Lesson 7: Real Estate Agency: Terms Flashcards

Lesson 7: Real Estate Agency: Terms Flashcards Material factsA fact is considered "material" if it has a substantially negative effect on the property's value or a party's ability to perform his or her contractual obligations, or it defeats the purpose of the transaction.Patent defectA defect that is readily apparent, through ordinary inspection.Duty of loyaltyThe licensee must put the principal's interests above those of a third party, and above his own interests.

• compensation optionsRetainerseller paid feebuyer paid fee

Inadvertent dual agencyoccurs if an agent unintentionally leads each party to believe that he or she (rather than the other party) is the principal, but the agent fails to make the dual agency disclosures, obtain written consent, and secure an agency agreement with each party.Seller paid feeProbably the most common compensation arrangement for buyer's agents is the seller-paid fee. Under this arrangement, the buyer's agent receives a share of the listing agent's commission.Employeesupervised and controlled much more closely than an independent contractor.Imputed knowledge ruleUnder general agency law, a principal is held to have notice of all information that is in the possession of the agent. In Washington, the rule no longer applies in real estate transactions.Universal agentauthorized to perform any acts that the law allows one person to delegate to another. This type of agent has the greatest degree of authority.Torta mistake, accident, or misconduct that results in an injury to another person.Latent defectA material fact. A problem with the property that a buyer wouldn't discover through a casual inspection of it.Non-agencyIn some transactions, real estate licensees choose to act merely as facilitators, not as agents. In other words, they make a deliberate decision not to take on any agency duties in regard to either the seller or the buyer.Agency relationshipEstablished when one person authorizes another to represent her in dealings with other people.Real Estate Brokerage Relationships ActTraditionally, the general rules of agency law also applied to the relationship between a real estate licensee and a client. However, in 1997 the Washington State Legislature adopted a statute that modified these rules in the real

estate context. This statute now governs real estate agency in Washington.Dual agencywhen a real estate agent represents both the seller and the buyer in the same transaction

Operation of lawterm expirespurposed is fulfilleddeath, incompetence, or bankruptcy of partysubject property is extinguished Exception to revocation rulean agency coupled with an interest can't be revoked. An agency is coupled with an interest if the agent has a financial stake or other interest in the subject matter of the agency.Acts of partiesmutual agreement, revocation by principal, renunciation by agent Agent classificationsDepending on the scope of authority granted, an agent may be classified as a universal agent, general agent, or special agent.EstoppelUnder the legal doctrine of estoppel, a person cannot take a position that contradicts her previous conduct, if someone else has relied on the previous conduct.Listing agentEither a licensee or a real estate firm may be referred to as the listing agent. The licensee who actually takes the listing is called the listing agent.AccountingAgent must account for all money and property received during agency relationship Vicarious liabilityIn some circumstances, a principal may be held liable for his agent's negligent or wrongful acts as if he had committed them himself Mutual agreementThe principal and the agent can terminate their relationship by mutual agreement at any time. It's a good idea to put the termination in writing, especially if the agency was based on a written contract (such as a listing agreement).Independent contractorhired to perform a particular job and is allowed to use her own judgment in carrying out the work Retainera fee paid up front, before the agent starts to work for the buyer Tort lawsuitA tort is a civil wrong, as opposed to a criminal wrong.This means that in a tort suit, one private individual (the injured party) sues another (the wrongdoer) for redress AgentThe person authorized to act as the principal's representative

• categories of ways to terminate and agency Acts of parties & operation of law

Caveat emptor"let the buyer beware" ClientA real estate agent's client is the person who engaged the agent's services. The client may be a seller, a buyer, a landlord, or a tenant.AgentA property seller or buyer hires a real estate firm to act as his representative, or agent, in a real estate transaction.General agentauthorized to act only in a specified area of the principal's affairs. Within that area, however, the general agent has broad authority

Duty of loyaltyThis means that the agent is legally obligated to act in the principal's best interests.Selling agentThe licensee who actually procures the buyer for a home is referred to as the selling agent Types of agency relationshipsseller agencybuyer agencydual agencynon-agency ConfidentialityAgent must not disclose principal's confidential information Apparent authorityagency authority that someone appears to have, although the principal didn't actually grant it.Third partyA person outside the agency relationship who deals with the principal through the agent is referred to as a third party.RenunciationJust as the principal can terminate the agency unilaterally, the agent also has the power to terminate the agency at any time without the principal's consent.Termination under Washington State Real estate agency law Complete performanceTerm expiresMutual consentNotice of termination CustomerA third party that a real estate agent is dealing with on behalf of a client may be referred to as the agent's customer

• ways an agency relationship can be established express agreement, ratification, estoppel, implication

Actual authorityauthority granted to the agent by the principal Fiduciarysomeone who acts for the benefit of another in a relationship founded on trust and confidence.Cooperating agentAll the members of the listing firm's multiple listing service (and the members of any other MLS that is participating in the transaction) are called cooperating agents General agency lawa body of law that applies to agency relationships in nearly any context.Scope of the agent's authorityA principal may grant varying degrees of authority to her agent, giving the agent sweeping powers or strictly limited ones.Special agentA special agent has more limited authority. She is authorized only to do a specific thing or conduct a specific transaction.Trust fundsfunds that the licensee is holding on behalf of a client or another party. A buyer's earnest money deposit and a tenant's security deposit are examples of trust funds commonly held by licensees Duties real estate agents have to all parties The licensee must:exercise reasonable skill and caredeal honestly and in good faithpresent all written offersdisclose material factsaccount for trust fundsprovide an agency law pamphletmake an agency disclosure.Duties real estate agent has for principal In regard to her principal, the licensee must

be:Loyaldisclose conflicts of interestprotect confidential

informationrecommend expert advicemake a good faith and