1. California Real Estate Principles, 10.1 Edition
Chapter 3
Real Estate Agency

2. Chapter 3 Define agency and list the 3 ways an agency may be created.
Discuss the fiduciary relationship that exists between a principal and a licensed real estate agent.
Explain the difference between a single agency and a dual agency.
List and give examples of real estate violations.
Describe the agency differences between salespersons and brokers.
List and give examples of six ways in which real estate agencies are terminated.

3. TYPES OF AGENTS Examples: UNIVERSAL – Court-appointed Guardian
SPECIAL
GENERAL
UNIVERSAL
Examples:
UNIVERSAL – Court-appointed Guardian
GENERAL – Business Manager (Recorded Power of Attorney)
SPECIAL – Real Estate Broker (appointed by principal to negotiate or conduct business with other parties on behalf of the principal)

4. Parties to the AGENCY LISTING Contract
PRINCIPAL (Seller – property owner)
appoints
AGENT (Licensed real estate Broker)
to find
THIRD PARTY (Buyer)

5. Parties to the AGENCY BUYER-BROKER Contract
PRINCIPAL (Buyer)
appoints
AGENT (Licensed real estate broker)
to find
THIRD PARTY (Seller – property owner)

6. CREATION OF AGENCY Agency = Authority
BY AGREEMENT (Actual authority)
-Implied (Actions)
- Express (Verbal or Written)
BY RATIFICATION (Ostensible Authority)
-Principal approves an unauthorized agents action.
-Principal accepts the acts of the agent.
BY Estoppel (Relied Authority – Detrimental Reliance)
-Allow an innocent party to believe that you are their agent and rely on that belief.

7. AGENCY REQUIREMENTS Capacity of the parties Lawful Objective
Disclosure and Confirmation of the Relationship
Offer and Acceptance
Implied or Expressed Agreement

8. Multiple Listing Service (M L S)
Pool of licensees sharing listings
Maximizes market exposure for sellers
Association of Realtors® affiliation
Most Association of REALTORS® (AOR) have
Member status
Reciprocal status
Seller typically pays the listing broker who pays any co-operating broker

9. Type of Agency D E C Single Agency (One, not both)
-Broker for the seller
-Broker for the buyer
Dual Agency (Both)
-Broker for BOTH seller and buyer
3 steps required to establish Agency Relationship (DEC):
D isclosure
E lection
C onfirmation (written)
D E C

10. AGENCY VIOLATIONS Trust Fund Violations
-Example: Agent fails to use proper Accounting Procedures
2. Misrepresentation
-Incorrect statement
-Withheld information
3. False Promises
-False statement about future events
4. Divided Agency
-Receiving funds from both buyer and seller without disclosing the facts to the parties
5. Commingling
-Mixing client funds with the funds of the agent
-Failure to account between clients’ funds

11. AGENCY VIOLATIONS
6. Conversion -Using client funds for your own personal use 7. Definite termination date -Required on all “exclusive” real estate contracts 8. Secret Profit -Undisclosed profit without permission of the parties

12. Problem Areas False advertising Dishonest dealing Misuse of trade name
Trust Fund Handling
Broker must keep record of all client funds
Broker may have up to $200 to cover fees
Broker just handle client funds by:
Give to the proper party (principal)
Deposit into neutral escrow account
Put deposit into trust fund account
Failure to handle trust funds correctly:
Commingling

13. BRE Recovery Fund Finance by license fees
Reimburses public for uncollectable judgments against licensees
Licensee must pay fund back before doing business again
Fees collected and administered by the California Bureau of Real Estate
$50,000 find per individual; $250,000 for multiple claims

14. BROKER RESPONSIBILITY
Acts of the licensees under them
Obey principal’s lawful instructions
Use due diligence to find a buyer or property
Exercise reasonable care and skill
Have a written contract and agency relationship with each principal
No secret profit. Honest and fair dealing
Account for all funds of the client
Have written contract with each licensee
Discloses all funds, commissions and fees
Disclose agency agreement
Make diligent inspect and disclose
Reasonable skill and care. Good faith

15. DUTIES OF EACH AGENT To the Principal
A Fiduciary* Duty of Upmost Care: Loyalty, Confidentiality and Obedience
*a fiduciary holds the highest duty of care under the law
To the Principal and Third Parties
Diligent Exercise of Skill and Care
Honest and Fair Dealing in Good Faith
Disclose all Material Facts

16. INDEPENDENT CONTRACTOR
OFFICE STAFF
SALESPERSON
OFFICE STAFF
INDEPENDENT CONTRACTOR
EMPLOYER & EMPLOYEE
Pays own taxes & Social Sec.
Control over their own activities
No employee benefits
Broker liable to principals &
3rd parties for actions of agents
Broker withholds Social
Security taxes
Broker controls activities
May receive employee benefits
REAL ESTATE SALESPERSON
Usually and independent contractor for tax purposes
Always an employee under the real estate law by the Commissioner

17. TERMINATING AGENCY By Acts of the Parties
- Fulfillment/completion of the
purpose
- Term Expires
- Mutual agreement or consent of the principal and agent
- Unilateral Action
(Revoke, withdrawal,
renounce, cancellation)
By Law
- Death of Either Party
- Destruction of Property
- Court Action