Chapter 5 Brokerage and Agency 2010©Cengage Learning. All Rights Reserved

Chapter 5Brokerage and

Agency

2010©Cengage Learning. All Rights Reserved.

http://www.cengage.com/realestate/fraser

IN THIS CHAPTER

• Law that control the rights and duties in an agency relationship.

• Agency, types of agencies, and obligations of a person under the law of agency.

• Misconceptions that revolve around the subject of agency today.



AGENCY IN PRACTICE


• Laws and practices have evolved to address the confusion regarding agency loyalties and relationships.

• Laws in almost every state now require written disclosure of agency relationships.

• Buyers are more informed and often request buyer representation from their brokers.

• Many transactions involve both a seller broker and a buyer broker thus both parties have representation.


Fiduciary

• One who holds a position of trust.• The person hired on another’s behalf is the

agent. • The person who selects the agent to act on

his or her behalf is the principal.• Subagents assist in accomplishing the

purpose of the agency.• The principal has faith, trust, and

confidence in the fiduciary.2010©Cengage Learning. All Rights Reserved.


AGENCY RELATIONSHIPS

• A universal agent is authorized to handle all affairs of the principal.

• A general agent is authorized to handle all affairs of the principal concerning a certain matter or property.

• A special agent has narrow authorization to act on behalf of the principal.– example is a real estate broker who has a listing on real

estate.– broker can market the property for sale but cannot make

decisions



CREATION OF AGENCY• An agency relationship created by an oral or a

written agreement between the principal and agent is called an express agency.

• An agency also may be created by the words or actions of the principal and agent indicating that they have an agreement and is called an implied agency or ostensible agency.

• Estoppel occurs if an individual claims incorrectly that a person is his or her agent and a third party relies on the incorrect representation.



TERMINATION OF AGENCY

• An agency relationship ends in accordance with the terms of the agency contract.

• Also by completing the terms of the agency.

• By operation of law.



• Brokerage is the business of bringing buyers and sellers together and assisting in negotiations for the terms of sale of real estate.

• In the real estate field, a broker is defined as:– an individual licensed to sell, buy, exchange,

rent, lease, or option real property for a fee.

• Michigan and many other states add collection of rents to this list.



Michigan Uniform State Antitrust Act

• there are certain types of trade restraints that are so injurious to competition that there can be no justification for them.– 1. price fixing– 2. boycotts or concerted refusals to deal– 3. territorial or customer allocation– 4. tying agreements



Commission Arrangements

• Net Listing• Retainer• Flat Fee• Commission Paid to Sales Associates• Commission Paid to Cooperating Brokers• Referral Fees



Brokerage Firm

• May be owned by a single licensed broker (a sole proprietor) or by more than one licensed persons, such as a partnership or a corporation.



Multiple Listing Service

• MLS is a facility for the orderly correlation and dissemination of listing information among participants so that they may better serve their clients, customers and the public.



Agency Disclosure

• A buyer, seller, landlord, or tenant has the right to know how they will be represented when they are engaging in a real estate transaction.

• Michigan passed its mandatory agency disclosure law.

• The disclosure is required on all residential sales of one to four family dwellings and all vacant land to be used for one to four family residential dwellings or condominiums.



Agency Disclosure

• Disclosure must be made prior to the consumer disclosing any confidential information to the licensee.

• This is commonly considered to be “at first meeting.”

• The licensee is required to discuss all agency relationships allowed under Michigan law and provide the consumer with a document indicating the agency relationship.



Seller Agency

• A seller agency arrangement allows the broker employed to market the seller’s property for a given period of time.

• The listing contract is not a contract to sell but an employment contract between the seller and the broker.

• The seller has a right to expect agent will act in his best interest and keep all confidential information learned confidential.



Buyer Agency

• Licensees represent buyers of real estate.• A purchaser should expect that the licensee

would act in their: – best interest– follow legitimate instructions– advocate their price and terms– keep all pertinent information confidential

• The terms and conditions of the brokerage relationship with the purchaser is a Buyer Agency Agreement.



Subagency

• This arrangement generally involves two competing real estate firms.

• Common where one company has the seller under contract and a competing firm has a buyer/customer interested in viewing the property.

• The broker with the listing represents the seller, and the broker who brought the customer to the transaction also agrees to represent the seller.



Dual Agency

• When a real estate firm represents both the buyer and seller in the same transaction.

• Must be disclosed to all parties.• Both must agree in writing to the dual

relationship.• May be intended or unintended.



Designated Agency

• the client (buyer or seller) has an agency relationship with only those persons named in the listing contract or buyer agency contract.



Transaction Coordinator

• Michigan law allows a licensee to be involved in a real estate transaction without having an agency relationship with the buyer or seller.

• Intent is to provide an agent with an opportunity to participate in a transaction in which company policy does not allow the type of agency cooperation being offered by the listing company.



Agent’s Responsibility to Principals

• Obedience• Loyalty• Disclosure of Information• Confidentiality• Accounting• Reasonable Skill, Care, and Diligence


OLD CAR


Agent’s Responsibility to Third Persons

• Misrepresentation of fact• Negligent misrepresentation• Innocent misrepresentation• Michigan law has established that a

seller’s broker is not liable for statements made to a buyer/customer regarding the condition of the property.



DUTIES AND LIABILITIES OF PRINCIPALS

• Duties to Agents• Duties to Third Persons• Latent Defects• Michigan’s Seller Disclosure Act– Act requires that sellers disclose everything

they know about their property.– notice must be delivered in person, by fax, or

by registered mail within 72 or 120 hours.



accidental agencyagency disclosureagentbrokerageBuyer Agency Agreementcaveat emptorclientconfidentialitycustomerdesignated agencydisclosure of informationdual agencyduty of disclosureestoppelexpress agencyfiduciarygeneral agent

CHAPTER TERMINOLOGY REVIEW


Implied agencyInnocent misrepresentationLatent defectslisting contractMichigan Uniform State Antitrust ActMichigan’s Seller Disclosure Actmisrepresentationmultiple listing service (MLS)negligent misrepresentationpatent defectsprincipalseller agencyseller’s disclosure statementspecial agentsubagenttransaction coordinatoruniversal agent



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Chapter 5 Brokerage and Agency 2010©Cengage Learning. All Rights Reserved