by inpac01 | Mar 28, 2022 | Real Estate
부동산 지식 38-Agency-d.Agency Disclosure Rules
a.The Agency Relationship
b.Fiduciary Duties
c.Forms of Real Estate Agency
d.Agency Disclosure Rules
AGENCY DISCLOSURE RULES
Objectives of disclosure
Seller agent disclosures
Buyer agent disclosures
Dual agent disclosures
Facilitator disclosures
Traditionally, brokers and agents have disclosed to customers whose interests it is
that they are serving. This traditional ethic is now, in many states, required by
law. Agents must know what agency disclosures they have to make, to whom,
and when in the business relationship they must make them.
Objectives of
disclosure Disclosure removes confusion about who an agent is working for. It may obviate
complaints arising from customers and clients who feel they have been deceived.
Specifically, the requirement to disclose aims to:
notify clients and customers about whom the agent represents
inform clients and customers of the fiduciary duties and standards
of care the agent owes them
inform prospective clients and customers that they have a choice
in how they are represented
obtain acknowledgement and acceptance of the disclosure from
the principal parties
Recent legislation requires an agent to disclose to all parties the fact that the
agent represents one party and does not represent the other. In other words, an
agent must inform client and customer that the agent represents the client and
does not represent the customer (unless it is a dual agency). An agent must
disclose agency relationships whenever there is a transfer of a real estate interest,
whether the interest is a fee, partial fee, exchange, leasehold, sublease,
assignment, air right or subsurface right.
Seller agent
disclosures Client disclosure. Depending on state regulations, an agent who intends to
represent a seller or owner must disclose the import of the proposed agency
relationship in writing before the listing agreement is executed. The agent must
inform the seller or landlord in writing that the agent will be representing the
client’s interests as a fiduciary, and will not be representing the interests of any
potential buyer. Any subsequent sale or lease contract with a customer should
confirm this disclosure.
Customer disclosure. A listing agent must disclose in writing to a buyer or
tenant that the agent represents the owner in the transaction. This disclosure must
occur before or at the first “substantive contact” with the customer prospect. The
disclosure must also be confirmed in any subsequent sale or lease contract.
Substantive contact. Subject to variations in state regulation, “substantive
contact” between listing agent and customer occurs whenever the agent is:
Chapter 11 Agency 151
showing the prosp
showing the prospect a property
eliciting confidential information from a prospect regarding
needs, motivation, or financial qualification
executing a contractual offer to sell or lease
Exclusions. Interaction between a seller’s agent and a customer is not always
substantive. Possible instances that might be excluded from the requirement of
disclosure are:
attendance at, or supervision of, an open house, providing the
agent does not engage in any of the contacts described above
preliminary “small talk” concerning price ranges, locations, and
architectural styles
responding to questions of fact regarding advertised properties
Oral disclosure. If an agent becomes involved in a substantive contact over the
phone or in a such way that it is not feasible to make written disclosure, the agent
must make the disclosure orally and follow up with a written disclosure at the
first face-to-face meeting.
Buyer agent
disclosures Client disclosure. An agent who plans to represent a buyer or tenant must
disclose the import of the proposed agency relationship in writing before the
representation agreement is executed.
Customer disclosure. A buyer agent must disclose the agency relationship to the
seller or seller’s agent on first contact. Substantive contact is assumed.
Dual agent
disclosures Informed written consent. An agent who desires to operate in a dual agency
capacity must obtain the informed written consent of all parties. Subsequent
contracts should confirm the disclosure. “Informed written consent” means both
parties have read, understood, and signed an acceptable disclosure form.
