chapter seven is upon us welcome i'm sean kelly and this is my channel on everything real estate [Music] i remember this chapter specifically from class a long long time ago and i remember it being a pretty long one so i'm going to cut this intro short you already know to subscribe you already know to hit that thumbs up button so let's dive in now let's pass this north carolina real estate exam this is chapter 7 which is all about brokerage relationships agency is a fiduciary relationship it's a position of trust and confidence for someone else above all others even your own interest as an agent you are working on someone else's behalf however when a client signs an agency agreement they're actually signing that agreement with the firm itself not necessarily you the agent the firm is the one that gets the commission and then they split the check off to you it's bigger than you expected what is it it's a one-year membership in the jelly of the month club oh god now not all states practice agency but north carolina does so there are three different classifications when describing agency and you'll need to know all three because there will be a test question on this you have the universal agent you have a general agent and then you have a special agent the universal agent is the most broad and powerful of the three you basically have unlimited power and anything you can do i can do a general agent is someone who can perform specific activities so there's still limited power there and there's still limited rules a good example would be a property manager they can make some decisions on their own then there is the special agent which is us the realtors we have limited acts and very detailed instructions so we work on the behalf of the client and we're basically professional advisors so how does an agency relationship start so it can start when you begin negotiating on the behalf of another person additionally once you begin getting confidential information about somebody and start having conversations about someone's personal info that's another starter you don't necessarily need to get paid or have a written agreement to get an agency relationship started except for in north carolina which we'll discuss for starting an agency relationship here in north carolina you must have mutual consent with the client as well as having a written agreement then there's also expressed agency and implied agency express agency is just two people coming to terms with an agreement implied is when you take action on the behalf of the client imagine going through the entire purchasing process showing a client 40 different houses just to get to closing without you having an actual written agreement it's implied that you are their agent at this point however this is something you'll need to know for the state portion of the test in north carolina even with implied agency you still must have it in writing you still must have a written agreement on both the buying and the selling side and compensation is never a determining factor on starting agency relationships now let's talk about the difference between a client and a customer so a client is someone we have fiduciary duties to and a customer is just other people within the transaction so take a second to think about who a client might be in a transaction and usually there's only one or two and then think about who might be a customer within a transaction there's usually several a client would actually just be your buyer or your seller whoever it is that you are representing and a customer are people like your lenders appraisals inspectors and all these other people within the transaction including the other person sitting on the other side of the table if you're representing the buyer the seller is still your customer but not necessarily your client they're not your client an easy way to remember this a client is someone you work for while a customer is someone you work with so i mentioned fiduciary duties a couple of times now so let's dive into what that actually is there's a handy little acronym for it old car so you have obedience you have loyalty disclosure confidential accounting and reasonable skill and care so obedience you should follow all of the requests of your client to an extent and as long as their legal request so loyalty you must protect your clients interests above anyone else's including your own so disclosure which we went over a bunch in the last chapter you must disclose all of the offers any material facts and other points of interest so confidentiality you must keep all of your clients information and motivations private accounting you must keep track of all of the money and document it so reasonable care don't be negligent and don't make statements that you are not knowledgeable about so a good example here is don't take up somebody on a commercial real estate deal if you've never done a real estate transaction before and if you don't feel confident and knowledgeable within that field for agency disclosure there's actually this little brochure called working with real estate agents that you must actually hand to every person you talk to that's the first substantial contact within when dealing with real estate that is now this may be the strangest role i've ever heard of so don't be alarmed if you feel the same way so the brochure discusses agency choices and you're going to want to try to get this in front of your potential client as soon as the first substantial contact happens and have them sign this back page if possible they don't need to sign it but you'll have to notate that what is first substantial contact let me read it off this is when the customer provides personal financial confidential motivational wants needs or desires and so pretty much anything related to real estate basically as soon as someone starts opening their mouth and talking you shush them you hand in this brochure you discuss the brochure and then you move on and continue talking it's absolutely odd if you are not speaking with somebody in person so if you're doing it through text or through a phone call you'll still need to email or mail this to them within three calendar days now let's go over the types of agency relationships which is partly why this is somewhat important there is single agency there's dual agency there's designated dual agency and then there's no agency single agency is when an agent sits on only one side of the transaction either the buyer side or the seller side dual agency is when one broker works both sides of a transaction and represents both the buyer and the seller now remember both the buyer and the seller must provide their consent for you to do so designated dual agency is when two brokers are working within the same firm but one is representing the buyer's side and one is representing the seller side this creates way better representation for both the clients and keeps some of the confidential information apart this also requires consent from both parties there are several limitations when it comes to dual agency and this is why many agents choose not to represent both sides as a dual agent you can't negotiate pricing for either side because you owe both clients fiduciary duties you basically just become the delivery person within the transaction and you hand over the contract to one person you hand over the counter offer to the other and then you just kind of hand things back and forth but you can't negotiate again for either party you can't show any favors you just have to keep your mouth shut and just hand things back and forth so it's a strange situation to be in now for designated tool agency they can negotiate prices because again it's two separate agents and you have to keep your confidentiality to yourself obviously you're gonna see people passing by you in the office but you have to keep that conversation about that particular deal separate in designated dual agency a broker