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Law of Agency
Texas Real Estate License Exam Section 3 of 6: Law of Agency
| Question | Answer |
|---|---|
| Fiduciary | an individual upon whom is placed the highest levels of trust and confidence when acting on behalf of another; specific fiduciary duties include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care |
| Principal | a major party to a real estate transaction (buyer, seller, landlord, tenant) or an individual who authorizes an agent to represent their interests as a client in a real estate transaction |
| Client | a person who has signed an agency agreement with you as their agent a.k.a your principal |
| Customer | a person on the other side of the transaction with whom the license holder does not have an agency relationship |
| Third Party | any person involved in a real estate transaction who is not your client |
| Broker | an individual licensed by TREC to perform brokerage duties |
| Sales Agent | an individual holding a sales agent license from TREC who is sponsored by a broker |
| License Holder | a broker or a sales agent licensed by TREC |
| Brokerage | the joining of two people for the purpose of an exchange of products or services |
| REALTOR® | a licensed sales agent who is a member of the National Association of REALTORS® |
| Listing Agent | a broker representing a seller in a real estate transaction, a.k.a. seller’s agent, seller’s broker, or listing broker |
| Buyer’s Agent | a broker representing a buyer in a real estate transaction, a.k.a. buyer’s broker |
| Tenant’s Agent | a broker representing a tenant in a real estate transaction |
| Landlord’s Agent | a broker representing a landlord in a real estate transaction |
| Fiduciary | an individual whose principal has trusted to represent their interests - it denotes a high level of trust |
| Ostensible Agency | when a principal allows a license holder to act in such a way as to cause a third party to believe that license holder is the principal’s agent |
| Agency by Estoppel | legally binding agency created when an individual allows an agent act as though they were authorized to act on that person’s behalf (ostensible agency) and a third party suffers some harm while dealing with that agent in a transaction |
| Agency by Ratification | created when a license holder acts on behalf of but without prior authorization of a principal and that principal accepts the license holder’s action after the fact |
| Agency Coupled with Interest | when an agent is involved in a real estate transaction with a personal interest (either for themselves, a family member, or a business interest) |
| Agency by Actual Authority | actions taken by an agent for which they have permission, whether given through express or implied authority by a principal |
| Express Authority | when a principal gives an agent authority to act on their behalf by mutual consent, either by written or oral agreement |
| Implied Authority | when an agent takes actions that are considered customary for the profession in order to represent their agent’s interests |
| Special Agency | a form of agency relationship in which agents are limited in scope and are only authorized to perform acts permitted by their principal (Broker-Client) |
| General Agency | a form of agency relationship in which the principal is responsible for the acts of their agent as long as the agent is acting within the scope of their duties (Broker-Sales Agent) |
| Universal Agency | a form of agency relationship in which agents have a very broad and general scope of power to act on behalf of the principal - agents have the general power of attorney (Child-Parent) |
| Fiduciary Relationship | a relationship in which a client puts confidence in a trustee, an attorney, or a broker |
| Disclosure of Representation | the act of explicitly informing all parties of who an agent is representing |
| Client | a person who has signed an agency agreement with you as their agent (a.k.a. your principal) |
| Customer | a person on the other side of the transaction with whom the license holder does not have an agency relationship |
| Duty of Honesty | license holders are required to always tell the truth to their clients and customers; they should also advise their clients to be truthful in their disclosures as well |
| Duty of Fairness | license holders are required to proactively maintain a space of fairness in their real estate transactions and never mislead customers |
| Third Party | any individual in a real estate transaction who is not your client |
| Misrepresentation | a false statement (spoken or written) that is made unintentionally |
| Material Fact | a fact that may cause a buyer or seller to make a different decision in a real estate transaction |
| Innocent Misrepresentation | occurs when an agent communicates false information that the agent is not aware is false |
| Negligent Misrepresentation | occurs when an agent fails to disclose significant property flaws out of ignorance |
| Fraudulent Misrepresentation | occurs when an agent purposely and deliberately hides a property flaw or feature to make the sale |
| Stigmatized Property | a property on which an event has occurred that is affecting the perceived value of the property |
| Open Listing | an agreement that allows multiple real estate brokers (and the owners themselves) the right to sell the property; the individual considered the procuring cause of the sale of the property getting the commission |
| Net Listing | an agreement in which the seller names an amount they want their property to sell for, and then the broker tries to sell it for more because they receive the difference (the dollar amount above what the owner wants) as their commission |
