Chapter 21 ________________ The Principal-Broker Relationship: Agency

1. Chapter 21________________The Principal-Broker Relationship: Agency

2. Agency • Created when one person delegates to another the right to act on his behalf. • General agency – the right to bind the principal to perform a particular act. • Principal = Property owner • Agent = Broker • Client = Principal

3. Establishing Authority • Written – contractual agreement. • Implied– custom in the industry • Ostensible – conduct of the parties. • Ratification– agency established after the fact. • Estoppel – due to principles failure to maintain due diligence over the agent who exercises powers not granted him.

4. Agency Relationship Commission Principal Agent Skills and Knowledge

5. Care • Obedience • Accounting • Loyalty (Competence and expertise) (Lawful instructions) (For funds received) (Principal’s interest first) Broker’s Obligation to Principal Fiduciary

6. Disclosure Liability Said wrongly to mislead Facts Broker Knows A Unsaid in order to mislead Said without checking the facts Facts Broker Does not know B Not said and facts not checked

7. Red Flags • “As Is” • Puffing • Lead-based paint disclosure on homes built prior to 1978 • Home Inspections

8. Buyer Agency • The exact opposite theory from the traditional seller representation. • Here the principal or client is the buyer! • Agent owes the care of agency duties to buyer.

9. Agency Disclosure • Agency relationships can be created without written agreements and consumers must be informed who the agent represents so there is a clear understanding of the agent’s role in a transaction. • Many states now require disclosure forms.

11. Information • Owner disclosure information • Interstate land disclosure statements • Antitrust laws • Price fixing • Boycotting • Errors and Omission insurance

12. Key Terms • Ostensible authority • Price fixing • Principal • Puffing • Third parties • Agent • Boycotting • Commingling • Dual agency • Middleman