TABLE OF CONTENTS. Moseley Flint, Inc. All rights reserved. 1 LtdServAgy_7100

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1 TABLE OF CONTENTS Introduction Full-Service Agency...4 What is a Full-Service Agency?... 4 General Types of Services that a Standard/Full-Service Agency Licensee Can Provide Include:...4 Marketing Materials... 4 Open Houses...5 Signage...5 Negotiation...5 How Much Do Licensees Make?... 5 Are Full-Service Licensees Worth the Extra Money?...5 Final Sales Price... 6 How to Get the Top Price Limited Service Agency...9 Purpose of Agent Services Legislation... 9 Background...9 Who Does the Licensee Represent?...10 Differing Levels of Licensee Representation...10 Licensees Engaged by Sellers Licensees Engaged by Buyers...12 Disclosure Requirements are a Serious Matter...12 Disclosure Statistics...13 Reasons for Deteriorating Disclosure Statistics...13 Disclosure of Agency Relationships...13 Agent Responsibility Disclosure of Agency Relationship...15 Misrepresentation/Nondisclosure...15 Virginia Residential Property Disclosure...16 The New Changes...16 Sample Agency Disclosure Forms...16 Protections Limited Service Agency Disclosure Legislation...21 Real Estate Board Statutes Effective date July 1, Condition of Licensure...21 Continuing Education Requirements...21 New Definition for Limited Service Agent/Representative...21 Purpose of New Legislation Highlights of the New Legislation...22 About the Legislation...24 Obligations of Licensees...24 Moseley Flint, Inc. All rights reserved. 1 LtdServAgy_7100

2 4. Other Pertinent Information...28 What is Meant By the Phrase Agency Relationships? How the Broker Promotes Client s Interests...28 Dual Agency...28 Who will be Representing the Client?...28 Designated Representative...29 Evolution of Real Estate Salesperson...29 Types of Marketplaces...29 Brokerage Commissions Shared commissions with co-operating brokers...30 Commissions: Potential Points of Contention for Agents...30 Case Examples: MLS Lawsuits Open MLS Cases...32 Services Provided to Buyers:...33 Real Estate Brokers / Agents and Continuing Education...33 Dual agency/designated agency...34 Limiting Liability...34 Glossary...38 Moseley Flint, Inc. All rights reserved. 2 LtdServAgy_7100

3 Introduction As a customer, the buyer of real estate in Virginia used to rely upon the professional advice and services of a licensee, but there was no agency relationship and the buyer was not the represented party. Most states now require that proper disclosure of this fact be made to the buyer. Virginia is one of those states with specific disclosure requirements set forth by legislation regarding limited-service agency disclosure. The licensee who completes this course will be knowledgeable about limited-service agency disclosure requirements in Virginia. The licensee will receive the two hours of continuing education credit needed to meet the requirements for relicensure and can also use this educational module as a reference while conducting future business in the real estate market. Moseley Flint, Inc. All rights reserved. 3 LtdServAgy_7100

4 1. Full-Service Agency What is a Full-Service Agency? A full-service real estate agency handles all aspects of the real estate business including advertising, planning, design, production, and placement. Today, fullservice generally suggests that the agency also handles other aspects of marketing communication, such as public relations, sales promotion, Internet and direct marketing. General Types of Services that a Standard/Full-Service Agency Licensee Can Provide Include: Comparative Market Analysis - an estimate of the home s value compared with others. This differs from an appraisal in that property currently for sale may be taken into consideration. Exposure - Marketing the property to prospective buyers. Facilitating a Purchase - guiding a buyer through the process. Facilitating a Sale - guiding a seller through the selling process. For Sale by Owner document preparation - preparing necessary paperwork for sellers using Sale by Owner method. Home Selling Kits - guides regarding how to market and sell a property. Hourly Consulting for a fee, based on the consumer s needs. Leasing for a fee or percentage of the gross lease value. Property Management. Exchanging property. Auctioning property. Preparing contracts and leases in some states Marketing Materials Full-service agencies tend to project quality, and that may mean four-color flyers and four-color direct mail pieces. The days of hiring neighborhood kids to toss photocopies on neighbors front steps are gone. The Full-Service licensees spend considerable time sorting through photos to select those with the most light, the best angles, the sharpest contrast & best color. Photos are cropped and resized to accentuate positive attributes. Each photograph is entered into MLS with a full-length enticing description. Moseley Flint, Inc. All rights reserved. 4 LtdServAgy_7100

5 Open Houses Not all homes are right for an open house, but those that are, require skillful presentation. This means working the potential buyers who come through by pointing out impressive features of the home without making the buyer feel exploited or hounded, and that in itself is an art. It requires the service of an experienced licensee. In addition, licensees counsel sellers. They find out what made the seller decide to buy the home and how that moment happened. Then, they employ that knowledge at open houses. For example, suppose a seller said she knew she wanted to buy the house when she first stood gazing out at the pool. Good sales people at an open house would ask buyers to stand in that same spot by the pool. Then, they d share the seller s first experience verbatim. Signage Good signage is free advertising. Many full-service firms will advertise the: Main office phone number Licensee s personal cell phone or voice mail number Web site for more information Virtual tour links Specific information that makes this home different from others in the area Negotiation Real estate is an extremely competitive business, and there are many licensees fighting for the same listings. A full-service licensee who wins the listing needs to be a good negotiator, a person you want on your side during negotiations. How Much Do Licensees Make? Full-service agents typically spend more on overhead than their competitors by refusing to cut costs and seek quality services for the clients. Full-service licensees may charge more for their services and may receive less due to the higher cost of quality overhead expenses. Are Full-Service Licensees Worth the Extra Money? Consumers are always looking for ways to save money, and paying real estate commissions can amount to tens of thousands of dollars today. This is not an insignificant sum to most people. Is it worth it to hire a full-service real estate licensee over a discount service? This is a reasonable question and one that cannot Moseley Flint, Inc. All rights reserved. 5 LtdServAgy_7100

6 be answered quickly. The answer as to whether a full-service agency is worth the added cost is that it depends on the needs and desires of the consumer. Final Sales Price Sometimes full-service agents lose listings because the seller was promised a higher price based on a lower commission. It is these listings that often show up in MLS a month later with reduced prices. The amount of the price reductions, not surprisingly, tends to exceed the difference in commissions between the opposing agencies! In these scenarios, sellers received fewer services and ended up losing money on the sale as well. If the consumer cannot decide between an agent who charges 1 or 2 percent less than another, ask the consumer to think about how it would feel if he or she had to reduce the sales price, say five percent, to get the house sold. The consumer should be made aware of the need to ask the licensees to show their last 24 months of price reductions and compare the results. How to Get the Top Price Listings that sell at top price are typically those exposed to the most buyers, that are priced well, marketed well and show well. As the saying goes: It is the house that offers the most for the least that sells first. Moseley Flint, Inc. All rights reserved. 6 LtdServAgy_7100