in charge and a provisional broker can never be designated dual agents why because the broker in charge is the supervisor over the provisional broker so that wouldn't really be fair to the client now we talked a lot about our responsibilities but what about our clients responsibilities so a client should act in good faith and they should pay you what they had agreed to pay as well as if a client tells you some bad information and they know it's bad and you get in trouble they can also possibly be held accountable as well so now what terminates an agency relationship well the duties could be complete you know the offer goes through it's sold you're done there could be a breach in contract the agreement could expire the property itself can be destroyed where there could be a mutual agreement you no longer want to work with each other or the client can pass away now if you as the agent pass away there's still an agreement there because remember that agreement is between the client and the firm not necessarily the client and the agent now let's go over material facts so north carolina is a caviar mtor state meaning buyer beware however it is still up to the agent to disclose material facts a material fact is everything you do know and everything you should know this includes defects or facts based around developments or changes around the property and many other points of interest the agent does not fill out the disclosure form this is placed 100 on the seller however a seller can decide to mark no representation and not disclose anything when you do see a listing that says sold as is this does not mean the licensee is not held accountable for anything that they do not disclose you still must disclose any of the defects another disclosure form you'll want to acquire is the mineral oil and gas disclosure this will disclose any information on who owns the mineral rights and subsurface rights now let's go over some prohibited conduct for disclosures there are four different classifications of misconduct for an agent there is willful misrepresentation then there is negligent misrepresentation then there is willful omission and then negligent omission so rather than try to memorize these try to understand these so what does willful mean willful means you are willing which means you are lying and you are willing to lie now what is negligent means it means you thought something was true but it wasn't it was a mistake then misrepresentation means you stated something as fact even though it was untrue while omission means you just left it out means you didn't even mention it with this logic willful misrepresentation would be the worst misconduct now why because you willingly and knowingly stated an incorrect fact the most harmless ones are the negligent ones because you actually thought something was true and it just turned out that it wasn't there was a honest mistake a key word to know here is puffing and puffing is allowed in real estate and when listing a property it's a broad statement about a property and typically something descriptive like beautiful home wonderful living great neighborhood things like that the things you don't need to disclose about a property are things like the death or illness of a property owner the proximity to sex offenders or whether the house is haunted or not next let's talk about licensee or broker-owned houses a licensee can never sell their house and also represent the buyer on the other end this is common sense and would obviously be unfair to the buyer in general as a realtor you are held to a higher standard when selling some of your own properties you must also disclose all interest and ownership in properties before a transaction oh my gosh so that went way faster than the two to three days i remember spending in class on chapter seven i'm serious we are done we just have a review to do there's not even a time for a midterm we are good although maybe now i've just seen this stuff so many times that it just seems easy and quick so just remember you'll get there in no time let's get to the review when a client signs an agency agreement they're signing an agreement with the firm not necessarily the agent agency is working on someone else's behalf our firm is working on the behalf of the client universal agents have the most power general agents have limited power it's things like property managers and special agents are people like us realtors basically no power and we're basically professional advisors an agency starts in north carolina when there is mutual consent and it is in writing clients are the people we work for while customers are the people we work with fiduciary duties are the foundation of professionalism and go with the acronym old car that is obedience loyalty disclosure confidential accounting and reasonable skill and care you must disclose discuss and decide when it comes to this working with real estate's brochure at the very first substantial contact with your potential client so there are agency choices there's single agency dual agency designated dual agency and no agency single agency is when one agent is working on the selling side and a different agent in a different firm is working on the buying side and representing the other person in the transaction then dual agency is when one agent is working both the buying side and the selling side and can't negotiate on anyone's behalf is basically just an errand boy running contracts and counter offers back and forth then there is designated dual agency where two agents are still working within the same firm but one agent is working on the buying side one agent is working on the selling side and a lot of confident all of the confidentiality must be kept secret and held to both sides then no agency obviously is a client not wanting to be represented at all and remember a broker in charge and a provisional broker can never be designated dual agents at the same time a broker in charge supervises the provisional broker and it just wouldn't be fair so an agency relationship can be terminated if the duties are complete if the agreement has been expired if there has been a mutual agreement if there has been a breach in contract if the property has been destroyed or if the client themselves pass away remember if you as an agent pass away there's still an agreement between the client and the firm material facts always must be disclosed and are everything you do know and everything you should know a seller does not have to disclose anything they can mark no representation on the disclosure disclosure form however this would set off a huge red flag to any potential buyer like why are they representing anything why aren't they disclosing any of these defects they might be hiding something the mineral oil and gas disclosure shows who owns those subsurface and mineral rights willful misrepresentation is the worst type of misconduct negligent misrepresentation willful omission and negligent omission are the other three types of misconduct death or illness proximity to a sex offender or whether a house is haunted or not are things that do not need to be disclosed and an agent cannot represent a buyer when selling their own home and that's the end of the review y'all don't know how happy i am that chapter 7 went by this quickly it may have drug on for y'all but it went a lot quicker than i expected anyway subscribe by clicking the button down below give me a thumbs up if you enjoyed this video it's a free way for you to show your support for my channel as always thank you so much for watching this video on the north carolina real estate exam prep this was chapter seven up next we have agency contracts which we get into the fund of commissions and how much money you'll make grab the 10 off link down in the description below for your continuing education post education and pre-licensing classes for new sign ups and i'll see you on the next one [Music] [Music] you