1. © 2010 by Cengage Learning Chapter 21 ________________ The Principal- Broker Relationship: Agency

2. © 2010 by Cengage Learning  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

3. © 2010 by Cengage Learning  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.

4. © 2010 by Cengage Learning Commission Skills and Knowledge Principal Agent

5. © 2010 by Cengage Learning Care Obedience Accounting Loyalty (Competence and expertise) (Lawful instructions) (For funds received) (Principal’s interest first)

6. © 2010 by Cengage Learning 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

7. © 2010 by Cengage Learning  “As Is”  Puffing  Lead-based paint disclosure on homes built prior to 1978  Home Inspections

8. © 2010 by Cengage Learning  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.

9. © 2010 by Cengage Learning  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 agent’s role in a transaction.  Many states now require disclosure forms.

10. © 2010 by Cengage Learning

11.  Owner disclosure information  Interstate land disclosure statements  Antitrust laws ◦ Price fixing ◦ Boycotting  Errors and Omission insurance

12. © 2010 by Cengage Learning Key Terms Agent Boycotting Commingling Dual agency Middleman Ostensible authority Price fixing Principal Puffing Third parties