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Larabee Section 5
Contacts, Agency, Fair Housing
| Term | Definition |
|---|---|
| Acceptance | Communication to an offeror that the recipient (offeree) finds the terms and conditions of an offer acceptable. Turns an offer into a binding contract. Must be in the same manner as received, in writing for real estate sales. |
| Accord and Satisfaction | Agreement by a creditor to accept less than the original amount owed. |
| Actual Authority | That expressed or implied authority conferred upon an agent by the principal. |
| Agency | The fiduciary relationship that results when one party (principal) gives another party (agent) the authority to act on the principal's behalf to transact business. |
| Agency by Estoppel | An agency resulting from actions of the parties (that cannot later be denied) leading a third party to believe that an agency exists. See Estoppel |
| Agency by Implication | An agency created by words or actions that leads one or more parties to believe an agency relationship exists. |
| Agency by Ratification | An agency created by the actions of an unauthorized party being accepted by the principal after the fact. Example: I find a tenant to rent your office space and you agree even though we did not have an agreement to do so. |
| Agency Coupled with an Interest | Agency in which the agent holds an interest in the property, usually because he/she advances funds to the owner. Unlike a normal agency, may not be revoked by the principal, nor terminated by death of principal. |
| Agent | The one who acts for a principal in an agency relationship. |
| Americans with Disabilities Act (ADA) | A federal law (1992) intended to prevent discrimination against disabled persons in 4 areas: public transportation, public accommodations, government services and telecommunications. |
| Antitrust Laws | Laws that promote business competition. (Sherman Anti-Trust Laws) |
| Arbitration | Binding resolution of a dispute by a third party; faster and less expensive than proceedings in a court of law. Many contracts contain clauses requiring arbitration of any subsequent contract disputes. |
| Assignment (in leasing) | To replace one party in a contract with another. A new lessee (tenant) replaces original lessee, the assignee becomes primarily liable and the assignor remains secondarily liable, unless there is a novation agreement, relieving the assignor of liability |
| Attorney-in-Fact | One authorized to act independently (and sign for) another person for either a specific or general purpose or power. A real estate broker is NOT an attorney-in-fact unless specifically appointed separately from the listing agreement. |
| Bilateral Contract | A promise for a promise, e.g. real estate purchase contracts. Buyer promises to buy, seller promises to relinquish title. |
| Blind Ad | An advertisement that disguises the identity of the advertiser, i.e. contains a phone number with no other identifying data. Licensed brokers should not use blind ads and must disclose agency. |
| Blockbusting | The illegal act of inducing owners to sell now because property value will decrease due to real or rumored moving into the neighborhood by persons of any protected class. |
| Breach of Contract | A violation or default of the terms and/or conditions stated in a contract |
| Buyer Agent | An agent employed by and owing fiduciary duties to the buyer. |
| Civil Rights Act of 1866 | Gave all citizens the same rights as those previously only enjoyed by whites to inherit, purchase and sell real and personal property. |
| Civil Rights Act of 1964 | Title VI prohibits discrimination in any programs receiving federal funds, such as FHA and VA loans or urban renewal projects. |
| Civil Rights Act of 1968 | Title VIII a/k/a the Federal Fair Housing Act prohibits discrimination in housing based on national origin, color, religion and race. Enforced by HUD (Department of Housing and Urban Development). |
| Fair Housing Amendments Act of 1988 | Added protection for people with physical or mental handicaps plus familial status. Also gave H.U.D. increased enforcement power, removed the cap on punitive damages, etc. |
| Confidentiality | A duty of an agent to maintain the trusted confidence and secrets of a principal. Neither agent nor non-agent transaction brokers may reveal anything that would weaken the principal's or client's position. |
| Commingling | Mixing or depositing client's funds with broker's personal funds or business operating account. Commingling is illegal |
| Compensatory Damage | To compensate for the actual cost of the claim. |
| Consensual Relationship | A relationship agreed to by all parties. Express agency is a consensual relationship |
| Consideration | Anything of value that entices one into a contract or something received by the grantor in return for his/her deed. |
| Contingency | A condition in a contract that requires completion of something before the contract will be binding. |
| Contractual Intent | Inference that both parties are acting in good faith. |
| Conversion | Converting trust account funds to personal use. |
| Cooperating Broker | One working with or representing the buyer or tenant; Cooperates with the listing broker by providing a prospective buyer/tenant for the listed property. |
| Counteroffer | Legally - rejection of original offer with new offer. In form, usually states the first offer is accepted "except for the following changes", thus incorporating/merging the first contract. Not binding on the buyer (who is now the offeree) until accepted. |