7 Chapter One Questions 1) A - real estate agency handles all aspects of the advertising process, including planning, design, production, and placement. 2) A is an estimate of the home s value compared with others. This differs from an appraisal in that property currently for sale may be taken into consideration. 3) True / False Paying real estate commissions can amount to tens of thousands of dollars today. This is an insignificant sum to most people. 4) The answer to the question, Is a full-service agency worth the added cost? depends on the needs and desires of the. 5) Property management, exchanging property, and auctioning property are all services provided by a - licensee. 6) True / False Good signage is free advertising. 7) True / False Not all homes are right for an open house, but those that are, require skillful presentation. 8) Licensees who can persuade you to pay what they feel is reasonable, will probably persuade a buyer to pay your price. These licensees are said to be good. 9) Full-service agents typically spend more on than their competitors. 10) Listings that sell at top price are typically those exposed to the most, that are well, well and well. Moseley Flint, Inc. All rights reserved. 7 LtdServAgy_7100

8 Chapter One Answers 1) full-service 2) comparative market analysis 3) False 4) consumer 5) full-service agency 6) True 7) True 8) negotiators 9) overhead 10) buyers, priced, marketed, show Moseley Flint, Inc. All rights reserved. 8 LtdServAgy_7100

9 2. Limited Service Agency A limited service agent may act only as the agent or representative of the client if a specific provision is in writing in the brokerage agreement. If the brokerage agreement does not specify the nature of the relationship, the limited-service representative is considered to be acting as an independent contractor of the client. Purpose of Agent Services Legislation The purpose of the Virginia Association of Realtor s (VAR s) Limited-Service Agency legislation is to: ensure that consumers have a clear understanding of the services they will or will not receive in a real estate brokerage relationship, while providing real estate brokers flexibility in their brokerage business models and the variety of brokerage relationships they may offer consumers. help clients and agents facilitate successful transactions by providing for the sharing of important information with those who need to know. Background The creation of limited-service real estate brokerage models brought about: uncertainty on the part of sellers, in particular, as to what services they will or will not receive in their brokerage relationship; uncertainty on the part of the selling agent as to exactly who is responsible for doing what to get the transaction closed; and doubts on everyone s part as to how limited-service relationships work from an agency and liability standpoint. Previously, Virginia agency law allowed for two kinds of relationships: 1) standard agency, in which clients are owed the full gamut of statutory agency services/duties by the real estate licensee; and 2) non-agency/independent contractor, in which licensees provide only the services contracted for, with no disclosure requirement as to services not provided. Moseley Flint, Inc. All rights reserved. 9 LtdServAgy_7100

10 New limited-services real estate brokerage models anticipate a new approach: a limited type of agency relationship, in which consumers may choose only desired brokerage services, and in return pay the broker a flat fee or reduced commission. unlike in a standard agency relationship, in which the client is due all agency services, the client in a limited-service agency relationship was often unaware of which services he or she would not receive in that particular relationship. It is that situation that VAR s Agent Services legislation addresses. Who Does the Licensee Represent? Homebuyers should understand the role of their real estate licensee in the sales transaction, and who their agents represent. Licensees require that a disclosure agreement be signed that describes who the agent represents in the transaction the buyer or seller? Differing Levels of Licensee Representation There are essentially five different types of real estate agent relationships. The consumer might want to examine each type for its benefits before deciding which one is right for the buyer or seller. First, there are seller s agents. The seller s agent works directly for the seller and represents the seller s interests. The seller s agent is obligated to fulfill certain responsibilities such as loyalty to the seller s interests, confidentiality, and full disclosure. The seller will want to interview potential licensees to find out the experience the licensee has in acting as a seller s agent before deciding to use a specific licensee. Next on the list are buyer s agents. As you might guess, a buyer s agent works directly for the buyer. Just like the seller s agent, a buyer s agent has certain legal obligations in the relationship with buyers and sellers. Loyalty to the buyer s interests, confidentiality, and full disclosure are three of those. Again, the client will want to interview any potential buyer s agent before making a decision. A disclosed dual agent works for the buyer and the seller. This type of relationship is not possible unless the buyer and seller agree, and they must both sign a statement to that effect. Disclosed dual agency is walking a fine line and there are legal repercussions for crossing it. Moseley Flint, Inc. All rights reserved. 10 LtdServAgy_7100

11 A common form of dual agency is the designated agency, or split agency. When a licensee under a broker acts on behalf of the seller and another licensee under that same broker represents the buyer, this is designated agency. Each licensee has the same legal and fiduciary responsibilities as seller s agent and buyer s agent and the broker has all the same responsibilities of a disclosed dual agent plus he or she must take special care with regard to confidential information disclosed to the selling agent. A transaction agent may interact with the buyer, seller, or both to assist in the dimensions of a transaction without representing either party. The transaction agent simply manages the paperwork and ensures the process goes smoothly. Licensees Engaged by Sellers. A. Licensee engaged by a seller shall: 1. Perform in accordance with the terms of the brokerage relationship; 2. Promote the interests of the seller by: Seeking a sale at the price and terms agreed upon in the brokerage relationship or at a price and terms acceptable to the seller; however, the licensee shall not be obligated to seek additional offers to purchase the property while the property is subject to a contract of sale, unless agreed to as part of the brokerage relationship or as the contract of sale so provides; Presenting in a timely manner all written offers or counteroffers to and from the seller, even when the property is already subject to a contract of sale; Disclosing to the seller material facts related to the property or concerning the transaction of which the licensee has actual knowledge; and Accounting for in a timely manner all money and property received in which the seller has or may have an interest; 3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential, unless otherwise provided by law or the seller consents in writing to the release of such information; 4. Exercise ordinary care; and 5. Comply with all requirements of the law, all applicable fair housing statutes and regulations, and all other applicable statutes and regulations. B. Licensees shall treat all prospective buyers honestly and shall not knowingly give them false information. A licensee engaged by a seller shall disclose to prospective buyers all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee. Moseley Flint, Inc. All rights reserved. 11 LtdServAgy_7100

