Lou Tulga Transaction Brokerage in NM real estate

Transaction Brokerage
4 Education CE Credit Hours
Presented by Lou Tulga CCIM CRB
www.loutulga.com
5/4/2015 Copyright (c) 2011 Lou Tulga CCIM CRB All
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Ockham’s Razor
“pluralitas non est ponenda sine necessitate”
(“Don’t make matters more complicated than is
necessary”)

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Background of Brokerage Choice
 Caveat emptor
 Seller Agency
 Notion of “Fairness to All Parties”
 Emergence of Public Policy Requirements
 Emergence of Consumer TORT Cases
 Common Law of Agency Applied to Real
Estate Practice at MLS Level
 Emergence of Consumer AGENCY Cases

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Key Questions
 What Does Agency Look Like?
 How Does Transaction Brokerage Look
Different? (Review)
 Why Would Anyone Demand Agency?
 Why Would Anyone Refuse Agency?
 Why Would a Client Accept Facilitation?
 How Are Conflicts of Interest Handled?

…CAPACITY…
Agency allows the granting of capacity to the agent
to speak and act on behalf of the principal by
“standing in the principal’s shoes” on matters
within the agent’s Scope of Authority
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States of “Choice”
 In New Mexico the Parties make their own
choices!
 Transaction Brokerage
 Dual Transaction Brokerage Facilitation
 Exclusive Agency
 Dual Agency Facilitation
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Keep it Simple!
Only 2 Roles and Only 2 Relationships
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ROLE
Exclusive Service
Impartial Service
RELATIONSHIP
Transaction Broker
Agent
Property Management
New Builder Exclusive
Rep
Absentee
Client/Customer
Seller/Buyer Brokerage
Building/Tenant Rep
TASK

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New Mexico Real Estate License
Law 61-29-10.1
 A. Agency solely by written express agency
agreement—no type assumed, created orally or by
implication
 B. Brokerage may have written agreements without
creating an agency relationship—and no agency duties
will be imposed
 C. Brokerage may provide real estate services without a
written agreement—and no agency duties will be
imposed

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Service Standards: Broker Duties
1. Honesty & reasonable care
2. Performance of all written agreements
3. Providing understood assistance unless excluded by written service
agreement with client/customer and disclosed in writing to any
cooperating brokers
4. Acknowledgement of areas outside licensee’s expertise
5. Prompt accounting of monies or property
6. Timely provision of written copy of Broker Duties
7. Timely disclosure in writing of conflicts of interest of any kind
8. Timely disclosure of actually known adverse material facts about the
property or transaction to clients and customers
9. Maintaining of confidential information from previous agency
relationship
10.Unless authorized in writing maintaining of confidential information
from one’s current client/customer except when disclosure is
required by law
(NMREC Part #19)

Facilitator
Seller
Buyer
“In the Middle”
5/4/2015 10Copyright (c) 2011 Lou Tulga CCIM CRB All
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ROLE
RELATIONSHIP
TASK

Potential Office Conversation
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“Once upon a Time-- there was
No Serpent in Paradise”
 Prior to the late 1980s--Brokers did not know
agency as a legal term or its legal consequence
–and when told were in surprised!
 Brokers never heard of “OLDCAR” and Forms
did not use the word “agency” until the early
1990s
 Brokers happily and needed no E&O Insurance

The “Garden” was Beautiful
 Caveat Emptor---if the buyer does not ask
there is no duty to tell—just don’t lie!
 Notion of “Fairness to ALL Parties”
 The term, “Agent” was for used but was
not defined
 The ONLY disclosure requirement was for
a broker to let the other party know that
the broker was “buying or selling for the
broker’s own account”—5/4/2015 Copyright (c) 2011 Lou Tulga CCIM CRB All
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An Issue that Never Goes Away
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NAR 2011 Legal Scan
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Keep it Simple!
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ROLE
Exclusive Service
Impartial Service
RELATIONSHIP
Transaction Broker
Agent
Property Management
Rep
Absentee
Client/Customer
Building/Tenant Rep
TASK

States of “No Choice”
 Licensee is an “Agent” and Buyer or Seller
is an “Agency Principal” whether they want
it or not!
 HUD Repo Listing Broker Contracts—even
in those states are “non-agency”---so
those states simply look the other way but
do not offer brokerage relationship choice
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New Mexico Real Estate License
Law 61-29-10.1
 A. Agency solely by written express agency
agreement—no type assumed, created orally or by
implication
 B. Brokerage may have written agreements without
creating an agency relationship—and no agency duties
will be imposed
 C. Brokerage may provide real estate services without a
written agreement—and no agency duties will be
imposed

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Service Standards: Broker Duties
1. Honesty & reasonable care
2. Performance of all written agreements
3. Providing understood assistance unless excluded by written service
agreement with client/customer and disclosed in writing to any
cooperating brokers
4. Acknowledgement of areas outside licensee’s expertise
5. Prompt accounting of monies or property
6. Timely provision of written copy of Broker Duties
7. Timely disclosure in writing of conflicts of interest of any kind
8. Timely disclosure of actually known adverse material facts about the
property or transaction to clients and customers
9. Maintaining of confidential information from previous agency
relationship
10.Unless authorized in writing maintaining of confidential information
from one’s current client/customer except when disclosure is
required by law
(NMREC Part #19)

Potential Office Conversation
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“Once upon a Time-- there was
No Serpent in Paradise”
 Prior to the late 1980s--Brokers did not know
agency as a legal term or its legal consequence
–and when told were in surprised!
 Brokers never heard of “OLDCAR” and Forms
did not use the word “agency” until the early
1990s
 Brokers happily and needed no E&O Insurance

The “Garden” was Beautiful
 Caveat Emptor---if the buyer does not ask
there is no duty to tell—just don’t lie!
 Notion of “Fairness to ALL Parties”
 The term, “Agent” was for used but was
not defined
 The ONLY disclosure requirement was for
a broker to let the other party know that
the broker was “buying or selling for the
broker’s own account”—5/4/2015 Copyright (c) 2011 Lou Tulga CCIM CRB All
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An Issue that Never Goes Away
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NAR 2011 Legal Scan
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Keep it Simple!
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ROLE
Exclusive Service
Impartial Service
RELATIONSHIP
Transaction Broker
Agent
Property Management
Rep
Absentee
Client/Customer
Building/Tenant Rep
TASK

