Principles and Practice Module 4 PowerPoint
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This document summarizes a chapter on agency relationships in real estate from a training course. It discusses key concepts like fiduciary duties, disclosure requirements, dual agency, and termination of agency. It also provides examples of quiz questions and answers that test understanding of topics like distinguishing between actual and constructive fraud, the duties of limited service agents, and situations that constitute dual agency under Ohio law.
Principles and Practice Module 4 PowerPoint
- 1. Real Estate Principles & Practices Module 4 March 9, 2016
- 2. Chapter 6 – Continued Brokers, Salespeople, and the Agency Relationship March 9, 2016
- 3. Consumer Guide to Agency Relationships • Ohio’s consumer-friendly method of providing sellers and/or buyers with information regarding the type of agency relationships recognized in Ohio and the type of agency a particular brokerage practices • Presented at the first substantive contact a licensee has with a consumer March 9, 2016
- 4. Agency Disclosure Statement • Discloses the actual agency relationship that will result in a property-specific transaction and lets the buyer and seller know exactly who is working for whom in the transaction • The second form required under Ohio law March 9, 2016
- 5. Exemptions • These disclosure forms are not required for: – Referrals from one licensee to another – Open houses (unless an offer is written) – Residential property that is rented or leased for a term of 18 months or less – Transactions dealing with foreign real estate or cemetery interment rights March 9, 2016
- 6. The Agent’s Duties to the Principal • Fiduciary responsibilities (ACCOLD*) – Accountability – Confidentiality – Care – Obedience – Loyalty – Disclosure * Also known as OLD CAR (Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable Care) March 9, 2016
- 7. Waiver of Duties— “Limited Service Agents” • Duties that may be waived by a seller include: – Seeking a purchase offer at a price and with terms acceptable to the seller – Accepting delivery of purchase offer(s) and presenting it to the seller in a timely manner, even if the property is subject to a contract of sale, lease, or letter of intent to lease – Answering the seller’s questions and providing information regarding any offers or counteroffers – Assisting the seller in developing, communicating, and presenting offers or counteroffers – Answering the seller’s questions regarding the steps to fulfill the terms of any contract (within the scope of knowledge required for real estate licensure) March 9, 2016
- 8. Authority to Negotiate • Under Ohio law, the definition of “negotiate” includes: – Delivering or communicating an offer, counteroffer, or proposal – Discussing or reviewing the terms of any offer, counteroffer, or proposal – Facilitating communication regarding an offer, counteroffer, or proposal and preparing any response as directed March 9, 2016
- 9. Dual Agency • When a licensee represents both buyer and seller in a transaction • A dual agent owes fiduciary duties to both buyer and seller • Con: Inherent conflict of interest in the arrangement March 9, 2016
- 10. Ohio’s Agency Law: Acceptable Dual Agency Forms • One licensee may represent both buyer and seller (or lessor and lessee) as clients in the same real estate transaction • Two licensees affiliated with the same brokerage (one represents the buyer or lessor while the other represents the seller or lessee), where the broker and management- level licensees are dual agents (unless a management-level licensee falls under the exemption below) • Two licensees affiliated with the same brokerage (one has the buyer or lessor as a client and the other has the seller or lessee as a client), where every licensee in the brokerage represents every client, therefore, both agents are dual agents March 9, 2016
- 11. Dual Agency Disclosures • Licensee must disclose to buyer and seller all relevant information to enable each party to make an informed decision regarding consent to the dual agency relationship • If a material change in information occurs, it must be disclosed to buyer and seller and each party must be given a chance to revoke consent March 9, 2016
- 12. The Agent’s Duties to Third Parties • Agent owes third parties a duty of good faith and fair dealing • An agent is not a fiduciary in relation to a third party • Fair dealing means the seller’s agent must: – Disclose certain information to prospective buyers – Avoid misrepresentation March 9, 2016