12 A licensee shall not be liable to a buyer for providing false information to the buyer if the false information was provided to the licensee by the seller and the licensee did not (i) have actual knowledge that the information was false, or (ii) act in reckless disregard of the truth No cause of action shall arise against any licensee for revealing information as required by applicable law. Nothing shall limit in any way the provisions of the Virginia Residential Property Disclosure Act. C. A licensee engaged by a seller in a real estate transaction may, unless prohibited by law or the brokerage relationship, provide assistance to a buyer or potential buyer by performing ministerial acts. Performing such ministerial acts shall not be construed to violate the licensee s brokerage relationship with the seller unless expressly prohibited by the terms of the brokerage relationship, nor shall performing such ministerial acts be construed to form a brokerage relationship with such buyer or potential buyer. D. A licensee engaged by a seller does not breach any duty or obligation owed to the seller by showing alternative properties to prospective buyers, whether as clients or customers, or by representing other sellers who have other properties for sale. E. Licensees shall disclose brokerage relationships pursuant to the provisions of this article. Licensees Engaged by Buyers. When acting as a buyer s agent with a signed agreement, the licensee assists buyers by helping them purchase property for the best possible price under the best terms. Disclosure Requirements are a Serious Matter Licensees need to take agency disclosure requirements seriously; it is a critical element of consumer protection. One of the concerns of consumer organizations like the U.S. Department of Justice, and the Federal Trade Commission has been over efforts to prohibit or discriminate against limited-service brokers or agents by traditional brokers or agents. Discrimination against limited-service agencies has been well documented in the past. Licensees need to take agency disclosure requirements seriously because it is a critical element of consumer protection. It is not good for licensees or consumers that the trend line is going down. Compliance is worsening and thus legislation and education are required to improve compliance with disclosure issues. Moseley Flint, Inc. All rights reserved. 12 LtdServAgy_7100

13 Disclosure Statistics The use of disclosure requirements are designed to avoid confusion and/or protect the interests of consumers in real estate transactions. Although agency disclosure is required by state law that homebuyers are told the role of their real estate agent in the sales process, and most importantly, whom the agent represents, less than one-third of real estate agents comply, according to the National Association of Realtors 2005 Profile of Home Buyers and Sellers. Agency disclosure compliance has been on a downward trend since 2000, when 38 percent of homebuyers were disclosed at first meeting, 28 percent when the contract was written, and nineteen percent weren t disclosed at all. One out of five buyers were not sure whether they had been disclosed or not. By 2002, compliance was worse. According to the National Association of Realtors Profile of Home Buyers and Sellers in 2002, the NAR found that 35 percent of all buyers were disclosed at first meeting, 26 percent when the contract for purchase was written, and 18 percent weren t disclosed at all. Twenty-one percent were unsure whether or not they had been disclosed. Reasons for Deteriorating Disclosure Statistics 1. Since 2000, the population of real estate professionals has doubled, with NAR memberships climbing from approximately 750,000 in 2001 to nearly 1.5 million by the end of It is speculated that there may not have been enough training of these new licensees. 2. The NAR points out that disclosure laws by the states are all over the place. Iverson Moore, senior associate in public affairs for the NAR says, There are a lot of newcomers, and in most cases they should be trained to disclose as early as possible, but not all state laws require it. Virginia has clarified its position on disclosure with House Bill 316 that will be discussed in detail in Chapter Three. Disclosure of Agency Relationships Almost all states, including Virginia, now require disclosure of agency relationships. With new disclosure requirements the numbers regarding compliance with agency disclosures should be increasing annually as agents become accustomed to making them on a regular basis. With greater emphasis in licensee training about the benefits of agency disclosure, improvements should further be seen in the statistics regarding disclosure by licensees to clients. Agency disclosure benefits everyone. It helps avoid any confusion among buyers and sellers as to whom the agent represents. It also helps the agents avoid creating unintended agency relationships with consumers. Moseley Flint, Inc. All rights reserved. 13 LtdServAgy_7100

14 Adequate disclosure Any disclosure that substantially complies with the disclosure samples presented later in this chapter will be considered legally sufficient. Such written consent and disclosure shall be presumed to have been given as against any client who signs a disclosure as provided in this section. Licensees need to keep in mind, however, that proper disclosure and written consent are only half the battle. All subsequent actions and words must be consistent with the disclosure in order to avoid creating an unintended, illegal brokerage relationship with another party. Buyer/seller customers must be informed that the licensee has a brokerage relationship with another party, either orally or in writing, upon having a substantive discussion about a specific property or properties, however, full written disclosure must be given to customers at the earliest practical time, but in no event later than the time when specific real estate assistance is first provided. There are no exceptions. Lessor/lessee customers must be informed that the licensee has a brokerage relationship with another party in writing in all lease applications or in the lease itself, whichever occurs first. An exception is made for lease terms of less than two months. Agent Responsibility Licensees have no responsibility concerning the contents of the form, but they are responsible for informing their clients of the need to fill it out and present it to the buyer. Licensees are also responsible for informing both buyer and seller of information which is reasonably available and is material to the condition of the real property. Disclosure Exemptions (not required): An occupant of the property is or was HIV positive. The property was the site of an act or occurrence which had no effect on the physical structure of the real property, its physical environment, or the improvement(s). The property was the site of a homicide, felony, or suicide. Time for disclosure The residential homeowner must deliver the written disclosure or disclaimer statement prior to acceptance of a purchase contract. The statement may be in a separate document or may be included in the purchase contract. If the disclosure/disclaimer is delivered to the purchaser after the acceptance of the contract, then the purchaser s sole remedy shall be to terminate the contract without penalty. Moseley Flint, Inc. All rights reserved. 14 LtdServAgy_7100

15 Disclosure of Agency Relationship A licensee must disclose any brokerage relationship the licensee has with another party to the transaction, upon having a substantive discussion about a specific property with an actual or prospective buyer or seller, who is NOT the client of the licensee. Timely disclosure that is presented clearly and explicitly with signatures of all parties is the key. If disclosure is presented to a customer or client in combination with other documents the disclosure must be conspicuous, bold, all caps, underlined, or within a separate box. If a licensee s relationship to a client or customer changes, the licensee must disclose this fact in writing to all clients and customers to the transaction. Misrepresentation/Nondisclosure An agent must disclose all material facts in a real estate transaction. A material fact is a fact that is sufficiently significant to influence an individual into acting in a certain way, such as entering into a real estate contract. An agent can be liable for: fraudulent or intentional misrepresentation - intentionally making a false statement. negligent misrepresentation - unintentionally making a false statement, if the agent failed to use reasonable care in obtaining the information. innocent misrepresentation - unknowingly making a false statement. nondisclosure or concealment not disclosing a defect that the agent is aware of. Common law duties of disclosure. The Real Estate Board can suspend or revoke a license for misrepresentation/ nondisclosure. Facts related to whether a death or felony occurred on property, or whether a property occupant ever had a disease listed by the Public Health Commissioner, is not considered to be material and not required to be disclosed unless specifically asked for in writing. Moseley Flint, Inc. All rights reserved. 15 LtdServAgy_7100