Prohibited disclosures. State regulations prohibit a dual agent from making
certain disclosures. For instance, a dual agent, unless expressly instructed by the
relevant party, usually cannot disclose:
to the buyer that the seller will accept less than the listed price
to the seller that the buyer will pay more than the price submitted
in a written offer to the seller
the motivation of any party concerning the transaction
that a seller or buyer will agree to financing terms other than
those
offered
Facilitator
disclosures Rules for disclosing a transaction broker’s status of non-agency are similar to
those of dual agency. The agent must provide written notice to all parties or their
agents on first becoming a transaction broker or on the first substantive contact,
whichever comes first.
by inpac01 | Mar 25, 2022 | Real Estate
부동산 지식 37-Agency-c.Forms of Real Estate Agency
a.The Agency Relationship
b.Fiduciary Duties
c.Forms of Real Estate Agency
d.Agency Disclosure Rules
C.FORMS OF REAL ESTATE AGENCY
Single agency
Subagency
Dual agency
No agency
No subagency
The primary forms of agency relationship between brokers and principals are:
single agency, dual agency, and subagency. In a fourth kind of relationship,
referred to as transaction brokerage, no agency relationship exists in the
transaction. Finally, some states are beginning to disallow subagency
altogether. Students are advised to ascertain which agency relationships are
allowed and practiced in their particular state.
Single agency
The agent represents one party in a transaction. The client may be either seller or
buyer.
Seller agency. In the traditional situation, a seller or landlord is the agent’s client.
A buyer or tenant is the customer.
Buyer agency. Recently, it has become common for an agent to represent a
buyer or tenant. In this relationship, the property buyer or tenant is the client and
the property owner is the customer.
Real estate vernacular calls an agent of the seller or owner the listing broker. An
agent who works for the listing broker and who obtained the listing is the listing
agent. A broker who represents a buyer is the buyer’s broker. One who does
this as a specialization is a buyer broker. A broker or salesperson who
represents tenants is a tenant representative.
Subagency
In a subagency, a broker or licensed salesperson works as the agent of a broker
who is the agent of a client. Subagents might include a cooperating licensed
broker, that broker’s licensed salespeople, and the listing broker’s licensed
salespeople, all of whom agree to work for the listing broker on behalf of the
client. In effect, a subagent is an agent of the broker who is agent of the client.
The subagent owes the same duties to the agent as the agent owes to the client.
By extension, a subagent owes all the fiduciary duties to the client.
Outside “co-brokers” and agents. It is common practice for brokers and
salespersons to “cooperate” with a listing broker in finding buyers or tenants. A
listing broker, in return, agrees to share the commission with a cooperating broker.
It is cooperating brokers who form multiple listing services to facilitate the
process of bringing together buyers and sellers.
The broker’s salespersons. All of the listing broker’s salespeople who have
agreed to work for the broker to find a customer are subagents of the listing
broker and owe the fiduciary duties to the broker and, by extension, to the
broker’s client.
Dual agency
Dual agency means representing both principal parties to a transaction. The agent
represents both buyer and seller or tenant and owner. For instance, if a
salesperson completes a buyer agency agreement with a party on behalf of a
broker, and the party then becomes interested in a property listed by the broker,
the broker becomes a dual agent.
Dual agency has become increasingly prevalent with the advent of buyer and
tenant representation. Dual agency may arise from voluntary, specific agreement
between the principal parties or from the parties’ actions, much like implied
single agency.
Conflict of interest. Dual agency contains an inherent conflict of interest.
Since many of an agent’s fiduciary duties can only be rendered to one party,
dual agency is, by definition, difficult, if not impossible.
Written, informed consent. In states that permit dual agency, the agent must
meet strict disclosure requirements, and principals must agree in writing to
proceed with the dual agency relationship.
Disclosed (voluntary) dual agency. The parties to a transaction may create a
dual agency by giving written consent in disclosure forms, confirmation forms,
and sale contract forms. For example, an agent represents a buyer who becomes
interested in a property that the agent has listed with the seller. The agent then
discloses the relationship with the principals to both principals, and the principals
agree in writing to move ahead. A disclosed dual agency is thus voluntarily
created.