| Default | Breach or violation of an agreement. |
| Deficiency Judgment | A judgment given to the holder of a foreclosed promissory note against the borrower when the proceeds of the foreclosure sale are not enough to pay off the debt. |
| Designated Brokerage | The employing broker designates a licensee as the exclusive company representative (agent) to a seller/buyer landlord/tenant; This enables another licensee in the same firm to be on the other side of the transaction without creating dual agency. |
| Disclosure | Agent's duty to principal to discover/reveal info that might adversely affect the principal's position. Also a duty to reveal adverse material facts about property condition, inability of either party to complete the contract, etc. |
| Dual Agency | Representation of both parties by the same licensee (or by licensees in the same firm in a non-designated brokerage state) in an agency relationship. Undisclosed dual agency is always fraudulent. Dual agency is illegal in Colorado. |
| Duress | The use of force to make a party sign a contract. The threat of duress is menace. In either case, a contract signed under duress or menace may be voided by the signer. |
| Duties of an Agent | Fiduciary duties that are inherent in an agency relationship include reasonable Care, Obedience to lawful instructions, Accounting, Loyalty and Disclosure. (C.O.A.L.D.) |
| Earnest Money | Deposit paid w/ offer as a good faith gesture by the buyer. Although not consideration in a contract (the buyer's promise to pay is the consideration), generally a higher amount of earnest money evidences a more serious intent on the part of the buyer. |
| Equitable Title | That interest the purchaser holds as soon as his or her offer becomes a contract. The seller continues to hold record (legal) title until the contract is closed. |
| Estoppel | Doctrine that prevents claiming something contrary to facts previously known. Certificate of estoppel signed by a tenant at time of sale prevents the tenant from later claiming to the new owner that the rent is other than what was previously certified. |
| Exclusive Agency Listing | Gives a brokerage firm exclusive right-to-sell, but reserves to the seller the right to procure the buyer and not pay a commission. |
| Exclusive Right-to-Sell Listing | An agreement in which the seller agrees to compensate the brokerage firm regardless of who (including the seller) procures the buyer. |
| Execute | To sign a document; or to carry out a promised act or contract. |
| Executed Contract | One that has been fully performed. The closing executes the real estate purchase contract. |
| Executory Contract | One that has not yet been fully performed. (Example: when you are "under contract" you have an executory contract.) |
| Exemplary Damages | Damages above and beyond the actual cost of the loss, assessed to punish or set an example for others. |
| Express Agency | A relationship formed by oral or written expression; Opposite of Implied Agency. |
| Express Contract | A specific agreement either written or oral that states what the principal expects an agent to perform. Real estate contracts are express contracts that must be in writing as required by the statute of frauds. |
| Facilitator or Transactional Broker | A licensee assisting in a real estate transaction as a neutral non-agent. No inherent fiduciary relationship w/ client, and does not advocate for the client. A facilitator may assist buyer and seller in the same transaction without creating dual agency. |
| Familial Status | A fair housing protected class prohibiting discrimination against individuals under the age of 18 living with a parent or legal guardian, including pregnant women or a person waiting to be claimed by a legal guardian. |
| Fiduciary | That special relationship of trust and confidence forged by agency whereby the agent puts the principal's interests ahead of his or her own interest. Fiduciary duties owed to a principal are the same as duties of an agent. |
| Fraud | Intentional deception or misrepresentation - a material misstatement of fact. |
| Forbearance | Refraining from taking a legal or contractual action even though entitled. Example: "I promise not to sell if you give me $500". Accepting a late rent payment without the penalty specified in the lease is an act of forbearance by the landlord. |
| General (Universal) Agent | An agent given a wide scope of authority to handle a variety of things. A property manager is a general agent because of the wide range of activity necessary to rent and maintain the property. Opposite of Special Agent |
| General Power of Attorney | Appointment of an attorney-in-fact with signature authority and with wide-ranging discretion in handling the delegated matters in the appointment. |
| Good Consideration | Non-monetary consideration in a contract. Example: "For love and affection". Good consideration is okay for a gift deed, but not a normal arms-length transaction. Opposite of valuable consideration |
| Handicap | A mental or physical impairment that substantially limits activity such as hearing, seeing, walking, learning, etc. |
| Hold Harmless Clause | A provision in a contract that protects a party from damage or harm arising from the transaction. |
| Implied Agency | An agency relationship created by the acts or conduct of the parties involved. Opposite of Express Agency. |
