Chapter 4 Agency Real estate is an industry about property, but it’s also an industry about people. The concept of agency is entirely about people, and relationships between and among them.

2 ©2013 Kaplan, Inc. 4 Agency Learning objectives –Identify the various types of agency relationships common in the real estate profession and the characteristics of each –Describe the fiduciary duties involved in an agency relationship –Explain the process by which agency is created and terminated and the role of disclosure in agency relationships –Distinguish the duties owed by an agent to clients from those owed to customers

3 ©2013 Kaplan, Inc. 4 Agency Introduction and history of agency Law of Agency and Definitions Law of agency Definitions –Agent –Principal –Fiduciary –Client –Customer –Nonagent

4 ©2013 Kaplan, Inc. 4 Agency Definitions in Georgia’s Brokerage Relationships in Real Estate Transactions Act (BRRETA) definitions Agency Broker Brokerage engagement Brokerage relationship Client Common source information companies Customer Designated agent Dual agent Material facts Ministerial acts Transaction broker

5 ©2013 Kaplan, Inc. 4 Agency Creation of agency Express agency Implied agency Compensation

6 ©2013 Kaplan, Inc. 4 Agency The six common-law fiduciary duties: 1.Care 2.Obedience 3.Loyalty 4.Disclosure 5.Accounting 6.Confidentiality

7 ©2013 Kaplan, Inc. 4 Agency Obligations to Buyer Responsibilities Earnest Money Deposit Seller Financing Property Condition Documents Negotiation Showing Property Goals Offers Possession Dates Default Efficiency Negotiation Appraisal

8 ©2013 Kaplan, Inc. 4 Agency Duties and responsibilities of an agent under Georgia’s BRRETA –broker engaged by seller –broker engaged by buyer –broker engaged by landlord –broker engaged by tenant

9 ©2013 Kaplan, Inc. 4 Agency Termination of Agency Completion, performance, or fulfillment of the purpose for which the agency was created Death or incapacity of either party Destruction or condemnation of the property Expiration of the terms of the agency Mutual agreement by all parties to cancel the contract Breach by one of the parties By operation of law, as in bankruptcy of the principal (bankruptcy terminates the agency contract and title to the property transfers to a court-appointed receiver) Georgia specifics about termination

10 ©2013 Kaplan, Inc. 4 Agency Types of agency relationships –Universal agent –General agent –Special agent –Designated agent

11 ©2013 Kaplan, Inc. Limitations on Authority 4 Agency Universal AgentGeneral AgentSpecial Agent Empowered to do anything the principle could do personally Represents the principal in a broad range of matters related to a particular business or activity Authorized to represent the principal in one specific act or business transaction under detailed instructions

12 ©2013 Kaplan, Inc. 4 Agency Types of agency relationships –Single agency –Seller representation –Buyer representation –Owner as principal –Dual agency Disclosed dual agency Undisclosed dual agency Georgia’s specifics about dual agency –Nonagency

13 ©2013 Kaplan, Inc. 4 Agency Single Agency

14 ©2013 Kaplan, Inc. 4 Agency Dual Agency

15 ©2013 Kaplan, Inc. 4 Agency Customer-level services –Reasonable care and skill in performance –Honest and fair dealing –Disclosure of all facts the licensee knows that materially affect the value or desirability of the property –State law may require additional services or disclosures

16 ©2013 Kaplan, Inc. 4 Agency Customer-level services –Environmental hazards –Opinion versus fact (puffing, misrepresentation, fraud) Property conditions—Georgia specifics –Latent defect (A hidden structural defect that would not be discovered by ordinary inspection) Stigmatized properties— Georgia specifics Properties branded undesirable because of actual or rumored criminal, tragic, or scandalous events that occurred on the property

17 ©2013 Kaplan, Inc. 4 Agency Puffing –Exaggeration of a property’s benefits Misrepresentation –Fraud: Intentional misrepresentation of a material fact to harm or take advantage or another –Negligent Misrepresentation: Broker should have known a statement was false