2011©Cengage Learning. All Rights Reserved.

Agency and Broker’s Relationship 2011©Cengage Learning. All Rights Reserved.

AGENCY RELATIONSHIPS Classification of Agencies Comparison to Employee Relationship Comparison to Independent Contractors 2011©Cengage Learning. All Rights Reserved.

Creation of Express Agency Created by an express contract or by authorization Contract may be oral Almost all real estate contracts must be in writing 2011©Cengage Learning. All Rights Reserved.

Creation of Implied Agency Implied by the conduct of the parties Consideration is not a requirement The acts of the parties may themselves create an agency relationship Ostensible Agents 2011©Cengage Learning. All Rights Reserved.

Termination of Agency Relationship End of Employment Death or Incapacity Revocation Irrevocable if Coupled with an Interest 2011©Cengage Learning. All Rights Reserved.

Real Estate Activities on Internet The California Department of Real Estate requires that any activities for which a real estate license is required must be by a licensee. 2011©Cengage Learning. All Rights Reserved.

Real Estate Activities on Internet Full-Service Discount Brokerages Limited-Service Discount Brokerages Information and Referral Companies Alternative Listing Web Sites 2011©Cengage Learning. All Rights Reserved.

REAL ESTATE BROKERS Someone who, for compensation or expectation of compensation, represents another in the sale or transfer of an interest in real estate. 2011©Cengage Learning. All Rights Reserved.

REAL ESTATE BROKERS Include not only those who negotiate or solicit the sale, purchase, and exchange of property, but also those who negotiate loans and leases, manage property, service trust deeds, and are involved in most other transactions of real estate in which they act on behalf of others in expectation of a commission. 2011©Cengage Learning. All Rights Reserved.

Exceptions Exception for Own Property Exceptions for Finders 2011©Cengage Learning. All Rights Reserved.

Salespersons Any licensed person employed by the broker in a professional capacity. A salesperson must work for a broker. May not operate independent of the broker’s supervision. 2011©Cengage Learning. All Rights Reserved.

Status of Real Estate Broker Employee for General Purposes Employee Eligibility for Workman’s Compensation 2011©Cengage Learning. All Rights Reserved.

Status of Real Estate Broker Independent Contractor Eligibility for Unemployment Rights Employee Eligibility for Payment of Commission Status Varies for IRS Purposes 2011©Cengage Learning. All Rights Reserved.

Whose Agent Is Broker? The broker is the agent of the first employer Usually the seller Subagents 2011©Cengage Learning. All Rights Reserved.

REGULATION OF BROKERS Regulated by the Real Estate Law The real estate commissioner’s regulations. Ordinary duties and responsibilities of their agency relationship 2011©Cengage Learning. All Rights Reserved.

Handling of Deposits Any funds received by the broker on behalf of a principal must be promptly given to the principal or deposited in a qualified escrow or trust account. 2011©Cengage Learning. All Rights Reserved.

Unlawful Acts of Brokers Making false statements or concealing material facts from a principal Acting as an agent for more than one party without the full consent of all principals Commingling Failing to disclose broker’s full profit to his principal Dishonest dealing 2011©Cengage Learning. All Rights Reserved.

Referral Fees Brokers can pay referral fees only in limited circumstances. 2011©Cengage Learning. All Rights Reserved.

Unlawful Acts as Individuals Obtaining a license by fraud Being convicted of a criminal act involving moral turpitude False or misleading advertising Misuse of the term realtor 2011©Cengage Learning. All Rights Reseved.

Unlawful Acts as Individuals Violation of any restricted license provisions Misuse of government records Inducing panic selling on the basis of race, color, creed, or national origin Violating the franchise law Failure to supervise salespersons adequately. 2011©Cengage Learning. All Rights Reseved.

Real Estate Recovery Fund The recovery is limited to the amount of the uncollectable judgment or $50,000 per transaction, whichever is less. 2011©Cengage Learning. All Rights Reserved.

No Special Liability When Acting as Principal It is not uncommon for a broker to act as a principal and to purchase property personally. The broker is not an agent, because the definition of an agent is someone who acts for another person. A licensee acting as principal is not entitled to a commission 2011©Cengage Learning. All Rights Reserved.

BROKER’S OBLIGATION TO CLIENTS Violation of Duties Duty of Good Faith Duty of Full Disclosure Duty of Loyalty: No Adverse Interest Duty to Use Professional Standard of Care Duty to Account 2011©Cengage Learning. All Rights Reserved.

BROKER’S OBLIGATION TO THIRD PERSONS Fraud Intentional Misrepresentation Puffing Negligent Misrepresentation Concealment Nondisclosure 2011©Cengage Learning. All Rights Reserved.

BROKER’S OBLIGATION TO THIRD PERSONS False Promise Secret Profits Negligence Principal’s Contracts Disclosure of Property’s Condition 2011©Cengage Learning. All Rights Reserved.