Transaction brokerage january 2012

Transaction Brokerage

4 Education CE Credit Hours

Presented by Lou Tulga CCIM CRB

www.loutulga.com

04/14/2023 Copyright (c) 2011 Lou Tulga CCIM CRB All Rights Reserved

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http://www.loutulga.com/


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Ockham’s Razor

“pluralitas non est ponenda sine necessitate”

(“Don’t make matters more complicated than is necessary”)


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Background of Brokerage Choice

Caveat emptor Seller Agency Notion of “Fairness to All Parties” Emergence of Public Policy Requirements Emergence of Consumer TORT Cases Common Law of Agency Applied to Real

Estate Practice at MLS Level Emergence of Consumer AGENCY Cases


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Key Questions

What Does Agency Look Like? How Does Transaction Brokerage Look

Different? (Review) Why Would Anyone Demand Agency? Why Would Anyone Refuse Agency? Why Would a Client Accept Facilitation? How Are Conflicts of Interest Handled?

…CAPACITY…

Agency allows the granting of capacity to the agent to speak and act on behalf of the principal by “standing in the principal’s shoes” on matters

within the agent’s Scope of Authority


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States of “Choice”

In New Mexico the Parties make their own choices!

Transaction Brokerage Dual Transaction Brokerage Facilitation Exclusive Agency Dual Agency Facilitation


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Keep it Simple!Only 2 Roles and Only 2 Relationships


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ROLEExclusive ServiceImpartial Service

RELATIONSHIPTransaction

BrokerAgent

Property ManagementNew Builder Exclusive RepAbsentee Client/Customer

Seller/Buyer BrokerageBuilding/Tenant Rep

TASK


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New Mexico Real Estate License Law 61-29-10.1

A. Agency solely by written express agency agreement—no type assumed, created orally or by implication

B. Brokerage may have written agreements without creating an agency relationship—and no agency duties will be imposed

C. Brokerage may provide real estate services without a written agreement—and no agency duties will be imposed


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Service Standards: Broker Duties

1. Honesty & reasonable care2. Performance of all written agreements3. Providing understood assistance unless excluded by written service

agreement with client/customer and disclosed in writing to any cooperating brokers

4. Acknowledgement of areas outside licensee’s expertise5. Prompt accounting of monies or property6. Timely provision of written copy of Broker Duties7. Timely disclosure in writing of conflicts of interest of any kind8. Timely disclosure of actually known adverse material facts about the

property or transaction to clients and customers9. Maintaining of confidential information from previous agency

relationship10.Unless authorized in writing maintaining of confidential information

from one’s current client/customer except when disclosure is required by law

(NMREC Part #19)

Facilitator

Seller

Buyer

“In the Middle”

04/14/2023 10Copyright (c) 2011 Lou Tulga CCIM CRB All Rights Reserved


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ROLE

RELATIONSHIPTASK

Potential Office Conversation


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“Once upon a Time-- there wasNo Serpent in Paradise”

Prior to the late 1980s--Brokers did not know agency as a legal term or its legal consequence –and when told were in surprised!

Brokers never heard of “OLDCAR” and Forms did not use the word “agency” until the early 1990s

Brokers happily and needed no E&O Insurance

The “Garden” was Beautiful

Caveat Emptor---if the buyer does not ask there is no duty to tell—just don’t lie!

Notion of “Fairness to ALL Parties” The term, “Agent” was for used but was

not defined The ONLY disclosure requirement was for

a broker to let the other party know that the broker was “buying or selling for the broker’s own account”—


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An Issue that Never Goes Away


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NAR 2011 Legal Scan


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BrokerAgent



TASK

States of “No Choice”

Licensee is an “Agent” and Buyer or Seller is an “Agency Principal” whether they want it or not!

HUD Repo Listing Broker Contracts—even in those states are “non-agency”---so those states simply look the other way but do not offer brokerage relationship choice


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New Mexico Real Estate License Law 61-29-10.1

A. Agency solely by written express agency agreement—no type assumed, created orally or by implication

B. Brokerage may have written agreements without creating an agency relationship—and no agency duties will be imposed

C. Brokerage may provide real estate services without a written agreement—and no agency duties will be imposed


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Service Standards: Broker Duties

1. Honesty & reasonable care2. Performance of all written agreements3. Providing understood assistance unless excluded by written service

agreement with client/customer and disclosed in writing to any cooperating brokers

4. Acknowledgement of areas outside licensee’s expertise5. Prompt accounting of monies or property6. Timely provision of written copy of Broker Duties7. Timely disclosure in writing of conflicts of interest of any kind8. Timely disclosure of actually known adverse material facts about the

property or transaction to clients and customers9. Maintaining of confidential information from previous agency

relationship10.Unless authorized in writing maintaining of confidential information

from one’s current client/customer except when disclosure is required by law

(NMREC Part #19)

Potential Office Conversation


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“Once upon a Time-- there wasNo Serpent in Paradise”

Prior to the late 1980s--Brokers did not know agency as a legal term or its legal consequence –and when told were in surprised!

Brokers never heard of “OLDCAR” and Forms did not use the word “agency” until the early 1990s

Brokers happily and needed no E&O Insurance

The “Garden” was Beautiful

Caveat Emptor---if the buyer does not ask there is no duty to tell—just don’t lie!

Notion of “Fairness to ALL Parties” The term, “Agent” was for used but was

not defined The ONLY disclosure requirement was for

a broker to let the other party know that the broker was “buying or selling for the broker’s own account”—


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An Issue that Never Goes Away


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NAR 2011 Legal Scan


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BrokerAgent



TASK

States of “No Choice”

Licensee is an “Agent” and Buyer or Seller is an “Agency Principal” whether they want it or not!

