AGENCY For Real Estate Professionals - PowerPoint Presentation

Slide1

AGENCYFor Real Estate Professionals

Presented by:

John M. Crane, Esq.

John M. Crane, P.C.

295

Madison Ave, 12

th

Floor New York, NY 10017

Tel: (212) 748-9477

Fax: (888) 820-6197

Cell: (914) 403-3867

Email:

johncrane@johnmcrane.comSlide2

Overview of Agency

How

Common is Agency? Most of the business world

involves

agency

relationships.

Corporations

and

other

entities

(LLC’s,

Trusts)

could

not

exist

without

agents!

They

are

fictional

entities

created

based

on

the

law

of

agency.

There

are

agents

that

exist

that

can

act

on

behalf

of Mercedes

Benz,

Google,

IBM,

or any

other entity

to bind the

company.

When

a

salesperson

comes

from

Carpet

Depot

to

measure

your

apartment,

he

is

probably

an

employee

or

independent

contractor

of

Carpet

Depot.

If

you

call

Uber

to

take

you

shopping,

the

Uber

driver

is

usually

an

independent

contractor.

He

is

not

acting

primarily

for

the

benefit

of

Uber. He

is

acting

for

his

own

benefit. An

independent

contractor

has

autonomy.

An

employee

is

someone

that

works

for

another

person

or

entity.

They

work

at

the

direction

of

their

employer.

Both

of

these

contrast with an

agent-

whom is acting

primarily

for another’s benefit.Slide3

What is an Agent- Definitions

1. Agency- is a legal relationship that exists between the principal who gives an specific authorization for another, an agent, to act on their behalf. The principal must have control over the agent, but the control does not have to be significant. The agent must be acting on the principal’s behalf, which courts generally have stated means that the agent must be acting primarily for the benefit of the principal.

We are talking this type of AgentSlide4

Not This

Or

ThisSlide5

2. Customer- Any consumer with whom we have no agency agreement.3. . Client- A consumer becomes a client when they enter into an agreement to be represented by a fiduciary.

4. Fiduciary: A fiduciary is a person who holds a legal or ethical

relationship of trust with one or more other parties.Examples: ! You drop your shoes off to be shined• You order a custom birthday cake with a candle for every year- They know your real age!!• You give your cousin the stockbroker 50k to invest• You sign a contract to list your home for sale• You go to an attorney to draw up a willSlide6

5. Real Estate Brokerage Relationship Form- Listing Agreement or Buyer Agency Agreement.6

. Listing or Seller’s Agent-The agent that represents the seller of a property in a real estate transaction.7

. Buyer Agent- A real estate licensee who represents a buyer in a transaction.8. Selling Agent- The buyer's agent is the individual that represents buyers when they purchase a home. They are commonly referred to as the “selling agent” because it was their work that brought about the actual deal.Appointing Broker- The Designating Broker, or their designee, appointed to oversee an appointing agent transaction. Appointed Agent (or Designated Agent)- A real estate licensee designated to represent one side of a transaction, WHEN BOTH SIDES ARE BEING REPRESENTED by the same agent (whether salesperson or broker), and one party does not desire dual agency representation.Disclosed Dual Agent- An agent that represents both the buyer and the Seller in the same transaction. This is legal and possible where you have disclosed your dual agency to both the buyer and seller, and are authorized by both the buyer and the seller by their signature on the NYS Disclosure Form for consent to dual agency. In NYS, you must disclose, so this is the only kind of dual agency.Slide7

12. Self-Representation- An agent that represents themselves when they purchase property for themselves.

l3

. Broker’s Agent-A Broker’s Agent is an agent that cooperates or is engaged by a listing agent (or a buyer’s agent) but does not work at the same firm as the other agent. A broker’s agent does not have a direct relationship with a buyer or seller. A broker’s agent may assist the listing agent or buyer’s agent in finding a property to sell or buy. The broker’s agent takes direction and instruction from the listing or buyer’s agent.Slide8

