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.
by inpac01 | Mar 15, 2022 | Real Estate
부동산 지식 33-Agency-1.Basic roles
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
The most primary of relationships in real estate brokerage is that between
broker and client, the relationship known in law as the agency relationship.
In every state, a body of law, generally called the law of agency, defines and
regulates the legal roles of this relationship. The parties to the relationship are
the principal (a client), the agent (a broker), and the customer ( a third
party).
The laws of agency are distinct from laws of contracts, although the two
groups of laws interact with each other. For example, the listing agreement — a
contract -establishes an agency relationship. Thus the relationship is subject to
contract law. However, agency law dictates how the relationship will achieve
its purposes, regardless of what the listing contract states.
The essence of the agency relationship is trust, confidence, and mutual good
faith. The principal trusts the agent to exercise the utmost skill and care in
fulfilling the authorized activity, and to promote the principal’s best interests.
The agent undertakes to strive in good faith to achieve the desired objective,
and to fulfill the fiduciary duties.
It is important to understand that the agency relationship does not require
compensation or any form of consideration. Nor does compensation define
an agency relationship: a party other than the principal may compensate
the agent.
Basic roles
In an agency relationship, a principal hires an agent as a fiduciary to perform a
desired service on the principal’s behalf. As a fiduciary, the agent has a legal
obligation to fulfill specific fiduciary duties throughout the term of the
relationship.
The principal, or client, is the party who hires the agent. The agent works for
the client. The principal may be a seller, a buyer, a landlord, or a tenant.
The agent is the fiduciary of the principal, hired to perform the authorized
work and bound to fulfill fiduciary duties. In real estate brokerage the agent
must be a licensed broker.
The customer or prospect is a third party in the transaction whom the agent does
not represent. The agent works with a customer in fulfilling the client’s
objectives. A seller, buyer, landlord, or tenant may be a customer. A third party
who is a potential customer is a prospect.
by inpac01 | Mar 14, 2022 | Real Estate
부동산 지식 32-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
by inpac01 | Dec 23, 2021 | Real Estate
부동산 지식 31-Validity of a conveyance
Validity of a conveyance
contract In addition to satisfying the foregoing requirements, a contract that conveys
an interest in real estate must:
be in writing
contain a legal description of the property
be signed by one or more of the parties
A lease contract that has a term of one year or less is an exception. Such leases do
not have to be in writing to be enforceable.
Enforcement limitations
Certain contracts that fail to meet the validity requirements are voidable if a
damaged party takes appropriate action. The enforcement of voidable
contracts, however, is limited by statutes of limitation. Certain other
contracts which are valid may not be enforceable due to the statute of
frauds.
Statute of limitations. The statute of limitations restricts the time period for
which an injured party in a contract has the right to rescind or disaffirm the
contract. A party to a voidable contract must act within the statutory period.
Statute of frauds. The statute of frauds requires that certain contracts must be
in writing to be enforceable. Real estate contracts that convey an interest in
Consideration
good
(“love and affection”)
valuable
sufficient insufficient
valid not valid
Chapter 10 Real Estate Contract Law 133
real property fall in this category, with the exception that a lease of one year’s
duration or less may be oral. All other contracts to buy, sell, exchange, or
lease interests in real property must be in writing to be enforceable. In
addition, listing agreements in most states must be in writing.
The statute of frauds concerns the enforceability of a contract, not its validity.
Once the parties to a valid oral contract have executed and performed it, even
if the contract was unenforceable, a party cannot use the Statute of Frauds to
rescind the contract.
For example, a broker and a seller have an oral agreement. Following the
terms of the agreement, the broker finds a buyer, and the seller pays the
commission. They have now executed the contract, and the seller cannot later
force the broker to return the commission based on the statute of frauds.
Electronic contracting
Contracting electronically through email and fax greatly facilitates the
completion of transactions. Clients, lenders, title agents, inspectors, brokers,
and other participants in a transaction can quickly share documentation and
information. Electronic contracting is made possible by the Uniform
Electronic Transactions Act (UETA) and the Electronic Signatures in Global
and National Commerce Act (E-Sign), which are federal laws. UETA, which
has been accepted in most states, provides that electronic records and
signatures are legal and must be accepted. E-Sign makes contracts, records,
and signatures legally enforceable, regardless of medium, even where UETA
is not accepted.
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