HUD Repo Listing Broker Contracts—even in those states are “non-agency”---so those states simply look the other way but do not offer brokerage relationship choice


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States: Where Agency is the Automatic Relationship

Just by being licensed the licensee is in an agency relationship with those who receive the licensee’s services

This means anyone who “double-ends” a transaction is some form of “dual agent”

This means there is special liability for both the agent and the agency principal

Special remedies for “breach of fiduciary duties”


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Common Misconceptions

That Transaction Broker is really “Transactional Broker”

Transaction Brokers are really ONLY Intermediaries Finders Facilitators

States Where Agency is Created ONLY by Choice

Agency not created by common law “implications, appearances, accident, etc.”

Agency only by an express written agency agreement

Those special liabilities and remedies for both the licensee and client do not exist


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Another---Cartoon!


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Exclusive

Exclusive Transaction Broker: “In Your Corner”

Out of House Sale


Exclusive

Exclusive Transaction Broker: “In Your Corner” –and has Buyer as Well

Your Buyer Customer


Exclusive

Exclusive Agency: In Your Corner and In Your Shoes

Out of House Sale


Seller’s Agent obtains Seller’s written permission for Dual Agency prior to an offer being presented and makes it clear that Agent will represent both parties as impartial facilitator

Buyer’s Agent obtains Buyer’s written permission for Dual Agency prior to an offer being written and makes it clear that Agent will represent both parties as impartial facilitator

What Can Two Clients Expect with One Agent in Dual Agency?


Transaction Broker Facilitation

This Broker is not in any Corner and not in any party’s shoes—but rather stands in the middle as an impartial facilitator


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The Essence of Agency is Capacity

Authorization to speak or act on behalf of the agency principal for the agency principal’s benefit

Thi


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Take a Good Look!


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Transaction Broker Listing Agreement


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Listing Agreement: Agency Addendum


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Dual Agency Facilitation Role


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Transaction Broker Facilitation Role*


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Purchase Agreement Cover Page II Disclosures: #1


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II. Sources

2011 NAR Legal Scan: Trend Discussion NM Real Estate License Law NM Real Estate Commission RULES

Definitions

Part 19


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III. Standards of Conduct

Agency: OLDCAR

Parahoo v. Mancini: “You be the Judge”

Lombardo v. Albu: “You be the Judge”


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Meaning of Professionalism

________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________


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Say What You Mean--- But Don’t Over-Promise

Represent Protect Agent Loyalty Advocate Advise/Advice Services Assist04/14/2023 Copyright (c) 2011 Lou Tulga CCIM CRB All

Rights Reserved51

III. Transaction Brokerage

Not Agency Can Be by Written Contract Can Be Exclusive-- but to Only One Party

at a Time Can Be Impartial to both Parties

Simultaneously


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Listing Agreement Item 20: Example

“In the event that listing broker directly obtains a buyer for this property—seller and brokerage agree to modify this exclusive listing contract to provide for assistance for both seller and buyer by impartial facilitation”


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IV. Uncertainty of Agency Courts

Fiduciary Duty and Federal Law Breach of Fiduciary Duty—Sources Breach of Fiduciary Duty—Another Listing Breach of Fiduciary Duty—Leasing Breach of Fiduciary Duty—Listing Broker Transaction Broker---Agency Remedies


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V. Agency: Useful and Serious

Agency Can Be an Essential Relationship Scope of Authority: Taking it Seriously Importance of OLDCAR Significance of “Respondeat Superior”


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Your Agency Perceptions


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Agency EQUALS Superior Service Compared to Other Relationships

Agency EQUALS Protection of Client’s Interests as Foremost Concern

Agency EQUALS Authorization from Client to Make Promises to Others

Agency EQUALS Protection of Client’s Interests as Primary Concern

Agency EQUALS Professionalism of the Highest Order

Agency EQUALS Client’s Potential Liability for Agent’s Words/Deeds

Agency EQUALS Exceptional Remedies to Client for Agent’s Breach

Agency EQUALS… __________________________________________

Transaction Broker—Services and Assistance without Authorization to

Speak and Commit


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“Not in Customer/Client’s Shoes” because they are in their Own Shoes”

Finis


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Facilitator

Seller

Buyer

“In the Middle”



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Don’t Be Careless—with “Agent”

National Association of Realtors® is to blame—they tend to think everyone is an agent

Slogan: “Not all Agents are Realtors®”

NMREC Website: “Our function is to license real estate sales agents and brokers, and enforce the New Mexico Real Estate License Law and Commission Rules and Regulations. ”


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Real Estate Commission Agency Disclosures Required

First NMREC Disclosure Requirements—1992 Subagency Single Agency

Changes of Requirements over Time“First Substantive Contact”“Licensee Duties”“Agency solely by Written Agency

Agreement “Broker Duties”“Transaction Broker Terminology


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Real Estate Commission Agency Terminology/Requirements

First NMREC Disclosure Requirements—1992 Subagency, Buyer’s Agency, Dual Agency, Licensee Licensee Duties First Substantive Contact

Changes of Requirements over Time“Licensee Duties”—”Broker Duties”

“Common Law of Agency Abrogated” “Transaction Broker Terminology”


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A Billion Dollar Question

1,000,000 Real Estate Licensees

X $100.OO per year Spent in “Agency Education”= 1

Hundred Million

X 20 Years = 20 Hundred Million Dollars Seeking to

Understand all of This

Equals = $2,000,000,000 Spent on the “Fix”

I. Introduction


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NMREC Rules Definitions

A. Agency: the fiduciary relationship created solely by the express written agency agreement between a person and a brokerage, authorizing the broker age to act as agent for the person according to the scope of authority granted in that express written agreement for real estate services subject to the jurisdiction of the commission.

