Term
Nature of Agency
(Common Law of Agency) |
|
Definition
| In conducting a real estate transaction, it is important to understand the relationship between the parties. |
|
|
Term
Principal or Client
(Nature of Agency)
(Common Law of Agency) |
|
Definition
| One who authorizes another person or entity to act on their behalf |
|
|
Term
Agent
(Nature of Agency)
(Common Law of Agency) |
|
Definition
| person engaged to act on behalf of another |
|
|
Term
Third Party or Customer
(Nature of Agency)
(Common Law of Agency) |
|
Definition
| With whom the agent interacts |
|
|
Term
Agency Law- A Fiduciary
(Nature of Agency)
(Common Law of Agency) |
|
Definition
The relationship between the agent and the principal is fiduciary. A fiduciary relationship is one that implies trust and confidence.
The agent is obligated to protect and promote the best interests of their client at all times.
Payment of a commission does not create an agency relationship. Who pays the agent's commission is not necessarily the client.
FIDUCIARY = LOYALTY |
|
|
Term
Universal Agent
(3 Types of Agents)
(Nature of Agency)
(Common Law of Agency) |
|
Definition
authorized to perform any act the principal could perform. full power of attorney.
note: a real estate agent will never be a universal agent |
|
|
Term
General Agent
(3 Types of Agents)
(Nature of Agency)
(Common Law of Agency) |
|
Definition
has the authority to bind the principal in a the on-going conduct of a particular business.
Real estate agent + Broker contract = general agency
Real estate agent representing broker + property management company or community association manager =general agency |
|
|
Term
Special or Limited Agent
(3 Types of Agents)
(Nature of Agency)
(Common Law of Agency) |
|
Definition
appointed for a particular purpose or to act on a particular occasion.
Listing agent = special agent
Selling agent = special agent |
|
|
Term
Implications of Agency Law
(Nature of Agency)
(Common Law of Agency) |
|
Definition
In a listing, the property owner is the principal and the broker hired to market the property is the agent.
In a buyer brokerage agreement, the buyer is the principal and the licensee is the agent.
In a property management agreement, the owner is the principal and the broker is the agent.
THE BROKER IS ALWAYS THE AGENT IN ALL REAL ESTATE TRANSACTIONS |
|
|
Term
Types of Agency
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
The agency agreement is essentially an employment contract.
In GA, real estate relationships are only created intentionally AND in writing |
|
|
Term
Actual Agency
(Types of Agency)
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
RECOGNISED IN GA- NEEDS TO BE IN WRITING + INTENTIONAL
Arises when the parties to the agreement have entered into the relationship intentionally, whether in writing or verbally |
|
|
Term
Ostensible Agency
(Types of Agency)
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
No agreement signed-NOT RECOGNIZED IN GA
Third party relies on the principal's expressed or implied representation that a particular person is his/her agent even though no such agreement ever existed |
|
|
Term
Implied Agency
(Types of Agency)
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
NOT RECOGNIZED IN GA
When a broker, showing the property to a prospective buyer, by words and actions causes the buyer to feel the broker is acting on his behalf |
|
|
Term
Power of Attorney
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
a document frequently used to authorize one person to act on behalf of another. The person so chosen is an ATTORNEY-IN-FACT not necessarily a lawyer.
This document was be revoked by the principal or renounced by the agent at any time and it ceases to exist when either party dies. It should specify how much authority the attorney-in-fact is to have |
|
|
Term
Implied Authority
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
arises out of custom and common usage.
