© 2008 by South-Western, Cengage Learning Chapter 19 Charles J. Jacobus Thomas E. Gillett

© 2008 by South-Western, Cengage Learning Georgia Real Estate An Introduction to the Profession Seventh Edition Chapter 19 The Principal-Broker Relationship: Agency

© 2008 by South-Western, Cengage Learning Agency Agency: is created when one person (the principal) delegates to another person (the agent) the right to act on the principal’s behalf.

© 2008 by South-Western, Cengage Learning 3 Levels of Agent Authority Universal Agent All matters General Agent Particular trade or business on a continuing basis Special Agent Particular act or transaction

© 2008 by South-Western, Cengage Learning Establishing Agent Authority Expressed Authority Contractual agreement Implied Authority Acts Custom, common usage, & conduct

© 2008 by South-Western, Cengage Learning Establishing Agent Authority Agency by estoppel Principal fails to maintain due diligence over the agent & the agent exercises powers not granted

© 2008 by South-Western, Cengage Learning Establishing Agent Authority Agency by ratification Established after the fact Agency coupled with an interest Agent holds an interest in property being represented

© 2008 by South-Western, Cengage Learning Brokers Obligations to Principal Loyalty to the Principal Trust, confidence, responsibility Faithful Performance Best effort & diligence Obey legal Instructions

© 2008 by South-Western, Cengage Learning Brokers Obligations to Principal Confidentiality Full Disclosure Accountability for Actions & Funds Received Trust Account Commingling

© 2008 by South-Western, Cengage Learning Brokers Obligations to Principal Reasonable Care Honesty, Fairness & Integrity Doctrine of Fairness

© 2008 by South-Western, Cengage Learning Obligations to Third Parties Honesty, Integrity, Care, Accountability, & Fair Business Dealings Loss of commission Loss of license Suit for damages

© 2008 by South-Western, Cengage Learning Obligations to Third Parties Lead-Based Paint HUD requirements Red Flags Possible problems? Inspections Home Warranty

© 2008 by South-Western, Cengage Learning Owner’s Disclosure Statement

© 2008 by South-Western, Cengage Learning “As Is” !

© 2008 by South-Western, Cengage Learning Puffing..

Buyer Agency Client is the Buyer Help make informed decisions Lowest price or “good deal” No latent defects

© 2008 by South-Western, Cengage Learning Principal’s Obligations

© 2008 by South-Western, Cengage Learning Broker’s Sales Staff CompetenceObedienceAccountingLoyalty Full Disclosure

© 2008 by South-Western, Cengage Learning Broker’s Sales Staff CompensationReimbursementIndemnificationPerformance

© 2008 by South-Western, Cengage Learning Cooperating Broker Fiduciary obligation of cooperating Broker Theory 1: Agent or subagent of the Seller Theory 2: Agent of neither Seller nor Buyer

© 2008 by South-Western, Cengage Learning Cooperating Broker Complicating Issues Buyer’s perception Middleman Principal Broker represents no one

© 2008 by South-Western, Cengage Learning Agency Dual Agency Conflict of interest Designated Agency One Broker Two Salespeople

© 2008 by South-Western, Cengage Learning Agency Disclosure Agency Disclosure Ostensible Authority: Agency created without written agreements Disclose to all parties who the Broker represents First significant contact Dual Agency Informed written consent

© 2008 by South-Western, Cengage Learning Termination of Agency

© 2008 by South-Western, Cengage Learning Termination of Agency Act of the Parties Agreement Revocation / Renunciation Operation of Law Death Expiration Incapacity Extinction

© 2008 by South-Western, Cengage Learning Interstate Land Sales Disclosures provided in a property report Not a HUD approval

© 2008 by South-Western, Cengage Learning Antitrust Laws Promote competition & Regulate activities which endanger completion Price Fixing Boycotting Monopoly Tie-In Agreement

© 2008 by South-Western, Cengage Learning Antitrust Laws Penalties Up to 3 Years in Prison Fines: $350,000 Individual $10,000,000 Corporation

© 2008 by South-Western, Cengage Learning Errors & Omissions Insurance Intentional acts to deceive Punitive Damages NegligenceMisrepresentation

© 2008 by South-Western, Cengage Learning Key Terms Key Terms Agent Boycotting Commingling Dual agency Middleman Ostensible authority Price fixing Principal Puffing Third parties