Chapter 4 Slide 1 Copyright – David A. McGowan All rights reserved. Revised Chapter 4 REAL ESTATE AGENCY Law of Agency The rights and duties of the principal and the agent. Common Law of Agency Based upon the principle-agent relationship developed under old English law. Statutory Law of Agency Created by legislative action

Chapter 4 Slide 2 Copyright – David A. McGowan All rights reserved. Revised Common Law of Agency Agent - The individual who is authorized and consents to represent the interests of another person. Sub-Agent - The agent of an agent. Principal - The individual who hires the agent and delegates to him or her the responsibility of representing the Principals interests. Client - The principal, the individual to whom fiduciary duties are owed. DEFINITIONS

Chapter 4 Slide 3 Copyright – David A. McGowan All rights reserved. Revised DEFINITIONS Common Law of Agency Agency - The fiduciary relationship of trust between the principal and the agent. Fiduciary - The relationship in which the agent is held in a position of special trust and confidence by the principal. Customer - A consumer for whom some small level of service is provided and who is entitled to fairness and honesty.

Chapter 4 Slide 4 Copyright – David A. McGowan All rights reserved. Revised COMMON LAW OF AGENCY Seller (Principal / Client) Agent (Broker) Hires Employment Fiduciary Relationship  Care (Page 41)  Obedience (Page 41)  Loyalty (Page 42) Salesperson (sub-agent)

Chapter 4 Slide 5 Copyright – David A. McGowan All rights reserved. Revised Seller (Principal) Agent (Broker) Hires Salesperson (sub-agent) MLS Coop Broker (Sub-Agent) Salesperson (Sub-agent) Buyer COMMON LAW OF AGENCY Loyalty (Page 42) know who you represent Seller L SA S SA L SA S SA

Chapter 4 Slide 6 Copyright – David A. McGowan All rights reserved. Revised Revised 6-08 Seller (Principal) Agent (Broker) Hires Salesperson (sub-agent) MLS Coop Broker (Sub-Agent) Salesperson (sub-agent) Buyer COMMON LAW OF AGENCY Loyalty (Page 42) know who you represent Dual Agency

Chapter 4 Slide 7 Copyright – David A. McGowan All rights reserved. Revised When the agent represents both buyer and seller in the same transaction. A licensee may act as a dual agent only with the informed written consent of all clients. (Illinois License Act of Page 21) A licensee cannot act as a dual agent when they are also a principal in the transaction DUAL AGENCY RULES (Page 56)

Chapter 4 Slide 8 Copyright – David A. McGowan All rights reserved. Revised Seller (Principal) Broker (Agent) Hires Salesperson (sub-agent) DUAL AGENCY (Page 56) Common Law Buyer Hires Salesperson (sub-agent) Single Office

Chapter 4 Slide 9 Copyright – David A. McGowan All rights reserved. Revised COMMON LAW OF AGENCY Seller (Principal) Agent (Broker) Hires Employment Fiduciary Relationship Care Obedient Loyalty Accountability Disclosure Confidentiality Salesperson (sub-agent)

Chapter 4 Slide 10 Copyright – David A. McGowan All rights reserved. Revised STATUTORY LAW OF AGENCY IN ILLINOIS Statutory Law of Agency REPLACED Common Law of Agency License Act of 2000 Page 19

Chapter 4 Slide 11 Copyright – David A. McGowan All rights reserved. Revised A licensee is considered to be representing the person they are work with. STATUTORY LAW OF AGENCY

Chapter 4 Slide 12 Copyright – David A. McGowan All rights reserved. Revised Statutory Law of Agency Agency – a relationship in which real estate broker or license whether directly or indirectly represents a consumer by the consumer’s consent Customer – a consumer who is not being represented by a licensee, but for whom the licensee is performing ministerial acts. STATUTORY LAW OF AGENCY

Chapter 4 Slide 13 Copyright – David A. McGowan All rights reserved. Revised Statutory Law of Agency Designated Agent – sales associate defined by the broker as the legal agent of the client assuming the fiduciary obligations Sub Agency - No longer exists in Illinois Client – a person who is being represented by a licensee STATUTORY LAW OF AGENCY