16 Virginia Residential Property Disclosure In 2006, HB 286 required changes to be made to the Residential Property Disclosure Statement. The New Changes The disclosure and disclaimer forms shall contain a notice to purchasers that the owner agrees there are no pending enforcement actions pursuant to the Uniform Statewide Building Code that affect the safe, decent, and sanitary living conditions of the property with notification in writing by the locality. The Disclosure and Disclaimer Statements have also been revised. The disclosure/disclaimer form must include the following statements: Note to Owner(s): Complete and sign this statement only if you elect to disclose defects in the condition of the property actually known by you; otherwise, sign the Residential Property Disclaimer Statement. You may wish to obtain professional advice or inspections of the property, but you are not required to undertake or provide any independent investigation or inspection of the property in order to make the disclosures set forth below. Note to Purchaser(s): This statement is based upon the owner s actual knowledge of the condition of the property as of the date noted. You may wish to obtain professional advice or inspections of the property. The information contained in this statement is the representation of the owner and not the representation of the broker or salesperson, if any. All homeowners must comply with the provisions of this law regardless of whether an agent is involved. Sample Agency Disclosure Forms Any disclosures that generally comply with the examples shown here shall be deemed in compliance with the disclosures as required by Virginia law. Disclosure of Brokerage Relationship The undersigned do hereby acknowledge disclosure that the licensee (Name of Firm) represents The following party in a real estate transaction: Seller(s) or Buyer(s) Landlord(s) or Tenant(s) Date Name Date Name Moseley Flint, Inc. All rights reserved. 16 LtdServAgy_7100

17 Disclosure of Dual Representation The undersigned do hereby acknowledge disclosure that the licensee Name of Broker, Firm or Salesperson as applicable represents more than one party in this real estate transaction as indicated below: Seller(s) and Buyer(s) Landlord(s) & Tenant(s) The undersigned understands that the foregoing dual representative may not disclose to either client or such client s designated representative any information that has been given to the dual representative by the other client within the confidence and trust of the brokerage relationship except for that information which otherwise required or permitted by Article 3 ( et. Seq.) of Chapter 21 of Title 54.1 of the Code of Virginia to be disclosed. The undersigned by signing this notice do hereby acknowledge their informed consent to the disclosed dual representation by the licensee. Date Name (One Party) Date Name (One Party) Disclosure of the Use of Designated Representatives The undersigned do hereby acknowledge disclosure that the licensee Name of Broker and Firm represents more than one party in this real estate transaction as indicated below: Seller(s) and Buyer(s) Landlord(s) and Tenant(s) The undersigned understands that the foregoing dual representative may not disclose to either client or the client s designated representative any information that has been given to the dual representative by the other client within the confidence and trust of the brokerage relationship except for the information that is otherwise required or permitted by Article 3 ( et seq.) of Chapter 21 of Title 54.1 of the Code of Virginia to be disclosed. By signing this notice the undersigned acknowledges informed consent to the disclosed dual representation by the licensee. The principal or supervising broker has assigned to act as Designated Representative (Licensee/Sales Associate) for the one party as indicated below: Seller(s) or Buyer(s) Landlord(s) or Tenant(s) and, to act as Designated Representative (Licensee/Sales Associate) for the other party as indicated below: Seller(s) or Buyer(s) Landlord(s) or Tenant(s) Date Name (One Party) Date Name (One Party) Protections This new law contains language designed to protect licensees when they make required disclosures and perform certain duties. The following may be performed without violating the brokerage relationship between licensee and client: Information was supplied to the licensee by his client, provided the licensee did not know that the information was false and he did not act in reckless disregard of the truth. Moseley Flint, Inc. All rights reserved. 17 LtdServAgy_7100

18 No cause of action may be brought against a licensee for revealing information as required by law. Licensees may perform ministerial acts for customers unless such acts are expressly prohibited by the terms of the brokerage relationship, and performing such acts shall not be construed as establishing a brokerage relationship with the customer. When an agent representing a seller/landlord shows alternate properties to customers he does not breach any duty or obligation to that seller/landlord; when an agent represents a buyer/tenant he breaches no duty or obligation when he shows properties that the buyer/tenant is interested in to others. A buyer s agent may disclose to a seller the buyer s intent to occupy the property as a principal residence. Moseley Flint, Inc. All rights reserved. 18 LtdServAgy_7100

19 Chapter Two Questions 1) The disclosure/disclaimer form must include the following statements: Note to and Note to. 2) A is a fact that is sufficiently significant to influence an individual into acting in a certain way, such as entering into a real estate contract. 3) Licensees need to take agency disclosure requirements seriously because it is a critical element of. 4) There are certain situations that are exempt from disclosure requirements. These include: An occupant of the property is or was positive The property was the site of an act or occurrence that had no effect on the structure, physical, or the site of a homicide, felony or 5) When a licensee under a broker acts on behalf of the seller and another licensee under that same broker represents the buyer, this is called a agency. 6) True / False The Real Estate Commission can suspend or revoke a license for misrepresentation/ nondisclosure. 7) is unintentionally making a false statement. 8) True / False A licensee must disclose any brokerage relationship the licensee has with another party to the transaction upon having a substantive discussion about a specific property with an actual or prospective buyer or seller who is not the client of the licensee. 9) True / False The residential homeowner must deliver the written disclosure or disclaimer statement after acceptance of a purchase contract. 10) True / False No cause of action may be brought against a licensee for revealing information as required by law. Moseley Flint, Inc. All rights reserved. 19 LtdServAgy_7100

20 Chapter Two Answers 1) Owner; Purchaser 2) material fact 3) consumer protection 4) HIV; physical; environment; suicide 5) designated 6) True 7) Negligent misrepresentation 8) True 9) False 10) True Moseley Flint, Inc. All rights reserved. 20 LtdServAgy_7100

21 3. Limited Service Agency Disclosure Legislation Real Estate Board Statutes Effective date July 1, 2007 The current real estate statutes address the 2006 General Assembly legislation requirements for condition of licensure plus continuing education hours regarding limited service agency. Condition of Licensure In accordance with Section (E) of the Code of Virginia, every applicant for relicensure as an active salesperson or broker shall complete at a minimum one twohour continuing education course on limited service agency prior to renewal or reinstatement of his or her licensure. Continuing Education Requirements As of July 1, 2007, the Virginia Real Estate Board requires this course as a one time only requirement for all active licensees renewing their license between July 1, 2007 and June 30, New Definition for Limited Service Agent/Representative The Virginia Real Estate Board has a new requirement regarding limited service agency. The new requirement becomes effective on July 1, In accordance with Section (E) of the Code of Virginia, every applicant for relicensure as an active salesperson or broker shall complete at a minimum one two-hour continuing education course on limited-service agency prior to renewal or reinstatement of his or her licensure. The following definition for limited-service agency has been added to Section of the Code of Virginia: Limited service representative means a licensee who acts for or represents a client with respect to real property containing from one to four residential units, pursuant to a brokerage agreement that provides that the limited-service representative will not provide one or more of the duties set forth in subdivision A 2 of , , , and , inclusive. A limited-service representative shall have the obligations set out in the brokerage agreement, except that a limitedservice representative shall provide the client, at the time of entering the brokerage agreement, copies of any and all disclosures required by federal or state law, or local disclosures expressly authorized by state law, and shall disclose to the client the following in writing: Moseley Flint, Inc. All rights reserved. 21 LtdServAgy_7100

