This document summarizes a chapter on agency relationships in real estate from a training course. It discusses key concepts like fiduciary duties, disclosure requirements, dual agency, and termination of agency. It also provides examples of quiz questions and answers that test understanding of topics like distinguishing between actual and constructive fraud, the duties of limited service agents, and situations that constitute dual agency under Ohio law.

1. Real Estate Principles &
Practices
Module 4
March 9, 2016

2. Chapter 6 – Continued
Brokers, Salespeople, and
the Agency Relationship
March 9, 2016

3. Consumer Guide to
Agency Relationships
• Ohio’s consumer-friendly method of
providing sellers and/or buyers with
information regarding the type of agency
relationships recognized in Ohio and the
type of agency a particular brokerage
practices
• Presented at the first substantive contact
a licensee has with a consumer
March 9, 2016

4. Agency Disclosure Statement
• Discloses the actual agency relationship
that will result in a property-specific
transaction and lets the buyer and seller
know exactly who is working for whom in
the transaction
• The second form required under Ohio law
March 9, 2016

5. Exemptions
• These disclosure forms are not required
for:
– Referrals from one licensee to another
– Open houses (unless an offer is written)
– Residential property that is rented or leased
for a term of 18 months or less
– Transactions dealing with foreign real estate
or cemetery interment rights
March 9, 2016

6. The Agent’s Duties to the Principal
• Fiduciary responsibilities (ACCOLD*)
– Accountability
– Confidentiality
– Care
– Obedience
– Loyalty
– Disclosure
* Also known as OLD CAR (Obedience, Loyalty, Disclosure,
Confidentiality, Accountability, and Reasonable Care)
March 9, 2016

7. Waiver of Duties—
“Limited Service Agents”
• Duties that may be waived by a seller include:
– Seeking a purchase offer at a price and with terms
acceptable to the seller
– Accepting delivery of purchase offer(s) and presenting it to
the seller in a timely manner, even if the property is subject
to a contract of sale, lease, or letter of intent to lease
– Answering the seller’s questions and providing information
regarding any offers or counteroffers
– Assisting the seller in developing, communicating, and
presenting offers or counteroffers
– Answering the seller’s questions regarding the steps to fulfill
the terms of any contract (within the scope of knowledge
required for real estate licensure)
March 9, 2016

8. Authority to Negotiate
• Under Ohio law, the definition of
“negotiate” includes:
– Delivering or communicating an offer,
counteroffer, or proposal
– Discussing or reviewing the terms of any offer,
counteroffer, or proposal
– Facilitating communication regarding an offer,
counteroffer, or proposal and preparing any
response as directed
March 9, 2016

9. Dual Agency
• When a licensee
represents both buyer
and seller in a
transaction
• A dual agent owes
fiduciary duties to
both buyer and seller
• Con: Inherent conflict
of interest in the
arrangement
March 9, 2016

10. Ohio’s Agency Law:
Acceptable Dual Agency Forms
• One licensee may represent both buyer and seller (or lessor
and lessee) as clients in the same real estate transaction
• Two licensees affiliated with the same brokerage (one
represents the buyer or lessor while the other represents
the seller or lessee), where the broker and management-
level licensees are dual agents (unless a management-level
licensee falls under the exemption below)
• Two licensees affiliated with the same brokerage (one has
the buyer or lessor as a client and the other has the seller or
lessee as a client), where every licensee in the brokerage
represents every client, therefore, both agents are dual
agents
March 9, 2016

11. Dual Agency Disclosures
• Licensee must disclose to buyer and seller
all relevant information to enable each
party to make an informed decision
regarding consent to the dual agency
relationship
• If a material change in information occurs,
it must be disclosed to buyer and seller
and each party must be given a chance to
revoke consent
March 9, 2016

12. The Agent’s Duties to Third Parties
• Agent owes third parties a duty of good
faith and fair dealing
• An agent is not a fiduciary in relation to a
third party
• Fair dealing means the seller’s agent
must:
– Disclose certain information to prospective
buyers
– Avoid misrepresentation
March 9, 2016

13. Disclosure to the Buyer
• Caveat emptor (“Let the buyer beware”)
• Seller and seller’s agent must tell the
buyer about any latent defects
• Seller and seller’s agent are generally not
required to tell the buyer about patent
defects
March 9, 2016

