Understanding Brokerage Relationships in Real Estate

Feb 24, 2025

Chapter 7: Brokerage Relationships

Introduction

  • Presenter: Sean Kelly
  • Focus: North Carolina Real Estate Exam
  • Main Topic: Brokerage Relationships

Agency Relationships

  • Agency is a fiduciary relationship, prioritizing client's interests over personal interests.
  • Client Agreement: Sign with the firm, not directly with the agent.
    • Firm gets commission; agent receives split.
  • North Carolina practices agency; some states do not.

Classifications of Agency

  1. Universal Agent
    • Broad power and scope.
  2. General Agent
    • Limited power; specific activities (e.g., property manager).
  3. Special Agent
    • Realtors; limited acts; professional advisors.

Starting an Agency Relationship

  • Begins with negotiation or receiving confidential information.
  • In North Carolina:
    • Requires mutual consent and a written agreement.
  • Expressed vs. Implied Agency:
    • Express Agency: Formal agreement.
    • Implied Agency: Actions implying agency.
    • Even implied agency needs written agreement in NC.

Clients vs. Customers

  • Client: Person for whom the fiduciary duties are owed.
  • Customer: Other parties in the transaction (e.g., lenders, inspectors).
  • Client = work for; Customer = work with.

Fiduciary Duties (OLD CAR)

  1. Obedience
    • Follow client’s legal requests.
  2. Loyalty
    • Prioritize client’s interests.
  3. Disclosure
    • Share offers, material facts.
  4. Confidentiality
    • Keep client info private.
  5. Accounting
    • Track and document finances.
  6. Reasonable Skill and Care
    • Avoid negligence; only operate within expertise.

Agency Disclosure

  • Brochure: "Working with Real Estate Agents"
    • Present at first substantial contact.
    • Discuss and attempt to get signed.
    • Send within three days if not in person.

Types of Agency Relationships

  1. Single Agency
    • One side representation.
  2. Dual Agency
    • One broker for buyer and seller; requires consent.
    • Limitations on negotiation.
  3. Designated Dual Agency
    • Two brokers in one firm; each represents one side.
    • Confidentiality maintained.
  4. No Agency
    • Client opts for no representation.

Client Responsibilities

  • Act in good faith.
  • Fulfill payment agreements.
  • Clients can be held accountable for false information.

Termination of Agency

  • Completion of duties.
  • Breach of contract.
  • Agreement expiration.
  • Mutual agreement to terminate.
  • Property destruction.
  • Client death.
  • Agent Death: Firm-client agreement still holds.

Material Facts

  • NC is "buyer beware," but agents must disclose all known and should-have-known facts.
  • Disclosure Forms: Seller can opt for no representation.
  • Mineral, Oil, and Gas Disclosure: Ownership of subsurface rights.

Prohibited Conduct

  1. Willful Misrepresentation
    • Knowingly false statements.
  2. Negligent Misrepresentation
    • Mistakenly false statements.
  3. Willful Omission
    • Deliberately leaving out information.
  4. Negligent Omission
    • Forgetting to include information.
  • Puffing: Broad, positive statements allowed.

Special Cases

  • Non-disclosure Items: Death, illness, proximity to sex offenders, haunted status.
  • Licensee-owned Properties: Cannot represent buyer in self-owned property sales.

Conclusion

  • Next Chapter: Agency Contracts
  • Offers insights on commissions and earnings.
  • Discounts for continuing education available.

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Full transcript