22 the rights and obligations of the client under the Virginia Residential Property Disclosure Act ( et seq.); if the client is selling a condominium, the rights and obligations of the client to deliver to the purchasers, or to receive as purchaser, the condominium resale certificate required by ; and if the client is selling a property subject to the Property Owners Association Act ( et seq.), the rights and obligations of the client to deliver to the purchasers, or to receive as purchaser, the association disclosure packet required by A limited service representative may act as the agent or representative of the client only by so providing in writing in the brokerage agreement. If the brokerage agreement does not so state, the limited-service representative shall be deemed as acting as an independent contractor of the client. Purpose of New Legislation The purpose of this legislation was to: 1) specifically outline an agent s duty to his or her client; and 2) to clarify for consumers the level of service that should be expected from a real estate licensee. Highlights of the New Legislation The new legislation adds a definition of limited service agent or representative to current agency law. Agency law will now include representation of a client as either a standard agent or limited-service agent. For those acting as a standard agent, the legislation clarifies the responsibilities of a licensee to his client. Allows a licensee to act as a limited-service agent or representative by entering into a separate brokerage agreement outlining specifically which services he will or will not provide. Requires that a limited-service agent provide copies of any disclosures provided by law. Clarifies that an MLS may require as a condition of participation that licensees disclose the nature of a brokerage relationship. (Therefore, an agent will know the extent of representation offered to the buyer or seller.) The Virginia Agent Services Legislation (House Bill 316) requires agents and other non-agent real estate service providers to disclose the services they provide. Some other states have prohibited alternative real estate service practices that provide consumers with lower-cost alternatives. Virginia s legislation more appropriately Moseley Flint, Inc. All rights reserved. 22 LtdServAgy_7100

23 addresses this issue through disclosure. Virginia sets an example that can be followed by other states. HB 316 addresses potential consumer confusion that might arise from the diversity of services provided by fee-for-service real estate brokers. HB 316 addresses this issue by means of disclosure, distinguishing services required by a standard agent from those required of a limited service agent or limited service representative. The bill requires that a limited service representative must disclose in writing services that he or she will and will not provide. The U.S. Department of Justice has commented on competition issues raised by legislative and regulatory proposals regarding real estate brokerage services in a number of other states. It was recommended that the state study carefully the need for any governmental restrictions and, if a need is shown, that any restriction be as narrowly tailored as possible. The Department has not seen any empirical evidence indicating that fee-for-service brokers have created any significant consumer confusion. Nevertheless, the Commonwealth of Virginia decided to address this potential concern. HB 316 was tailored to address this concern while preserving consumer choice and competition. In particular, the bill does not require brokers to provide a minimum level of services. Rather, it requires real estate brokers to disclose the services that they will and will not offer while preserving consumers ability to purchase a limited set of services. More generally, HB 316 does not make illegal any type of limited-service, flat-fee, or other brokerage models, or otherwise appear likely to displace competition in the real estate market. In addition, HB 316 includes a provision stating that Nothing in this Article shall be construed to limit, modify, impair, or supersede the applicability of any of the federal or state antitrust laws, an important confirmation that HB 316 does not manifest an intent to eliminate competition in the market for the provision of real estate brokerage services. Under HB 316, a limited service representative does not become an agent as defined under Virginia law unless he or she so specifies in writing. Unless a limited service representative agrees to become an agent, such an individual is an independent contractor and must provide only those services agreed to by the parties to the brokerage agreement. The Virginia Association of Realtors has made every effort to preserve consumer choice in real estate brokerage services. Continuing to allow Virginia consumers to choose the specific services that they want to buy can help save consumers thousands of dollars in one of the most important and costly transactions of their lives. Moseley Flint, Inc. All rights reserved. 23 LtdServAgy_7100

24 About the Legislation The Agent Services bill provides a three-fold focus: 1) To sharpen the law s descriptions of duties owed by standard agents to their clients, and legislatively introduces the concept of the limited-service representative as a broker who enters into an agreement with the consumer by which it is agreed that some of the services required by law of standard agents will not be performed. The legislation does not assume that limitedservice brokers are all alike in the services they provide, or that the model is limited to seller representation. The proposed statutory approach is across the board, and should help in whatever form the model appears. 2) To require broad disclosures of three types: a) The limited-service representative must disclose, in writing in the brokerage agreement, the unique nature of the brokerage relationship and must set forth specifically which of the services required of a standard agent will not be provided. b) Limited-service brokers must provide sellers with those disclosures the law requires of the client (lead paint, disclosure/disclaimer, information about condo and POA disclosures, etc.), as well as information about fulfilling these important seller obligations. c) Multiple listing services would be allowed to require the limited-service broker to make a similar disclosure to the MLS that the MLS could then publish to all participants. 3) To clarify the functions, if any, of the agent working with the client of the limited-service broker. It limits liability of the cooperating agent performing uncompensated services for the limited-service broker s client to those instances of gross negligence. It also makes clear that doing these things or accepting a fee for doing these things does not render the cooperating agent the agent of the other broker s client (although accepting compensation renders the agent subject to the standard of ordinary care). This legislation also takes the opportunity to clarify the disclosure obligations of licensees, and to extend the safeguards and protections of selling agents to those dealing with Full-Service Agencies, that present many of the same kinds of challenges to selling agents. Obligations of Licensees The bill also clarifies the obligations of licensees toward their clients, whether the clients are a buyer, seller, landlord, or tenant. The bill also allows a common source information company to require, as a condition of participation in or use of such common source information, that a licensee providing information through such company disclose the nature of the brokerage relationship with the client of the licensee. The bill requires the Real Estate Board to promulgate regulations to Moseley Flint, Inc. All rights reserved. 24 LtdServAgy_7100

25 implement the provisions of this bill to be effective on July 1, Further, the Real Estate Board is required to establish a continuing education curriculum of not less than two hours and, as of July 1, 2007, every applicant for re-licensure as an active salesperson or broker shall complete, at a minimum, one two-hour continuing education course on the amendments to the real estate agency laws prior to each renewal or reinstatement of his license. If the licensee submits a notarized affidavit to the Real Estate Board which certifies that he does not practice residential real estate and shall not do so during the licensing term, training in limited service agency shall not be required. The bill has a delayed effective date of July 1, Moseley Flint, Inc. All rights reserved. 25 LtdServAgy_7100