ex. a listing contract might not state that the broker has the right to accept an earnest money deposit but since these are customary ways of doing business the right is implied unless specifically forbidden. |
|
|
Term
Amount of Authority
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
| Agency contracts must be specific about how much authority the agent is to have |
|
|
Term
The Principal
(Creating an Agency relationship)
(Common Law of Agency) |
|
Definition
The principal is not liable for the agent's acts beyond the scope of the actual or ostensible authority. Even though the principal is not required to accept unauthorized acts, he/she can ratify such acts and this is the same as having authorized them in the first place
ratify=sign or give formal consent |
|
|
Term
Agent's Obligations to the Principal
(Common Law of Agency) |
|
Definition
When representing a principal in a fiduciary capacity, the agent has certain duties that are similar to those a trustee owes a trustor. POLAND
Personal Performance
Obedience
Loyalty
Accountability
Notice
Due care |
|
|
Term
Personal Performance
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
| Broker owes personal performance and should not refer to another broker without permission. |
|
|
Term
Obedience
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
| An agent must obey the principal's instructions unless asked to do something unethical, illegal or unreasonable |
|
|
Term
Loyalty
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
The principals interest must be placed above those of anyone else including those of the agent.
A broker cannot receive any additional profit, over and above the commission, without the knowledge and consent of the seller.
Would it be disloyal to delay in presenting an offer in the hope that a better one might come in? YES, the decision to accept or reject an offer is up the seller.
ALWAYS PRESENT AN OFFER |
|
|
Term
Straw Buyer
(Loyalty)
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
one who buys for another so as to hide the identity of the real buyer.
Under certain circumstances using a straw buyer is perfectly legal. The undisclosed buyer might want to hide their true identity because of being well-known or because their identity might drive up the price. IF Agent knows the buyer's true identity, the principal should be informed.
Ex. walt disney used straw buyers in orlando to buy land to assemble for Disney Land |
|
|
Term
Accountability
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
Earnest money or security deposits received by a broker are held in trust for a client, subject to the terms of the contract. All Monies must be handled correctly.
Does not refer to accounting but instead the responsibility of handling all monies received |
|
|
Term
Notice
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
| A broker's duties to the principal include full disclosure of any matter that might affect the business at hand |
|
|
Term
Due Care and Diligence
(POLAND)
(Agent's Obligations to the Principal)
(Common Law of Agency) |
|
Definition
| A real estate licensee must exercise the degree of care a prudent business person would employ in a similar situation. This includes proper handling of funds, care in preparing contracts, and responsible handling of property such as keys. |
|
|
Term
Indemnification
(Principal's 4 Duties to the Agent)
(Common Law of Agency) |
|
Definition
| The principal is obligated to indemnify the agent against any loss suffered through no fault of the agent |
|
|
Term
Performance
(Principal's 4 Duties to the Agent)
(Common Law of Agency) |
|
Definition
| A principle must give an agent a reasonable amount of cooperation and assistance. |
|
|
Term
Reimbursement
(Principal's 4 Duties to the Agent)
(Common Law of Agency) |
|
Definition
| In most real estate contracts, the principal is not obligated for the brokers marketing expenses unless there is an agreement to that effect. Sometimes there are unrelated expenses such as a necessary repair or lawn maintenance. It is a good idea to get authorization for reimbursement expenses, but in any case, the agent is entitled to be repaid |
|
|
Term
Compensation
(Principal's 4 Duties to the Agent)
(Common Law of Agency) |
|
Definition
| The principal owes the broker compensation upon performance. |
|
|
Term
Performance
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
| The agreement ends when the purpose for which it was created either no longer exists or is not longer possible. |
|
|
Term
Expiration
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
If the agreement contains a time limit, ends when the time runs out
Expiration terminates an agency agreement but NOT a Sales contract |
|
|
Term
Revocation
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
| Principal can terminate an agency agreement but might be held accountable by the agent for services already performed. |
|
|
Term
REnunciation
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
| An agent can terminate the agency agreement, but might be held accountable by the principle for breach of contract if there was not justifiable reason |
|
|
Term
Abandonment
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
| If the agent makes no effort to perform |
|
|
Term
Agreement
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
| Parties to an agency contract can end it by mutual agreement |
|
|
Term
Death
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
The death of either the agent of the principal ends the agency agreement
Broker death, NOT salesperson death |
|
|
Term
Incapacity
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
NOT THE SAME AS COMPETENCY
The agency agreement ends if either party declares bankruptcy or is judged to be legally incompetent |
|
|
Term
Supervening Illegality
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
A change in law could make the task the agent is supposed to perform illegal.
