©2011 Cengage Learning. Chapter 4 Real Estate Agency California Real Estate Principles ©2011 Cengage Learning

©2011 Cengage Learning

Chapter 4Real Estate Agency

California Real Estate Principles


Chapter 41. Define agency and list the 3 ways an agency may

be created.2. Discuss the fiduciary relationship that exists

between a principal and a licensed real estate agent.

3. Explain the difference between a single agency and a dual agency.

4. List and give examples of real estate violations.5. Describe the agency differences between

salespersons and brokers.6. List and give examples of six ways in which real

estate agencies are terminated.


TYPES OF AGENTS

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)

SPECIAL

GENERAL

UNIVERSAL


Parties to the AGENCY LISTING Contract

PRINCIPAL (Seller – property owner)

appoints

to find

AGENT (Licensed real estate Broker)

THIRD PARTY (Buyer)


Parties to the AGENCY BUYER-BROKER Contract

PRINCIPAL (Buyer)

appoints

to find

AGENT (Licensed real estate broker)

THIRD PARTY (Seller – property owner)


CREATION OF AGENCYAAgency = AAuthority

•BY AAGREEMENT (Actual authority)

-Orally -Written – Express Agency -Mutual Actions

•BY RRATIFICATION (Implied authority) -OK an unauthorized agents action. -Principal accepts the acts of the agent. -Ostensible or Implied Agency.

•BY Estoppel (Relied Authority) -Allow an innocent party to believe that you are their agent and rely o that belief.

ARE


AGENCY REQUIREMENTS Capacity of the parties Lawful objective Offer and Acceptance Consideration Written Compensation Agreement


Multiple Listing Service (M L S)

•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 co-operating broker©2011 Cengage Learning

Type of Agency

D E C

•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)


AGENCY VIOLATIONS

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


AGENCY VIOLATIONS

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


Problem Areas

False advertisingDishonest dealingMisuse of trade nameTrust Fund Handling

Broker must keep record of all client fundsBroker may have up to $200 to cover feesBroker just handle client funds by:

Give to the proper party (principal)Deposit into neutral escrow accountPut deposit into trust fund account

Failure to handle trust funds correctly:Commingling


DRE Recovery Fund

Finance by license feesReimburses public for uncollectable

judgments against licenseesLicensee must pay fund back before doing

business againFees collected and administered by the

California Department of Real Estate$50,000 find per individual; $250,000 for multiple claims


BROKER RESPONSIBILITY1. Acts of the licensees under them2. Obey principal’s lawful instructions3. Use due diligence to find a buyer or property4. Exercise reasonable care and skill 5. Have a written contract and agency relationship

with each principal6. No secret profit. Honest and fair dealing7. Account for all funds of the client8. Have written contract with each licensee9. Discloses all funds, commissions and fees10. Disclose agency agreement11. Make diligent inspect and disclose12. Reasonable skill and care. Good faith


DUTIES OF EACH AGENT

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


•Broker withholds Social •Security taxes•Broker controls activities•May receive employee benefits

REAL ESTATE SALESPERSON• Usually and independent contractor for tax purposes• Always an employee under the real estate law by the Commissioner

•Pays own taxes & Social Sec.•Control over their own activities•No employee benefits•Broker liable to principals &•3rd parties for actions of agents

EMPLOYER & EMPLOYEE

OFFICE STAFF

OFFICE STAFF

SALESPERSON

INDEPENDENT CONTRACTOR


TERMINATING AGENCY• 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


Review Quiz Chapter Four1. 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 agencyb. General agencyc. Subagencyd. Power of agency


Review Quiz Chapter Four2. A broker has an agency agreement to represent

just the buyer. This is an example of a:a. Dual agencyb. Single agencyc. In-house agencyd. Listing agency


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

Review Quiz Chapter Four


4. The Commissioner’s Regulations applies to all California:

a. REALTORS®b. Realtistc. Real estate salespersonsd. All of the above

Review Quiz Chapter Four


Review Quiz Chapter Four5. 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 conversionb. Innocent of any wrong doingc. Guilty of comminglingd. Required to place the deposit into a trust fund


Review Quiz Chapter Four6. 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. Misrepresentationb. Acting in a legal mannerc. False promised. Ostensible promise


Review Quiz Chapter Four7. According to the real estate law, for supervising

purposes, the relationship between a salesperson and a broker is:a. Fiduciaryb. Independent contractorc. Employer-employeed. ostensible


Review Quiz Chapter Four8. Receiving a commission from both the buyer and

seller without full disclosure and approval is called:a. Dual agencyb. Single agencyc. Divided agencyd. 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©2011 Cengage Learning

Answers: Review Quiz- Chapter 4:Real Estate Agency1. C 6. A

2. B 7. C

3. B 8. C

4. D 9. D

5. C


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©2011 Cengage Learning. Chapter 4 Real Estate Agency California Real Estate Principles ©2011 Cengage Learning