Modern Real Estate Practice in
Pennsylvania 12th Edition
Chapter 16: Agency in Real Estate
16
Agency
• Learning objectives
– Identify 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 his or her
client from those owed to customers
– Define key terms
©2012 Kaplan, Inc.
2
16
Agency
• Real estate agency
– Common-law history
– Definitions:
•
•
•
•
•
•
•
Agent
Principal
Agency
Fiduciary
Client
Customer
Nonagent
©2012 Kaplan, Inc.
• In Pennsylvania
– Consumer is
recipient of any real
estate service who
may engage a real
estate broker
– Section 201
3
16
Agency
©2012 Kaplan, Inc.
4
16
Agency
• Creation of agency
– Agency relationships
•
•
•
•
Express agency
Implied agency
Agency coupled with an interest
Compensation
– Client versus customer care
• Client is principal
• Agent is party hired
• Customer entitled to factual information, but not
fiduciary duties
©2012 Kaplan, Inc.
5
16
Agency
• Fiduciary duties of an agent
–
–
–
–
Care
Obedience
Loyalty
Disclosure
• In Pennsylvania: must disclose any person interest
• Must disclose material facts
– Accounting
– Confidentiality
• In Pennsylvania: confidentiality extends beyond
expiration of relationship
©2012 Kaplan, Inc.
6
16
Agency
• Termination of agency
–
–
–
–
–
–
–
Completion, performance, fulfillment
Death or incapacity of either party
Destruction or condemnation of property
Expiration of the terms
Mutual agreement by all parties
Breach by one of the parties
By operation of law
©2012 Kaplan, Inc.
7
16
Agency
• Limitations on authority
– Universal agent
• Empowered to do anything the principal could do
personally
– General agent
• Represents the principal in a broad range of matters
related to a particular business or activity
– Special agent
• Authorized to represent the principal in one specific act
or business transaction under detailed instructions
©2012 Kaplan, Inc.
8
16
Agency
• In Pennsylvania
– Agent of buyer/tenant
– Agent of seller/landlord
– Dual agent for both parties in the same
transaction
– Transaction licensee (nonagent)
©2012 Kaplan, Inc.
9
16
Agency
Single Agency
©2012 Kaplan, Inc.
10
16
Agency
• Types of agency relationships
– Single agency
•
•
•
•
Seller as principal
Buyer as principal
Landlord as principal
Tenant as principal
– Dual agency
• Disclosed dual agency
• Designated agency
• Undisclosed dual agency
©2012 Kaplan, Inc.
11
16
Agency
• Types of agency relationships
– Nonagency
– In Pennsylvania, licensee can provide the
following:
•
•
•
•
•
Communication
Document preparation services
Disclosure of known defects in property
No negotiations
Limited confidentiality
©2012 Kaplan, Inc.
12
16
Agency
• Consumer Notice
–
–
–
–
–
First substantive contact or first interview
Before providing any services
Before entering into agency agreement
Before entering into agreement of sale
Before learning any confidential information
©2012 Kaplan, Inc.
13
16
Agency
• Required in phone or e-mail
– The real estate law requires that I provide you with a
written consumer notice that describes the various
business relationship choices that you may have with a
real estate licensee. Since we are discussing real estate
without you having the benefit of the Consumer Notice, I
have the duty to advise you that any information you give
me at this time is not considered to be confidential, and
any information you give me will not be considered
confidential unless and until you and I enter into a
business relationship. At our first meeting I will provide
you with a written Consumer Notice which explains those
business relationships and my corresponding duties to you.
©2012 Kaplan, Inc.
14
16
Agency
• Customer-level services
– Reasonable care and skill in performance
– Honest and fair dealing
– Disclosure of all facts the licensee knows (or
should be expected to know) that materially
affect the value or desirability of the property
– State law may require additional services or
disclosures
©2012 Kaplan, Inc.
15
16
Agency
• Environmental hazards
• Sellers must disclose
– Lead-based paint hazards (properties built
before 1978)
– Sellers must complete Seller Property Disclosure
Statement
– Required for one- to four-family dwellings
• Buyers are responsible for discovery
©2012 Kaplan, Inc.
16