Chapter 4 Slide 14 Copyright – David A. McGowan All rights reserved. Revised Statutory Law of Agency Consumer – a person or entity seeking or receiving licensed activities Ministerial Acts – those acts that a license may perform for a consumer that are informative or clerical in nature and do not rise to the level of active representation. STATUTORY LAW OF AGENCY

Chapter 4 Slide 15 Copyright – David A. McGowan All rights reserved. Revised Seller (Principal) Broker Hires Salesperson Coop Broker Salesperson (sub-agent) Buyer STATUTORY LAW OF AGENCY Customer Designated Agent Customer (Agent)

Chapter 4 Slide 16 Copyright – David A. McGowan All rights reserved. Revised Revised DESIGNATED AGENT A sponsoring broker entering into an agreement with any person for the listing of property or for the purpose of representing any person in the buying, selling, exchanging, renting, or leasing of real estate may specifically designate those licensees employed by or affiliated with the sponsoring broker who will be acting as legal agents of that person to the exclusion of all other licensees employed by or affiliated with the sponsoring broker.

Chapter 4 Slide 17 Copyright – David A. McGowan All rights reserved. Revised DESIGNATED AGENT A sponsoring broker shall take ordinary and necessary care to protect confidential information disclosed by a client to his or her designated agent. A designated agent may disclose to his or her sponsoring broker or persons specified by the sponsoring broker confidential information of a client for the purpose of seeking advice or assistance for the benefit of the client in regard to a possible transaction.

Chapter 4 Slide 18 Copyright – David A. McGowan All rights reserved. Revised MINISTERIAL ACTS Action that is informative in nature Answering a specific question with a specific answer

Chapter 4 Slide 19 Copyright – David A. McGowan All rights reserved. Revised OPINION VERSUS FACT (Page 43) Statements of opinion are permissible only as long as they are offered as opinions and without any intention to deceive. Statements of fact must be accurate. Exaggeration of a property’s benefits is called puffing. While puffing is legal, licensees must ensure that none of their statements can be interpreted as fraudulent.

Chapter 4 Slide 20 Copyright – David A. McGowan All rights reserved. Revised DISCLOSURE Illinois Real Property Disclosure Form (Page 44) Lead Based Paint Disclosure (Page 442) Radon Disclosure (Page 444) Latent Defects (Page 48)

Chapter 4 Slide 21 Copyright – David A. McGowan All rights reserved. Revised DISCLOSURE Megan’s Law (Sexual Offender Act of 1994) Stigmatized Properties (Page 49 & ACT Page 20) Agency Status

Chapter 4 Slide 22 Copyright – David A. McGowan All rights reserved. Revised DISCLOSRES A clear indication that a designated agency will exist unless there is a written agreement providing otherwise A summary of any other agency relationships available The names of the designated agents

Chapter 4 Slide 23 Copyright – David A. McGowan All rights reserved. Revised DISCLOSRES The amount and manner of the brokers compensation An indication of whether the broker will share the compensation with brokers who represent other parties

Chapter 4 Slide 24 Copyright – David A. McGowan All rights reserved. Revised CREATION OF AGENCY Express agency (Page 51) Listing Contracts, Buyer Representation Agreements Implied agency (Page 51) Buyer Representation Agreements Compensation (Page 52)

Chapter 4 Slide 25 Copyright – David A. McGowan All rights reserved. Revised TERMINATION OF AGENCY Death or incapacity of either Client or Broker (Substantial) destruction or condemnation of the property Expiration of the terms of the agency

Chapter 4 Slide 26 Copyright – David A. McGowan All rights reserved. Revised TERMINATION OF AGENCY Mutual agreement by all parties to the contract Breach By operation of law, as in bankruptcy Completion, performance or fulfillment

Chapter 4 Slide 27 Copyright – David A. McGowan All rights reserved. Revised Listings must have a specific termination Date (Page 53 & 83, License Act Page 17) Automatic extension clauses are illegal. Agency Coupled with an Interest IN ILLINOIS …

Chapter 4 Slide 28 Copyright – David A. McGowan All rights reserved. Revised TYPES OF AGENCY General Agent represents the principal in a broad range of matters related to a particular business or activity. (Page 53) Special Agent represents the principal in one specific act or business transaction only (Page 53)