Implied and undisclosed dual agency. If a broker or agent acts in any way
that leads a customer to believe that the agent is representing the customer, a
dual agency has potentially been created. For example, a buyer makes
confidential disclosures to the agent who works for the seller and exhorts the
agent to keep them confidential. The buyer wants the house but knows he is
going to lose his job in a month and probably will not qualify for financing. If
the agent agrees to keep the information confidential, the agent has not only
created an agency relationship with the buyer, but is now in a dual agency
situation. Moreover, if the agent fails to disclose the buyer’s confidence to the
seller, the agent has violated fiduciary duty to the seller.
Duties of a disclosed dual agent. A dual agent’s first duty is to disclose the
agency relationship to both principal parties or to withdraw from one side of the
duality. After disclosing, the agent must obtain the written consent of both
parties.
If both parties accept the dual agency, the agent owes all the fiduciary duties to
both parties except full disclosure, undivided loyalty, and exclusive
representation of one principal’s interests.
No agency
In recent years, the brokerage industry has striven to clear up the question of who
works for whom, and who owes fiduciary duties to whom. A recent solution
allows a broker to represent no one in a transaction. That is, the broker acts as a
transaction broker, or facilitator, and is not an agent of either the buyer or
seller. In this relationship, the facilitator does not advocate the interests of either
party.
Duties of the transaction broker, or facilitator. In the role of transaction
broker, the broker’s duties and standards of conduct are to
account for all money and property received or handled
exercise reasonable skill and care
provide honesty and fair dealing
present all offers in a timely fashion
assist the parties in closing the transaction
keep the parties fully informed
advise the parties to obtain expert advice or counsel
disclose to both parties in residential sale transactions all material
facts affecting the property’s value
protect the confidences of both parties in matters that would
materially disadvantage one party over the other.
Duties not imposed on the transaction broker. Since there are no fiduciary
duties binding the transaction broker, the broker is held to standards for dealing
with customers as opposed to clients. These include honesty, fair dealing, and
reasonable care. The transaction broker is under no obligation to inspect the
property for the benefit of a party or verify the accuracy of statements made by a
party.
As state regulatory authorities formalize the facilitator role, it is expected that
brokers will have to obtain written consent from the principal parties, just as in
the case of dual agency.
No subagency
As another response to the problem of ‘who works for whom,’ some states have
recently moved in the direction of disallowing subagency. In this scenario,
subagency is replaced by buyer agency and seller agency only. In other words, an
agent either represents the buyer directly, or the seller directly. An agent who
shows a buyer a property either represents the buyer, or is in fact the listing
agent. Note that this arrangement need not change traditional compensation
structures: an agent may represent a buyer and still receive a portion of the
commission paid by the seller.
by inpac01 | Mar 23, 2022 | Real Estate
부동산 지식 36-Agency-b.FIDUCIARY DUTIES
Agent’s duties to the customer
Principal’s duties
Breach of duty
a.The Agency Relationship
b.Fiduciary Duties
c.Forms of Real Estate Agency
d.Agency Disclosure Rules
b.FIDUCIARY DUTIES
Agent’s duties to the client
Agent’s duties to the customer
Principal’s duties
Breach of duty
Agent’s duties to the customer
The traditional notion of caveat emptor– let the buyer beware– no longer applies
unequivocally to real estate transactions. Agents do have certain obligations to
customers, even though they do not represent them. In general, they owe a third
party:
honesty and fair dealing
reasonable care and skill
proper disclosure
An agent has a duty to deal fairly and honestly with a customer. Thus, an agent
may not deceive, defraud, or otherwise take advantage of a customer.
“Reasonable care and skill” means that an agent will be held to the standards of
knowledge, expertise, and ethics that are commonly maintained by other agents
in the area.
Proper disclosure primarily concerns disclosure of agency, property condition,
and environmental hazards.
An agent who fails to live up to prevailing standards may be held liable for
negligence, fraud, or violation of state real estate license laws and regulations.
Agents should be particularly careful about misrepresenting and offering
inappropriate expert advice when working with customers.