- 13. Disclosure to the Buyer • Caveat emptor (“Let the buyer beware”) • Seller and seller’s agent must tell the buyer about any latent defects • Seller and seller’s agent are generally not required to tell the buyer about patent defects March 9, 2016
- 14. Residential Property Disclosure Form • Delivered to buyer prior to an offer to purchase: – Detailed description of the property’s condition – Was property inspected for mold? – Any smoke damage? – Is property located in a flood plain? – Any problems and defects with mechanical systems, water quality/intrusion, and nonconforming uses? • Includes notification of “Megan’s Law” • Signed by seller and buyer March 9, 2016
- 15. Fraud • Intentional or negligent misrepresentation or concealment of material facts – Actual Fraud: Intentional – Constructive Fraud: Negligent misrepresentation March 9, 2016
- 16. Opinions, Predictions, and Puffing • Opinion: “Compared to the sale prices for other homes in the neighborhood, this one appears to be an excellent buy.” • Prediction: “Historically, property values have gone up 4% a year, and there is currently no reason to believe this will change for this area.” • Puffing: “Look at this backyard!” (Even though the agent knows the house really backs up to a park, but does not mention this.) March 9, 2016
- 17. “As Is” Clause • A provision in a purchase agreement stating the buyer accepts the property in its present condition • Ohio law states this does not protect the seller from liability for nondisclosure of a latent defect or deliberate concealment of a defect • Not a defense to fraud March 9, 2016
- 18. Penalties for Breach of Duty • Disciplinary action by professional associations • Action by the Ohio Division of Real Estate • Civil lawsuits filed by injured parties • The filing of criminal charges against the agent (in very serious cases) March 9, 2016
- 19. Terminating Agency • Accomplishment of purpose • Expiration • Operation of law • Mutual agreement • Renunciation • Revocation March 9, 2016
- 20. Agency Coupled with an Interest • A principal does not have the right to revoke an agency agreement if it is an agency coupled with an interest – When the agent has a personal interest in the subject of the agency • Is not terminated by the death, incompetency, or bankruptcy of the principal March 9, 2016
- 21. Chapter 6 Quiz 1.) Which statement regarding the broker- salesperson relationship is TRUE? a. It is not a fiduciary relationship since a salesperson works for the client. b. It is usually a subcontractor relationship. c. Salespeople are agents of their broker. d. all of the above March 9, 2016
- 22. Chapter 6 Quiz 2.) Which statement regarding an agency relationship is FALSE? a. An agency relationship may be created between a licensee and a buyer. b. It is illegal for a salesperson to represent a client directly, without a broker. c. The seller has a fiduciary responsibility toward the buyer. d. Subagency is when a licensee is an agent of an agent. March 9, 2016
- 23. Chapter 6 Quiz 3.) Under Ohio’s Agency Law, two licensees from the same brokerage are considered dual agents if a. company policy says that all agents represent all clients of the brokerage. b. the two licensees acted independently in establishing an agency relationship with their respective clients and did not assist one another. c. the two licensees are non-management-level licensees at the same brokerage. d. the two licensees co-listed a property. March 9, 2016
- 24. Chapter 6 Quiz 4.) A sellers agent must give a Consumer Guide to Agency Relationships to a seller a. at the same time a listing agreement is signed. b. before the buyer’s offer is presented. c. prior to showing a buyer the property. d. upon initiating a pre-qualification evaluation. March 9, 2016
- 25. Chapter 6 Quiz 5.) A buyer’s agent must give a Consumer Guide to Agency Relationships to the buyer a. after the buyer’s offer is presented. b. at the open house, if the buyer wants to write an offer on the home. c. at the same time a listing agreement is entered into. d. immediately after marketing or showing the property. March 9, 2016
- 26. Chapter 6 Quiz 6.) A buyer's agent must give an Agency Disclosure Statement to a buyer a. at the same time a listing agreement is signed. b. before the buyer’s offer is written. c. prior to marketing or showing the property. d. upon initiating a pre-qualification evaluation. March 9, 2016
- 27. Chapter 6 Quiz 7.) When must a buyer's agent give an Agency Disclosure Statement to a seller? a. at the same time a listing agreement is signed b. before the buyer’s offer is presented c. immediately after marketing or showing the property d. It is not required unless the agent requests confidential information from the buyer. March 9, 2016