| Procuring Cause | the defining actions that brought a buyer to purchase a property |
| Seller Agency | the relationship between a real estate agent and the seller in the brokerage of homes |
| Listing Agreement | a contract between a principal and a broker to sell or lease a property |
| Exclusive Agency | an agreement in which the seller has an exclusive relationship with an agent but has the right to sell the property to named prospects for a lesser (or none) commission to the listing broker |
| Exclusive Right-to-Sell Agency | an agreement in which the seller guarantees the named broker receives a commission if the property is sold even if the seller brings the buyer themselves |
| Subagent | a license holder who represents a principal through cooperation with the principal’s broker |
| Material Fact | any fact that is significant or essential to the real estate transaction |
| Substantive Communication | a meeting or written communication that involves a substantive discussion relating to specific real property |
| Seller’s Disclosure Notice | form filled out by sellers and given to buyers containing disclosures about the property being sold |
| Buyer Representation Agreement | a document that outlines the duties and implications of the broker-buyer agency relationship |
| Protection Period | a period of time after the buyer’s representation term ends in which the agent can still get compensation for their role in a transaction |
| Single Agency | the most commonly practiced agency form in which the agent represents only one side of a transaction |
| Dual Agency | type of agency in which the agent represents the buyer and seller in a transaction |
| Exclusive Broker Agreement | an agreement that binds the buyer into working only with that broker/ agent for the specified duration of the contract |
| Non-exclusive Broker Agreement | an agreement that leaves the buyer free to work with other agents to acquire a home under the condition that if the buyer does purchase a home because of that agent, the buyer will be required to compensate that agent based on procuring cause |
| Actual Authority | specific powers given to an agent by the principal that allows them to act on the principal’s behalf |
| Implied Buyer Agency | a type of agency where authority is implied or presumed based on the nature of the relationship between the agent and the buyer |
| Non-agency | a type of agency in which the buyer chooses to find and purchase a home without being represented by an agent |
| Attorney Representation | a situation in which a real estate attorney can represent the buyer in the purchase of a home (this option is only available in certain states) |
| Inspections | a vital part of the homebuying process which can reveal significant defects, conditions, and issues that can affect a property’s value |
| Broker Compensation | the percentage fee or commission (or, in rarer instances, flat fee) that is paid for an agent’s representation and services provided during real estate transactions (a.k.a., brokerage fee) |
| Ready, Willing, and Able Buyer Clause | clause in a listing agreement that offers brokers more protection and certainty of being paid compensation for the work and services performed on the client’s behalf |
| Junk Fees | additional fees charged by agents and brokers on top of the sales commission |
| Disclosure | statements of facts associated with real estate transactions that by law must be shared |
| Dual Agency | dual agency occurs when a broker represents both a seller and a buyer in a single real estate transaction according to common law precedent |
| Intermediary | the practice of intermediary brokerage occurs when a single transaction is negotiated within one brokerage and during which proper representation for both the seller and the buyer takes place in accordance with Section §1101.559 of TRELA |
| In-House Sale | when a brokerage handles both sides of a real estate transaction, that transaction is considered an in-house sale |
| Intermediary Relationship Notice | the form that is used to give the buyer and seller notice of intermediary and for the buyer and the seller to accept the appointments (required by law) |
| Syndicate | a financial services group formed to handle large transactions that would be too hard or impossible for an individual person or entity to handle |
| Undisclosed Dual Agency | an action taken by unscrupulous agents in order to take advantage of under-informed clients where the agent treats both parties like clients, but without the proper notice |
| Mutual Rescission | when the license holder (agent) and the principal (client) mutually agree to end the agency relationship |
| Unilateral termination | one party makes the decision to terminate the contract without permission from the other party |
| Revocation | the termination of an agreement by the person who granted it, such as when as when a principal terminates an agency relationship |
| Renunciation | the rejection of an agreement by the person who accepted it, such as when an agent terminates an agency relationship |
| Independent Contractor | someone who is bound by contract to perform a certain job, but who is not considered an employee for federal or state income tax purposes |
| Employee | an individual who works part- or full-time for wages or salary under contract and control of an employer |
| Safe Harbor | refers to effort made by Congress in 1978 to put a halt to what it deemed as overly aggressive attempts to reclassify independent contractors as employees |
| Employment Contract | an agreement between a principal and a broker to buy, sell, lease, or manage a property |