States of “No Choice”
 Licensee is an “Agent” and Buyer or Seller
is an “Agency Principal” whether they want
it or not!
 HUD Repo Listing Broker Contracts—even
in those states are “non-agency”---so
those states simply look the other way but
do not offer brokerage relationship choice
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States: Where Agency is the
Automatic Relationship
 Just by being licensed the licensee is in an
agency relationship with those who
receive the licensee’s services
 This means anyone who “double-ends” a
transaction is some form of “dual agent”
 This means there is special liability for
both the agent and the agency principal
 Special remedies for “breach of fiduciary
duties”5/4/2015 Copyright (c) 2011 Lou Tulga CCIM CRB All
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Common Misconceptions
 That Transaction Broker is really
“Transactional Broker”
 Transaction Brokers are really ONLY
 Intermediaries
 Finders
 Facilitators

States Where Agency is Created ONLY
by Choice
 Agency not created by common law
“implications, appearances, accident, etc.”
 Agency only by an express written agency
agreement
 Those special liabilities and remedies for
both the licensee and client do not exist
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Another---Cartoon!
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Exclusive
Exclusive Transaction Broker: “In
Your Corner”
Out of
House
Sale
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Exclusive
Exclusive Transaction Broker: “In
Your Corner” –and has Buyer as Well
Your
Buyer
Custome
r
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Exclusive
Exclusive Agency: In Your Corner
and In Your Shoes
Out of
House
Sale
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Seller’s Agent obtains Seller’s
written permission for Dual Agency
prior to an offer being presented and
makes it clear that Agent will represent
both parties as impartial facilitator
Buyer’s Agent obtains
Buyer’s written permission
for Dual Agency prior to an
offer being written and
makes it clear that Agent
will represent both parties
as impartial facilitator
What Can Two Clients Expect with
One Agent in Dual Agency?
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Transaction Broker Facilitation
 This Broker is not in any Corner and not in any
party’s shoes—but rather stands in the middle
as an impartial facilitator
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The Essence of Agency is
Capacity
 Authorization to speak or act on behalf of
the agency principal for the agency
principal’s benefit
 Thi
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Take a Good Look!
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Transaction Broker Listing
Agreement

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Listing Agreement: Agency Addendum

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Dual Agency Facilitation Role

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Transaction Broker Facilitation Role*

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Purchase Agreement
Cover Page II Disclosures: #1

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Purchase Agreement

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Purchase Agreement

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Purchase Agreement

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Purchase Agreement

II. Sources
 2011 NAR Legal Scan: Trend Discussion
 NM Real Estate License Law
 NM Real Estate Commission RULES
Definitions
Part 19
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III. Standards of Conduct
 Agency: OLDCAR
 Parahoo v. Mancini: “You be the Judge”
 Lombardo v. Albu: “You be the Judge”
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Meaning of Professionalism
 __________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
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Say What You Mean--- But
Don’t Over-Promise
 Represent
 Protect
 Agent
 Loyalty
 Advocate
 Advise/Advice
 Services
 Assist
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III. Transaction Brokerage
 Not Agency
 Can Be by Written Contract
 Can Be Exclusive-- but to Only One Party
at a Time
 Can Be Impartial to both Parties
Simultaneously
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Listing Agreement
Item 20: Example
 “In the event that listing broker directly
obtains a buyer for this property—seller
and brokerage agree to modify this
exclusive listing contract to provide for
assistance for both seller and buyer by
impartial facilitation”
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IV. Uncertainty of Agency
Courts
 Fiduciary Duty and Federal Law
 Breach of Fiduciary Duty—Sources
 Breach of Fiduciary Duty—Another Listing
 Breach of Fiduciary Duty—Leasing
 Breach of Fiduciary Duty—Listing Broker
 Transaction Broker---Agency Remedies
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V. Agency: Useful and Serious
 Agency Can Be an Essential Relationship
 Scope of Authority: Taking it Seriously
 Importance of OLDCAR
 Significance of “Respondeat Superior”
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Your Agency Perceptions
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Agency EQUALS Superior Service Compared to Other Relationships
Agency EQUALS Protection of Client’s Interests as Foremost Concern
Agency EQUALS Authorization from Client to Make Promises to Others
Agency EQUALS Protection of Client’s Interests as Primary Concern
Agency EQUALS Professionalism of the Highest Order
Agency EQUALS Client’s Potential Liability for Agent’s Words/Deeds
Agency EQUALS Exceptional Remedies to Client for Agent’s Breach
Agency EQUALS… __________________________________________

Transaction Broker—Services and
Assistance without Authorization to
Speak and Commit
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 “Not in Customer/Client’s Shoes” because
they are in their Own Shoes”

Finis
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Facilitator
Seller
Buyer
“In the Middle”
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Don’t Be Careless—with “Agent”
 National Association of Realtors® is to blame—
they tend to think everyone is an agent
 Slogan: “Not all Agents are Realtors®”
 NMREC Website: “Our function is to license real
estate sales agents and brokers, and enforce
the New Mexico Real Estate License Law and
Commission Rules and Regulations. ”

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Real Estate Commission Agency
Disclosures Required
 First NMREC Disclosure Requirements—1992
 Subagency
 Single Agency
 Changes of Requirements over Time
“First Substantive Contact”
“Licensee Duties”
“Agency solely by Written Agency
Agreement
“Broker Duties”
“Transaction Broker Terminology

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Real Estate Commission Agency
Terminology/Requirements
 First NMREC Disclosure Requirements—1992
 Subagency, Buyer’s Agency, Dual Agency, Licensee
 Licensee Duties
 First Substantive Contact
 Changes of Requirements over Time
“Licensee Duties”—”Broker Duties”
“Common Law of Agency Abrogated”
“Transaction Broker Terminology”

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A Billion Dollar Question
 1,000,000 Real Estate Licensees
X
 $100.OO per year Spent in “Agency Education”= 1
Hundred Million
X
 20 Years = 20 Hundred Million Dollars Seeking to
Understand all of This
Equals = $2,000,000,000 Spent on the “Fix”

I. Introduction
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NMREC Rules Definitions
 A. Agency: the fiduciary relationship created
solely by the express written agency agreement
between a person and a brokerage, authorizing
the brokerage to act as agent for the person
according to the scope of authority granted in
that express written agreement for real estate
services subject to the jurisdiction of the
commission.