- 28. Chapter 6 Quiz 8.) Trisha wants to sell her house quickly because her new job in another city begins the first of next month. She tells Ed to do whatever it takes to sell her house. Ed’s fiduciary duty requires him to a. find a suitable buyer as quickly as possible, even if this means Ed must make less of a commission on the deal than he had anticipated. b. have his friend buy the house at a lower price because he feels that Trisha’s primary interest is in selling the house quickly, not the price. c. tell prospective buyers that Trisha wants her house sold as quickly as possible because he must follow all instructions of the client. d. weed out offers that seem unreasonable or for which Ed knows the buyers cannot obtain financing to keep Trisha from wasting her time. March 9, 2016
- 29. Chapter 6 Quiz 9.) Marsha is a broker at Johnson Realty and has listed a rundown property. The owner has not made any effort to fix it up over the years and has ignored Marsha’s suggestions. Ron, one of Marsha’s non-management-level licensees, wants to buy the property. Which statement is TRUE? a. Marsha does not need to do anything as long as she keeps any confidential information she received from the seller confidential. b. Marsha should again suggest some improvements to the seller, and then make all necessary disclosures and have forms signed in regard to Ron as a potential buyer of the property. c. Marsha should again suggest some improvements to the seller, but nothing else. d. Since Ron is a non-management-level licensee, Marsha does not need to make any further disclosures to the seller. March 9, 2016
- 30. Chapter 6 Quiz 10.) Which is NOT dual agency? a. A brokerage represents both the buyer and seller as clients in the same real estate transaction. b. A licensee is dealing with both the buyer/customer and seller/client in the same real estate transaction. c. The only manager in the company represents a client in an in-company real estate transaction. d. Two licensees in the same company represent their own individual clients in the same transaction. March 9, 2016
- 31. Chapter 6 Quiz 11.) A salesperson who is NOT an agent of the buyer is responsible for telling the buyer a. all known latent defects in the property, whether or not the buyer asks about them. b. all known patent defects in the property, whether or not the buyer asks about them. c. everything, since the agent has the duties of good faith and fair dealing. d. nothing, since a fiduciary relationship does not exist. March 9, 2016
- 32. Chapter 6 Quiz 12.) Shane lists his home with Eve, a real estate agent, and tells her about the leaks in the roof because he thinks a new buyer will likely see them. Shane does not tell Eve that the house will also need a new well because the old one is not deep enough. Eve has the home inspected and discovers Shane’s house also has termites. Months later, Eve has shown the house to 13 buyers with no interest. Eve decides not to tell her new prospect about the leaky roof because she thinks that it is easy to spot, but also decides not to mention the termites because the inspection report was not required and the new prospect never asked her about it. Are any of these items considered to be actual fraud or constructive fraud? a. All three items represent actual fraud for both Shane and Eve. b. All three items represent constructive fraud. c. The roof is a non-issue; the well is actual fraud by Eve; the termite issue is constructive fraud by Shane. d. The roof may be an issue depending on how visible it was to prospective buyers; the well is actual fraud by Shane; the termite issue is actual fraud by Eve. March 9, 2016
- 33. Chapter 6 Quiz 13.) An "as is" clause in a purchase agreement a. applies to patent defects in the purchase of residential real estate. b. gives a buyer no recourse for problems with the property. c. is a defense against a fraud lawsuit. d. protects the seller from liability for nondisclosure of a latent defect. March 9, 2016
- 34. Chapter 6 Quiz 14.) Agency may NOT be terminated by a. accomplishment of purpose. b. action by NAR if either party is a member. c. renunciation by the agent. d. revocation by the principal. March 9, 2016
- 35. Chapter 6 Quiz 15.) Agency coupled with an interest should be terminated by a. bankruptcy of the principal. b. death of the principal. c. mutual agreement. d. revocation by the principal. March 9, 2016
- 36. Chapter 6 Quiz 16.) A property manager is usually considered a, a. General Agent. b. Limited Agent. c. Special Agent. d. Universal Agent. March 9, 2016
- 37. End Module 4 March 9, 2016