Ex. listing agent agreement can end if the property was to be taken by eminent domain |
|
|
Term
Extinction
(Terminations of the Agency Agreement)
(Common Law of Agency) |
|
Definition
|
|
Term
Reasonable Skill and Care
(Agent's Obligations to Third Parties)
(Common Law of Agency) |
|
Definition
Due Diligence.
The agent may not be careless or incompetent |
|
|
Term
Accountability
(Agent's Obligations to Third Parties)
(Common Law of Agency) |
|
Definition
"Cannot lose monies received"
account for all monies and valuables |
|
|
Term
Honesty and Integrity
(Agent's Obligations to Third Parties)
(Common Law of Agency) |
|
Definition
Cannot lie to anyone
Agent must provide accurate factual info free from fraud or misrepresentation |
|
|
Term
Disclosure to Third Parties
(Agent's Obligations to Third Parties)
(Common Law of Agency) |
|
Definition
Must disclose latent defects=defects that cannot be seen but are known ex. flooding only when it rains.
Patent defects= defects discovered through an ordinary inspection ex. hole in the wall
Side Note: If asked how long you have been an agent for? We are allowed to respond with "Less than 5 years, my broker and I(since you are attached to your broker) have been in the industry for BLANK years (go according to how long the broker has been in business for. |
|
|
Term
Puffing
(Disclosure to Third Parties)
(Agent's Obligations to Third Parties)
(Common Law of Agency) |
|
Definition
| A statement of exaggeration that a reasonable person (general population) would recognize as untrue is not misrepresentation. NEED TO KNOW VERBATEM |
|
|
Term
Georgia Stigmatized Property Law
Section 44-1-16
(Agent's Obligations to Third Parties)
(Common Law of Agency) |
|
Definition
properties being the site of a death, suicide, homicide, ghosts, rape or other criminal activity could cause the property to be stigmatized. The law states that if asked about any occurrences, a licensee shall answer truthfully but the licensee is not required to volunteer the information.
IN GA, these occurrences do not need to be disclosed unless asked. This is the only disclosure that is NOT required.
A licensee would owe absolute allegiance and should disclose any relevant fact including the information that the property is psychologically impacted. |
|
|
Term
The Broker's Responsibility
(Agency COntracts) |
|
Definition
| The salesperson has fiduciary responsibilities to the broker and to the broker's client and can sign contracts on the broker's behalf only with written authorization. All commissions are paid to the Broker |
|
|
Term
The Relationship between Broker and Salesperson
(Agency Contracts) |
|
Definition
When licensees affiliate with a broker, they should enter into a written contract which explains what the salesperson is authorized to do and how compensation will be paid.
Affiliation Agreement=Employment Contract |
|
|
Term
Employee
(The Relationship between Broker and Salesperson)
(Agency Contracts) |
|
Definition
Such things as office hours, floor duty, dress code etc can be required while hired as an employee. The broker must withhold state and federal income taxes from the paycheck and pay the employer's portion of social security contributions, unemployment insurance, and workers comp.
Under this relationship, the broker has more control over the salesperson e |
|
|
Term
Independent Contractor
(The Relationship between Broker and Salesperson)
(Agency Contracts) |
|
Definition
| Salesperson is in business for themselves pay their own taxes and expenses. They are accountable to their broker only for the results of their work, not for how the work is performed. |
|
|
Term
Compensation
(Agency Contracts) |
|
Definition
A percentage of the sales price, and the commission the company receives is shared with the agent responsible for the listing, the sale or both.
In the 100% commission plan, each affiliate pays a flat fee to the managing company for the service provided and then is allowed to keep 100% of the commissions earned.