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NMREC Rules Definitions
 B. Agent: the brokerage authorized to act as a
fiduciary for a person and to provide real estate
services solely by means of an express written
agreement.
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NMREC Rules Definition
 TT. Transaction Broker: the non-fiduciary
relationship created by 61-29-2 A 14
NMSA 1978, wherein a broker or
brokerage provides real estate services
without entering into an agency
relationship.
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Transaction Brokerage Obligations
 NMREC Broker Duties
 Contract Performance
 Subject to Breach of Contract
 Subject to TORT Violations
 Subject to Requirements of “Professional Duty”
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Agency Relationship Obligations
 NMREC Broker Duties
 Contract Performance
 Subject to Breach of Contract
 Subject to TORT Violations
 Subject to Requirements of “Professional Duty”
 Subject to Breach of “Fiduciary Duty” within
Scope of Authority—subject to interpretation!
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Agency and the National Association of
Realtors® Code of Ethics
 Article 1: “…When representing a buyer,
seller, landlord, tenant, or other client as
an agent, REALTORS® pledge themselves
to protect and promote the interests of
their client. This obligation to the client is
primary…”
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How Can this Be Interpreted when a
Client is Unhappy?
 1.
 2.
 3.
 4.
 5.
 6.
 7.
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Summary
 By statute, all exclusive contracts for real estate
services must be in writing and say so
 By statute, all agency relationships for real estate
services must be in writing and say so
 By statute, real estate services may be provided by a
transaction broker either with or without a written
contract
 By statute, all clients and customers are entitled to
Broker Duties when receiving real estate services

II. RANM Forms Language
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Listing Agreement: Agency
Addendum

III. Contract Obligations
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Listing Agreement Contract Duties
 2. Duties of Broker. Broker will use diligence in
effecting the sale of the Property, and will
provide the following services:
(a) assisting Seller to locate qualified buyers; (b)
if requested, assisting potential buyers to locate
financing and prepare offers; (c) assisting Seller
in negotiating the terms of a sale; (d) assisting
Seller in monitoring pre-closing and closing
procedures.

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Buyer Agreement Contract Duties
 2. Duties of Broker. During the term of this
Agreement Broker will:
(a) Become familiar with Buyer's property
requirements; (b) assist Buyer to locate suitable
properties; (c) assist Buyer to locate financing;
(d) assist Buyer to prepare offers (including
providing information concerning comparable
properties) (e) assist Buyer in negotiating
acquisition terms; (f) assist Buyer in monitoring
pre-closing and closing procedures; (g) act
solely for Buyer in any transaction;

Listing Agreement Potential Item
#20 “Other”
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Brokerage appoints listing broker as
Designated Broker to provide Seller
exclusive services. Brokerage reserves the
right to appoint additional Designated
Brokers when Brokerage deems it
necessary and Seller will be informed. In an
“in-house” transaction Brokerage will
appoint a Designated Broker to work
exclusively with Buyer

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Listing Agreement Item #20 “Other”
 “In the event that listing broker obtains a buyer
for this property-- seller and brokerage agree to
modify this exclusive agreement to provide for
impartial facilitation between seller and buyer”

IV. Task-Role-Relationship
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Lou’s Relationship “Wheel”
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Task Varieties
 1.
 2.
 3.
 4.
 5.
 6.
 7.
 8.
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Role Choices
 Exclusive Services
 Facilitation

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Relationship Selection
 Transaction Brokerage
 Agency

V. A Second Look
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 Transaction Broker
 Provides assistance and services to client or
customer
 Does NOT have right to make decisions that
bind client or customer
 Does NOT have scope of authority to commit
without written ratification of client or
Discussion
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 Transaction Broker should not make decision-
recommendations to clients or customers –
except to obtain more information prior to client
or customer making their own decision
 “I provide—you decided”—Realtor® Mantra
Discussion
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 Exclusive Agent—acts as a fiduciary precisely
because agency carries with it the essential
understanding of potential capacity to make
decisions and bind a client—in keeping with
implied or express scope of authority
 Therefore, as a fiduciary who acts, an agent is
held to a higher standard and may be
accountable for damages, rescission, and loss
of compensation
Discussion
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Facilitation is:
 Impartial toward both parties
 Both parties receive Basic Duties
 Both parties receive pre-set limited
recommendations for further information
 Both parties understand that neither will
receive decision-making recommendations
 Both parties understand that confidentiality is
preserved for both parties
Discussion
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 Exclusive Services of any kind means that
the exclusive broker is promoting the
interests of the client
 Exclusive Agency means that the
Exclusive Agent is not only promoting but
also protecting the client’s interest in a
fiduciary capacity with special penalties for
“breach” of that duty
Corner and Shoes
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 Seller Client assisted by
Exclusive Listing Broker
Buyer Customer assisted by
What Can Client and Customer
Expect?
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 Seller Client assisted by
Buyer Client assisted by
Exclusive Buyer
Broker
who is ALSO the
What Can the Two Clients Expect?
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Qualifying Broker appoints
Listing Broker as Designated
Broker and Seller Client continues
to receive Exclusive Services
Qualifying Broker appoints
Buyer Broker as Designated
Broker and Buyer Client
Continues to receive
Exclusive Services
What Can Two Clients Expect with
Designated Broker Dual Representation?
Rights Reserved

Qualifying Broker appoints
Listing Broker as Designated
Agent and Seller Client continues
to receive Exclusive Services
Qualifying Broker
appoints
Buyer Broker as Designated
Agent and Buyer
Client
Continues to receive
Exclusive Services
What Can Two Clients Expect Two
Agents with Dual Agency?
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 Impartial toward both parties
 Both parties receive Basic Duties
 Both parties receive pre-set limited
recommendations for further information
 Both parties understand that neither will
receive decision-making
recommendations
 Both parties understand that confidentiality
is preserved for both parties
What Is Facilitation?
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Benefits
 Some Benefits
 Minimizing Complexity
 Minimizing Uncertainty
 Avoiding Appearance of Authority to Commit Client
 Say “Goodbye” to Dual Agency
 Responsible for “Recognized/Measurable” Standards
 Providing an Agency Alternative to Client’s Benefit
 Fits the other than “Substantial Services” Agreements
 A Better Fit for the world of “CBA’s,” and “AfBA’s,”

