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Thomson/South-Western©2008 Chapter 20 The Principal-Broker Relationship: Agency _______________________________________
Thomson/South-Western©2008 Agency Created when one person delegates to another the right to act on his behalf. General agency – the right to bind the principal to perform a particular act. Special agency – empowers the agent to perform only specific acts and no others. Principal = Property owner Client = Principal Agent = Broker
Thomson/South-Western©2008 Establishing Authority Written – contractual agreement. Implied – custom in the industry. Ostensible – conduct of the parties. Ratification – agency established after the fact. Estoppel – due to principles failure to maintain due diligence over the agent who exercises powers not granted him.
Thomson/South-Western©2008 Commission Skills and Knowledge Principal Agent Agency Relationship
Thomson/South-Western©2008 Care Obedience Accounting Loyalty (Competence and expertise) (Lawful instructions) (For funds received) (Principal’s interest first) Broker’s Obligation to Principal
Thomson/South-Western©2008 Said without checking the facts Not said and facts not checked Said Wrongly to Mislead Unsaid in Order to Mislead A Facts Broker Knows B Facts Broker Does not know Disclosure Liability
Thomson/South-Western©2008 Red Flags Commingling Puffing Lead base paint disclosure on homes built prior to 1978 Home Inspections
Thomson/South-Western©2008 Buyer Agency The exact opposite theory from the traditional seller representation. Here the principal or client is the buyer! Agent owes the care of agency duties to buyer.
Thomson/South-Western©2008 Agency Disclosure Agency relationships can be created without written agreements and consumers must be informed who the agent represents so there is a clear understanding of the agents role in a transaction. Many states now require disclosure forms.
Thomson/South-Western©2008 Agency Dual agent – broker represents both parties (seller & buyer) in the same transaction. –Note: TREC does not allow dual agency! Must be intermediary. Intermediary – broker who is employed to negotiate a transaction between the parties and is the agent to both.
Thomson/South-Western©2008 Disclosure of representation A licensee under this Act who represents a party in a proposed real estate transaction shall disclose that representation at the time of the licensee's first contact with: another party to the transaction another licensee who represents another party to the transaction. The disclosure required under Subsection (a) of this section may be made orally or in writing. A licensee who represents a party in a real estate transaction acts as that party's agent. Except as provided by Subsection (e) of this section, a licensee shall furnish to a party in a real estate transaction at the time of the first face-to- face meeting with the party the required written statement.
Thomson/South-Western©2008 IF THE BROKER REPRESENTS THE OWNER: The broker becomes the owner's agent by entering into an agreement with the owner, usually through a written listing agreement, or by agreeing to act as a subagent by accepting an offer of subagency from the listing broker. A subagent may work in a different real estate office. A listing broker or subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first. The buyer should not tell the owner's agent anything the buyer would not want the owner to know because an owner's agent must disclose to the owner any material information known to the agent.
Thomson/South-Western©2008 IF THE BROKER REPRESENTS THE BUYER: The broker becomes the buyer's agent by entering into an agreement to represent the buyer, usually through a written buyer representation agreement. A buyer's agent can assist the owner but does not represent the owner and must place the interests of the buyer first. The owner should not tell a buyer's agent anything the owner would not want the buyer to know because a buyer's agent must disclose to the buyer any material information known to the agent.
Thomson/South-Western©2008 Intermediary The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker's obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction: 1.Shall treat all parties honestly. 2.May not disclose that the owner will accept a price less than the asking price unless authorized in writing to do so by the owner. 3.May not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer 4.May not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License Act or a court order or if the information materially relates to the condition of the property.
Thomson/South-Western©2008 If you choose to have a broker represent you Enter into a written agreement with the broker that clearly establishes the broker's obligations and your obligations. The agreement should state how and by whom the broker will be paid. You have the right to choose the type of representation, if any, you wish to receive. Your payment of a fee to a broker does not necessarily establish that the broker represents you. If you have any questions regarding the duties and responsibilities of the broker, you should resolve those questions before proceeding.
Thomson/South-Western©2008 Information Owner disclosure information Interstate land disclosure statements Antitrust laws –Price fixing –Boycotting Errors and Omission insurance
Thomson/South-Western©2008 Key Terms Agent Boycotting Commingling Dual agency Intermediary Middleman Ostensible authority Price fixing Principal Puffing Third parties
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