Note: Each transaction involves 2 brokers (unless dual agency), 1 represents the Seller and the other represents the Buyer. Because of this, the total commission is divided by 2 and each agent gets a percentage of that split depending on the split ex. 70/30 agent gets 70% and broker 30% |
|
|
Term
Agency Policy
(Agency Contracts) |
|
Definition
The broker is responsible for determining the company's policy regarding agency relationships. THe choices are:
1. Represent sellers only, dealing with buyers as customers, not as clients
2. represent buyers only, declining to enter into listings
3. a single agency policy, representing either buyers or sellers but never entering ina dual agency
4. A policy representing buyers, sellers and on occasion acting as designated and or dual agents |
|
|
Term
The Listing
(Agency Contracts) |
|
Definition
A type of agency agreement
The listing is the brokers contract of employment with an owner authorizing the broker to find a buyer or tenant who is "ready, willing, and able" to meet the owner's terms.
The listing does NOT obligate the seller to sell. The commission has been earned even if the seller refuses a full-price offer, changes the terms, or is unwilling or unable to close. |
|
|
Term
Open Listing
(Types of Listings)
(The Listing)
(Agency Contracts) |
|
Definition
can be written or oral
The owner promises a commission to a broker who produces a ready willing and able buyer at the named price. The owner can have as many open listings as he chooses and can sell the property themselves with no obligation to pay any broker.
In return, the broker makes no promise.
An open Listing is an express, unilateral (promise made by owner only), executory (terms are not fulfilled) contract. |
|
|
Term
Exclusive Agency Listing
(Types of Listings)
(The Listing)
(Agency Contracts) |
|
Definition
Must be in writing to be enforceable and must have a termination date.
Exclusive agency listing, only 1 broker is authorized to market the property but the owner reserves the right to sell it themselves with no obligation to pay commission.
This is an expressed bilateral executory contract |
|
|
Term
Exclusive Right to Sell Listing
(Types of Listings)
(The Listing)
(Agency Contracts) |
|
Definition
Must be in writing and have an ending date
Best for Licensees=We get paid no matter what
This is an expressed bilateral executory contract
broker receives max protection because the right to market the property is exclusive and the commission is assured it the property sells, no matter by whom. |
|
|
Term
Net Listing
(Types of Listings)
(The Listing)
(Agency Contracts) |
|
Definition
ILLEGAL IN GA
Seller has a certain amount in mind that they want to receive from the sale and authorizes the broker to market the property at any price and pocket the difference. |
|
|
Term
Multiple Listings
(The Listing)
(Agency Contracts) |
|
Definition
Multiple Listing Service MLS
social media for Brokers. Not a type of listing but an organization of brokers who wish to share info and solicit the cooperation of other members in marketing their listings |
|
|
Term
Termination of Listing
(The Listing)
(Agency Contracts) |
|
Definition
can be terminated same way as any contract:
Performance
Mutual agreement
breach and expiration |
|
|
Term
The Listing Presentation
(The Listing)
(Agency Contracts) |
|
Definition
| Justifies why the seller should list with broker/salesperson |
|
|
Term
The right to a commission
(The Listing)
(Agency Contracts) |
|
Definition
In the event the seller breaches his agreement to pay a commission upon the broker's performance, the broker who takes the matter to court must prove:
1. That he/she hold a valid real estate license FIRST STEP
2. That there is a written listing agreement
3. The broker must also prove procuring cause: if the agreement is not an exclusive right to sell |
|
|
Term
Procuring Cause
(The right to a commission)
(The Listing)
(Agency Contracts) |
|
Definition
defined as the broker who began an uninterrupted chain of events that eventually resulted in the sale:
Physically shown the property
Followed through and communicated
provided a service, creating events, which without a break in continuity, contributed to the sale |
|
|
Term
Buyer Representation
(Agency Contracts) |
|
Definition
Broker working with the buyer regardless of what agreement entered is known as the selling agent (selling a property to a buyer) Buyer becomes client.