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Why All This Matters
 Expanding Expectations of Service
 Increased Awareness of Legal
Implications
 Knowledge of Points of Vulnerability
 Need to for Licensees to Self-Monitor

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Potential Downsides
Transaction Broker Is Acting like an “Agent”
 Forgetting that “agency is capacity”
 Taking on “agency specific tasks”
 Misleading others to believe transaction
broker is in fact acting as “agent” of client

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The “Duck-Theory” and
Task-Specific Agency
 Duck Theory…”You are not an agent UNLESS
you act like an agent…”
 Task-Specific Agency Services
 Trustee
 “Acting as Though”
 Accepting Delivery and Notice
 Making Objections, etc. on Behalf of Client
 Accepting Power of Attorney

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Summary
 The “Wheel”
 TASK and ROLE suggest RELATIONSHIP
 Agency
Determine which is best to perform obligations of seller
or buyer agreements

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ROLE
Exclusive Representative
Facilitator
RELATIONSHIP
Agency
Property Management
Rep
Absentee
Client/Customer
Building/Tenant Rep
TASK
Making Rational
Choices

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finis
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 Brokerage appoints listing broker as
exclusive services. Brokerage reserves
the right to appoint additional Designated
necessary and Seller will be informed. In
an “in-house” transaction Brokerage will
Listing Agreement Item #20
Possibilities
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 Brokerage appoints listing broker as
exclusive services. Brokerage reserves
the right to appoint additional Designated
necessary and Seller will be informed. In
an “in-house” transaction Brokerage will
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 Awareness and Involvement
 “Known and Unknown”
 Potential Litigation Sources
 Valid and Exclusive Agreements
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 In the event listing broker obtains a buyer
for this listed property Seller and
Brokerage agree to modify this exclusive
agreement to provide for impartial
facilitation between Seller and Buyer
Listing Agreement Item #20
Possibilities
Rights Reserved

 Under the common law of agency “breach
of fiduciary duty” carries special
“accountability”
 Not only “damages” as compensation to the
agency client, but also
 Potential for “rescission” of any already closed
transaction
 Potential that the agent has forfeited claim to
the commission
Corner and Shoes
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 The real consequence of a broker being
found to be an “agent” under the common
law is exposure to remedies—a
transaction broker is responsible under the
common law of Tort for damages due to
misrepresentation (intentional or
otherwise) and negligence—but not loss of
compensation or rescission of the
transaction
Corner and Shoes
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 Both Seller and Buyer Clients can expect
full disclosure and modification of contract
for exclusive services to either:
 Maintain Exclusive Services to Seller and
NOT to Buyer
 Maintain Exclusive Services to Buyer and
NOT to Seller
 Modify BOTH Exclusive Service Agreements
to provide, in writing, for Impartial Facilitation
What Can the Two Clients Expect?
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Transaction Broker Rationale (1)
 It is the parties' intention to minimize the
likelihood that Seller will be held liable for
the acts and omissions of the Broker and
to eliminate the possibility that Broker is
held liable to Seller under agency law.

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Transaction Broker Rationale (2)
 LIABILITY. Seller acknowledges that as a
result of the agency relationship Seller can
be held liable for acts or omissions of
Broker that are within the scope of the
Broker's authority

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A House of Cards
Built on Complex
Disclosures

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ROLE
Exclusive Service
Impartial Service
RELATIONSHIP
Transaction Broker
Agent
Property Management
Rep
Absentee
Client/Customer
Building/Tenant Rep
TASK

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Classroom Input
 Listing broker advertises a property as "being near public
transportation" and as a result of the advertisement finds a buyer
prospect who states up front that she must live close to public
transportation because does not drive or own a vehicle. The listing
broker writes the offer with the perception that the property is close
to public transportation, but without making the close-by-
availability –of- public- transportation a contingency in the offer
to purchase. The offer is accepted along with $5,000 as earnest
money. Two days after the date of acceptance, the listing broker
sees a notice in the local newspaper of record that the only bus line
serving that neighborhood would be permanently discontinued in
one month.

Finis
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NAR Code of Ethics—Written Service
Agreements
 “For the protection of all parties, shall
assure whenever possible that all
agreements related to real estate
transactions, including, but not limited to,
listing and representation agreements…”

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Agency Authorization
 “For all regulated real estate transactions first
executed on or after January 1, 2000, no agency
relationship between a buyer, seller, landlord or
tenant and a brokerage shall exist unless the
buyer, seller, landlord or tenant and the
brokerage agree, in writing, to the agency
relationship. No type of agency relationship may
be assumed by a buyer, seller, landlord, tenant
or licensee, or created orally or by implication.”
(NMSA 1978)

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121

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122
Prologue: The “Iron Age” of Agency
Reality
 Disclaimers
 Disclosures
 Choosing Sides—taking “agency” seriously
 Complexities

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I. INTRODUCTION
 Background of Non-Agency in Real Estate
Undefined and Unregulated and not Role Specific
 Background of Agency in Real Estate
Defined by Common Law and One-Sided
 Agency Embraced by NAR
Listings and All MLS Cooperation Based on Agency Only

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124
Written Service Agreements
without Agency
“A brokerage may provide real estate
services to a client pursuant to an express
written agreement that does not create an
agency relationship and no agency duties
will be imposed on the brokerage” (NMSA 1978)

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125
The “Wheel”
•TASK
•ROLE
•RELATIONSHIP

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II. Brokerage Relationships
in New Mexico
 Client—Services Differential?
 Customer—Services Differential?
 Exclusive Agency
 Client Only and Only with Express Agency
 Agency--Designated Agency--Subagency
 Facilitation
 Dual Transaction Broker or Dual Agent

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127
Broker Assignment
Agent
 Scope of Authority: The client’s authorization--
within the scope of authority-- for agent to
speak and/or act on client’s behalf and to
commit client without client’s further approval

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128
Broker Assignment
Transaction Broker
 Scope of Engagement: those tasks brokerage
has accepted to do on behalf of the client or
customer

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129
Value of Written Service Agreements
 Required to establish a contract for real estate services
 Written instructions and acceptance
 Makes brokerage relationships clear
 Written permission of your principal is necessary to get
paid by the other party to the transaction
 Necessary for standing under Article 16 protection
 Necessary for contract protection under common law
 Creates a “commitment” in writing from client

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130
Written Listing Agreement Benefits
 1. _______________________________
 2. _______________________________
 3. _______________________________
 4. _______________________________

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131
Written Buyer Agreement Benefits
1. ______________________________
2. ______________________________
3. _______________________________
4. _______________________________

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132
Transaction Broker Listing
Agreement
 EXCLUSIVE SERVICES. The undersigned
("Seller") grants to the undersigned Broker firm
the exclusive right to sell the real property
described in Paragraph 3. Broker will act as
Seller's Transaction Broker in this transaction
without creating an agency relationship. Broker
and Seller will owe each other loyalty.