26 Chapter Three Questions 1) 2006 General Assembly legislation requirements for condition of licensure, continuing education hours, and post-license education requirements regarding limited service agency will go into effect on,. 2) In accordance with Section (E) of the Code of Virginia, every applicant for relicensure as an active salesperson or broker shall complete at a minimum one -hour continuing education course on limited service agency prior to renewal or reinstatement of his or her licensure. 3) True / False As of July 1, 2007, the Virginia Real Estate Board requires this course as an annual requirement for all active licensees renewing their license between July 1, 2007 and June 30, ) - means a licensee who acts for or represents a client with respect to real property containing from one to four residential units, pursuant to a brokerage agreement that provides that the limited service representative will not provide one or more of the duties specified in HB ) The purpose of HB 316 legislation was to: a) specifically outline to his or her client; and b) to clarify for consumers the level of that should be expected from a real estate licensee 6) True / False The Virginia Agent Services Legislation (House Bill 316) requires agents and other non-agent real estate service providers to disclose the services they provide. 7) HB 316 addresses the issue of Limited-Service Agency. 8) True / False If the licensee submits a notarized affidavit to the Real Estate Board that certifies that he does not practice residential real estate and shall not do so during the licensing term, training in limited service agency shall not be required. 9) HB 316 includes a provision stating that Nothing in this Article shall be construed to,,, or the applicability of any of the federal or state antitrust laws, an important confirmation that HB 316 does not manifest an intent to eliminate competition in the market for the provision of real estate brokerage services. 10) Real estate licensees in Virginia are required to disclose the that they will and will not offer while preserving consumers ability to purchase a limited set of services. Moseley Flint, Inc. All rights reserved. 26 LtdServAgy_7100

27 Chapter Three Answers 1) July 1, ) two 3) False 4) Limited-service representative 5) an agent s duty; service 6) True 7) Disclosure 8) True 9) limit; modify; impair; supersede 10) services Moseley Flint, Inc. All rights reserved. 27 LtdServAgy_7100

28 4. Other Pertinent Information What is Meant By the Phrase Agency Relationships? It is the relationship resulting from mutual consent between the client and the real estate licensee. That the agent will act upon your behalf during the course of the real estate transaction. To begin this relationship, you will be asked to enter into a legal agreement. How the Broker Promotes Client s Interests If a brokerage firm ( Broker ) has a contractual obligation to represent the buyer or the seller, then the Broker shall promote the interests of the client by: 1. Performing the terms of their contractual agreement; 2. Obtaining a transaction at a price and terms acceptable to the client; 3. Present in a timely manner all written offers or counteroffers to and from the client; 4. Disclosing to the client all material facts related to the property of which they have actual knowledge; 5. Accounting for in a timely manner all money and property received in which the client has or may have an interest. Dual Agency Because of the relationship that is formed with the clients from the property that the agent has listed, it creates a dual agency capacity for that agent. In all cases, the agent must have the informed consent of both the seller and the buyer in order to perform this service. The agent is obligated to make certain that all material facts relating to the property s condition are disclosed; however, they must exercise care with negotiating information. Because in any instance, this form of agency limits the agent s ability to represent both parties fully, it is required by law (in states where Dual Agency is legal) that all parties enter into this agreement in writing. Laws governing agency relationships differ from state to state. Therefore, it is extremely important that a consumer make a wise decision when selecting the real estate licensee. The client should make sure a true professional is chosen, who willingly describes the various forms of agency relationships. Who will be Representing the Client? If there is a limited fiduciary responsibility provided to both the buyer and the seller in either a Dual Agency or Sub-Agency transaction, it is difficult, if not impossible to have an allegiance to one client or the other. If a licensee is hired by the client to sell a home, the licensee will use expertise in marketing the property to the target market with the highest probability of finding a buyer the Buyer s Agent! If the Moseley Flint, Inc. All rights reserved. 28 LtdServAgy_7100

29 licensee had information on a buyer that was interested in the client s home, the licensee would pre-qualify the buyer for the purchase and refer the buyer to a colleague who could represent them fully in the transaction. Real Estate is about fairness, loyalty, and confidentiality. When one agent represents both sides of a transaction, someone s rights and privileges may very well be compromised in the process. A licensee should never be willing to jeopardize anyone s rights in a transaction! Designated Representative A principal or supervising broker may assign different licensees affiliated with the broker as designated representatives to represent different clients in the same transaction to the exclusion of all other licensees in the firm. In these situations the firm and the principal or supervising broker are a dual representative, but the designated representatives are not. Use of such designated representatives shall not constitute dual representation if a designated representative is not representing more than one client in a particular real estate transaction. The dual representative (principal or supervising broker) must maintain a neutral posture and may not disclose confidential information, but the designated representatives are advocates for their clients and are required to pass on all known information to their client. Evolution of Real Estate Salesperson In the past, when licensees only represented sellers, the term real estate salesperson may have been more appropriate than it is today, given the different ways that licensees can help a buyer through the process rather than simply sell him or her a property. Today the real estate licensee may also represent a buyer and is thus required to disclose to prospective buyers and sellers who represents whom. This is the case in the state of Virginia. Types of Marketplaces If the current market is a seller s market, many homes are selling the minute they hit the multiple listing service. Will it be the highest price the consumer can get? Buyer s markets exist when inventory exceeds the supply of buyers. In these markets, some homes aren t selling at all. Brokerage Commissions In the U.S., a commission in the 5% to 7% range is considered standard for residential real estate and is typically paid by the seller at the closing of the transaction. Commissions are negotiable between seller and broker. The commission Moseley Flint, Inc. All rights reserved. 29 LtdServAgy_7100

30 could also be paid as flat fee or some combination of flat fee and percentage, particularly in the case of lower-priced properties, vacant lots, or other unusual real estate. The details are determined by the listing contract. However, some brokers charge as much as 10% while others will offer services for 1%. Fee-for-service or flat-fee real estate brokerages are also increasing in popularity. Out of the commission received from the seller, the broker will typically pay any expenses incurred to do the work of trying to sell the listed properties, such as advertisements, etc. Shared commissions with co-operating brokers If any buyer s broker (or any of his/her agents) brings the buyer for the property, the buyer s broker would typically be compensated with a shared commission coming from the total offered to the listing broker, often about half of the full commission from the seller. If an agent or salesperson working for the buyer s broker brings the buyer for the property, then the buyer s broker would commonly compensate his agent with a fraction of the shared commission, again as determined in a separate agreement. A discount brokerage may offer a reduced commission in the event no other brokerage firm is involved and no shared commission is paid out. If there is no shared commission to pay to another brokerage, the listing brokerage receives the full amount of the commission minus any other types of expenses. Commissions: Potential Points of Contention for Agents 1. Real estate commissions are becoming a point of controversy. Home values in many areas have quadrupled over the past 20 years. This may be contributing to the increased number of licensees and growing competition between them. The number of real estate licensees in areas tends to rise when home values do, and the productivity of existing agents goes down. The rewards have increased, but so have the demands of clients and business risks faced by agents. In North America, agents have had to become familiar with marketing through the internet as well as traditional print and other media. Additionally the law is complicated with issues such as defects in housing and other issues of which the agent is the front line defense for his client. There is more liability than ever in advising buyers and sellers. 2. Another controversy exists for the commissions to real estate agents. If a listing agent sells a property for any amount above the listed price, he in turn will make additional income. In theory, this will motivate him/her to get top dollar price for his client, the seller. However, if the agent representing the buyer attempts to obtain a lower sales price for his client, then he/she would make a lower commission. Thus, it could be considered to be in the agent s best interest to advise his client to purchase the property at a higher price. Moseley Flint, Inc. All rights reserved. 30 LtdServAgy_7100