III. Creation of AgencyExpress

Agency- An express agency is created by a written agreement. In real estate, this is usually a listing agreement, but it could be a napkin! An express agency can also be found where there is an oral agreement between the principal and the agent. I would prefer 87 witnesses! An express agency indicates the parties’ express intent for this type of representation

.B. Implied Agency- An implied agency agreement could be created where the parties’ actions lead others to believe that one person is acting as the agent and with the consent and authority of the other person (the principal).C. Listing Agreement- Today, most agency agreements are express and created by listing agreements. For good reason! In order to have a high degree of confidence that you will not be working for free, a written agreement specifically authorizing you to do the things you need to do is desirable. In those areas that have MLS systems, a written listing agreement is required (at least in every county below Poughkeepsie)!Slide9

IV. Agency & BrokerageA. Let’s Reexamine the Definitions

Listing or Seller’s Agent-The agent that represents the seller of a property in a real estate transaction.Buyer Agent- A real estate licensee who represents a buyer in a transaction.

Selling Agent- The buyer's agent is the individual that represents buyers when they purchase a home. They are commonly referred to as the “selling agent” because it was their work that brought about the actual deal.Appointing Broker- The Designating Broker, or their designee, appointed to oversee an appointing agent transaction. Slide10

Appointed Agent (or Designated Agent)- A real estate licensee designated to represent one side of a transaction, WHEN BOTH SIDES ARE BEING REPRESENTED by the same agent (whether salesperson or broker), and one party does not desire dual agency representation

.Disclosed Dual Agent- An agent that represents both the buyer and the Seller in the same transaction. This is legal and possible where you have disclosed your dual agency to both the buyer and seller, and are authorized by both the buyer and the seller by their signature on the NYS Disclosure Form for consent to dual agency. In NYS, you must disclose, so this is the only kind of dual agency

.Self-Representation- An agent that represents themselves when they purchase property for themselves.Broker’s Agent- A Broker’s Agent is an agent that cooperates or is engaged by a listing agent (or a buyer’s agent) but does not work at the same firm as the other agent. A broker’s agent does not have a direct relationship with a buyer or seller. A broker’s agent may assist the listing agent or buyer’s agent in finding a property to sell or buy. The broker’s agent takes direction and instruction from the listing or buyer’s agent.Slide11

V. Fiduciary ResponsibilityCommon

law doctrine of agency said that a principal was liable for actions of their agents. This type of liability is known as vicarious liability.

Vicarious Liability- Vicarious liability is liability imposed on another by law for acts done by third parties. It is imposed based on a theory of Respondeat Superior.Respondeat Superior- is a latin phrase that translates to “let the master answer.” This is a common law doctrine which states that, in many circumstances, an employer is responsible for the actions of employees performed within the course of their employment. Slide12

Example: Sally wants to lists her home for sale with her niece, Nancy, who just got her sales license. Nancy suggests listing it with her broker, Betty, who lists Nancy on the listing agreement as the subagent.

Example: Sally lists her home with Betty. Betty has Nancy show the home and do all of the things that Betty could do. Nancy works for Betty and is a broker’s agent.

Difference: The difference is that Sub-agents are agents of the Seller or Buyer, whereas, Broker's Agents are agents of the Broker. This is important because of the doctrine of "vicarious" liability. This goes back many of hundreds of years and is based on common law theory that supervisory parties (employers) are responsible and have a duty to control acts of their subordinates (employees). With Sub-agents, the Seller or Buyer are “vicariously” liable for the actions of the Sub-agents. Sub-agents were seen more in the past with “cobroker” agreements. With Broker’s Agents, the Broker is “vicariously” liable for the actions of the Broker’s Agents.Slide13

TERMINATION

OF AGENCY: Termination of an agency may be

done by

the

operation

of

law

as

follows:

Expiration

of

time:

An

agency

contract

may

be

for

a

particular

period.

In

such a

case,

the

agency

relationship

will

terminate

at

the

end

of

that

time

period.

Fulfillment

of

object:

I

sign a

listing

agreement

and

you

sell

my

house

in

one

week.

At

the

end

of

the

closing,

our

agreement

will

terminate.

Death

or

incompetency

of

either

party:

Whenever

a

principal

or

agent

dies

or

is

declared

incompetent,

the

agency

contract

will

terminate.