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133
Listing Broker Service Agreement
Broker will use diligence in effecting the
sale of the Property, and will provide the
following services: (a) assisting Seller to
locate qualified buyers; (b) if requested,
assisting potential buyers to locate
financing and prepare offers; (c) assisting
Seller in negotiating the terms of a sale;
(d) assisting Seller in monitoring
preclosing and closing procedures--RANM

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134
NAR CODE OF ETHICS—
Clients and Customers
 A Distinction in Terms
Client—Written Agreement for Service
Relationship Protected by Article 16
Customer—Without a written agreement with
relationship NOT protected under Article 16

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135
NAR Code of Ethics--Brokerage
Relationships
 Agency
Treat client’s interests as primary and all
parties with honesty
 Nonagency
Treat all parties with honesty

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136
Agency Scope of Authority
“The authority to act on behalf of or in
place of a principal with specific
parameters governing the brokerage’s
authority to act” (NMREC Part #1)

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137
Agency Fiduciary Duties
 Obedience
 Loyalty
 Disclosure
 Confidentiality
 Accounting
 Reasonable Care and Diligence

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138
Listing Broker Agency Agreement
 Broker will serve as Seller's agent in this
transaction. In addition to the basic licensee
duties, Broker will owe to Seller fiduciary
duties.
 Seller acknowledges that as a result of the
agency relationship Seller can be held liable
for acts or omissions of Broker that are within
the scope of the Broker's authority.

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139
Loyalty by Written Service
Agreement
Pledge of “Loyalty”
 Agency Contract
 Transaction Broker Contract
Meaning of “Loyalty”
 Agency Relationship?
 Transaction Broker—Client and Customer?

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140
Buyer Broker Service Agreement
Broker will: (a) Become familiar with Buyer's
property requirements; (b) assist Buyer to locate
suitable properties; (c) assist Buyer to locate
financing; (d) assist Buyer to prepare offers
(including providing information concerning
comparable properties); (e) assist Buyer in
negotiating acquisition terms; (f) assist Buyer in
monitoring pre-closing and closing procedures;
(g) act solely for Buyer in any transaction …
unless otherwise specifically and expressly
agreed to by Buyer in writing;--RANM

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141
Buyer Agreement Psychology
RANM Compensation Provisions
 Buyer “guarantees” broker’s compensation
 Buyer gives broker permission to get
compensation from “other side”
 Buyer will pay the difference after consulting
 Broker does not have to find or show when
compensation is not enough
 Buyer will pay broker if buyer causes default
or if buyer cuts broker out after term is expired

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142
Buyer Agreement Psychology
Lou’s Provisions
 Buyer owes loyalty to broker
 Buyer owes no compensation to broker
 Broker is given permission to get paid by “other
side”
 Broker owes broad range of professional duty
 Agreement can be cancelled by either side with
simple written notice

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143
Dual Agency Agreement
 BROKER'S DUAL AGENCY ROLE: Brokerage
is representing both Buyer and Seller as clients
by means of a written agency agreement with
each of them. Buyer and Seller consent to
Brokerage acting as a Dual Agent.
 Buyer and Seller agree to modify the fiduciary
duties of the brokerage. As a Dual Agent,
Brokerage shall act as a facilitator between
Buyer and Seller,

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144
Dual Transaction Broker
Agreement
 Dual Transaction Facilitation: The parties agree
that this Agreement supersedes and modifies
the separate Exclusive Buyer and Listing
Agreements between Broker and Buyer and
Seller.
 Broker’s Transaction Facilitation Role: Buyer
and Seller consent to Broker not acting as
exclusive representative for either party in order
to facilitate this transaction

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145
A SAMPLE Transaction
Facilitation Statement.
Broker will assist in the evaluation process and continue
to offer such services as specified in any previously
entered into written agreement with the Seller or Buyer—
EXCEPT
 Broker but will not takes sides or represent either
party.
 Broker will NOT disclose any pertinent information
obtained during the term of an Exclusive Agreement
unless by permission or required by law
 Broker, will offer information and services to Seller
and Buyer but will not takes sides or represent either
party.

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146
Buyer Broker Agency Agreement
 Broker will serve as Buyer's agent. In
addition to the basic licensee duties,
Broker will owe to Buyer fiduciary duties.
 Buyer acknowledges that as a result of
the agency relationship Buyer can be
held liable for acts or omissions of Broker
that are within the scope of the Broker's
authority

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147
Dual Agency Duties--RANM
 Buyer and Seller agree to modify the fiduciary
duties of the brokerage. As a Dual Agent,
Brokerage shall act as a facilitator between
Buyer and Seller, shall not disclose confidential
information of one party to the other without the
affected party's consent, will provide information
on an equal basis to assist Buyer and Seller to
negotiate on their own behalf, but will not
advocate for either Buyer or Seller.