Licensee has 4 choices in working with a buyer or tenant:
1. Representing the seller as agent or sub-agent . The seller is a client and the buyer is a customer
2. Representing the buyer as agent, The buyer is the client and the seller is the customer.
3. Representing both buyer and seller as a dual agent. Both are clients
4. Representing neither buyer nor seller as a transaction agent . Both are customers (used alot by investors)
An agent can keep 100% of commission without entering a dual agency by treating the buyer as a customer and and representing the seller. The seller pays the commission
You can easily breach POLAND policies of fiduciary when entering a dual agency |
|
|
Term
Sub Agency
(Buyer Representation)
(Agency Contracts) |
|
Definition
Not done today
Involves 2 different brokers both of whom are representing the seller.
Ex.: Broker 1 and Agent 1 + Seller client
Broker 2 and Agent 2 + Buyer Customer have no contract therefore Broker 1 and Broker 2 owe loyalty and become a subagent to Seller Client and Broker 2 becomes a subagent to Broker 1. Buyer is only a customer. Brokers now have to pay commission to Agent 1 and 2.
Not normally done since it created conflict |
|
|
Term
Dual Agency
Buyer Representation
(Agency Contracts) |
|
Definition
Legal in GA but not recommended
OCcurs when one licensee has both the seller and the buyer or landlord and tenant as clients in the same transaction |
|
|
Term
Designated Agency
Buyer Representation
(Agency Contracts) |
|
Definition
Both parties(buyer and seller) are not represented by the same agent but are represented by different agents affiliated with the same broker.
Ex. Broker 1 has Agent 1 representing seller and Agent 2 Representing Buyer. Agent 1 can charge a referral fee to Agent 2 on top of earned commission
Confidentiality is maintained. |
|
|
Term
Transaction Broker
Buyer Representation
(Agency Contracts) |
|
Definition
Non Agent-no agency relationship
Agent does not offer advice not counsel |
|
|
Term
Working with a customer
Buyer Representation
(Agency Contracts) |
|
Definition
A salesperson can perform ministerial acts without creating an agency
No counseling or advertising. "If you can google it, I can do it. No realtor expertise required.
Ex. Show properties, provide facts globally known, provide info about comparable sales, point out neighborhood amenities, provide info about schools, taxes, utilities etc.
TIP: try to always represent a seller and become a listing agent, commision comes from seller not buyer |
|
|
Term
Risk Reduction
Buyer Representation
(Agency Contracts) |
|
Definition
| If you ever need help, CALL YOUR BROKER |
|
|
Term
BRETTA
The Brokerage Relationship in Real Estate Transactions Act 1994
Agency Law |
|
Definition
Brokerage is the occupation or the business in real estate
BRETTA is a law passed by the Georgia state legislature. It is designed to prevent "detrimental misunderstandings" that common law might cause in brokerage relationships. Governs the relationships between licensees and their clients or customers.
Special interest in this law are:
-A brokerage is the occupation or business of business of a real estate broker
-a brokerage relationship, an agency, or non-agency relationship between a broker and a client customer.
-Material facts MUST BE IN WRITING: facts a party does not know, could not reasonably discover and would want to know
-Ministerial facts: "if you can google it, i can do it" facts that do not require licensees skill or profession judgement |
|
|
Term
Duties of Brokers engaged by sellers of landlords
(BRETTA) |
|
Definition
DiFFERENCE between common law and BRETTA
Common law uses POLAND, BRETTA uses POLAND and added confidentiality. Ultimately the same.
The broker must disclose to all parties.:
1. Any adverse material facts KNOWN about the property that the buyer or tenant could not readily discover by inspecting
2. Any adverse material facts KNOWN about the neighborhood to a radius of 1 mile that the buyer or tenant could not discover by inspection or by contacting appropriate gov. agencies and records.
A licensee should avoid giving false info. but cannot be held liable for false data if it was unknowingly and the source was revealed. Example: Always disclosed the material fact and where you got it from so your not held liable if incorrect. "According to public records" |
|
|
Term
Termination of an Agency Relationship
(BRETTA) |
|
Definition
| If an agency contract does not contain a specific date of termination, it will terminate in one year. |
|
|
Term
Transaction Brokerage
(BRETTA) |
|
Definition
| No agency relationship. no advice or counseling. Can prepare contracts as a scribe |
|
|
