South-Western Publishing©2002 By Charles J. Jacobus Real Estate Principles Ninth Edition Real Estate: An Introduction to the Profession Ninth Edition South-Western Publishing©2002

Chapter 21 The Principal-Broker Relationship: Agency _______________________________________

South-Western Publishing©2002 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

South-Western Publishing©2002 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.

South-Western Publishing©2002 Commission Skills and Knowledge Principal Agent Agency Relationship

South-Western Publishing©2002 Care Obedience Accounting Loyalty (Competence and expertise) (Lawful instructions) (For funds received) (Principal’s interest first) Broker’s Obligation to Principal

South-Western Publishing©2002 Said without checking the facts Not said and facts not checked Said Wrongly to Mislead Unsaid in Order to Mislead A Facts Broker Knows B Facts Broker Does not know Disclosure Liability

South-Western Publishing©2002 Red Flags “As Is” Puffing Lead base paint disclosure on homes built prior to 1978 Home Inspections

South-Western Publishing©2002 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.

South-Western Publishing©2002 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 agents role in a transaction. Many states now require disclosure forms.

South-Western Publishing©2002 Information Owner disclosure information Interstate land disclosure statements Antitrust laws –Price fixing –Boycotting Errors and Omission insurance

South-Western Publishing©2002 Key Terms Agent Boycotting Commingling Dual agency Middleman Ostensible authority Price fixing Principal Puffing Third parties