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148
NAR CODE OF ETHICS--
Confidentiality
 Confidentiality
 Preserved except by permission, disclosure is
required by law, or for Realtor® to be able to
defend himself when accused
 Identical provisions for Realtors® as agents
and nonagents

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149
NAR Code of Ethics—
Disclosure Issues
Same duties for all Realtors® regardless of
brokerage relationship
 Discovery
 Concealment
 Misrepresentation

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150
NAR Code of Ethics--Competence
“The services which Realtors® provide to their
clients and customer shall conform to the
standards of practice and competence which are
reasonably expected in the specific real estate
disciplines in which they engage” (Article 11)

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151
Conflict of Interest
“Realtors® shall not undertake to provide
professional services concerning property
or its value where they have a present or
contemplated interest unless such interest
is specifically disclosed to all parties” (Article 5)

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152
Respect for Exclusive Agreements of
Others
 “…Realtors® shall not knowingly provide
substantive services…to prospects who
are parties to exclusive representation
agreements, except with the consent of
the prospects exclusive representative or
at the direction of prospects” (SOP 16-13)

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153
Consumer Protection and the
Common Law of Tort
 Fraud
 Active
 Passive
 Negligent Misrepresentation
 Negligence

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154
Key New Mexico Tort Cases
 Neff v Bud Lewis (1976)
 Amato v Rathbun (1982)
 Gouveia v Citicorp (1984)

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155
Common Law Uncertainties
 Case Specific
 Case Law Precedence
 Risk Management Responses

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156
Some “Reality Checks”
 Broker Service Check List
 Comparisons
 Duty Intensifiers
 Service Expanders
 Greater Obedience

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157
Selected Law Cases
 “Common Law duties are difficult to ascertain
even with in-depth legal research” .... Laurie Janik,
NAR General Counsel 1999
 “[Agency] Common Law is a hit-and-miss
proposition. It sets forth fiduciary duties in very
broad terms and leaves a lot to uncertainty…”--
Laurie Janik, NAR General Counsel 1999

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A. Priority of Duties
 Department of Real Estate Regulations
 Common Law of Agency Fiduciary Duty
 Contract Law Covenants

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159
Priority of Duties
 Common Law of Agency Fiduciary Duty
 Federal Fair Housing Act

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160
C. Breach of Fiduciary Duty
 Misrepresentation
 Lack of Further Inquiry
 Dependence on “Unreliable Date Source”

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161
Fiduciary Duty and Disclosure
 Listing Agent’s Non-Disclosure to Buyer
 Seller’s Obligations to Buyer
 Third Party Providers’ Obligation to Buyer

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162
Breach of Fiduciary Duty
 Failure to Disclose to Seller Relationship
to Buyer
 Transaction Closed and Funded
 Seller Refused to Pay Compensation

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163
F. “Breach of TB Duty”
 Transaction Broker for Seller Did Not
Perform all of the Transaction Broker
Duties
 Transaction Closed and Funded
 Seller Refused to Pay Compensation

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164
Benefits
 Some Benefits
 Minimizing Complexity
 Minimizing Uncertainty
 Avoiding Appearance of Authority to Commit Client
 Say “Goodbye” to Dual Agency
 Responsible for “Recognized/Measurable” Standards
 Providing an Agency Alternative to Client’s Benefit
 Fits the other than “Substantial Services” Agreements
 A Better Fit for the world of “CBA’s,” and “AfBA’s,”

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165
Implications

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166
Potential Downsides
Transaction Broker Is Acting like an “Agent”
 Forgetting that “agency is capacity”
 Taking on “agency specific tasks”
 Misleading others to believe transaction
broker is in fact acting as “agent” of client

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167
The “Duck-Theory” and
Task-Specific Agency
 Duck Theory…”You are not an agency UNLESS
you act like an agent…”
 Task-Specific Agency Services
 Trustee
 “Acting as Though”
 Accepting Delivery and Notice
 Making Objections, etc. on Behalf of Client
 Accepting Power of Attorney

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168
Summary
 The “Wheel”
 TASK and ROLE suggest RELATIONSHIP
 Agency
Determine which is best to perform obligations of seller
or buyer agreements

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169
ROLE
Exclusive Representative
Facilitator
RELATIONSHIP
Agency
Property Management
Rep
Absentee
Client/Customer
Building/Tenant Rep
TASK
Making Rational
Choices

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170
finis

Rights Reserved
171
When it Matters
gravitas sola quanda
gravis
(Old Roman Proverb)

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172
ROLE
RELATIONSHIP
TASK

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173
finis

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174
XII. Break-Out Discussions
 Class Problem #1—Public Transportation
 Class Problem #2—Meth Lab Issue
 Class Problem #3—Sex Offender Issue
 Class Problem #4—Financing Clause

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175
XI. Break-Out Discussions
 Class Problem #1—Public Transportation
 Class Problem #2—Meth Lab Issue
 Class Problem #3—Sex Offender Issue
 Class Problem #4—Financing Clause

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176
finis

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177
“Designated Broker” Possible Replacement
 “Designated Broker: A Qualifying Broker
or Broker who is designated in writing by a
Qualifying Broker to serve as Exclusive
Transaction Broker or Exclusive Agent for
a seller, landlord, buyer, or tenant in a real
estate transaction. A Designated Broker
may work with a seller or landlord in one
transaction and work with a buyer or
tenant in another transaction.” Lou Tulga

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178

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179
“Facilitator” Possible Replacement
 “Facilitator: The role of a Broker in either a
Dual Agency or Transaction Brokerage
relationship in which the exclusive
relationships between a seller or landlord
client or buyer or tenant client are modified
so that the Broker impartially facilitates the
Transaction.” Lou Tulga

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180
Listing Broker Duties--RANM
Broker will: (a) Become familiar with Buyer's
property requirements; (b) assist Buyer to locate
suitable properties; (c) assist Buyer to locate
financing; (d) assist Buyer to prepare offers
(including providing information concerning
comparable properties); (e) assist Buyer in
negotiating acquisition terms; (f) assist Buyer in
monitoring pre-closing and closing procedures;
(g) act solely for Buyer in any transaction …
unless otherwise specifically and expressly
agreed to by Buyer in writing;

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181

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182

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183

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184
Dual Agency—What’s Missing?
 There is no mention of modifications of
“services provided”
 There is no mention of “scope of authority”
changes
 There is no clarification of “modification of
fiduciary duties”

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185
V. Written Service Agreements
 Seven Good Reasons for Written Agreements
 RANM Form #1106 Listing Agreement
 RANM Form #1206 Buyer Broker Agreement
 RANM Form #1301 Agency—Dual Agreement
 Discussion Items--Transaction Broker Dual Facilitation,
Designated Representation, and Cover Page II
Expansion to provide for Transaction Broker Facilitation