| Implied Contract | An implied contract is created by the actions of the parties. It is understood but not stated. |
| Injunction | A court order directing a party to refrain from doing some certain act(s). |
| Installment Land Contract (ILC) or Contract For Deed | An alternative sale agreement in which the buyer makes periodic payments directly to the seller, but does not receive a deed until all (or an agreed upon amount) of the payment price is reached. Used more often in times of tight money. |
| Intermediary / Facilitator | A licensee who assists buyers and sellers but has no fiduciary relationship with either, and whose non-agent duties and limitations are spelled out in a written agreement. (In Colorado known as a transaction-broker) |
| Legal Purpose | An essential element of a valid contract. A contract for an illegal purpose is void. |
| Liquidated Damages | Those damages specified by contract in advance (usually loss of earnest money) if the buyer defaults. If specified, liquidated damages are the seller's only remedy against the buyer. |
| Loyalty | The fiduciary duty of an agent to act at all times solely in the best interests of the principal to the exclusion of all other interests, especially the broker's own self-interest. |
| Megan's Law | A federal law requiring residence registration of convicted sexual predators, in effect creating a stigmatized property. Licensees should direct buyers/tenants to the source of such registration lists as opposed to providing the information personally. |
| Menace | The threat of duress used to force a party to sign a contract. The injured party may void a contract signed under duress or menace. |
| Misrepresentation | An untrue statement of material fact that induces a party to act. It may be intentional (fraud) or unintentional. A contract so signed is voidable by the injured party. |
| Mistake | An error of fact by both parties that may cause a contract to be voidable. Example: A contract's legal description depicts a different lot than the buyer was shown. |
| Multiple Listing Service (MLS) | A marketing service of NAR (National Association of REALTORS(r)) through local REALTOR(r) associations to which members post listings for all members to access. |
| Mutual Assent or Agreement | An essential element of a contract. A meeting of the minds. The parties agree to all provisions of the contract. |
| Mutual Rescission | Agreement by both parties to abandon an executory contract. |
| Net Listing | One in which the broker's compensation is all "net" funds over and above the sales price the seller agreed to. Possibly used to sell distressed or pre-foreclosure property with not enough equity from which to pay a broker commission. |
| Novation | Substitution of a new contract (or party) for a previous one. Without novation the original party is still liable. I.E. When an existing loan is assumed, original borrower should sign a novation agreement releasing him or her from liability for the loan. |
| Obedience | A fiduciary duty of an agent to obey the lawful instructions of the principal. |
| Offer and Acceptance | The final step in creating a contract. Notifying the offering party (offeror) that the offer has been signed converts an offer to a contract. Signing the contract alone does not create the contract. |
| Open Listing | Non-exclusive, simultaneous right-to-sell agreements with multiple brokers, the first of whom to procure a buyer earns a commission. The seller reserves the right to personally procure the buyer and not owe any commission. High risk for the broker |
| Ostensible Agency | The agency relationship occurs due to actions of the parties - implied agency. |
| Parol Evidence Rule | A judicial rule of procedure prohibiting oral evidence from being used to change the terms of a written contract. |
| Power of Attorney | Written document appointing an "attorney-in-fact" (act independently and with signature authority on behalf of another person in matters specified). Can be specific (sign on behalf of a seller) or general (manage business/personal matters). |
| Price Fixing | Conspiracy by two or more professionals to mutually standardize fees for service. Price fixing defeats competition and violates federal and state antitrust laws. |
| Principal | The person appointing an agent in an agency relationship. |
| Procuring cause | The broker who is the immediate and primary reason for the sale of a property. More likely to become an issue in other than exclusive right-to-sell listing contracts |
| Puffery | An exaggerated opinion, not necessarily based in fact, intended to portray a property in a more favorable light. Example: "This property is one of the best buys in the neighborhood. It is sure to go up in value". |
| Punitive Damages | Additional charges intended to "punish" above and beyond compensatory damages which are intended to return the parties to their original positions before the contract. |
| Real Estate Broker | Licensed person/firm/partnership/association/corporation who, in consideration of valuable compensation, acts as special agent in the sale/lease of real estate. |
| Real Estate Salesman | In some states, one who is employed by a real estate broker, usually as an independent contractor. In single licensing states there is no salesperson license, and entry-level licensees are educated to and licensed at the associate broker level. |