Intentional misrepresentation. An agent may intentionally or unintentionally
defraud a buyer by misrepresenting or concealing facts. While it is acceptable to
promote the features of a property to a buyer or the virtues of a buyer to a seller,
it is a fine line that divides promotion from misrepresentation. Silent
misrepresentation, which is intentionally failing to reveal a material fact, is just as
fraudulent as a false statement.
Negligent misrepresentation. An agent can be held liable for failure to disclose
facts the agent was not aware of if it can be demonstrated that the agent should
have known such facts. For example, if it is a common standard that agents
inspect property, then an agent can be held liable for failing to disclose a leaky
roof that was not inspected.
Misrepresentation of expertise. An agent should not act or speak outside the
agent’s area of expertise. A customer may rely on anything an agent says, and the
agent will be held accountable. For example, an agent represents that a property
will appreciate. The buyer interprets this as expert investment advice and buys
the property. If the property does not appreciate, the buyer may hold the agent
liable.
Principal’s duties
The obligations of a principal in an agency relationship concern the following:
Availability. In a special agency, the power and decision-making authority of the
agent are limited. Therefore, the principal must be available for consultation,
direction, and decision-making. Otherwise the agent cannot complete the job.
Information. The principal must provide the agent with a sufficient amount
of information to complete the desired activity. This may include property
data, financial data, and the client’s timing requirements.
Compensation. If an agreement includes a provision for compensating the agent
and the agent performs in accordance with the agreement, the client is obligated
to compensate the agent. As indicated earlier, however, the agency relationship
does not necessarily include compensation.
Breach of duty
An agent is liable for a breach of duty to client or customer. Since clients and
customers rely on the expertise and actions of agents performing within the
scope of their authority, regulatory agencies and courts aggressively enforce
agency laws, standards, and regulations.
A breach of duty may result in:
rescission of the listing agreement (causing a loss of a
potential commission)
forfeiture of any compensation that may have already been earned
disciplinary action by state license law authorities, including
license suspension or revocation
suit for damages in court
by inpac01 | Mar 17, 2022 | Real Estate
부동산 지식 35-Agency-b.FIDUCIARY DUTIES
Agent’s duties to the client
a.The Agency Relationship
b.Fiduciary Duties
c.Forms of Real Estate Agency
d.Agency Disclosure Rules
b.FIDUCIARY DUTIES
Agent’s duties to the client
Agent’s duties to the customer
Principal’s duties
Breach of duty
The agency relationship imposes fiduciary duties on the client and agent, but
particularly on the agent. An agent must also observe certain standards of
conduct in dealing with customers and other outside parties.
Agent’s duties
to the client Skill, care, and diligence. The agent is hired to do a job, and is therefore
expected to do it with diligence and reasonable competence. Competence is
generally defined as a level of real estate marketing skills and knowledge
comparable to those of other practitioners in the area.
The notion of care extends to observing the limited scope of authority granted
to the agent. A conventional listing agreement does not authorize an agent to
obligate the client to contracts, and it does not allow the agent to conceal
offers to buy, sell, or lease coming from a customer or another agent. Further,
since a client relies on a broker’s representations, a broker must exercise care
not to offer advice outside of his or her field of expertise. Violations of this
standard may expose the agent to liability for the unlicensed practice of a
profession such as law, engineering, or accounting.
Loyalty. The duty of loyalty requires the agent to place the interests of the client
above those of all others, particularly the agent’s own. This standard is
particularly relevant whenever an agent discusses transaction terms with a
prospect.
Obedience. An agent must comply with the client’s directions and instructions,
provided they are legal. An agent who cannot obey a legal directive, for whatever
reason, must withdraw from the relationship. If the directive is illegal, the agent
must also immediately withdraw.
Confidentiality. An agent must hold in confidence any personal or business
information received from the client during the term of employment. An agent
may not disclose any information that would harm the client’s interests or
bargaining position, or anything else the client wishes to keep secret.
An agent must exercise care in fulfilling this duty: if confidentiality conflicts with
the agent’s legal requirements to disclose material facts, the agent must inform
the client of this obligation and make the required disclosures. If such a conflict
cannot be resolved, the agent must withdraw from the relationship
Accounting. An agent must safeguard and account for all monies, documents,
and other property received from a client or customer. State license laws regulate
the broker’s accounting obligations and escrow practices.
