Florida Real Estate Principles, Practices & Law 38th Edition Linda L. Crawford Copyright © 2015 Kaplan, Inc. All rights reserved.

Authorized Relationships and Ethics Chapter 4 Authorized Relationships and Ethics

Law of Agency When people delegate authority to another to act on their behalf, an agency relationship is created Three types of law Common law (unwritten law) Case law Statutory law F.S. 475 and F.S. 455 Administrative law FREC rules ©2015 Kaplan, Inc.

Agency Relationships in General Business Dealings Fiduciary relationship Opposite of arm’s length relationship Principal Person who delegates authority to another Agent Person who is authorized to represent and act for principal Universal agent General agent Special agent ©2015 Kaplan, Inc.

Brokerage Relationships in Florida Three options in real estate transactions Transaction broker for buyer and/or seller Single agent for buyer or seller (not both) No brokerage relationship ©2015 Kaplan, Inc.

Dual Agency Dual Agent Broker who represents as a fiduciary both the buyer and the seller in a real estate transaction Florida law prohibits a broker from creating a fiduciary relationship with both the buyer and the seller Fiduciary Relationship of trust and confidence between broker as agent and the principal ©2015 Kaplan, Inc.

Written Disclosure Required in Residential Sales Sale of improved residential property of four or fewer units Unimproved residential property intended for four or fewer units Agricultural property of 10 acres or less ©2015 Kaplan, Inc.

Disclosure Does Not Apply To Nonresidential transactions Rental or leasing, unless there is an option to purchase property with four or fewer residential units Auctions Appraisals Business opportunities ©2015 Kaplan, Inc.

Transaction Broker Relationship Presumed Under Florida law It is presumed licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established A transaction broker disclosure is not required ©2015 Kaplan, Inc.

Transaction Broker Relationship Provides limited representation to customer (buyer, seller or both) Does not represent buyer or seller as a fiduciary or as a single agent Customer is not responsible for actions of transaction broker Limited Representation ©2015 Kaplan, Inc.

Duties of a Transaction Broker Deal honestly and fairly Account for all funds Use skill, care, and diligence in the transaction Disclose all known facts that materially affect the value of real property not readily observable Timely present of all offers and counteroffers Exercise limited confidentiality, unless waived in writing by a party Perform additional duties mutually agreed to ©2015 Kaplan, Inc.

Transaction Broker Relationship Parties give up rights to undivided loyalty Limited representation allows licensee to assist both buyer and seller License cannot represent one party to detriment of other party Not required to give customers a written transaction broker notice but still have duties of a transaction broker ©2015 Kaplan, Inc.

Single Agent Relationship Single agent A broker who represents, as a fiduciary, either the buyer or seller but not both in the same transaction Principal The party with whom a licensee has entered into a single agent relationship ©2015 Kaplan, Inc.

Subagents Authorized to assist and represent the agent Duties are delegated by the original agent Broker’s sales associates are general agents of the broker and subagents of the broker’s principals The broker is an agent of the principal Sales associates owe same fiduciary obligations to the principal as does broker ©2015 Kaplan, Inc.

Duties of a Single Agent Deal honestly and fairly Loyalty Confidentiality Obedience Full disclosure Account for all funds Skill, care, and diligence in the transaction Timely present all offers and counteroffers Disclose all known facts that materially affect the value of residential real property that are not readily observable ©2015 Kaplan, Inc.

No Brokerage Relationship Seller or buyer can choose not to be represented Broker facilitates sale/purchase Law does not require buyers and seller be represented ©2015 Kaplan, Inc.

Duties in No Brokerage Relationship Deal honestly and fairly Disclose all known facts that materially affect the value of residential property that are not readily observable to the buyer Account for all funds entrusted to the licensee ©2015 Kaplan, Inc.

No brokerage relationship Who’s Duty? Deal honestly and fairly Disclose all known facts that affect the value of residential property Account for all funds Transaction broker Single agent No brokerage relationship ©2015 Kaplan, Inc.

Who’s Duty? Transaction broker Single agent Use skill, care, and diligence Present all offers and counteroffers Transaction broker Single agent Exercise limited confidentiality Perform additional duties ©2015 Kaplan, Inc.