Insolvency

of

Principal:

A Principal

must

have

capacity

to

contract.

An

insolventl

principal

lacks

capacity

to

contract

and

the

agency

will

terminate.

An

agent

that

is

insolvent

may

continue

to

act

as

agent,

as

he

is

acting

on

the

Principal’s behalf.

Destruction

of

agency

subject

matter:

An

agency

agreement

will

terminate

where

the

subject

matter

of

the

agency

is

destroyed.

A drone

strike

on

325

Broadway

will

also

kill

the

agency

contract

(listing

agreement).

Enemy

of

U.S.:

Where

the

Principal

is

an

alien and war

breaks

out

between

the

U.S.

and

the

alien’s

country,

the

principal

is

declared

an

alien enemy

and

the

agency

contract

gets terminated.Slide14

Bankruptcy liquidation of company: If either Principal or Agent are liquidated, agency relationship terminates

.8. A sub-agency terminates whenever the main agency gets terminated, no matter what the reason.

9. By Acts of Parties. The following are the situations where the agency is terminated by the act of parties. A) A Principal can terminate the contract of agency by giving notice to agent. However, the agent may have rights to compensation for damages for any financial injury suffered. B) Termination of agency by the Agent: An agent also can terminate the agency contract by giving notice to principal. Similarly, if Principal suffers any damages, the agent has to compensate. C) Mutual Agreement: By means of mutual agreement between principal and agent, the agency contract may be terminated.Slide15

VII. HOW TO STAY LICENSEDNo

matter which license you have, you can be subject to civil or criminal penalties should you commit a mistake.

B. Criminal penalties usually are imposed based on intentional actions that are- surprise - criminal!! We know them. Stealing money, discrimination, etc. Civil penalties come from honest mistakes- we all make them, but those that are organized make many less!C. How to avoid? Disclose, disclose, disclose 1. What to disclose? Everything, except what you can’t disclose!RPL §443-1: Upon the first substantial contact, an agent shall provide the disclosure form set forth in subdivision four to a seller or landlord prior to entering into a listing agreement with the seller or landlord and shall obtain a signed acknowledgment from the seller or landlord, except as provided in paragraph e of this subdivision. §443-1(d). The agent shall provide to the buyer, seller, tenant or landlord a copy of the signed acknowledgment and shall maintain a copy of the signed acknowledgment for not less than three years. §443-1(e). If the seller, buyer, landlord or tenant refuses to sign an acknowledgment of receipt pursuant to this subdivision, the agent shall set forth under oath or affirmation a written declaration of the facts of the refusal and shall maintain a copy of the declaration for not less than three years. 3. Exhibit A: Buyer/Seller Disclosure Form SamplesSlide16

VII. Disclosure- Property Condition Disclosure ActA. What Can’t You Disclose- Whatever your client tells you not to! You cannot disclose if the client tells you not to and you are not liable if you disclosed the requirement of the Property Condition Disclosure Act upfront.

Breathe Easy! Every once in awhile, our politicians do good things. The Property Condition Disclosure Act states that Realtors are not liable for failing to disclose if they give the Disclosure Act requirements upfront.Slide17

B. RPL § 466. Duty of an agent. An agent representing a seller of residential real property as a listing broker shall have the duty to timely inform each seller represented by that agent of the seller's obligations under this article. An agent representing a buyer of residential real property, or, if the buyer is not represented by an agent, the agent representing a seller of residential real property and dealing with a prospective buyer, shall have the duty to timely (in any event, before the buyer signs a binding contract of sale) inform such buyer of the buyer's rights and obligations under this article. If an agent performs the duties and obligations imposed upon him or her pursuant to this section, the agent shall have no further duties under this article and shall not be liable to any party for a violation of this article.