Full disclosure. An agent has the duty to inform the client of all material facts,
reports, and rumors that might affect the client’s interests in the property
transaction.
In recent years, the disclosure standard has been raised to require an agent to
disclose items that a practicing agent should know, whether the agent actually
had the knowledge or not, and regardless of whether the disclosure furthers or
impedes the progress of the transaction.
The most obvious example of a “should have known” disclosure is a property
defect, such as an inoperative central air conditioner, that the agent failed to
notice. If the air conditioner becomes a problem, the agent may be held liable for
failing to disclose a material fact if a court rules that the typical agent in that area
would detect and recognize a faulty air conditioner.
There is no obligation to obtain or disclose information related to a customer’s
race, creed, color, religion, sex or national origin: anti-discrimination laws hold
such information to be immaterial to the transaction.
Some states have recently enacted laws requiring a seller to make a written
disclosure about property condition to a prospective buyer. This seller disclosure
may or may not relieve the agent of some liabilities for disclosure.
by inpac01 | Mar 16, 2022 | Real Estate
부동산 지식 34-Agency-11.2-4 Types of agency
a.The Agency Relationship
b.Fiduciary Duties
c.Forms of Real Estate Agency
d.Agency Disclosure Rules
The Agency Relationship-
1.Basic roles
2.Types of agency
3.Creating an agency relationship
4.Terminating an agency relationship
Types of agency
According to the level of authority delegated to the agent, there are three types of
agency: universal, general, and special.
Universal agency. In a universal agency relationship, the principal empowers the
agent to perform any and all actions that may be legally delegated to an agency
representative. The instrument of authorization is the power of attorney.
General agency. In a general agency, the principal delegates to the agent
ongoing tasks and duties within a particular business or enterprise. Such
delegation may include the authority to enter into contracts.
Special, or limited, agency. Under a special agency agreement, the principal
delegates authority to conduct a specific activity, after which the agency
relationship terminates. In most cases, the special agent may not bind the
principal to a contract.
In most instances, real estate brokerage is based on a special agency. The
principal hires a licensed broker to procure a ready, willing, and able buyer or
seller. When the objective is achieved, the relationship terminates, although
certain fiduciary duties survive the relationship.
Creating an agency relationship
An agency relationship may arise from an express oral or written agreement
between the principal and the agent, or from the actions of the parties by
implication.
Written or oral listing agreement. The most common way of creating an
agency relationship is by listing agreement, which may be oral or written. The
agreement sets forth the various authorizations and duties, as well as
requirements for compensation. A listing agreement establishes an agency for a
specified transaction and has a stated expiration.
Implied agency. An agency relationship can arise by implication, intentionally or
unintentionally. Implication means that the parties act as if there were an
agreement. For example, if an agent promises a buyer to do everything possible
to find a property at the lowest possible price, and the buyer accepts the
proposition, there may be an implied agency relationship even though there is no
specific agreement. Even if the agent does not wish to establish an agency
relationship, the agent’s actions may be construed to imply a relationship.
Whether intended or accidental, the creation of implied agency obligates the
agent to fiduciary duties and professional standards of care. If these are not
fulfilled, the agent may be held liable
Terminating an agency relationship
Full performance of all obligations by the parties terminates an agency
relationship. In addition, the parties may terminate the relationship at any time
by mutual agreement. Thirdly, the agency relationship automatically
terminates on the expiration date, whether the obligations were performed or
not.
Involuntary termination. An agency relationship may terminate contrary to
the wishes of the parties by reason of:
death or incapacity of either party
abandonment by the agent
condemnation or destruction of the property
renunciation
breach
bankruptcy
revocation of the agent’s license
Involuntary termination of the relationship may create legal and financial
liability for a party who defaults or cancels. For example, a client may
renounce an agreement but then be held liable for the agent’s expenses or
commission.
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