Chapter 4 Slide 1 Copyright – David A. McGowan All rights reserved. Revised 3-15-09 Chapter 4 REAL ESTATE AGENCY Law of Agency The rights and duties of

Chapter 4Slide 1

Copyright – David A. McGowan

All rights reserved.Revised 3-15-

09

Chapter 4

REAL ESTATE

AGENCY Law of Agency

The rights and duties of the principal and the agent.

Common Law of AgencyBased upon the principle-agent relationship developed under old English law.

Statutory Law of AgencyCreated by legislative action

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Common Law of Agency

Agent - The individual who is authorized and consents to represent the interests of another person.

Sub-Agent - The agent of an agent.

Principal - The individual who hires the agent and delegates to him or her the responsibility of representing the Principals interests.

Client - The principal, the individual to whom fiduciary duties are owed.

DEFINITIONS

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DEFINITIONS

Common Law of Agency

Agency - The fiduciary relationship of trust between the principal and the agent.

Fiduciary - The relationship in which the agent is held in a position of special trust and confidence by the principal.

Customer - A consumer for whom some small level of service is provided and who is entitled to fairness and honesty.

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COMMON LAW OF AGENCY

Seller(Principal / Client)

Agent (Broker)

HiresEmploymen

t

Fiduciary Relationship Care (Page 41)

Obedience (Page 41)

Loyalty (Page 42)

Salesperson (sub-agent)

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Seller (Principal)

Agent (Broker)

Hires


MLS

Coop Broker(Sub-Agent)

Salesperson (Sub-agent)

Buyer

COMMON LAW OF AGENCY Loyalty (Page 42)

know who you represent

Seller

L SAS SA

L SA

S SA

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Revised 6-08

Seller (Principal)

Agent (Broker)

Hires


MLS

Coop Broker(Sub-Agent)


Buyer


Loyalty (Page 42)

know who you represent

Dual Agency

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When the agent represents both buyer and seller in the same transaction.

A licensee may act as a dual agent only with the informed written consent of all clients. (Illinois License Act of 2000 - Page

21)

A licensee cannot act as a dual agent when they are also a principal in the transaction

DUAL AGENCY RULES (Page

56)

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Seller (Principal)

Broker (Agent)

Hires


DUAL AGENCY (Page 56)

Common Law

Buyer

Hires


Single Office

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Seller(Principal)

Agent (Broker)

Hires Employment

Fiduciary Relationship

Care

Obedient

Loyalty

Accountability

Disclosure

Confidentiality


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STATUTORY LAW OF

AGENCY IN ILLINOIS

Statutory Law of Agency

REPLACED

Common Law of AgencyLicense Act of 2000 Page 19

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A licensee is considered to be representing the person they are work with.

STATUTORY LAW OF

AGENCY

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Agency – a relationship in which real estate broker or license whether directly or indirectly represents a consumer by the consumer’s consent

Customer – a consumer who is not being represented by a licensee, but for whom the licensee is performing ministerial acts.

STATUTORY LAW OF AGENCY

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Designated Agent – sales associate defined by the broker as the legal agent of the client assuming the fiduciary obligations

Sub Agency - No longer exists in Illinois

Client – a person who is being represented by a licensee


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Consumer – a person or entity seeking or receiving licensed activities

Ministerial Acts – those acts that a license may perform for a consumer that are informative or clerical in nature and do not rise to the level of active representation.


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Seller (Principal)

Broker

Hires

SalespersonCoop

Broker


Buyer


Customer

Designated Agent

Designated Agent

Customer

(Agent)

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Revised 7-30-08

DESIGNATED AGENTA sponsoring broker entering into an agreement with any person for the listing of property or for the purpose of representing any person in the buying, selling,

exchanging, renting, or leasing of real estate may specifically designate those licensees employed by or affiliated with the sponsoring broker who will be acting as legal agents of that person to the exclusion of all other licensees employed by or affiliated with the sponsoring broker.

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DESIGNATED AGENT

A sponsoring broker shall take ordinary and necessary care to protect confidential information disclosed by a client to his or her designated agent.

A designated agent may disclose to his or her sponsoring broker or persons specified by the sponsoring broker confidential information of a client for the purpose of seeking advice or assistance for the benefit of the client in regard to a possible transaction.

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MINISTERIAL ACTS

Action that is informative in nature

Answering a specific question with a specific answer

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OPINION VERSUS FACT (Page 43)

Statements of opinion are permissible only as long as they are offered as opinions and without any intention to deceive.

Statements of fact must be accurate.

Exaggeration of a property’s benefits is called puffing. While puffing is legal, licensees must ensure that none of their statements can be interpreted as fraudulent.

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DISCLOSURE

Illinois Real Property Disclosure Form (Page 44)

Lead Based Paint Disclosure (Page 442)

Radon Disclosure (Page 444)

Latent Defects (Page 48)

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DISCLOSURE

Megan’s Law (Sexual Offender Act of 1994)

Stigmatized Properties (Page 49 & ACT

Page 20)

Agency Status

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DISCLOSRES

A clear indication that a designated agency will exist unless there is a written agreement providing otherwise

A summary of any other agency relationships available

The names of the designated agents

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DISCLOSRES

The amount and manner of the brokers compensation

An indication of whether the broker will share the compensation with brokers who represent other parties

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CREATION OF AGENCY

Express agency (Page 51)

Listing Contracts, Buyer Representation Agreements

Implied agency (Page 51)

Buyer Representation Agreements

Compensation (Page 52)

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TERMINATION OF AGENCY

Death or incapacity of either Client or Broker

(Substantial) destruction or condemnation of the property

Expiration of the terms of the agency

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TERMINATION OF AGENCY

Mutual agreement by all parties to the contract

Breach

By operation of law, as in bankruptcy

Completion, performance or fulfillment

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Listings must have a specific termination Date (Page 53 & 83, License Act Page 17)

Automatic extension clauses are illegal.

Agency Coupled with an Interest

IN ILLINOIS …

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TYPES OF AGENCY

General Agent represents the principal in a broad range of matters related to a particular business or activity. (Page 53)

Special Agent represents the principal in one specific act or business transaction only (Page 53)

Documents

Chapter 4 Slide 1 Copyright – David A. McGowan All rights reserved. Revised 3-15-09 Chapter 4 REAL ESTATE AGENCY Law of Agency The rights and duties of