seeks triple damages of about
$5,000 per MLS user on a class action basis against the realtor association, its MLS,
and directors. Based on about 3,000 MLS users and an estimated 30% non-join rate, a
judgment for plaintiffs would amount to about $4.5 million. The directors requested
dismissal from the case, and the court denied the request.
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Services Provided to Buyers:
Buyers as Clients
With the increase in the practice of buyer brokerage in the US, especially since the
late 1990s in most states, licensees (acting under their brokers) have been able to
represent buyers in the transaction with a written “Buyer Agency Agreement” not
unlike the “Listing Agreement” for sellers referred to above. In this case, buyers are
clients of the brokerage.
Some real estate brokerages choose only to represent buyers in an exclusive buyer’s
agency relationship and do not take “listings” from sellers.
A real estate brokerage attempts to do the following for the buyers of real estate
only when they represent the buyers with some form of written buyer-brokerage
agreement:
•
Find real estate in accordance with the buyer’s needs, specifications, and
affordability.
•
Takes buyers to and shows them properties available for sale.
•
When deemed appropriate, prescreens buyers to ensure they are financially
qualified to buy the properties shown (or uses a mortgage professional to do
that task).
•
Assist the buyer in making an offer for the property.
•
Negotiates price and terms on behalf of the buyers and prepares standard real
estate purchase contract by filling in the blanks in the contract form.
•
The buyer’s agent acts as a fiduciary for the buyer.
In most states, until the 1990s, buyers who worked with an agent of a real estate
broker in finding a house were customers of the brokerage, since the broker
represented only sellers. Today, state laws differ. Buyers and/or sellers may be
represented. Typically, a written “Buyer Brokerage” agreement is required for the
buyer to have representation (regardless of which party is paying the commission),
although by his/her actions, an agent can create representation.
Often real estate licensees are allowed to act for the buyer as well as the seller as
long as there is full disclosure to all parties that this is occurring.
Real Estate Brokers / Agents and Continuing Education
In addition to completing the educational requirements for Virginia real estate
license, the state requires real estate professionals to complete a certain number of
hours of continuing education on a biennial basis in specific areas in order to renew
his or her licenses.
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Dual agency/Designated agency
A brokerage firm representing both a buyer and seller (or landlord and tenant) must
get both parties informed consent and permission to proceed with transactional
representation. This can be done in one of two ways. Dual Agency Consent
Agreement informs both parties that the brokerage firm and all salespersons
working for the brokerage firm represents both parties and that there may be a
conflict of interest. Dual Agency/Designated Agency Disclosure Notice and
Consent Agreement informs both parties that the brokerage firm is a dual agent and
represents both parties, but then assigns separate salespersons to be the sole agent of
each party.
Limiting Liability
A party to a brokerage relationship is innocent unless he knew or should have
known of the misrepresentation and failed to take steps to correct the
misrepresentation in a timely manner. This protection extends to negligence, gross
negligence and intentional acts.
Clients are protected against the acts of their broker agents, and broker
representatives are protected against the acts of other brokers (and their licensees)
who are engaged to act as subagents for their clients.
Only actual knowledge or information possessed by licensees or clients will be
considered. Knowledge or information among or between clients and licensees shall
not be imputed (assigned or assumed).
However, nothing in this section shall limit liability for unlawful discriminatory
housing practices.
Licensees should not expect to be able to “hide behind” the limits on vicarious
liability as evidenced by the case below. The words “or should have known” should
be taken seriously. If the court decides that this agent “was willfully blind” to the
client’s occupation.
CASE STUDY DISCUSSION: Representation Issues
A licensee entered into a listing agreement with a Seller. The Buyer views the
Seller’s property at an open house, and is not represented by another real estate
agent.
Does the Broker represent the Buyer?
No, Broker would represent Buyer only if they enter into a signed buyer agency
agreement.
Does the Buyer have to be represented?
No, the Broker can proceed in this transaction by representing the Seller and
working with the Buyer as a customer.
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Does the Broker have to give any document to the Buyer?
Yes, the only required document at this point is an Agency Disclosure Notice,
notifying the Buyer that the Broker represents the Seller.
What if the Buyer wants to be represented by the Broker?
The broker must get consent of Seller and Buyer to dual agency or designated
agency and must then enter into an agency agreement with Buyer.
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Chapter Four Questions
1) The relationship resulting from mutual consent between the customer and the
real estate licensee is referred to as an ____________________
__________________________.
2) True / False Often real estate licensees are allowed to act for the buyer as well
as the seller as long as there is full disclosure to all parties that this is occurring.
3) If any buyer’s broker (or any of his/her agents) brings the buyer for the
property, the _________ broker would typically be compensated with a co-op
commission coming from the total offered to the listing broker, often about half
of the full commission from the seller.
4) True / False Clients are protected against the acts of their broker agents, and
broker representatives are protected against the acts of other brokers (and their
licensees) who are engaged to act as subagents for their clients.
5) If an agent or salesperson working for the buyer’s broker brings the buyer for the
property, then the ______________ broker would commonly compensate his
agent with a fraction of the co-op commission, as determined in a separate
agreement.
