Florida Real Estate Principles Practices Law 39 th

Florida Real Estate Principles, Practices & Law 39 th Edition Unit 4: Authorized Relationships, Duties, and Disclosure

Law of Agency • When people delegate authority to another to act on their behalf, an agency relationship is created • Three types of law – Common law (unwritten law) • Case law – Statutory law • F. S. 475 and F. S. 455 – Administrative law • FREC rules

Agency Relationships in General Business Dealings • Fiduciary relationship – Opposite of ‘at arm’s length’ relationship – Caveat emptor • Principal – Person who delegates authority to another • Agent – Person who is authorized to represent and act for principal • Universal agent • General agent • Special agent

Brokerage Relationships in Florida • Three options in real estate transactions – Transaction broker for buyer and/or seller – Single agent for buyer or seller (not both) – No brokerage relationship (nonrepresentation)

Dual Agency • Dual Agent – Brokerage who represents as a fiduciary both the buyer and the seller in a real estate transaction – Florida law prohibits a brokerage firm from creating a fiduciary relationship with both the buyer and the seller • Fiduciary – Relationship of trust and confidence between broker as agent and the principal

Written Disclosure Required in Residential Sales • Sale of improved residential property of four or fewer units • Unimproved residential property intended for four or fewer units • Agricultural property of 10 acres or less

Disclosure Does Not Apply To: • Nonresidential transactions • Rental or leasing, unless there is an option to purchase property with four or fewer residential units • Auctions • Appraisals • Business opportunities

Transaction Broker Relationship Presumed • Under Florida law, it is presumed licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established • A transaction broker disclosure is not required

Transaction Broker Relationship • Provides limited representation to customer (buyer, seller or both) • Does not represent either buyer or seller as a fiduciary or as a single agent • Customer is not responsible for actions of transaction broker

Duties of a Transaction Broker Deal honestly and fairly Account for all funds Use skill, care, and diligence in the transaction Disclose all known facts that materially affect the value of real property not readily observable • Timely present of all offers and counteroffers • Exercise limited confidentiality, unless waived in writing by a party • Perform additional duties mutually agreed to • •

Transaction Broker Relationship • Parties give up rights to undivided loyalty • Limited representation allows licensee to assist both buyer and seller • License cannot represent one party to detriment of other party • Not required to give customers a written transaction broker notice but still have duties of a transaction broker

Single Agent Relationship • Single agent – A broker who represents, as a fiduciary, either the buyer or seller but not both in the same transaction • Principal – The party (client) with whom a licensee has entered into a single agent relationship

Subagents • Authorized to assist and represent the agent • Duties are delegated by the original agent – Broker’s sales associates are general agents of the broker and subagents of the broker’s principals – The broker is an agent of the principal – Sales associates owe same fiduciary obligations to the principal as does broker

Duties of a Single Agent • • • Deal honestly and fairly Loyalty Confidentiality Obedience Full disclosure Account for all funds Skill, care, and diligence in the transaction Timely present all offers and counteroffers Disclose all known facts that materially affect the value of residential real property that are not readily observable

No Brokerage Relationship (Nonrepresentation) • Seller or buyer can choose not to be represented • Broker facilitates sale/purchase • Law does not require buyers and seller be represented

Duties in No Brokerage Relationship • Account for all funds entrusted to the licensee • Deal honestly and fairly • Disclose all known facts that materially affect the value of residential property that are not readily observable to the buyer

Whose Duty? • A Account for all funds • D Deal honestly and fairly • D Disclose all known facts that affect the value of residential property – Transaction broker – Single agent – No brokerage relationship

Whose Duty? • Use skill, care, and diligence • Present all offers and counteroffers – Transaction broker – Single agent • Exercise limited confidentiality • Perform additional duties – Transaction broker

Whose Duty? • • C Confidentiality O Obedience L Loyalty D Disclosure (full) – Single agent

Brokerage Relationship Limitations • If a brokerage firm is – Transaction broker for seller, then • Transaction broker for buyer or • No brokerage relationship with buyer – Single agent for seller, then • No brokerage relationship with buyer

Practical Example #1 • Sales associate Amy works for XYZ Realty, Inc. Amy lists a house and establishes a single agent relationship with the seller. A buyer contacts Amy and wants to view the property. What relationship may Amy have with this buyer?

Example #1 Solution • Because Amy and XYZ Realty, Inc. have a single agent relationship with the seller, Amy must give the buyer a No Brokerage Relationship disclosure before showing the property. • Single agent for the seller No brokerage relationship with the buyer

Practical Example #2 • Broker Brown is working with buyer Jones as a transaction broker. Broker Brown has also listed a property that buyer Jones is considering purchasing. • If buyer Jones is going to buy this property, what relationship can Broker Brown have with the owner of the listed property?

Example #2 Solution • Broker Brown can list the property as a Transaction Broker or with No Brokerage Relationship. He cannot be a Transaction Broker for the buyer and a Single Agent for the seller. • Transaction broker with buyer Transaction broker or no brokerage relationship (nonrepresentation) with seller

Disclosure Requirements • Duties must be described and disclosed in writing (single agent or no brokerage relationship) • Can be included in listing agreement – Signature line inserted following disclosure – Single agent disclosure before, or at time of entering into a listing agreement, or before showing property – No brokerage notice before showing property

Recordkeeping and Retention • Brokers must retain agreements that engage their services for 5 years • Brokers must retain brokerage relationship disclosure documents for 5 years – All residential transactions that result in a written contract – Includes files of properties that fail to close

Exceptions to Disclosure Requirements • Licensee knows that a single agent or transaction broker represents buyer or seller • Bona fide open house or model showing • Unanticipated casual encounters • Responding to general questions of advertised property • Communications concern services offered • When selling new residential units built by the owner

Transition to Single Agent Relationship • F. S. 475 permits a licensee to change the relationship from a single agent to a transaction broker, the principal must sign – Consent to Transition to Transaction Broker Notice

Practical Example #3 • Sales associates Yvette and Zach work for Extra-Fine Realty. Yvette has just listed the house at 3456 Main St. as a single agent for the seller. Zach is a single agent for buyer Black. If buyer Black wants to view the house at 3456 Main St. , how can this legally happen?

Example #3 Solution • Because Extra-Fine Realty is acting as a single agent for both the seller of 3456 Main St. and for buyer Black, both the seller and the buyer must sign a Consent to Transition to Transaction Broker notice to show this property to buyer Black.

Designated Sales Associates • Nonresidential transactions only • At the request of the buyer and seller, the broker may designate sales associates to act as single agents for different customers in the same transaction • Buyer and seller each must have assets of at least $1 million • Written disclosures – Single agent disclosure – Designated sales associate disclosure

Terminating a Brokerage Relationship • • Fulfillment of brokerage relationship purpose Mutual agreement to terminate Expiration of agreement Broker renounces by giving notice Principal revokes relationship by giving notice Death of broker Destruction of property or eminent domain Bankruptcy of principal or customer