04/14/2023 Copyright (c) 2011 Lou Tulga CCIM CRB All

Rights Reserved66

NMREC Rules Definitions

B. Agent: the brokerage authorized to act as a fiduciary for a person and to provide real estate services solely by means of an express written agreement.


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NMREC Rules Definition

TT. Transaction Broker: the non-fiduciary relationship created by 61-29-2 A 14 NMSA 1978, wherein a broker or brokerage provides real estate services without entering into an agency relationship.


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Transaction Brokerage Obligations

NMREC Broker Duties Contract Performance Subject to Breach of Contract Subject to TORT Violations Subject to Requirements of “Professional Duty”


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Agency Relationship Obligations

NMREC Broker Duties Contract Performance Subject to Breach of Contract Subject to TORT Violations Subject to Requirements of “Professional Duty” Subject to Breach of “Fiduciary Duty” within

Scope of Authority—subject to interpretation!


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Agency and the National Association of Realtors® Code of Ethics

Article 1: “…When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary…”


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How Can this Be Interpreted when a Client is Unhappy?

1. 2. 3. 4. 5. 6. 7.


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Summary

By statute, all exclusive contracts for real estate services must be in writing and say so

By statute, all agency relationships for real estate services must be in writing and say so

By statute, real estate services may be provided by a transaction broker either with or without a written contract

By statute, all clients and customers are entitled to Broker Duties when receiving real estate services

II. RANM Forms Language


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Listing Agreement: Agency Addendum

III. Contract Obligations


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Listing Agreement Contract Duties

2. Duties of Broker. Broker will use diligence in effecting the sale of the Property, and will provide the following services:

(a) assisting Seller to locate qualified buyers; (b)

if requested, assisting potential buyers to locate financing and prepare offers; (c) assisting Seller in negotiating the terms of a sale; (d) assisting Seller in monitoring pre-closing and closing procedures.


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Buyer Agreement Contract Duties

2. Duties of Broker. During the term of this Agreement Broker will:

(a) Become familiar with Buyer's property requirements; (b) assist Buyer to locate suitable properties; (c) assist Buyer to locate financing; (d) assist Buyer to prepare offers (including providing information concerning comparable properties) (e) assist Buyer in negotiating acquisition terms; (f) assist Buyer in monitoring pre-closing and closing procedures; (g) act solely for Buyer in any transaction;

Listing Agreement Potential Item #20 “Other”


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Brokerage appoints listing broker as Designated Broker to provide Seller exclusive services. Brokerage reserves the right to appoint additional Designated Brokers when Brokerage deems it necessary and Seller will be informed. In an “in-house” transaction Brokerage will appoint a Designated Broker to work exclusively with Buyer


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Listing Agreement Item #20 “Other”

“In the event that listing broker obtains a buyer for this property-- seller and brokerage agree to modify this exclusive agreement to provide for impartial facilitation between seller and buyer”

IV. Task-Role-Relationship


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Lou’s Relationship “Wheel”


Task Varieties

1. 2. 3. 4. 5. 6. 7. 8.04/14/2023 Copyright (c) 2011 Lou Tulga CCIM CRB All

Rights Reserved83


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Role Choices

Exclusive Services

Facilitation


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Relationship Selection


Agency

V. A Second Look


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Transaction Broker

Provides assistance and services to client or customer

Does NOT have right to make decisions that bind client or customer

Does NOT have scope of authority to commit without written ratification of client or customer

Discussion


Transaction Broker should not make decision-recommendations to clients or customers –except to obtain more information prior to client or customer making their own decision

“I provide—you decided”—Realtor® Mantra

Discussion


Exclusive Agent—acts as a fiduciary precisely because agency carries with it the essential understanding of potential capacity to make decisions and bind a client—in keeping with implied or express scope of authority

Therefore, as a fiduciary who acts, an agent is held to a higher standard and may be accountable for damages, rescission, and loss of compensation

Discussion


Facilitation is:

Impartial toward both parties Both parties receive Basic Duties Both parties receive pre-set limited

recommendations for further information Both parties understand that neither will receive

decision-making recommendations Both parties understand that confidentiality is

preserved for both parties

Discussion


Exclusive Services of any kind means that the exclusive broker is promoting the interests of the client

Exclusive Agency means that the Exclusive Agent is not only promoting but also protecting the client’s interest in a fiduciary capacity with special penalties for “breach” of that duty

Corner and Shoes


Seller Client assisted by Exclusive Listing Broker

Buyer Customer assisted byExclusive Listing Broker

What Can Client and Customer Expect?


Seller Client assisted by Exclusive Listing Broker

Buyer Client assisted by

Exclusive Buyer Broker who is ALSO the Exclusive Listing Broker

What Can the Two Clients Expect?


Qualifying Broker appoints Listing Broker as Designated Broker and Seller Client continues to receive Exclusive Services

Qualifying Broker appoints Buyer Broker as Designated

Broker and Buyer Client Continues to receive Exclusive Services

What Can Two Clients Expect with Designated Broker Dual Representation?


Qualifying Broker appoints Listing Broker as Designated Agent and Seller Client continues to receive Exclusive Services

Qualifying Broker appoints

Buyer Broker as Designated Agent and Buyer Client

Continues to receive Exclusive Services

What Can Two Clients Expect Two Agents with Dual Agency?