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186
Some Good Reasons…
For Transaction Brokerage with Written Agreement
 It is a “trust/commitment” document Service Contract Loyalty
 It expressly indicates the agreement Basic Licensee Duties
 Mandatory for “exclusive relationships”47-1-45 NMSA
 Code of “requires” written agreements Article Nine

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187
Some Good Reasons…
 Code Protection only for Exclusive Written
Agreements Article 16 SOP 16-9 & 16-13
 Contract Law Protection for Written
Agreements
 License law requires it for compensation
from other party61-299-12 A 3
 Contract contains “mediation clause”

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188
“ For the Future” (now done in Colorado)—”Designated
Representative” for In-House Transaction Brokerage
Representation—Not RANM Approved!
Designated Representative. “If Qualifying
Broker chooses Designated Representation,
Broker Firm designates to represent the Client
exclusively. The designated representative will
provide the Client services as transaction broker
without an agency relationship…

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189
“Broker Firm reserves the right to name
additional designated representatives
when at its discretion it is necessary. If
additional designated representatives
are named, Client will be informed. Only
the persons designated as Client's
designated representatives will be
assigned to the Client…

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190
“In an in-house transaction Qualifying
Broker will designate another licensee to
represent the Other Client exclusively.
Client’s designated representative and
Other Client’s designated representative
will work for the same Qualifying Broker,
who supervises all, transactions and
maintains impartiality and safeguards
confidentiality for both parties.”

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191
“ For the Future” (Selection #C is NOT currently in Item #4 of
Cover Page II of the RANM Form # 2103 Purchase Agreement)
4. DUAL REPRESENTATION/DUAL AGENCY/TRANSACTION BROKER FACILITATION
DISCLOSURE AND CONSENT (if applicable)
[ ] A. Brokerage is representing both Buyer and Seller as clients by means of a
written agreement with each of them without creating dual agency, and Buyer
and Seller hereby consent to this representation.
[ ] B. If Dual Agency exists, prior to writing or presenting offer, obtain written authority from
buyer client and seller client on RANM Form 1301, Agency Agreement - Dual.
[ ]C. If Transaction Broker Dual Facilitation is to be
entered, prior to writing or presenting offer, obtain
written authority from buyer client and seller client
modifying the existing Exclusive Agreements with
consent for Transaction Broker Dual Facilitation.

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192
Brokerage Service Check List
(attached worksheet)
 Check the “A Box” if You, as Exclusive Agent,
Would Provide this Service
 Check the “B Box” if You, as Exclusive
Transaction Broker Would Provide this Service
 Leave Both Boxes Blank, if Service Is NOT
Provided Regardless of Brokerage Relationship

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193
ROLE
RELATIONSHIP
TASK

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194
#4 Issue of Extent of Fiduciary Duty
 Does it Extend to the Client beyond
Obligations of the Listing?
 Does it Extend to Seller Client’s Other
Properties that Are Not Listed?

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195
#5 Issue Do Disclosure
Responsibilities Differ?
 Disclosure Responsibilities of Seller
 Disclosure Responsibilities of Title Company
 Disclosure Responsibility of Listing Agent
 Disclosure Responsibility of Buyer’s Agent

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196
#6 Issue of Loyalty
 Competing with Former Agency Client
 Effect of Contract “Hold-Over” Clause
 What Constitutes a “de novo”
Transaction?
 Loss of Right to Get Paid

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197
#7 Issue of Loyalty
 Failure to Disclose
 Self-Dealing

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198
ROLE
RELATIONSHIP
TASK

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199
Remember….
 Professional Services are Required
Regardless of Role or Relationship
 Scope of Authority—Authorizations with
potential Capacity to Commit Client
 Scope of Engagement—Provision of
Services Only

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200
VI. Task-Role-Relationship Model
 Determine the TASK
 Suggest the Role Suitable for TASK
 Suggest the Relationship that Best Fits the
Task and Role

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201
ROLE
RELATIONSHIP
TASK

Rights Reserved
202
Implications

Rights Reserved
203

Rights Reserved
204

Rights Reserved
205

Rights Reserved
206
Finis

Rights Reserved
207
Forms Discussion
 Listing Agreement and Addendum
 Dual Agency Agreement
 Transaction Broker Facilitation Agreement
 Purchase Agreement Cover Page II

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208
IX. Making it Work
 Class Problem #1: Public Transportation
 Class Problem #2: Decline of Inspections

Rights Reserved
209

Rights Reserved
210

Rights Reserved
211
 1. EXCLUSIVE SERVICES. The undersigned("Seller") grants to the
undersigned Broker firm the exclusive right to sell the real property
described in Paragraph 3. Broker will act as Seller's Transaction
Broker in this transaction without creating an agency relationship.
Broker and Seller will owe each other loyalty. "Sale" includes the
voluntary sale, lease, exchange or other transfer of the Property or
the voluntary creation of the right to acquire any interest in the
Property (including a contract or lease). It is the parties' intention to
minimize the likelihood that Seller will be held liable for the acts and
omissions of the Broker and to eliminate the possibility that Broker is
held liable to Seller under agency law.

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212
What Do These Terms Mean in
Real Estate Practice?
 “Assistance”
 “Facilitation”
 “Representation”
 “Advocacy”

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213

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214
I. Introduction
 #1 Caveat Emptor and Vendor Agency
 #2 Trade Associations with Ethical Standards
 #3 Real Estate License Law & Commissions
 #4 Courts & Consumer Protection

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215
I. Introduction
 New Mexico Cases
 Neff v Bud Lewis (1976)
 Amato v Rathbun (1982)
 Gouveia v Citicorp (1984)
 Easton v Strassburg (CA 1984)

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216
I. Introduction
 #5 Agency Understood & Effect on Buyers
 #6 Buyer Agency & Dual Agency
 #7 Courts & Failure to Disclose
 #8 Nonagency and Transaction Brokerage

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217
I. Introduction
 “How We Do It”-- Licensee
Responsibilities
 Differences with “OLDCAR” Fiduciary Duties
 Differences in Potential for Liability

Rights Reserved
218
IV. Transaction Broker Duties and
Professional Standards
 NAR Code of Ethics and Brokerage
Relationships
 Article 1-- Priority and Honesty
 Article 2-- Confidentiality
 Article 11--Competency
 Article 16--Exclusive Relationships

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219
II. Some Important Terms
 Agency
 Business Relationship
 Facilitator
 Fiduciary Duty

Rights Reserved
220
 Nonfiduciary Duty
 Principal
 Professional Duty
 Standard of Care

Rights Reserved
221
Reasonable Care
“That degree of care which a person of ordinary
prudence would exercise in the same or similar
circumstances. Due care under all the
circumstances. Failure to exercise such care is
ordinary negligence”

Rights Reserved
222

Rights Reserved
223
Reasonable Care

Rights Reserved
224
Reasonable Care

Rights Reserved
225

Rights Reserved
226
Utmost Care
“The standard is relative, not absolute, and
sometimes regarded as no more than
reasonable care measured by
circumstances.”

