Real Estate Lesson 7: Agency Law Flashcards

Real Estate Lesson 7: Agency Law Flashcards

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.A cooperating agent may be the buyer's agent or the seller's agent. (A cooperating agent who succeeds in procuring a buyer is the selling agent.) Breach of DutyIf a licensee breaches a duty to either her principal or a third party, the injured party may file a tort suit against the licensee.The court may order the licensee to pay compensatory damages.Whether or not there is a lawsuit, the Department of Licensing may suspend or revoke the licensee's real estate license.Advantages of Buyer AgencyBeing represented by a buyer's agent gives a buyer the advantages of loyalty and confidentiality, objective advice, help with negotiating, and access to more homes.Duty of LoyaltyThe licensee must put the principal's interests above those of a third party, and above his own interests.He may not take any action that is adverse or detrimental to his principal's interests in a transaction, and must follow any lawful instruction given by the principal.Buyer's Agency Agreement StatesA buyer agency agreement typically states:1. The term of the agency2. The characteristics of the property the buyer wants to find3. A price range4. Conditions under which a fee will be earned,who will pay the fee, and the agent's contractual duties.A buyer agency agreement, like a listing agreement, may be either exclusive or open. A buyer may enter into multiple open buyer agency agreements.Good Faith and Continuous EffortThe last of a licensee's special duties to her principal concerns diligent representation.A licensee who enters into an agency relationship must make a good faith and continuous effort on her principal's behalf.Specifically, a licensee representing a seller has a duty to make a good faith and continuous effort to find a buyer for the property.And a licensee representing a buyer must make a good faith and continuous effort to find a suitable property.Inadvertent Dual AgencyAn inadvertent dual agency may be created by implication, when a real estate agent who's representing the seller acts as if he's representing the buyer.Unintentionally, the agent's behavior makes him a dual agent.Imputed KnowledgeWhen a third party communicates something to an agent, the principal is held to have notice of that information, even

if the agent never actually tells the principal.Similarly, if the agent knows something that should be communicated to a third party, the principal is also held to be aware of the information.Thus, the principal may be held responsible for failing to disclose the information to the third party, even if the agent never actually told the principal.Under Washington's real estate agency statute, the imputed knowledge rule no longer applies in real estate transactions.Unless otherwise agreed in writing, a principal doesn't have knowledge or notice of facts known by a real estate agent that are not actually known by the principal.

Secret ProfitA secret profit is any financial benefit an agent receives without the principal's consent.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. (The licensee's real estate firm and designated broker are also often referred to as the listing agent.)A listing agent is the seller's agent Real Estate Agent's Duties to all Parties 1. Reasonable Skill and Care2. Honesty and Good Faith3.Present Written Offers4. Disclose Material Facts5. Account for Trust Funds6. Provide Agency Law Pamphlet7.Disclose Agency Status Ostensible AgentSomeone acting on another's behalf without authority to do so, or exceeding the scope of her authority, may be referred to as an ostensible agent or apparent agent.Creating an Agency through RatificationAn agency is created by ratification if the principal gives approval after the fact to acts that weren't authorized at the time they were performed.The unauthorized acts may have exceeded the authority that the principal originally granted to the agent.Or the agent may be someone who originally had no authority to act for the principal.The principal may ratify the agency by expressly approving the unauthorized acts.Or, even without express approval, the principal may ratify the agency simply by accepting the benefits of the unauthorized acts.Seller-paid FeesProbably 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.By law, agency representation is not determined or affected by which party is paying an agent's fee. So accepting payment from the seller does not give the buyer's agent any special duties toward the seller.The buyer's agent is still representing only the buyer.Power of AttorneyIn a power of attorney, a principal appoints another person to act as his attorney in fact and carry out actions specified in the document. (An attorney in fact does not have to be an attorney at law.) In-House TransactionsIt's an in-house transaction when the listing agent and the selling agent both work for the same brokerage.In this situation, as a general rule, the listing agent represents the seller, the selling agent represents the buyer, and the designated broker for the firm is a dual agent.This arrangement is sometimes referred to as split agency, since the same brokerage firm is serving both parties.It may also be called designated agency, assigned agency, or appointed agency, in that one agent in the firm is

assigned to represent one party and another agent in the same firm is assigned to represent the other party.In a typical in-house transaction, the brokerage firm and designated broker automatically become dual agents, but the two brokers do not. Each broker represents only his or her own client.A buyer and a seller may also deliberately enter into a dual agency, agreeing to be represented not just by the same firm, but by the same broker at that firm.A dual agent must sign a buyer agency agreement with the buyer and a seller agency agreement with the seller. And in any dual agency situation, the standard disclosure and consent requirements apply.Trust FundsTrust funds are funds 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.RetainersA retainer is a fee paid up front, before services are provided. It's not common, but some buyer's agents collect a retainer from new clients, to make sure their work doesn't go entirely uncompensated.The retainer is usually