| Special Agency | the relationship between a broker and a principal/client wherein the broker has restricted authority to act on behalf of the principal to achieve a one specific objective |
| General Agency | the relationship between a broker and a principal wherein the broker has broad authority to act on behalf of the principal and can bind the principal in a transaction |
| Direct Activities | activities (that usually require a license) in which a person directly helps another buy, sell or lease real property |
| Indirect Activities | day-to-day activities that are influential, but more difficult to classify as to whether a license is required |
| Foreign Broker | a broker licensed outside of Texas |
| Quarterly Taxes | quarterly estimated taxes used to pay not only income tax, but other taxes such as self-employment tax and alternative minimum tax for individuals or entities who do not have taxes withheld from their income |
| Laws | rules that are enforced by government authority and require mandatory compliance |
| Ethics | standards of conduct agreed upon and recognized by a particular group or culture |
| Morals | personal values derived from a system of beliefs |
| Kickback | any money, fees, commission, credit, gift, gratuity, thing of value, or compensation of any kind for improperly obtaining or rewarding favorable treatment |
| Security | a tradable financial asset of any kind |
| Collusion | a secret agreement or cooperation for an illegal or deceitful purpose |
| Redlining | the refusal for lenders to issue mortgages to a specific area; a violation of the Fair Housing Act |
| Protected Classes | classes of people covered under the Federal Fair Housing Act |
| Steering | deliberate avoidance of showing a protected person a non-integrated area |
| Blockbusting | occurs when an agent canvasses an area and incites panic by suggesting that people of certain races, colors, religions, or other protected classes will be moving into the neighborhood and causing the area to deteriorate and prices to destabilize |
| Disparate Treatment | when someone is treated differently than other people who don’t share the same protected characteristic |
| Lottery | any scheme or procedure whereby 1 or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win anything -- called a pool, lottery, raffle, gift, gift enterprise, sale, policy game, or other names |
| Mediation | a resolution procedure where an impartial person (the mediator) used to facilitate communication between parties and to promote reconciliation, settlement or understanding |
| Arbitration | a forum where parties and counsel present their positions before an impartial third party who renders a specific award |
| Fiduciary Duty | a responsibility to act in the best interest of your client |
| Fraud | deception deliberately done with the intention of gaining something of value or causing damage to another person |
| Tort Reform | a judicial movement that tries to limit the amount of recourse and awards that can go to a complainant |
| Texas Deceptive Trade Practices Act (DTPA) | the primary consumer protection law in Texas, which protects against false and misleading statements, unconscionable actions, and breaches of warranty |
| Unconscionable Action | an act or practice which, to a consumer’s detriment, takes advantage of the lack of knowledge, ability, experience, or capacity of the consumer to a grossly unfair degree |
| Consumer | an individual, partnership, corporation, the state, or a subdivision or agency of the state who seeks or acquires by purchase or lease, any goods or services |
| Goods | tangible chattels or real property purchased or leased for use |
| Services | work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods |
| Public Remedies | remedies enforced by the Texas Attorney General’s Office, specifically the Consumer Protection Division |
| Private Remedies | civil lawsuits brought by consumers against the alleged violators |
| Damages | an award paid to someone to compensate them for economic or non-economic loss |
| Treble Damages | damages that are three times the amount |
| Stigmatized Property | property that is less appealing to some buyers not because of its material condition, but because of an unpleasant event that occurred there |
| Reasonable Person Standard | judicial standard for determining liability in which the court would decide that if a reasonable person would have known about the defect in question, the license holder should have, too |
| Puffing/Puffery | the use of exaggeration in advertising; stating opinions about a property that do not constitute misrepresentation |
| Curb Appeal | the attractiveness of property, as viewed from the street (exterior) |
| Broker’s Price Opinion (BPO) | the agent’s determination of an appropriate purchase price |
| REO | real estate owned; describes property that is owned by a lender as result of a failure to find a third-party buyer at a foreclosure auction |
| Net Sheet | one of several names given to a worksheet that provides a seller with an idea of what they would net from the sale on their home if they accepted an offer as presented; a tool for comparing multiple offers |
| Contingency | a provision within a contract that makes performance conditional upon the occurrence of a stated event |
| Errors and Omissions Insurance | protects agents and brokers in the event of accidental legal violations, including mistakes and failures to complete required tasks |
| Home Warranty | policy that insures household items such as the air conditioner, heater, and large kitchen appliances |
Created by:
jamesowens
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