Impartial toward both parties Both parties receive Basic Duties Both parties receive pre-set limited

recommendations for further information Both parties understand that neither will

receive decision-making recommendations

Both parties understand that confidentiality is preserved for both parties

What Is Facilitation?



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Benefits

Some Benefits Minimizing Complexity Minimizing Uncertainty Avoiding Appearance of Authority to Commit Client Say “Goodbye” to Dual Agency Responsible for “Recognized/Measurable” Standards Providing an Agency Alternative to Client’s Benefit Fits the other than “Substantial Services” Agreements A Better Fit for the world of “CBA’s,” and “AfBA’s,”


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Why All This Matters

Expanding Expectations of Service

Increased Awareness of Legal Implications

Knowledge of Points of Vulnerability

Need to for Licensees to Self-Monitor


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Potential Downsides

Transaction Broker Is Acting like an “Agent”

Forgetting that “agency is capacity”

Taking on “agency specific tasks”

Misleading others to believe transaction broker is in fact acting as “agent” of client


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The “Duck-Theory” and Task-Specific Agency

Duck Theory…”You are not an agent UNLESS you act like an agent…”

Task-Specific Agency Services Trustee “Acting as Though” Accepting Delivery and Notice Making Objections, etc. on Behalf of Client Accepting Power of Attorney


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Summary

The “Wheel”

TASK and ROLE suggest RELATIONSHIP Agency

Transaction Broker

Determine which is best to perform obligations of seller or buyer agreements


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ROLEExclusive

RepresentativeFacilitator

RELATIONSHIPTransaction Brokerage

Agency



TASK

Making Rational Choices


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finis



Listing Agreement Item #20 Possibilities




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Awareness and Involvement

“Known and Unknown”

Potential Litigation Sources

Valid and Exclusive Agreements


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In the event listing broker obtains a buyer for this listed property Seller and Brokerage agree to modify this exclusive agreement to provide for impartial facilitation between Seller and Buyer

Listing Agreement Item #20 Possibilities


Under the common law of agency “breach of fiduciary duty” carries special “accountability” Not only “damages” as compensation to the

agency client, but also Potential for “rescission” of any already closed

transaction Potential that the agent has forfeited claim to

the commission

Corner and Shoes


The real consequence of a broker being found to be an “agent” under the common law is exposure to remedies—a transaction broker is responsible under the common law of Tort for damages due to misrepresentation (intentional or otherwise) and negligence—but not loss of compensation or rescission of the transaction

Corner and Shoes


Both Seller and Buyer Clients can expect full disclosure and modification of contract for exclusive services to either: Maintain Exclusive Services to Seller and

NOT to Buyer Maintain Exclusive Services to Buyer and

NOT to Seller Modify BOTH Exclusive Service Agreements

to provide, in writing, for Impartial Facilitation

What Can the Two Clients Expect?



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Transaction Broker Rationale (1)

It is the parties' intention to minimize the likelihood that Seller will be held liable for the acts and omissions of the Broker and to eliminate the possibility that Broker is held liable to Seller under agency law.


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Transaction Broker Rationale (2)

LIABILITY. Seller acknowledges that as a result of the agency relationship Seller can be held liable for acts or omissions of Broker that are within the scope of the Broker's authority


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A House of Cards Built on Complex

Disclosures


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ROLEExclusive Service

Impartial Service


BrokerAgent



TASK


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Classroom Input

Listing broker advertises a property as "being near public transportation" and as a result of the advertisement finds a buyer prospect who states up front that she must live close to public transportation because does not drive or own a vehicle. The listing broker writes the offer with the perception that the property is close to public transportation, but without making the close-by-availability –of- public- transportation a contingency in the offer to purchase. The offer is accepted along with $5,000 as earnest money. Two days after the date of acceptance, the listing broker sees a notice in the local newspaper of record that the only bus line serving that neighborhood would be permanently discontinued in one month.

Finis


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NAR Code of Ethics—Written Service Agreements

“For the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions, including, but not limited to, listing and representation agreements…”


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Agency Authorization

“For all regulated real estate transactions first executed on or after January 1, 2000, no agency relationship between a buyer, seller, landlord or tenant and a brokerage shall exist unless the buyer, seller, landlord or tenant and the brokerage agree, in writing, to the agency relationship. No type of agency relationship may be assumed by a buyer, seller, landlord, tenant or licensee, or created orally or by implication.” (NMSA 1978)


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Prologue: The “Iron Age” of Agency Reality

Disclaimers

Disclosures

Choosing Sides—taking “agency” seriously

Complexities


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I. INTRODUCTION

Background of Non-Agency in Real Estate

Undefined and Unregulated and not Role Specific

Background of Agency in Real Estate

Defined by Common Law and One-Sided

Agency Embraced by NAR

Listings and All MLS Cooperation Based on Agency Only


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Written Service Agreements without Agency

“A brokerage may provide real estate services to a client pursuant to an express written agreement that does not create an agency relationship and no agency duties will be imposed on the brokerage” (NMSA 1978)


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The “Wheel”

• TASK

• ROLE

• RELATIONSHIP


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II. Brokerage Relationships in New Mexico

Transaction Broker Client—Services Differential? Customer—Services Differential?