| Reasonable Care and Diligence | The duty of an agent to discover and share relevant facts that a real estate licensee could readily discover--such as zoning changes, school closing, new roads, etc. |
| Redlining | Illegal restriction on the number of loans or the loan-to-value ratio in specific areas based on grounds that exclude any protected class. |
| Rescind | To take back or annul. Until an offer is accepted and becomes a contract, the offering party may rescind the offer without penalty. |
| Rescission | Ending of a contract with the return of the parties to their original position. |
| Revocation | To recall or withdraw; such as withdrawal of an offer prior to acceptance by the offeree, or the state's disciplinary action permanently removing a real estate license. |
| Right of First Refusal | The right to have the first chance to purchase or lease property if the owner decides to sell or lease. sometimes seen in common interest condominium communities. |
| Salesperson | In some states, one who is employed by a real estate broker, usually as an independent contractor. In single licensing states there is no salesperson license, and entry-level licensees are educated to and licensed at the associate broker level. |
| Single Agency | Representation of only one party in a real estate transaction. |
| Special Agent | One authorized by the principal to perform a narrow or specific task. A listing broker employed to sell one home is a special agent. Opposite of General Agent |
| Specific Performance and or Damages | A contract remedy permitting either party to force the other to perform the contract and/or sue for damages. Buy-Sell contracts are often "specific performance" against the seller. Opposite of liquidated damages. |
| Statute of Frauds | State laws requiring transfer of any interest in land to be in writing to be enforceable. Statues of Fraud generally exempt oral or written lease of less than one year from this requirement. |
| Statute of Limitations | Laws requiring lawsuits to be brought to court within a specific period of time |
| Steering | The discriminatory practice of directing homebuyers to (or away from) specific areas based on a protected class to maintain homogeneity. |
| Subagent | An agent of an agent. In the past, MLS participants agreed to be subagents of each other, all working on the seller's behalf. With the advent of buyer agency, subagency is all but defunct. |
| Time is of the Essence | A contract clause requiring adherence to contract deadlines. |
| Trust Accounts | Bank accounts to maintain funds that belong to the public -i.e., buyers' earnest money, tenants' security deposits, owners' rental income. |
| Undue Influence | Strong urging that overwhelms a person so they no longer act of their own accord. Contracts signed as a result of undue influence are voidable. |
| Unilateral Contract | A promise for an unrequired act. If you perform, I will pay you, but you are not obligated to perform. Example: an option contract |
| Valid Contract | A contract that is enforceable by all parties to the contract in a court of law. |
| Valuable Consideration | Valuable consideration is money, a promise, property etc., something having value. Contrast with good consideration |
| Voidable Contract | A flawed contract in which the innocent party has the power to either void or enforce, but that remains valid unless voided. Example: A minor (not legally competent) may enforce the contract even though the adult party cannot force the minor to perform. |
| Option | A unilateral contract in which the optionor (property owner) promises to sell if and when the optionee (prospective buyer) chooses to buy - at a price and before a date set in the option contract |
| Protected Class | A category protected in law from housing discrimination. Federal law includes race, color, religion, national origin, sex, familial status and handicap. States and even local governments may have additional protected classes |
| Fair Housing Act of 1974 | Added sex (gender) as a protected class. |
| Diversion | The criminal use of trust account funds for the benefit of other than the owner of those funds |
| Essential Elements of a Contract | Competent Parties, Mutual Assent (Meeting of the Minds), Legal Purpose and Consideration |
| Contract | a voluntary, legally enforceable promise between two competent parties to perform some legal act in exchange for consideration |
| Escrow contract | An agreement between buyer and seller and escrow holder setting forth rights and responsibilities of each. ie: when earnest money is deposited into a broker’s escrow account |
| Land contract | also called contract for deed, a bond for title, a land sales contract is an installment contract where the seller retains legal title while the buyer takes possession and gets equitable title to the property. |
| Lease | an agreement, written or verbal, transferring the right to exclusive possession and use of real estate for a definite period of time |
| Void | having no legal force or binding effect, not enforceable |
| Attorney in Fact | Agent of the prinvipal, a person named in a written power of attorney document to act on behalf of the person who signs the document, called the principal. Power/responsibilities depend on the specific powers granted in the document. |
| Reformation | An action taken to correct a mistake or error in a deed or other legal document. |
Created by:
tyhart44
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