10/2/2008
• Objectives
▫ Discuss Various levels of Agency
▫ Discuss the Code of Ethics regarding Agency ▫ Explain how Agency is formed
▫ Discuss Virginia Agency Law ▫ Explain Disclosure Laws ▫ Explain Duties to Clients and Customers
History of Agency
1983 Federal Trade Commission Survey
71% of Buyers thought Sub-Agent represented them
• Common Law (Where we were)
▫ Law based on precedent
1985 NAR Appoints Committee on Agency 1996 NAR adopts Code of Ethics changes 1997 Virginia adapts statutory agency law, to include Buyer Agency 2007 Virginia Real Estate Board adopts Standard Agent / Limited Services Legislation
• Statutory Law (Where we are)
▫ Laws predefined or made “statutes” in the Commonwealth
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Principal / Client Customer Designated Agent Agent (Standard Agent) Dual Agent Sub-Agent Transaction “Agent” Limited Services Representative
• • • • • • • • Everyone Must Do’s Perform to agreement Promote best interests Maintain confidentiality Exercise ordinary care Account for all monies Disclose material facts Comply with all laws Provide all Disclosure Docs If Waived, Results in Limited Representation • Assist in Marketing Activities • Assist in Drafting / Negotiating • Establish Strategies for Accomplishing Objectives • Reasonable Assistance to Satisfy Contract Obligations
Limited Services
Required Disclosure Language
• “By entering into this brokerage agreement, the undersigned do hereby acknowledge their informed consent to the limited service p y f representation by the licensee and do further acknowledge that neither the other party to the transaction nor any real estate licensee representing the other party is under any legal obligation to assist the undersigned with the performance of any duties and responsibilities of the undersigned not performed by the limited service representative.”
Provision of Service by Standard Agent
• Licensee engaged by one party to transaction dealing with party represented by limited service representative may provide i f t ti id information or ti assistance to other party (without compensation) without incurring liability and does not establish brokerage relationship.
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Duties Owed to the Clients
Honesty Obedience Loyalty (Undivided) Disclosure (Full) Confidentiality Accounting Reasonable Care and Diligence
“Ministerial Acts”
The Non-Client Limited Services Unrepresented Sellers (FSBO)
Personal Disclosure
• Termination of Agency • Creation of Agency
▫ Expressed Agency
Written
▫ I li d Agreement (O Implied A (Ostensible) ibl )
AKA “Accidental Agency” Oral Agreement Demonstrated by Action or Statement of the Parties
▫ ▫ ▫ ▫ ▫ ▫ ▫ ▫
Revocation Renunciation Death of Principal / Agent Insanity Bankruptcy Illegal Destruction Expiration
▫ MLS does not establish Agency – just salary
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• Types of Termination (Type 2)
▫ Operation of Law
• Types of Termination (Type 1) yp yp
▫ Acts of the Party
Mutual Consent Completion of the Objective Renunciation of Abandonment by the Agent Revocation by the client (Renunciation or Revocation can be a breach)
Mental incompetence of either party Death f h D h of the salesman (d l (doesn’t void the contract) ’ id h ) Destruction of disposition of the subject Bankruptcy of either party (may be breach) Expiration of time
• Ratification:
▫ To Approve, Sanction or Validate
• Agency Disclosure Revisited
▫ Must be (one of the following)
Conspicuous Printed in bold letters All capital letters Underlined In a separate box
• Estoppel:
▫ Prevents one from asserting there is no agency relationship.
▫ Dual Agency
Disclosed to ALL parties and agreed to in writing
Listing agreement does not cover the change
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10/2/2008
• Disclosure Documents
▫ Regional Contract ▫ Exclusive Right to Represent
Listing Agreement Buyer Agency Agreement
• Code of Ethics Consideration
▫ Article 1: Honesty
SOP 1-15: Disclose competing offers and their authors
▫ VAR Disclosure of Brokerage Relationship ▫ NVAR Disclosure of Brokerage Relationship
▫ Article 3: Variable Rate Commissions must be disclosed ▫ Article 16: Prohibition to work with another REALTORS client
SOP 16-12: Agency Disclosures no later than executing offer.
• Dual Agency is ALWAYS a conflict of interest. Virginia law merely permits you to engage in it with the informed consent of the parties provided you act accordingly. Their informed consent, once obtained, does not mean the th conflict ceases t exist, merely th t th clients fli t to i t l that the li t consent to your acting as a dual agent notwithstanding the existence of the conflict. This is an important point to remember: the conflict does not go away just because you get the requisite consent. You still must act in a manner consistent with the conflicting interests of your clients.
▫ Lem Marshall, VAR General Counsel ▫ March/April 2004 issue of “Commonwealth” Magazine
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Paragraph 5 of the Preamble to the Code of Ethics
• Realizing that cooperation with other real estate professionals promotes the best interests of those who utilize their services, REALTORS® urge exclusive representation of clients; do not attempt to gain any unfair advantage over their competitors; and they refrain from making unsolicited comments about other practitioners. In instances where their opinion is sought, or where REALTORS® believe that comment is necessary, their opinion is offered in an objective, professional manner, uninfluenced by any personal motivation or potential advantage or gain.
“Don't forget the problems caused by being a Dual Agent. The difficulties associated with this perfectly legal agency relationship seem to be on the increase. Be very careful to communicate and explain dual agency to prospects and clients and avoid dual representation if at all possible.”
Schafer Oglesby, VREB Chairman VREB Speaking – Winter 2006
• Limits of Clients Liabilities
▫ Not liable for unknown misrepresentation made by the licensee ▫ Negligence or intentional acts of the licensee
• Limitations for Licensee Liability
▫ False information provided by Seller ▫ Revealing information required by law ▫ Misrepresentation made by sub-agent
(unless broker / licensee should have known)
▫ Negligence or gross negligence or intentional acts of th A i ti B k / S l f the Assisting Broker Salesperson
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• Potential Penalties of Agency Breach
▫ ▫ ▫ ▫ ▫ Forfeiture of C F f i f Commission i i Actual damages Punitive damages Consequences for NAR Code of Ethics Loss of Real Estate License
•R Record Keeping dK i
▫ Disclosures to be kept for 3 years ▫ To include time place and date of disclosure even if unsigned or oral
• Listing Agreement • Non-Client Disclosure of Relationships • Sales Contract • VAR Required Disclosure • Buyer Agency Agreement
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