14. Residential Property
Disclosure Form
• Delivered to buyer prior to an offer to purchase:
– Detailed description of the property’s condition
– Was property inspected for mold?
– Any smoke damage?
– Is property located in a flood plain?
– Any problems and defects with mechanical systems,
water quality/intrusion, and nonconforming uses?
• Includes notification of “Megan’s Law”
• Signed by seller and buyer
March 9, 2016

15. Fraud
• Intentional or negligent misrepresentation
or concealment of material facts
– Actual Fraud: Intentional
– Constructive Fraud: Negligent
misrepresentation
March 9, 2016

16. Opinions, Predictions, and Puffing
• Opinion: “Compared to the sale prices for other
homes in the neighborhood, this one appears to
be an excellent buy.”
• Prediction: “Historically, property values have
gone up 4% a year, and there is currently no
reason to believe this will change for this area.”
• Puffing: “Look at this backyard!” (Even though
the agent knows the house really backs up to a
park, but does not mention this.)
March 9, 2016

17. “As Is” Clause
• A provision in a purchase agreement
stating the buyer accepts the property in
its present condition
• Ohio law states this does not protect the
seller from liability for nondisclosure of a
latent defect or deliberate concealment of
a defect
• Not a defense to fraud
March 9, 2016

18. Penalties for Breach of Duty
• Disciplinary action by professional
associations
• Action by the Ohio Division of Real Estate
• Civil lawsuits filed by injured parties
• The filing of criminal charges against the
agent (in very serious cases)
March 9, 2016

19. Terminating Agency
• Accomplishment of purpose
• Expiration
• Operation of law
• Mutual agreement
• Renunciation
• Revocation
March 9, 2016

20. Agency Coupled with an Interest
• A principal does not have the right to
revoke an agency agreement if it is an
agency coupled with an interest
– When the agent has a personal interest in the
subject of the agency
• Is not terminated by the death,
incompetency, or bankruptcy of the
principal
March 9, 2016

21. Chapter 6 Quiz
1.) Which statement regarding the broker-
salesperson relationship is TRUE?
a. It is not a fiduciary relationship since a
salesperson works for the client.
b. It is usually a subcontractor relationship.
c. Salespeople are agents of their broker.
d. all of the above
March 9, 2016

22. Chapter 6 Quiz
2.) Which statement regarding an agency
relationship is FALSE?
a. An agency relationship may be created
between a licensee and a buyer.
b. It is illegal for a salesperson to represent a
client directly, without a broker.
c. The seller has a fiduciary responsibility
toward the buyer.
d. Subagency is when a licensee is an agent
of an agent.
March 9, 2016

23. Chapter 6 Quiz
3.) Under Ohio’s Agency Law, two licensees
from the same brokerage are considered
dual agents if
a. company policy says that all agents represent
all clients of the brokerage.
b. the two licensees acted independently in
establishing an agency relationship with their
respective clients and did not assist one
another.
c. the two licensees are non-management-level
licensees at the same brokerage.
d. the two licensees co-listed a property.
March 9, 2016

24. Chapter 6 Quiz
4.) A sellers agent must give a Consumer
Guide to Agency Relationships to a seller
a. at the same time a listing agreement is
signed.
b. before the buyer’s offer is presented.
c. prior to showing a buyer the property.
d. upon initiating a pre-qualification evaluation.
March 9, 2016

25. Chapter 6 Quiz
5.) A buyer’s agent must give a Consumer
Guide to Agency Relationships to the buyer
a. after the buyer’s offer is presented.
b. at the open house, if the buyer wants to
write an offer on the home.
c. at the same time a listing agreement is
entered into.
d. immediately after marketing or showing
the property.
March 9, 2016

26. Chapter 6 Quiz
6.) A buyer's agent must give an Agency
Disclosure Statement to a buyer
a. at the same time a listing agreement is
signed.
b. before the buyer’s offer is written.
c. prior to marketing or showing the property.
d. upon initiating a pre-qualification
evaluation.
March 9, 2016

27. Chapter 6 Quiz
7.) When must a buyer's agent give an Agency
Disclosure Statement to a seller?
a. at the same time a listing agreement is
signed
b. before the buyer’s offer is presented
c. immediately after marketing or showing the
property
d. It is not required unless the agent requests
confidential information from the buyer.
March 9, 2016