Exclusive Agency Client Only and Only with Express Agency Agency--Designated Agency--Subagency

Facilitation Dual Transaction Broker or Dual Agent


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Broker Assignment

Agent Scope of Authority: The client’s authorization--

within the scope of authority-- for agent to speak and/or act on client’s behalf and to commit client without client’s further approval


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Broker Assignment

Transaction Broker Scope of Engagement: those tasks brokerage

has accepted to do on behalf of the client or customer


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Value of Written Service Agreements

Required to establish a contract for real estate services Written instructions and acceptance Makes brokerage relationships clear Written permission of your principal is necessary to get

paid by the other party to the transaction Necessary for standing under Article 16 protection Necessary for contract protection under common law Creates a “commitment” in writing from client


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Written Listing Agreement Benefits

1. _______________________________

2. _______________________________

3. _______________________________

4. _______________________________


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Written Buyer Agreement Benefits

1. ______________________________

2. ______________________________

3. _______________________________

4. _______________________________


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EXCLUSIVE SERVICES. The undersigned ("Seller") grants to the undersigned Broker firm the exclusive right to sell the real property described in Paragraph 3. Broker will act as Seller's Transaction Broker in this transaction without creating an agency relationship. Broker and Seller will owe each other loyalty.


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Listing Broker Service Agreement

Broker will use diligence in effecting the sale of the Property, and will provide the following services: (a) assisting Seller to locate qualified buyers; (b) if requested, assisting potential buyers to locate financing and prepare offers; (c) assisting Seller in negotiating the terms of a sale; (d) assisting Seller in monitoring preclosing and closing procedures--RANM


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NAR CODE OF ETHICS—Clients and Customers

A Distinction in Terms

Client—Written Agreement for Service

Relationship Protected by Article 16

Customer—Without a written agreement with relationship NOT protected under Article 16


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NAR Code of Ethics--Brokerage Relationships

Agency Treat client’s interests as primary and all

parties with honesty

NonagencyTreat all parties with honesty


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Agency Scope of Authority

“The authority to act on behalf of or in place of a principal with specific parameters governing the brokerage’s authority to act” (NMREC Part #1)


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Agency Fiduciary Duties

Obedience Loyalty Disclosure Confidentiality Accounting Reasonable Care and Diligence


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Listing Broker Agency Agreement

Broker will serve as Seller's agent in this transaction. In addition to the basic licensee duties, Broker will owe to Seller fiduciary duties.

Seller acknowledges that as a result of the agency relationship Seller can be held liable for acts or omissions of Broker that are within the scope of the Broker's authority.


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Loyalty by Written Service Agreement

Pledge of “Loyalty” Agency Contract Transaction Broker Contract

Meaning of “Loyalty” Agency Relationship? Transaction Broker—Client and Customer?


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Buyer Broker Service Agreement

Broker will: (a) Become familiar with Buyer's property requirements; (b) assist Buyer to locate suitable properties; (c) assist Buyer to locate financing; (d) assist Buyer to prepare offers (including providing information concerning comparable properties); (e) assist Buyer in negotiating acquisition terms; (f) assist Buyer in monitoring pre-closing and closing procedures; (g) act solely for Buyer in any transaction … unless otherwise specifically and expressly agreed to by Buyer in writing;--RANM


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Buyer Agreement Psychology

RANM Compensation Provisions Buyer “guarantees” broker’s compensation Buyer gives broker permission to get

compensation from “other side” Buyer will pay the difference after consulting Broker does not have to find or show when

compensation is not enough Buyer will pay broker if buyer causes default

or if buyer cuts broker out after term is expired


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Buyer Agreement Psychology

Lou’s Provisions Buyer owes loyalty to broker Buyer owes no compensation to broker Broker is given permission to get paid by “other

side” Broker owes broad range of professional duty Agreement can be cancelled by either side with

simple written notice


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Dual Agency Agreement

BROKER'S DUAL AGENCY ROLE: Brokerage is representing both Buyer and Seller as clients by means of a written agency agreement with each of them. Buyer and Seller consent to Brokerage acting as a Dual Agent.

Buyer and Seller agree to modify the fiduciary duties of the brokerage. As a Dual Agent, Brokerage shall act as a facilitator between Buyer and Seller,


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Dual Transaction Broker Agreement

Dual Transaction Facilitation: The parties agree that this Agreement supersedes and modifies the separate Exclusive Buyer and Listing Agreements between Broker and Buyer and Seller.

Broker’s Transaction Facilitation Role: Buyer and Seller consent to Broker not acting as exclusive representative for either party in order to facilitate this transaction


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A SAMPLE Transaction Facilitation Statement.

Broker will assist in the evaluation process and continue to offer such services as specified in any previously entered into written agreement with the Seller or Buyer—EXCEPT Broker but will not takes sides or represent either

party. Broker will NOT disclose any pertinent information

obtained during the term of an Exclusive Agreement unless by permission or required by law

Broker, will offer information and services to Seller and Buyer but will not takes sides or represent either party.


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Buyer Broker Agency Agreement

Broker will serve as Buyer's agent. In addition to the basic licensee duties, Broker will owe to Buyer fiduciary duties.

Buyer acknowledges that as a result of the agency relationship Buyer can be held liable for acts or omissions of Broker that are within the scope of the Broker's authority


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Dual Agency Duties--RANM

Buyer and Seller agree to modify the fiduciary duties of the brokerage. As a Dual Agent, Brokerage shall act as a facilitator between Buyer and Seller, shall not disclose confidential information of one party to the other without the affected party's consent, will provide information on an equal basis to assist Buyer and Seller to negotiate on their own behalf, but will not advocate for either Buyer or Seller.