1. It isn’t criminal or a material defect for a seller or their agent not to disclose that: (a) an owner or occupant of the property is, or was at any time suspected to be, infected with human immunodeficiency virus or diagnosed with acquired immune deficiency syndrome or any other disease which has been determined by medical evidence to be highly unlikely to be transmitted through occupancy of a dwelling place; or (b) the property is, or is suspected to have been, the site of a homicide, suicide or other death by accidental or natural causes, or any crime punishable as a felony. (N.Y. Real Prop. Law §443a-1.) Slide18

No cause of action shall arise against an owner or occupant of real property, or the agent of such owner or occupant, or the agent of a seller or buyer of real property, for failure to disclose in any real estate transaction a fact or suspicion contained in subdivision one of this section. (N.Y. Real Prop. Law §443a-2

.)

3. Failure to disclose a fact contained in subdivision one of this section to a transferee shall not be grounds for a disciplinary action against a real estate agent or broker licensed pursuant to this article. (N.Y. Real Prop. Law §443a-2(b).)Slide19

VIII. NUANCES OF AGENCYCustomer-

A consumer with no agency agreement. Transaction brokers/facilitators/non- agents all work with customers. They don’t represent any side, but they assist in the transaction

.1. Customers- No fiduciary duties owed, but you must provide a minimum level of service. For example, you must comply with all laws, and treat the customer fairly and honestly.2. Question: Bob is buying a home and asks for your help. You show him the buyer agency agreement and Bob doesn’t want to sign in case he finds a home through another agent he is working with. Bob sees a home with you and wants to submit an offer. You again ask Bob to sign the agreement, but Bob still refuses, saying “the Seller pays you anyway.” a. Can you submit the offer? b. Can you give Bob your advice on the price of the offer? c. Can you give advice if the Seller comes back with a counter-offer? d. Can you negotiate or advocate for Bob in speaking to the Seller or Seller’s agent?Slide20

Agency Agreements- Obligate the principal and agent to act or not act in a certain way, but it also enables the agent to act on the principal’s behalf. Without a signed agreement, you have no authority to act on anyone’s behalf. This means you cannot bind the person. When

theysign,

they become your client and you are acting with specific authority. Your actions can bind the client and you have a signed agreement stating that you are authorized to act, which means they cannot say you were not authorized!1. What to say to a seller? What does being a seller’s agent mean?Seller says “I won’t sign a listing agreement, but if you sell, I will give you full commission”. You say, “I understand your reluctance to sign, but by signing you and I are entering into an agreement where I am obligated to represent your best interests. I have a fiduciary duty and legal obligation to put your needs above everything else, including my own personal needs and wants.” 2. What to say to a buyer? What does it mean to be “their” agent?Buyer says “Nobody else asks me to sign an agreement. Why do I need to sign this?”You say, “Signing this agreement tells me that you are serious about working with me. More importantly, by signing this agreement, I am agreeing to use all of my skill, experience, and real estate knowledge to help you present your offer in the best possible light and in a manner that will show the Seller that your offer is strong. I also owe you a fiduciary duty to put your interests above my own and to hold all the information you provide me in the strictest confidence, and to negotiate on your behalf based only upon your express instruction.”Slide21

IX. Fiduciary Duties- Think of Summer, We all want COLDD ACA. A Fiduciary Relationship is one of trust. It goes beyond the typical relationship and is one where the client entrusts their transaction, matter, money, or confidence to you. Think of a doctor/patient, financial advisor/investor, attorney/client, or Realtor/Client. When an agent enters into a contract with a consumer, that consumer or customer becomes a client.

A

client is owed the full range of fiduciary duties. There are seven specific duties that a fiduciary owes to his client and are easily remembered by the acronym COLDD AC:Slide22

C is for the skillful Care you offer your client.O

is for lawful Obedience to the client.L is for Loyalty to the client (above even yourself).

D is for Disclosure of material facts relevant to the transaction.D is for timely Diligence in handling documents, funds, and research.A is for Accounting of all funds.C is for Confidentiality of information that may potentially harm your clientSlide23

Care: You must be competent and if you are brand new, you should team up with someone that can handle the transaction if you are unsure of your competence.