31 3. In practical terms, there is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client. 4. Another potential conflict of interest exists when a listing agent in a very active real estate market has incentive to sell properties quickly at unnecessarily low prices in order to benefit from a high volume of sales. In any case, agents who create satisfied clients and develop subsequent referrals are likely to do far better in the long run. Case Example: Broker in Texas Sues to Stop State-mandated Negotiation Assistance Rule A new rule by the Texas Real Estate Commission seeks to define the boundaries of real estate brokerage by adopting an amendment to define the minimum level of service to a consumer in a real estate transaction. The new rule requires all brokers to include helping clients with negotiations as part of their services to consumers. That prompted Austin discount broker Aaron Farmer to file a lawsuit against the Commission, claiming the Commission was trying to help full-service brokers hold on to their six percent commissions by cutting discount brokers out of the industry. Farmer s attorney was able to obtain a temporary restraining order last week from the courts, blocking the new rule from going into effect at least until a hearing is held, or the restraining order runs out. Discount brokers and traditional brokers are in conflict over this issue. Texas Discount Realty charges a flat fee of $495 to put a seller s home in the MLS. A full service broker may charge about six percent and pocket all of the fee, or split that fee with an agent, and the broker and agent representing the other side of the transaction. But the differences don t end there. Once the home is listed, Texas Discount Realty performs no further services, while the work just begins for a full-service brokerage to get the home sold. If more consumers take advantage of discount models, that could put more pressure on the already slim profits traditional brokers yield for fullservice. Case Examples: MLS Lawsuits In defiance of several court decisions, over 800 MLSs in America illegally force MLS users to pay dues to Realtor Associations on top of MLS charges. Moseley Flint, Inc. All rights reserved. 31 LtdServAgy_7100

32 Four cases across the United States have been initiated that seek triple damages for four years of Realtor dues, amounting to about $5,000 for each MLS user who would not have joined a Realtor Association if they had not been forced to join. These four suits will only benefit the MLS users in these small MLSs. These four cases are briefly described below. Open MLS Cases 1. Buyer s Corner v. Northern Kentucky Assn. of Realtors (Northern Kentucky) This Open MLS case was filed Feb. 20, The case is not a class action, and seeks damages for only one MLS user. The parties filed summary judgment motions in early May Trial will be scheduled depending on the order on the motions for summary judgment. 2. Prencipe v. Spokane Board of Realtors (Spokane, WA) This Open MLS case was filed Aug. 25, The case seeks triple damages of about $5,000 per MLS user on a class action basis against the realtor association, its separately incorporated MLS, and MLS directors. Based on about 1,400 MLS users and an estimated 30% non-join rate, a judgment for plaintiffs would amount to about $2 million. 3. Hekker v. Sarasota Assn. of Realtors (Sarasota, FL) This Open MLS case was filed Nov. 30, The case challenges the evasion common in Florida, Georgia, and Alabama of offering MLS services to realty agents without requiring realtor association membership, but requiring realtor association membership to obtain lockboxes or comparable data. The case seeks triple damages of about $5,000 per lockbox/comparable data user on a class action basis against the realtor association and directors. Based on about 3,000 MLS users and an estimated 30% non-join rate, a judgment for plaintiffs would amount to about $4.5 million. 4. Reifert v. South Central Wisconsin MLS (Madison, WI) This Open MLS case was filed Dec. 21, The case seeks triple damages of about $5,000 per MLS user on a class action basis against the realtor association, its MLS, and directors. Based on about 3,000 MLS users and an estimated 30% non-join rate, a judgment for plaintiffs would amount to about $4.5 million. The directors requested dismissal from the case, and the court denied the request. Moseley Flint, Inc. All rights reserved. 32 LtdServAgy_7100

33 Services Provided to Buyers: Buyers as Clients With the increase in the practice of buyer brokerage in the US, especially since the late 1990s in most states, licensees (acting under their brokers) have been able to represent buyers in the transaction with a written Buyer Agency Agreement not unlike the Listing Agreement for sellers referred to above. In this case, buyers are clients of the brokerage. Some real estate brokerages choose only to represent buyers in an exclusive buyer s agency relationship and do not take listings from sellers. A real estate brokerage attempts to do the following for the buyers of real estate only when they represent the buyers with some form of written buyer-brokerage agreement: Find real estate in accordance with the buyer s needs, specifications, and affordability. Takes buyers to and shows them properties available for sale. When deemed appropriate, prescreens buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task). Assist the buyer in making an offer for the property. Negotiates price and terms on behalf of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form. The buyer s agent acts as a fiduciary for the buyer. In most states, until the 1990s, buyers who worked with an agent of a real estate broker in finding a house were customers of the brokerage, since the broker represented only sellers. Today, state laws differ. Buyers and/or sellers may be represented. Typically, a written Buyer Brokerage agreement is required for the buyer to have representation (regardless of which party is paying the commission), although by his/her actions, an agent can create representation. Often real estate licensees are allowed to act for the buyer as well as the seller as long as there is full disclosure to all parties that this is occurring. Real Estate Brokers / Agents and Continuing Education In addition to completing the educational requirements for Virginia real estate license, the state requires real estate professionals to complete a certain number of hours of continuing education on a biennial basis in specific areas in order to renew his or her licenses. Moseley Flint, Inc. All rights reserved. 33 LtdServAgy_7100

34 Dual agency/designated agency A brokerage firm representing both a buyer and seller (or landlord and tenant) must get both parties informed consent and permission to proceed with transactional representation. This can be done in one of two ways. Dual Agency Consent Agreement informs both parties that the brokerage firm and all salespersons working for the brokerage firm represents both parties and that there may be a conflict of interest. Dual Agency/Designated Agency Disclosure Notice and Consent Agreement informs both parties that the brokerage firm is a dual agent and represents both parties, but then assigns separate salespersons to be the sole agent of each party. Limiting Liability A party to a brokerage relationship is innocent unless he knew or should have known of the misrepresentation and failed to take steps to correct the misrepresentation in a timely manner. This protection extends to negligence, gross negligence and intentional acts. Clients are protected against the acts of their broker agents, and broker representatives are protected against the acts of other brokers (and their licensees) who are engaged to act as subagents for their clients. Only actual knowledge or information possessed by licensees or clients will be considered. Knowledge or information among or between clients and licensees shall not be imputed (assigned or assumed). However, nothing in this section shall limit liability for unlawful discriminatory housing practices. Licensees should not expect to be able to hide behind the limits on vicarious liability as evidenced by the case below. The words or should have known should be taken seriously. If the court decides that this agent was willfully blind to the client s occupation. CASE STUDY DISCUSSION: Representation Issues A licensee entered into a listing agreement with a Seller. The Buyer views the Seller s property at an open house, and is not represented by another real estate agent. Does the Broker represent the Buyer? No, Broker would represent Buyer only if they enter into a signed buyer agency agreement. Does the Buyer have to be represented? No, the Broker can proceed in this transaction by representing the Seller and working with the Buyer as a customer. Moseley Flint, Inc. All rights reserved. 34 LtdServAgy_7100

