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Agency and Broker’s Relationship

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AGENCY RELATIONSHIPS

Classification of Agencies Comparison to Employee Relationship Comparison to Independent Contractors

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Creation of Express Agency

Created by an express contract or by authorization

Contract may be oral Almost all real estate contracts must be in

writing

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Creation of Implied Agency

Implied by the conduct of the parties Consideration is not a requirement The acts of the parties may themselves

create an agency relationship Ostensible Agents

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Termination of Agency Relationship End of Employment Death or Incapacity Revocation Irrevocable if Coupled with an Interest

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Real Estate Activities on Internet The California Department of Real Estate

requires that any activities for which a real estate license is required must be by a licensee.

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Real Estate Activities on Internet Full-Service Discount Brokerages Limited-Service Discount Brokerages Information and Referral Companies Alternative Listing Web Sites

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REAL ESTATE BROKERS

Someone who, for compensation or expectation of compensation, represents another in the sale or transfer of an interest in real estate.

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REAL ESTATE BROKERS Include not only those who negotiate or solicit

the sale, purchase, and exchange of property, but also those who negotiate loans and leases, manage property, service trust deeds, and are involved in most other transactions of real estate in which they act on behalf of others in expectation of a commission.

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Exceptions

Exception for Own Property Exceptions for Finders

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Salespersons

Any licensed person employed by the broker in a professional capacity.

A salesperson must work for a broker. May not operate independent of the broker’s

supervision.

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Status of Real Estate Broker

Employee for General Purposes Employee Eligibility for Workman’s

Compensation

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Status of Real Estate Broker

Independent Contractor Eligibility for Unemployment Rights

Employee Eligibility for Payment of Commission

Status Varies for IRS Purposes

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Whose Agent Is Broker?

The broker is the agent of the first employer Usually the seller Subagents

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REGULATION OF BROKERS

Regulated by the Real Estate Law The real estate commissioner’s regulations. Ordinary duties and responsibilities of their

agency relationship

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Handling of Deposits

Any funds received by the broker on behalf of a principal must be promptly given to the principal or deposited in a qualified escrow or trust account.

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Unlawful Acts of Brokers

Making false statements or concealing material facts from a principal

Acting as an agent for more than one party without the full consent of all principals

Commingling Failing to disclose broker’s full profit to his

principal Dishonest dealing

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Referral Fees

Brokers can pay referral fees only in limited circumstances.

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Unlawful Acts as Individuals

Obtaining a license by fraud Being convicted of a criminal act involving

moral turpitude False or misleading advertising Misuse of the term realtor

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Unlawful Acts as Individuals

Violation of any restricted license provisions Misuse of government records Inducing panic selling on the basis of race,

color, creed, or national origin Violating the franchise law Failure to supervise salespersons

adequately.

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Real Estate Recovery Fund

The recovery is limited to the amount of the uncollectable judgment or $50,000 per transaction, whichever is less.

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No Special Liability When Acting as Principal It is not uncommon for a broker to act as a

principal and to purchase property personally. The broker is not an agent, because the

definition of an agent is someone who acts for another person.

A licensee acting as principal is not entitled to a commission

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BROKER’S OBLIGATION TO CLIENTS Violation of Duties Duty of Good Faith Duty of Full Disclosure Duty of Loyalty: No Adverse Interest Duty to Use Professional Standard of Care Duty to Account

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BROKER’S OBLIGATION TO THIRD PERSONS Fraud Intentional Misrepresentation Puffing Negligent Misrepresentation Concealment Nondisclosure

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BROKER’S OBLIGATION TO THIRD PERSONS False Promise Secret Profits Negligence Principal’s Contracts Disclosure of Property’s Condition

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