28. Chapter 6 Quiz
8.) Trisha wants to sell her house quickly because her new job
in another city begins the first of next month. She tells Ed to do
whatever it takes to sell her house. Ed’s fiduciary duty requires
him to
a. find a suitable buyer as quickly as possible, even if this means Ed
must make less of a commission on the deal than he had
anticipated.
b. have his friend buy the house at a lower price because he feels that
Trisha’s primary interest is in selling the house quickly, not the price.
c. tell prospective buyers that Trisha wants her house sold as quickly as
possible because he must follow all instructions of the client.
d. weed out offers that seem unreasonable or for which Ed knows the
buyers cannot obtain financing to keep Trisha from wasting her time.
March 9, 2016

29. Chapter 6 Quiz
9.) Marsha is a broker at Johnson Realty and has listed a rundown
property. The owner has not made any effort to fix it up over the
years and has ignored Marsha’s suggestions. Ron, one of Marsha’s
non-management-level licensees, wants to buy the property. Which
statement is TRUE?
a. Marsha does not need to do anything as long as she keeps any
confidential information she received from the seller confidential.
b. Marsha should again suggest some improvements to the seller, and
then make all necessary disclosures and have forms signed in regard
to Ron as a potential buyer of the property.
c. Marsha should again suggest some improvements to the seller, but
nothing else.
d. Since Ron is a non-management-level licensee, Marsha does not need
to make any further disclosures to the seller.
March 9, 2016

30. Chapter 6 Quiz
10.) Which is NOT dual agency?
a. A brokerage represents both the buyer and seller
as clients in the same real estate transaction.
b. A licensee is dealing with both the
buyer/customer and seller/client in the same
real estate transaction.
c. The only manager in the company represents a
client in an in-company real estate transaction.
d. Two licensees in the same company represent
their own individual clients in the same
transaction.
March 9, 2016

31. Chapter 6 Quiz
11.) A salesperson who is NOT an agent of the
buyer is responsible for telling the buyer
a. all known latent defects in the property,
whether or not the buyer asks about them.
b. all known patent defects in the property,
whether or not the buyer asks about them.
c. everything, since the agent has the duties of
good faith and fair dealing.
d. nothing, since a fiduciary relationship does
not exist.
March 9, 2016

32. Chapter 6 Quiz
12.) Shane lists his home with Eve, a real estate agent, and tells her about the
leaks in the roof because he thinks a new buyer will likely see them. Shane
does not tell Eve that the house will also need a new well because the old one
is not deep enough. Eve has the home inspected and discovers Shane’s house
also has termites. Months later, Eve has shown the house to 13 buyers with no
interest. Eve decides not to tell her new prospect about the leaky roof because
she thinks that it is easy to spot, but also decides not to mention the termites
because the inspection report was not required and the new prospect never
asked her about it. Are any of these items considered to be actual fraud or
constructive fraud?
a. All three items represent actual fraud for both Shane and Eve.
b. All three items represent constructive fraud.
c. The roof is a non-issue; the well is actual fraud by Eve; the termite issue is
constructive fraud by Shane.
d. The roof may be an issue depending on how visible it was to prospective
buyers; the well is actual fraud by Shane; the termite issue is actual fraud by
Eve.
March 9, 2016

33. Chapter 6 Quiz
13.) An "as is" clause in a purchase
agreement
a. applies to patent defects in the purchase
of residential real estate.
b. gives a buyer no recourse for problems
with the property.
c. is a defense against a fraud lawsuit.
d. protects the seller from liability for
nondisclosure of a latent defect.
March 9, 2016

34. Chapter 6 Quiz
14.) Agency may NOT be terminated by
a. accomplishment of purpose.
b. action by NAR if either party is a
member.
c. renunciation by the agent.
d. revocation by the principal.
March 9, 2016

35. Chapter 6 Quiz
15.) Agency coupled with an interest
should be terminated by
a. bankruptcy of the principal.
b. death of the principal.
c. mutual agreement.
d. revocation by the principal.
March 9, 2016

36. Chapter 6 Quiz
16.) A property manager is usually
considered a,
a. General Agent.
b. Limited Agent.
c. Special Agent.
d. Universal Agent.
March 9, 2016

37. End Module 4
March 9, 2016