Obedience: You must follow your client’s instructions, unless they are criminal or against REBNY

Guidelines, in which case you should decline representation.Loyalty: If your client is buying a $500,000 home from someone for $150,000 and your client asks you to submit an offer, you cannot tell your sister to submit an offer of$175,000!Disclosure: You must disclose to your client (not a customer) material facts relevant to the transaction, but not if you are a dual agent! You have dual loyalties and cannot disclose without the other principal’s consent.Diligence: If you are to submit an offer, you cannot go on vacation and submit it when you return.Accounting: In NY, you normally do not handle funds, but if you do property management, you have a duty to account to the landlord or your clients for all funds collected and amounts expended on their behalf.Confidentiality: You cannot disclose any information without your client’s consent- now or any time in the future!Slide24

Final Exam:Bob the Buyer calls and requests that you show him a few homes. Bob signs a buyer

representation agreement that will last for 6 months. On the very first showing, you show Bob hisdream home, with everything he ever wanted. He wants to put in an offer at full ask. You see that the

Seller has the home listed with another agent in your office and that the commission is 6%, with 3% goingto the listing agent and 3% to you. You know from speaking to the Seller’s agent, your good friend, thatthe Seller is very motivated.1. Bob is:A. A customerB. A clientC. A consumerD. A unrepresented principal2. What kind of responsibility do you have towards Bob?A. NoneB. FiduciaryC. Basic minimum level of serviceD. None of the above3. As a professional agent, should you tell Bob the Seller is motivated?A. Yes.B. NoC. No, because motivated is not a clear termD. Yes, because there is a fiduciary duty owed to Bob.Slide25

4. Suppose Bob questions your loyalty, do you tell him:A. That you are the buyer’s agent and your loyalty is to him and him alone.

B. That you are a designated sales agent, and that because you have beendesignated, that you work for him.

C. That Bob signed the disclosure form and he is stuck.D. That you are a dual agent and that you will act in a way that is fair toeveryone.5. If this was your listing, could you represent Bob as well?A. YesB. NoC. I would be a dual agent and be able to represent both parties if they both saidyes.D. I would have to have both parties sign a form agreeing to dual representation.6. You represent both parties. The Seller would not sign and wanted someone elseappointed. You should ________________________________________,Slide26

Answer Key1. Bob is:A. A customer

B. A clientC. A consumerD. A unrepresented principal

2. What kind of responsibility do you have towards Bob?A. NoneB. FiduciaryC. Basic minimum level of serviceD. None of the above3. As a professional agent, should you tell Bob the Seller is motivated?A. Yes.B. NoC. No, because motivated is not a clear termD. Yes, because there is a fiduciary duty owed to Bob.4. Suppose Bob questions your loyalty, do you tell him:A. That you are the buyer’s agent and your loyalty is to him and him alone.B. That you are a designated sales agent, and that because you have beendesignated, that you work for him.C. That Bob signed the disclosure form and he is stuck.D. That you are a dual agent and that you will act in a way that is fair toeveryone.Slide27

5. If this was your listing, could you represent Bob as well?A. YesB. NoC. I would be a dual agent and be able to represent both parties if they both said

yes.D. I would have to have both parties sign a form agreeing to dual representation.

6. You represent both parties. The Seller would not sign and wanted someone elseappointed. You should Go to your broker and tell them that you have a situationwhere you represent buyer and seller and one party does not consent. The brokerSlide28

Answers Explained:1. Bob signed an agreement and is your client.

2) You are Bob’s agent and you have a fiduciary duty to him and him alone.

3) Legally, since you understand that motivated means that they will sell for less than askingprice, your fiduciary duty requires you to give Bob your opinion on the amount of his initialoffer.4) The Seller is not your client and your only duty of loyalty is towards Bob.5) It is perfectly legal to represent both parties after full disclosure. However, there are somepeople who believe that it is always a conflict and should never be done!6) If you were the listing agent, NYS law requires that you have both the buyer and seller signthe Dual Agency Disclosure Form. When this agreement is signed, you cannot be liable for anyfailure to disclose and it is understood that your loyalties are split. If the Seller refused to sign,they are within their right and a designated agent is the only way for this transaction to proceed.Your broker would be called the “Appointing Broker” or “Designating Broker” and the agentthat took over working with the Seller would be the “Designated Agent”.