Chapter 4 Agency

Real estate is an industry about property, but it’s also an industry about people. The concept of agency is entirely about people, and relationships between and among them.

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4 Agency

• Learning objectives– Identify the various types of agency relationships common

in the real estate profession and the characteristics of each

– Describe the fiduciary duties involved in an agency relationship

– Explain the process by which agency is created and terminated and the role of disclosure in agency relationships

– Distinguish the duties owed by an agent to clients from those owed to customers

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4 AgencyIntroduction and history of agency

Law of Agency and Definitions• Law of agency• Definitions

– Agent

– Principal

– Fiduciary

– Client

– Customer

– Nonagent

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4 Agency• Definitions in Georgia’s Brokerage Relationships in Real Estate

Transactions Act (BRRETA) definitions• Agency• Broker• Brokerage engagement• Brokerage relationship• Client• Common source information companies• Customer• Designated agent• Dual agent• Material facts• Ministerial acts• Transaction broker

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4 Agency

Creation of agency• Express agency• Implied agency• Compensation

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4 Agency

The six common-law fiduciary duties: 1. Care2. Obedience3. Loyalty4. Disclosure5. Accounting6. Confidentiality

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4 Agency

Obligations to Buyer• Responsibilities• Earnest Money Deposit• Seller Financing• Property Condition• Documents• Negotiation• Showing• Property Goals• Offers• Possession Dates• Default• Efficiency• Negotiation• Appraisal

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4 Agency

• Duties and responsibilities of an agent under Georgia’s BRRETA– broker engaged by seller– broker engaged by buyer– broker engaged by landlord– broker engaged by tenant

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4 Agency

Termination of Agency• Completion, performance, or fulfillment of the purpose for which

the agency was created• Death or incapacity of either party• Destruction or condemnation of the property• Expiration of the terms of the agency• Mutual agreement by all parties to cancel the contract• Breach by one of the parties • By operation of law, as in bankruptcy of the principal

(bankruptcy terminates the agency contract and title to the property transfers to a court-appointed receiver)

• Georgia specifics about termination

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4 Agency

• Types of agency relationships– Universal agent– General agent– Special agent– Designated agent

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Limitations on Authority

4 Agency

Universal Agent General Agent Special Agent

Empowered to do anything the principle could do personally

Represents the principal in a broad range of matters related to a particular business or activity

Authorized to represent the principal in one specific act or business transaction under detailed instructions

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4 Agency

• Types of agency relationships– Single agency– Seller representation– Buyer representation– Owner as principal– Dual agency

• Disclosed dual agency• Undisclosed dual agency• Georgia’s specifics about

dual agency– Nonagency

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4 Agency

Single Agency

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4 Agency

Dual Agency

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4 Agency

• Customer-level services– Reasonable care and skill in performance– Honest and fair dealing– Disclosure of all facts the licensee knows that materially

affect the value or desirability of the property– State law may require additional services or disclosures

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4 Agency

Customer-level services– Environmental hazards– Opinion versus fact (puffing, misrepresentation, fraud)

Property conditions—Georgia specifics– Latent defect (A hidden structural defect that would not

be discovered by ordinary inspection)

Stigmatized properties—Georgia specifics

• Properties branded undesirable because of actual or rumored criminal, tragic, or scandalous events that occurred on the property

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4 Agency

• Puffing– Exaggeration of a

property’s benefits

• Misrepresentation– Fraud: Intentional

misrepresentation of a material fact to harm or take advantage or another

– Negligent Misrepresentation: Broker should have known a statement was false