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NAR CODE OF ETHICS--Confidentiality

Confidentiality

Preserved except by permission, disclosure is required by law, or for Realtor® to be able to defend himself when accused

Identical provisions for Realtors® as agents and nonagents


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NAR Code of Ethics—Disclosure Issues

Same duties for all Realtors® regardless of brokerage relationship

Discovery Concealment Misrepresentation


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NAR Code of Ethics--Competence

“The services which Realtors® provide to their clients and customer shall conform to the standards of practice and competence which are reasonably expected in the specific real estate disciplines in which they engage” (Article 11)


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NAR Code of Ethics—Conflict of Interest

“Realtors® shall not undertake to provide professional services concerning property or its value where they have a present or contemplated interest unless such interest is specifically disclosed to all parties” (Article 5)


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NAR Code of Ethics—Respect for Exclusive Agreements of

Others

“…Realtors® shall not knowingly provide substantive services…to prospects who are parties to exclusive representation agreements, except with the consent of the prospects exclusive representative or at the direction of prospects” (SOP 16-13)


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Consumer Protection and the Common Law of Tort

Fraud Active Passive

Negligent Misrepresentation

Negligence


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Key New Mexico Tort Cases

Neff v Bud Lewis (1976)

Amato v Rathbun (1982)

Gouveia v Citicorp (1984)


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Common Law Uncertainties

Case Specific

Case Law Precedence

Risk Management Responses


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Some “Reality Checks”

Broker Service Check List

Comparisons

Duty Intensifiers Service Expanders Greater Obedience


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Selected Law Cases

“Common Law duties are difficult to ascertain even with in-depth legal research” .... Laurie Janik,

NAR General Counsel 1999

“[Agency] Common Law is a hit-and-miss proposition. It sets forth fiduciary duties in very broad terms and leaves a lot to uncertainty…”--Laurie Janik, NAR General Counsel 1999


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A. Priority of Duties

Department of Real Estate Regulations

Common Law of Agency Fiduciary Duty

Contract Law Covenants


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Priority of Duties

Common Law of Agency Fiduciary Duty

Federal Fair Housing Act


160

C. Breach of Fiduciary Duty

Misrepresentation

Lack of Further Inquiry

Dependence on “Unreliable Date Source”


161

Fiduciary Duty and Disclosure

Listing Agent’s Non-Disclosure to Buyer

Seller’s Obligations to Buyer

Third Party Providers’ Obligation to Buyer


162

Breach of Fiduciary Duty

Failure to Disclose to Seller Relationship to Buyer

Transaction Closed and Funded

Seller Refused to Pay Compensation


163

F. “Breach of TB Duty”

Transaction Broker for Seller Did Not Perform all of the Transaction Broker Duties

Transaction Closed and Funded

Seller Refused to Pay Compensation


164

Benefits

Some Benefits Minimizing Complexity Minimizing Uncertainty Avoiding Appearance of Authority to Commit Client Say “Goodbye” to Dual Agency Responsible for “Recognized/Measurable” Standards Providing an Agency Alternative to Client’s Benefit Fits the other than “Substantial Services” Agreements A Better Fit for the world of “CBA’s,” and “AfBA’s,”


165







166

Potential Downsides

Transaction Broker Is Acting like an “Agent”

Forgetting that “agency is capacity”

Taking on “agency specific tasks”

Misleading others to believe transaction broker is in fact acting as “agent” of client


167

The “Duck-Theory” and Task-Specific Agency

Duck Theory…”You are not an agency UNLESS you act like an agent…”

Task-Specific Agency Services Trustee “Acting as Though” Accepting Delivery and Notice Making Objections, etc. on Behalf of Client Accepting Power of Attorney


168

Summary

The “Wheel”

TASK and ROLE suggest RELATIONSHIP Agency

Transaction Broker

Determine which is best to perform obligations of seller or buyer agreements


169

ROLEExclusive

RepresentativeFacilitator

RELATIONSHIPTransaction Brokerage

Agency



TASK



170

finis


171

When it Matters

gravitas sola quanda gravis

(Old Roman Proverb)


172

ROLE

RELATIONSHIPTASK


173

finis


174

XII. Break-Out Discussions

Class Problem #1—Public Transportation

Class Problem #2—Meth Lab Issue

Class Problem #3—Sex Offender Issue

Class Problem #4—Financing Clause


175

XI. Break-Out Discussions

Class Problem #1—Public Transportation

Class Problem #2—Meth Lab Issue

Class Problem #3—Sex Offender Issue

Class Problem #4—Financing Clause


176

finis


177

“Designated Broker” Possible Replacement

“Designated Broker: A Qualifying Broker or Broker who is designated in writing by a Qualifying Broker to serve as Exclusive Transaction Broker or Exclusive Agent for a seller, landlord, buyer, or tenant in a real estate transaction. A Designated Broker may work with a seller or landlord in one transaction and work with a buyer or tenant in another transaction.” Lou Tulga


178


179

“Facilitator” Possible Replacement

“Facilitator: The role of a Broker in either a Dual Agency or Transaction Brokerage relationship in which the exclusive relationships between a seller or landlord client or buyer or tenant client are modified so that the Broker impartially facilitates the Transaction.” Lou Tulga


180

Listing Broker Duties--RANM

Broker will: (a) Become familiar with Buyer's property requirements; (b) assist Buyer to locate suitable properties; (c) assist Buyer to locate financing; (d) assist Buyer to prepare offers (including providing information concerning comparable properties); (e) assist Buyer in negotiating acquisition terms; (f) assist Buyer in monitoring pre-closing and closing procedures; (g) act solely for Buyer in any transaction … unless otherwise specifically and expressly agreed to by Buyer in writing;


181


182


183


184

Dual Agency—What’s Missing?