Rights Reserved
227
 Transaction Broker in Other States
 Colorado
 Florida
 Missouri
 Oklahoma
 Tennessee

Rights Reserved
228
#1 Issue of Priority
 Common Law or Rules & Regs?
 Non-Fiduciary Duty
 Covenant of Good Faith and Fair Dealing

Rights Reserved
229
#2 Issue of Priority
 Common Law or Fair Housing Law?

Rights Reserved
230
#3 Issue of Reliable Source
 Substantial Misrepresentation
 Source “Deemed Reliable”
 Responsibility for “Red Flags”

Rights Reserved
231
#4 Issue of Extent of Fiduciary Duty
 Does it Extend to the Client beyond
Obligations of the Listing?
 Does it Extend to Seller Client’s Other
Properties that Are Not Listed?

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232
#5 Issue Do Disclosure
Responsibilities Differ?
 Disclosure Responsibilities of Seller
 Disclosure Responsibilities of Title Company
 Disclosure Responsibility of Listing Agent
 Disclosure Responsibility of Buyer’s Agent

Rights Reserved
233
#6 Issue of Loyalty
 Competing with Former Agency Client
 Effect of Contract “Hold-Over” Clause
 What Constitutes a “de novo”
Transaction?

Rights Reserved
234
#7 Issue of Loyalty
 Failure to Disclose
 Self-Dealing

Rights Reserved
235
 Real Estate License Law & Regulations
 Misrepresentations
 Other conduct such as negligence,
impropriety and incompetence
 Basic Licensee Duties of NMREC Part 19

Rights Reserved
236
 Necessity for Written Contracts or
Memorandums
 47-1-45 NMSA 1978 Written Contracts
 61-29-12 A (3) written permission required
from one’s principal to receive compensation
from other party to the transaction

Rights Reserved
237
Customer Service
Transaction Broker
 Obligations of Real Estate Law and NMREC
Basic Licensee Duties
 Obligation to perform all oral and written
agreements with honesty and reasonable care
 Liability for money damages from
misrepresentation and negligence

Rights Reserved
238

Rights Reserved
239
Client Service
Exclusive Transaction Broker
 All Customer Service Obligations and Liabilities
 Basic Licensee Duties
 Performance of Promises Made
 Liability for Misrepresentation & Negligence
PLUS—Undivided Loyalty entered solely by
Exclusive Brokerage Agreement

Rights Reserved
240
Client Service
Exclusive Agency
 Fiduciary duty obligations of utmost care
 Liability for breach of fiduciary duties including potential
for not getting paid
 Implied authority to commit client by word or deed
 Client liability for word or deed of agent under the scope
of authority granted

Rights Reserved
241
Brokerage Service Check List
 Check the “A Box” if You, as Exclusive Agent,
Would Provide this Service
 Check the “B Box” if You, as Exclusive
Transaction Broker Would Provide this Service
 Leave Both Boxes Blank, if Service Is NOT
Provided Regardless of Brokerage Relationship

Rights Reserved
242
Transaction Brokerage Duties and
 Real Estate License Law
 NMREC Rules & Regulations
 National Association of Realtors® Code of
Ethics

Rights Reserved
243
Transaction Brokerage Disclosure
Requirements
 “Trigger Event”
 When Presenting Consumer with a Written Document
that when Filled Out Could become an Express
Written Agreement
 Written Disclosures
 Existence of Your Own Listing Contracts
 Licensee’s Material Interests or Relationships

Rights Reserved
244
RANM “Cover Page II”
 Transaction Broker Listing Agreement
 Transaction Broker Buyer Agreement
 Purchase Agreement—Residential Resale

Rights Reserved
245
RANM “Cover Page II”
 Transaction Broker Listing Agreement
 Transaction Broker Buyer Agreement
 Purchase Agreement—Residential Resale

Rights Reserved
246
Transaction Broker Services
Agreement
 Exclusive Right to Sell Listing Agreement
 “Designated Representative”

Rights Reserved
247
Facilitation—Agency or Transaction
Brokerage?
 “Dual Agency” Form (RANM)
 Modified Fiduciary Duties
 “Transaction Brokerage Facilitation”
(PES)
 No Fiduciary Duties

Rights Reserved
248

Rights Reserved
249
Chart of Obligations (attached as handout)
 Real Estate License Law
 NMREC Rules and Regulations
 Reference to Common Law
 Reference to NAR Code of Ethics

Rights Reserved
250
Ockham’s Razor
“pluralitas non est ponenda sine necessitate”
(“Don’t make matters more complicated than is
necessary”)

Rights Reserved
251

Rights Reserved
252

Rights Reserved
253
Ambiguities: Use of Terms
 Assistance
 Representation
 Advocacy
 Loyalty
 Fiduciary
 Advise
 Facilitation

Rights Reserved
254
An Ancient Proverb
“When you are in a hole and cannot get out
you have several options”

Rights Reserved
255
Making Rational Choices
ROLE
RELATIONSHIP
TASK
Lou Tulga’s “Wheel”

Rights Reserved
256
Brokerage Relationship Comparison
Chart: Agency
 Loyalty is agreement to promote and protect
client’s interests as foremost
 Acceptance of CAPACITY by word or deed to
commit client without further ratification under
scope of authority—trustee
 Acceptance of LIABILITY for breach of
fiduciary duty—which includes, payment of
damages, rescission of transaction and/or
forfeiture of right to compensation

Lou Tulga Transaction Brokerage in NM real estate

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