35 Does the Broker have to give any document to the Buyer? Yes, the only required document at this point is an Agency Disclosure Notice, notifying the Buyer that the Broker represents the Seller. What if the Buyer wants to be represented by the Broker? The broker must get consent of Seller and Buyer to dual agency or designated agency and must then enter into an agency agreement with Buyer. Moseley Flint, Inc. All rights reserved. 35 LtdServAgy_7100

36 Chapter Four Questions 1) The relationship resulting from mutual consent between the customer and the real estate licensee is referred to as an. 2) True / False Often real estate licensees are allowed to act for the buyer as well as the seller as long as there is full disclosure to all parties that this is occurring. 3) If any buyer s broker (or any of his/her agents) brings the buyer for the property, the broker would typically be compensated with a co-op commission coming from the total offered to the listing broker, often about half of the full commission from the seller. 4) True / False Clients are protected against the acts of their broker agents, and broker representatives are protected against the acts of other brokers (and their licensees) who are engaged to act as subagents for their clients. 5) If an agent or salesperson working for the buyer s broker brings the buyer for the property, then the broker would commonly compensate his agent with a fraction of the co-op commission, as determined in a separate agreement. 6) True / False There is rarely a great enough difference between the listing (asking) price and the negotiated selling price to make a significant difference between the commissions generated on each side, and certainly hardly enough to justify an agent failing in his fiduciary duty to obtain the best terms for his/her client. Answer questions 7-9 from the following paragraph. A licensee entered into a listing agreement with a Seller. The Buyer views the Seller s property at an open house, and is not represented by another real estate agent. 7) Does the Broker represent the Buyer? Y N 8) Does Buyer have to be represented? Y N 9) Does Broker have to give any document to Buyer? Y N 10) True / False Real estate licensees are allowed to act for the buyer as well as the seller as long as there is full disclosure to all parties that this is occurring. Moseley Flint, Inc. All rights reserved. 36 LtdServAgy_7100

37 Chapter Four Answers 1) Agency relationship 2) True 3) buyer s 4) True 5) buyer s 6) True 7) No 8) No 9) Yes 10) True Moseley Flint, Inc. All rights reserved. 37 LtdServAgy_7100

38 Glossary Agency The definition for agency has been revised to include representation of a client as a standard agent or a limited-service agent. This includes every relationship in which a real estate licensee acts for or represents a person by such person s express authority in a real estate transaction, unless a different legal relationship is intended and is agreed to as part of the brokerage relationship. Buyer Agency A real estate agency that represents only the buyer s interests. The sales commission may be obtained from the seller as a split with the listing agent, or paid by the buyer. Some buyer agencies may charge the buyer an hourly fee or a retainer for services, in addition to, or, instead of the sales commission. Buyer s Licensees A licensee that works directly for the buyer. Just like the seller s licensee, a buyer s licensee has certain legal obligations in the relationship with buyers and sellers. Loyalty to the buyer s interests, confidentiality, and full disclosure are three of those. Designated Agency The seller and buyer are represented by their own individual licensees who are affiliated with the same Broker. Each of these licensees, known as Designated Licensees, represent fully the interests of a different client in the transaction. Disclosed Dual Licensee Works for the buyer and the seller. This type of relationship is not possible unless the buyer and seller agree, and they must both sign a statement to that effect. When a real estate licensee acts as a dual licensee, in order to reveal confidential information of one party (buyer or seller) to the other, he or she must have the express written permission of the party whose confidential information will be revealed. Disclosed dual agency is walking a fine line and there are legal repercussions for crossing it. Discount Broker One who provides a menu of services at various fees, usually requiring an upfront fee even before any buyers are found. Dual Agency Dual agency may be called several other names including transaction broker or facilitator. A licensee will usually have many properties listed for sale, meaning they have entered into an agreement with the seller. When a buyer chooses to utilize this same agent s professional service, they, too, enter into an agreement. The buyer has the ability to employ a licensee in a legal capacity to act in their best interest. Most times, this arrangement is at no expense to the buyer as Buyer s Agents are typically compensated by the Listing Broker as a consequence of the contractual arrangement between the seller and the licensee. Moseley Flint, Inc. All rights reserved. 38 LtdServAgy_7100

39 Full-Service Agency An agency that handles all aspects of the advertising process, including planning, design, production, and placement. Today, full-service generally suggests that the agency also handles other aspects of marketing communication, such as public relations, sales promotion, Internet and direct marketing. Limited-Service Representative A licensee who acts for or represents a client with respect to real property containing from one to four residential units. Material Fact A fact that is sufficiently significant to influence an individual into acting in a certain way, such as entering into a real estate contract Seller Agency A real estate licensee representing only the seller s interests. Because the seller s licensee lists and markets the property to sell, the licensee is also referred to as the listing licensee. The seller s licensee has responsibilities that include obtaining the highest possible purchase price and the best possible terms for the seller. Seller s Licensees Works directly for the seller and represents the seller s interests. The seller s licensee is obligated to fulfill certain responsibilities such as loyalty to the seller s interests, confidentiality, and full disclosure. Split Agency A licensee under a broker acts on behalf of the seller and another licensee under that same broker represents the buyer, this is designated agency. Each licensee has the same legal and fiduciary responsibilities as seller s licensee and buyer s licensee and the broker has all the same responsibilities of a disclosed dual agent plus he or she must take special care with regard to confidential information disclosed to the selling licensee. Sub-Agency A sub-agent is a real estate licensee, who may be contacted by a buyer to find a home for purchase. However, the sub-agent represents the seller and is responsible for getting the best possible price and terms for the seller. The subagent may provide such services as, home search, explanation of financing options, calculating monthly payments and estimating closing costs. They may NOT disclose confidential information that is not in the best interest of the seller, but may share with the seller information provided by the buyer. Moseley Flint, Inc. All rights reserved. 39 LtdServAgy_7100

40 REFERENCES Weintraub, Elizabeth. Home Buying/Selling: Full-Service Real Estate Brokers and Agents. Sign Up Now, December RESOURCES Federal Trade Commission 600 Pennsylvania Avenue, N.W. Washington, D.C Real Estate Board Department of Professional and Occupational Regulation 3600 West Broad St. Richmond, VA Virginia Association of Realtors Telegraph Road Glen Allen, Virginia Moseley Flint, Inc. All rights reserved. 40 LtdServAgy_7100