There is no mention of modifications of “services provided”

There is no mention of “scope of authority” changes

There is no clarification of “modification of fiduciary duties”


185

V. Written Service Agreements Seven Good Reasons for Written Agreements

RANM Form #1106 Listing Agreement

RANM Form #1206 Buyer Broker Agreement

RANM Form #1301 Agency—Dual Agreement

Discussion Items--Transaction Broker Dual Facilitation, Designated Representation, and Cover Page II Expansion to provide for Transaction Broker Facilitation


186

Some Good Reasons… For Transaction Brokerage with Written Agreement

It is a “trust/commitment” document Service Contract Loyalty

It expressly indicates the agreement Basic Licensee Duties

Mandatory for “exclusive relationships”47-1-45 NMSA

Code of “requires” written agreements Article Nine


187

Some Good Reasons…

Code Protection only for Exclusive Written Agreements Article 16 SOP 16-9 & 16-13

Contract Law Protection for Written Agreements

License law requires it for compensation from other party 61-299-12 A 3

Contract contains “mediation clause”


188

“ For the Future” (now done in Colorado)—”Designated Representative” for In-House Transaction Brokerage

Representation—Not RANM Approved!

Designated Representative. “If Qualifying

Broker chooses Designated Representation, Broker Firm designates to represent the Client exclusively. The designated representative will provide the Client services as transaction broker without an agency relationship…


189

“Broker Firm reserves the right to name additional designated representatives when at its discretion it is necessary. If additional designated representatives are named, Client will be informed. Only the persons designated as Client's designated representatives will be assigned to the Client…


190

“In an in-house transaction Qualifying Broker will designate another licensee to represent the Other Client exclusively. Client’s designated representative and Other Client’s designated representative will work for the same Qualifying Broker, who supervises all, transactions and maintains impartiality and safeguards confidentiality for both parties.”


191

“ For the Future” (Selection #C is NOT currently in Item #4 of Cover Page II of the RANM Form # 2103 Purchase Agreement)

4. DUAL REPRESENTATION/DUAL AGENCY/TRANSACTION BROKER FACILITATION DISCLOSURE AND CONSENT (if applicable)

[ ] A. Brokerage is representing both Buyer and Seller as clients by means of a written agreement with each of them without creating dual agency, and Buyer

and Seller hereby consent to this representation. [ ] B. If Dual Agency exists, prior to writing or presenting offer, obtain written authority from buyer client and seller client on RANM Form 1301, Agency Agreement - Dual.

[ ]C. If Transaction Broker Dual Facilitation is to be entered, prior to writing or presenting offer, obtain written authority from buyer client and seller client modifying the existing Exclusive Agreements with consent for Transaction Broker Dual Facilitation.


192

Brokerage Service Check List(attached worksheet)

Check the “A Box” if You, as Exclusive Agent, Would Provide this Service

Check the “B Box” if You, as Exclusive Transaction Broker Would Provide this Service

Leave Both Boxes Blank, if Service Is NOT Provided Regardless of Brokerage Relationship


193

ROLE

RELATIONSHIPTASK


194

#4 Issue of Extent of Fiduciary Duty

Does it Extend to the Client beyond Obligations of the Listing?

Does it Extend to Seller Client’s Other Properties that Are Not Listed?


195

#5 Issue Do Disclosure Responsibilities Differ?

Disclosure Responsibilities of Seller

Disclosure Responsibilities of Title Company

Disclosure Responsibility of Listing Agent

Disclosure Responsibility of Buyer’s Agent


196

#6 Issue of Loyalty

Competing with Former Agency Client

Effect of Contract “Hold-Over” Clause

What Constitutes a “de novo” Transaction?

Loss of Right to Get Paid


197

#7 Issue of Loyalty

Failure to Disclose

Self-Dealing



198

ROLE

RELATIONSHIPTASK


199

Remember….

Professional Services are Required Regardless of Role or Relationship

Scope of Authority—Authorizations with potential Capacity to Commit Client

Scope of Engagement—Provision of Services Only


200

VI. Task-Role-Relationship Model

Determine the TASK

Suggest the Role Suitable for TASK

Suggest the Relationship that Best Fits the Task and Role


201

ROLE

RELATIONSHIPTASK


202







203


204


205


206


Finis


207

Forms Discussion

Listing Agreement and Addendum

Dual Agency Agreement

Transaction Broker Facilitation Agreement

Purchase Agreement Cover Page II


208

IX. Making it Work

Class Problem #1: Public Transportation

Class Problem #2: Decline of Inspections


209


210


211

1. EXCLUSIVE SERVICES. The undersigned ("Seller") grants to the undersigned Broker firm the exclusive right to sell the real property described in Paragraph 3. Broker will act as Seller's Transaction Broker in this transaction without creating an agency relationship. Broker and Seller will owe each other loyalty. "Sale" includes the voluntary sale, lease, exchange or other transfer of the Property or the voluntary creation of the right to acquire any interest in the Property (including a contract or lease). It is the parties' intention to minimize the likelihood that Seller will be held liable for the acts and omissions of the Broker and to eliminate the possibility that Broker is held liable to Seller under agency law.


212

What Do These Terms Mean in Real Estate Practice?