Who’s Duty? Confidentiality Obedience Loyalty Disclosure (full) Single agent ©2015 Kaplan, Inc.

Disclosure Requirements Duties must be described and disclosed in writing (except transaction broker) Can be included in listing agreement Signature line inserted following disclosure Single agent disclosure before, or at time of entering into a listing agreement, or before showing property No brokerage notice before showing property ©2015 Kaplan, Inc.

Exceptions to Disclosure Requirements Licensee knows that a single agent or transaction broker represents buyer or seller Bona fide open house or model showing Unanticipated casual encounters Responding to general questions of advertised property Communications concern services offered When selling new residential units built by the owner ©2015 Kaplan, Inc.

Practical Example #1 Sales Associate Amy works for XYZ Realty, Inc. Amy lists a house and establishes a single agent relationship with the seller. A buyer contacts Amy and wants to view the property. What relationship may Amy have with this buyer? ©2015 Kaplan, Inc.

Example #1 Solution Because Amy and XYZ Realty, Inc. have a single agent relationship with the seller, Amy must give the buyer a No Brokerage Relationship disclosure before showing the property. Single agent for the seller  No brokerage relationship with the buyer ©2015 Kaplan, Inc.

Practical Example #2 Broker Brown is working with buyer Jones as a transaction broker. Broker Brown is also listing 1234 Oak St., a property that buyer Jones is considering for purchase. If buyer Jones is going to buy this property, what relationship can Broker Brown have with the seller of 1234 Oak St.? ©2015 Kaplan, Inc.

Example #2 Solution Broker Brown can list 1234 Oak St. as a Transaction Broker or with No Brokerage Relationship. He cannot be a Transaction Broker for the buyer and a Single Agent for the seller. Transaction broker with buyer  Transaction broker or no brokerage relationship (nonrepresentation) with seller ©2015 Kaplan, Inc.

Transition to Another Relationship F.S. 475 permits a licensee to change the relationship To transition from a single agent to a transaction broker, the principal must sign Consent to Transition to Transaction Broker Notice ©2015 Kaplan, Inc.

Practical Example #3 Sales Associates Yvette and Zach work for Extra-Fine Realty. Yvette has just listed the house at 3456 Main St. as a single agent for the seller. Zach is a single agent for buyer Black. If buyer Black wants to view the house at 3456 Main St., how can this legally happen? ©2015 Kaplan, Inc.

Example #3 Solution Because Extra-Fine Realty is acting as a single agent for both the seller of 3456 Main St. and for buyer Black, both the seller and the buyer would have to sign a Consent to Transition to Transaction Broker notice to show this property to buyer Black. ©2015 Kaplan, Inc.

Designated Sales Associates Nonresidential transactions only At the request of the buyer and seller, the broker may designate sales associates to act as single agents for different customers in the same transaction Buyer and seller each must have assets of at least $1 million Written disclosures Single agent disclosure Designated sales associate disclosure ©2015 Kaplan, Inc.

Record Keeping and Retention Brokers must retain agreements that engage their services for 5 years Brokers must retain brokerage relationship disclosure documents for 5 years All residential transactions that result in a written contract All nonresidential transactions that utilize designated sales associates Includes files of properties that fail to close ©2015 Kaplan, Inc.

Terminating a Brokerage Relationship Fulfillment of brokerage relationship purpose Mutual agreement to terminate Expiration of agreement Broker renounces by giving notice Principal revokes relationship by giving notice Death of broker Destruction of property or eminent domain Bankruptcy of principal or customer ©2015 Kaplan, Inc.

Misrepresentation and Fraud Puffing Licensee boasting about property’s benefits Misrepresentation The misstatement of fact or the omission or concealment of a factual matter Fraud Licensee misrepresented the facts Licensee knew or should have known Buyer relied on the misrepresentation Buyer was damaged ©2015 Kaplan, Inc.

Professional Ethics Golden Rule Ethics is good business Professional standards NAR Code of Ethics ©2015 Kaplan, Inc.