6) True / False There is rarely a great enough difference between the listing
(asking) price and the negotiated selling price to make a significant difference
between the commissions generated on each side, and certainly hardly enough
to justify an agent failing in his fiduciary duty to obtain the best terms for
his/her client.
Answer questions 7-9 from the following paragraph.
A licensee entered into a listing agreement with a Seller. The Buyer views the
Seller’s property at an open house, and is not represented by another real
estate agent.
7) Does the Broker represent the Buyer? Y N
8) Does Buyer have to be represented?
Y N
9) Does Broker have to give any document to Buyer?
Y N
10) True / False Real estate licensees are allowed to act for the buyer as well as the
seller as long as there is full disclosure to all parties that this is occurring.
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Chapter Four Answers
1) Agency relationship
2) True
3) buyer’s
4) True
5) buyer’s
6) True
7) No
8) No
9) Yes
10) True
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Glossary
Agency – The definition for agency has been revised to include representation of a
client as a standard agent or a limited-service agent. This includes every relationship
in which a real estate licensee acts for or represents a person by such person’s
express authority in a real estate transaction, unless a different legal relationship is
intended and is agreed to as part of the brokerage relationship.
Buyer Agency – A real estate agency that represents only the buyer’s interests. The
sales commission may be obtained from the seller as a split with the listing agent, or
paid by the buyer. Some buyer agencies may charge the buyer an hourly fee or a
retainer for services, in addition to, or, instead of the sales commission.
Buyer’s Licensees – A licensee that works directly for the buyer. Just like the seller’s
licensee, a buyer’s licensee has certain legal obligations in the relationship with
buyers and sellers. Loyalty to the buyer’s interests, confidentiality, and full
disclosure are three of those.
Designated Agency – The seller and buyer are represented by their own individual
licensees who are affiliated with the same Broker. Each of these licensees, known as
Designated Licensees, represent fully the interests of a different client in the
transaction.
Disclosed Dual Licensee – Works for the buyer and the seller. This type of
relationship is not possible unless the buyer and seller agree, and they must both
sign a statement to that effect. When a real estate licensee acts as a dual licensee, in
order to reveal confidential information of one party (buyer or seller) to the other, he
or she must have the express written permission of the party whose confidential
information will be revealed. Disclosed dual agency is walking a fine line and there
are legal repercussions for crossing it.
Discount Broker – One who provides a menu of services at various fees, usually
requiring an upfront fee even before any buyers are found.
Dual Agency – Dual agency may be called several other names including
transaction broker or facilitator. A licensee will usually have many properties listed
for sale, meaning they have entered into an agreement with the seller. When a buyer
chooses to utilize this same agent’s professional service, they, too, enter into an
agreement. The buyer has the ability to employ a licensee in a legal capacity to act in
their best interest. Most times, this arrangement is at no expense to the buyer as
Buyer’s Agents are typically compensated by the Listing Broker as a consequence of
the contractual arrangement between the seller and the licensee.
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Full-Service Agency – An agency that handles all aspects of the advertising process,
including planning, design, production, and placement. Today, full-service
generally suggests that the agency also handles other aspects of marketing
communication, such as public relations, sales promotion, Internet and direct
marketing.
Limited-Service Representative – A licensee who acts for or represents a client with
respect to real property containing from one to four residential units.
Material Fact – A fact that is sufficiently significant to influence an individual into
acting in a certain way, such as entering into a real estate contract
Seller Agency – A real estate licensee representing only the seller’s interests.
Because the seller’s licensee lists and markets the property to sell, the licensee is also
referred to as the listing licensee. The seller’s licensee has responsibilities that
include obtaining the highest possible purchase price and the best possible terms for
the seller.
Seller’s Licensees – Works directly for the seller and represents the seller’s interests.
The seller’s licensee is obligated to fulfill certain responsibilities such as loyalty to
the seller’s interests, confidentiality, and full disclosure.
Split Agency – A licensee under a broker acts on behalf of the seller and another
licensee under that same broker represents the buyer, this is designated agency.
Each licensee has the same legal and fiduciary responsibilities as seller’s licensee and
buyer’s licensee and the broker has all the same responsibilities of a disclosed dual
agent plus he or she must take special care with regard to confidential information
disclosed to the selling licensee.
Sub-Agency – A sub-agent is a real estate licensee, who may be contacted by a
buyer to find a home for purchase. However, the sub-agent represents the seller and
is responsible for getting the best possible price and terms for the seller. The subagent may provide such services as, home search, explanation of financing options,
calculating monthly payments and estimating closing costs. They may NOT disclose
confidential information that is not in the best interest of the seller, but may share
with the seller information provided by the buyer.
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REFERENCES
http://marketing.about.com/cs/glossaryofterms/l/blglossary.htm
http://leg1.state.va.us/cgi-bin/legp504.exe?000+coh+54.1-2130+501480
Weintraub, Elizabeth. “Home Buying/Selling: Full-Service Real Estate Brokers and Agents”. Sign Up Now,
December 2006.
RESOURCES
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
reboard@dpor.state.va.us.
Real Estate Board
Department of Professional and Occupational Regulation
3600 West Broad St.
Richmond, VA 23230-4917
Virginia Association of Realtors
10231 Telegraph Road
Glen Allen, Virginia 23059-4578
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