“Assistance”

“Facilitation”

“Representation”

“Advocacy”


213


214

I. Introduction

#1 Caveat Emptor and Vendor Agency

#2 Trade Associations with Ethical Standards

#3 Real Estate License Law & Commissions

#4 Courts & Consumer Protection


215

I. Introduction

New Mexico Cases

Neff v Bud Lewis (1976) Amato v Rathbun (1982) Gouveia v Citicorp (1984)

Easton v Strassburg (CA 1984)


216

I. Introduction

#5 Agency Understood & Effect on Buyers

#6 Buyer Agency & Dual Agency

#7 Courts & Failure to Disclose

#8 Nonagency and Transaction Brokerage


217

I. Introduction

“How We Do It”-- Licensee Responsibilities

Differences with “OLDCAR” Fiduciary Duties

Differences in Potential for Liability


218

IV. Transaction Broker Duties and Professional Standards

NAR Code of Ethics and Brokerage Relationships

Article 1-- Priority and Honesty Article 2-- Confidentiality Article 11--Competency Article 16--Exclusive Relationships


219

II. Some Important Terms

Agency

Business Relationship

Facilitator

Fiduciary Duty


220


Nonfiduciary Duty

Principal

Professional Duty

Standard of Care


221


Reasonable Care

“That degree of care which a person of ordinary prudence would exercise in the same or similar circumstances. Due care under all the circumstances. Failure to exercise such care is ordinary negligence”


222


223


Reasonable Care



224


Reasonable Care



225


226


Utmost Care

“The standard is relative, not absolute, and sometimes regarded as no more than reasonable care measured by circumstances.”


227


Transaction Broker in Other States

Colorado Florida Missouri Oklahoma Tennessee


228

#1 Issue of Priority

Common Law or Rules & Regs?

Non-Fiduciary Duty

Covenant of Good Faith and Fair Dealing


229

#2 Issue of Priority

Common Law or Fair Housing Law?


230

#3 Issue of Reliable Source

Substantial Misrepresentation

Source “Deemed Reliable”

Responsibility for “Red Flags”


231

#4 Issue of Extent of Fiduciary Duty

Does it Extend to the Client beyond Obligations of the Listing?

Does it Extend to Seller Client’s Other Properties that Are Not Listed?


232

#5 Issue Do Disclosure Responsibilities Differ?

Disclosure Responsibilities of Seller

Disclosure Responsibilities of Title Company

Disclosure Responsibility of Listing Agent

Disclosure Responsibility of Buyer’s Agent


233

#6 Issue of Loyalty

Competing with Former Agency Client

Effect of Contract “Hold-Over” Clause

What Constitutes a “de novo” Transaction?



234

#7 Issue of Loyalty

Failure to Disclose

Self-Dealing



235


Real Estate License Law & Regulations

Misrepresentations

Other conduct such as negligence, impropriety and incompetence

Basic Licensee Duties of NMREC Part 19


236


Necessity for Written Contracts or Memorandums

47-1-45 NMSA 1978 Written Contracts

61-29-12 A (3) written permission required from one’s principal to receive compensation from other party to the transaction


237

Customer Service Transaction Broker

Obligations of Real Estate Law and NMREC Basic Licensee Duties

Obligation to perform all oral and written agreements with honesty and reasonable care

Liability for money damages from misrepresentation and negligence


238


239

Client ServiceExclusive Transaction Broker

All Customer Service Obligations and Liabilities Basic Licensee Duties Performance of Promises Made Liability for Misrepresentation & Negligence

PLUS—Undivided Loyalty entered solely by Exclusive Brokerage Agreement


240

Client ServiceExclusive Agency

Fiduciary duty obligations of utmost care

Liability for breach of fiduciary duties including potential for not getting paid

Implied authority to commit client by word or deed

Client liability for word or deed of agent under the scope of authority granted


241

Brokerage Service Check List

Check the “A Box” if You, as Exclusive Agent, Would Provide this Service

Check the “B Box” if You, as Exclusive Transaction Broker Would Provide this Service

Leave Both Boxes Blank, if Service Is NOT Provided Regardless of Brokerage Relationship


242

Transaction Brokerage Duties and Professional Standards

Real Estate License Law

NMREC Rules & Regulations

Basic Licensee Duties

National Association of Realtors® Code of Ethics


243

Transaction Brokerage Disclosure Requirements

“Trigger Event” When Presenting Consumer with a Written Document

that when Filled Out Could become an Express Written Agreement

Written Disclosures Basic Licensee Duties Existence of Your Own Listing Contracts Licensee’s Material Interests or Relationships


244

RANM “Cover Page II”


Transaction Broker Buyer Agreement

Purchase Agreement—Residential Resale


245

RANM “Cover Page II”


Transaction Broker Buyer Agreement

Purchase Agreement—Residential Resale


246

Transaction Broker Services Agreement

Exclusive Right to Sell Listing Agreement

“Designated Representative”


247

Facilitation—Agency or Transaction Brokerage?

“Dual Agency” Form (RANM) Modified Fiduciary Duties

“Transaction Brokerage Facilitation” (PES) No Fiduciary Duties


248


249

Chart of Obligations (attached as handout)

Real Estate License Law

NMREC Rules and Regulations

Reference to Common Law

Reference to NAR Code of Ethics


250

Ockham’s Razor

“pluralitas non est ponenda sine necessitate”

(“Don’t make matters more complicated than is necessary”)


251


252


253

Ambiguities: Use of Terms

Assistance Representation

Advocacy Loyalty Fiduciary

Advise Facilitation


254

An Ancient Proverb

“When you are in a hole and cannot get out you have several options”


255


ROLE

RELATIONSHIPTASK

Lou Tulga’s “Wheel”


256

Brokerage Relationship Comparison Chart: Agency

Loyalty is agreement to promote and protect client’s interests as foremost

Acceptance of CAPACITY by word or deed to commit client without further ratification under scope of authority—trustee

Acceptance of LIABILITY for breach of fiduciary duty—which includes, payment of damages, rescission of transaction and/or forfeiture of right to compensation

Date post:	17-Jul-2015
Category:	Real Estate
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