Virginia Real Estate License Exam

TABLE OF CONTENTS Introduction .................................................................................................................................... 7 Chapter 1 - Licensing and License Laws .......................................................................................... 8 History and Purposes of Real Estate License Laws ..................................................................... 9 Federal and State Regulatory Agencies ...................................................................................... 9 Real Estate License Categories .................................................................................................. 11 Licensure Requirements ............................................................................................................ 12 Laws Covering Licensing ............................................................................................................ 16 Becoming a Broker .................................................................................................................... 18 Chapter 1 Quiz ........................................................................................................................... 19 Chapter 1 Quiz Answers ............................................................................................................ 21 Chapter 2 - Types of Agents and Agency Relationships ............................................................... 23 Historical Perspective ................................................................................................................ 25 Laws that Govern Authorized Relationships ............................................................................. 26 Parties to an Agency .................................................................................................................. 27 Types of Authorized Brokerage Relationships .......................................................................... 31 Forming a Brokerage Relationship ............................................................................................ 39 Changing a Brokerage Relationship .......................................................................................... 40 Termination of Agency .............................................................................................................. 41 Disclosing an Agency Relationship ............................................................................................ 42 Chapter 2 Quiz ........................................................................................................................... 44 Chapter 2 Quiz Answers ............................................................................................................ 46 Chapter 3 - Ethics and Fiduciary Duties ........................................................................................ 48 1|Page

Ethics Overview ......................................................................................................................... 49 Common Forms of Dishonesty .................................................................................................. 51 Ethics and Real Estate ............................................................................................................... 53 Fiduciary Duties ......................................................................................................................... 65 Disciplinary Actions ................................................................................................................... 70 Chapter 3 Quiz ........................................................................................................................... 75 Chapter 3 Quiz Answers ............................................................................................................ 77 Chapter 4 - Contracts .................................................................................................................... 79 Overview ................................................................................................................................... 81 Five Contract Requirements...................................................................................................... 81 Types of General Contracts ....................................................................................................... 83 Seller Contracts ......................................................................................................................... 85 Buyer Contracts ......................................................................................................................... 87 Contract Breaches and Remedies ............................................................................................. 88 Chapter 4 Quiz ........................................................................................................................... 93 Chapter 4 Quiz Answers ............................................................................................................ 95 Chapter 5 - Managing the Office................................................................................................... 97 How to Organize a Real Estate Business ................................................................................... 98 Legal Structures for Brokerages ................................................................................................ 98 Real Estate Franchises ............................................................................................................... 99 Brokerage Operations ............................................................................................................... 99 Hiring ....................................................................................................................................... 103 Multiple Listing Service (MLS) ................................................................................................. 107 Reducing Real Estate Liability.................................................................................................. 107 2|Page

Recordkeeping......................................................................................................................... 108 Chapter 5 Quiz ......................................................................................................................... 111 Chapter 5 Quiz Answers .......................................................................................................... 113 Chapter 6 - Real Estate Concepts................................................................................................ 115 The Concept of Land ............................................................................................................... 116 The Concept of Improved Land ............................................................................................... 117 The Bundle of Property Rights ................................................................................................ 119 Limitations to Property Rights................................................................................................. 120 Chapter 6 Quiz ......................................................................................................................... 124 Chapter 6 Quiz Answers .......................................................................................................... 126 Chapter 7 – Real Property Ownership and Interests .................................................................. 128 Three Types of Possessory Interests ....................................................................................... 130 Four Types of Nonpossessory Estates ..................................................................................... 134 Four Forms of Ownership........................................................................................................ 136 Future Interests in Property .................................................................................................... 137 Chapter 7 Quiz ......................................................................................................................... 138 Chapter 7 Quiz Answers .......................................................................................................... 140 Chapter 8 - How Real Estate is Transferred ................................................................................ 142 Title vs. Deed ........................................................................................................................... 145 Nine Essential Elements in a Deed .......................................................................................... 146 Types of Deeds ........................................................................................................................ 150 Understanding Legal Descriptions .......................................................................................... 155 Chapter 8 Quiz ......................................................................................................................... 158 Chapter 8 Quiz Answers .......................................................................................................... 160 3|Page

Chapter 9 - Representing the Seller ............................................................................................ 162 Create Your Agency Relationship ............................................................................................ 163 The Listing Agreement ............................................................................................................ 164 Seller Disclosures..................................................................................................................... 165 Property Inspection ................................................................................................................. 167 Determining the List Price ....................................................................................................... 171 Advertising in Real Estate ........................................................................................................ 174 Earnest Money Deposits ......................................................................................................... 177 Chapter 9 Quiz ......................................................................................................................... 178 Chapter 9 Quiz Answers .......................................................................................................... 181 Chapter 10 - Representing the Buyer ......................................................................................... 183 Buyer Agency Agreement........................................................................................................ 185 Finding Properties ................................................................................................................... 186 Determining the Purchase Price.............................................................................................. 192 Negotiating Process................................................................................................................. 192 Preparing the Purchase Agreement ........................................................................................ 193 Other Types of Contracts ........................................................................................................ 204 Performance of Contract......................................................................................................... 206 Earnest Money Deposits ......................................................................................................... 206 Due Diligence........................................................................................................................... 208 Chapter 10 Quiz ....................................................................................................................... 218 Chapter 10 Quiz Answers ........................................................................................................ 220 Chapter 11 - Financing ................................................................................................................ 222 Sources of Financing................................................................................................................ 225 4|Page

Professionals Involved in Financing Real Estate ..................................................................... 227 The Pieces of the Mortgage Puzzle ......................................................................................... 229 Types of Real Estate Loans ...................................................................................................... 233 The Secondary Mortgage Market ........................................................................................... 236 Chapter 11 Quiz ....................................................................................................................... 238 Chapter 11 Quiz Answers ........................................................................................................ 240 Chapter 12 - The Closing ............................................................................................................. 242 Preparing the Seller ................................................................................................................. 243 Preparing the Buyer ................................................................................................................ 245 The Closing Process ................................................................................................................. 247 Key Closing Documents ........................................................................................................... 249 Getting Paid Your Commission ................................................................................................ 259 Chapter 12 Quiz ....................................................................................................................... 261 Chapter 12 Quiz Answers ........................................................................................................ 263 Chapter 13 - Real Estate Appraisal ............................................................................................. 265 Introduction to Real Estate Appraisal ..................................................................................... 267 Licensing Requirements .......................................................................................................... 267 A Comparative Market Analysis (CMA) vs The Appraisal........................................................ 269 The Principles of Value ............................................................................................................ 270 The Appraisal Process ............................................................................................................. 273 Chapter 13 Quiz ....................................................................................................................... 280 Chapter 13 Quiz Answers ........................................................................................................ 282 Chapter 14 – Property Management .......................................................................................... 284 Property Manager’s Responsibilities ...................................................................................... 285 5|Page

Landlord and Tenant Rights and Responsibilities ................................................................... 287 Leases and Disclosures ............................................................................................................ 289 Chapter 14 Quiz ....................................................................................................................... 293 Chapter 14 Quiz Answers ........................................................................................................ 295 Chapter 15 – Specific State Requirements - Virginia .................................................................. 297 Virginia..................................................................................................................................... 297 Chapter 16 – Practice Test .......................................................................................................... 301 Chapter 16 – Practice Test Answers ........................................................................................ 322

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INTRODUCTION This guide has been designed to help you to pass the exam to obtain your real estate license. But we wanted to do more than just help you pass a test. We want to make sure that you succeed as a real estate agent.

A common complaint of students is that once they enter the real estate profession, their training did little to prepare them for the reality of being a real estate salesperson. They were stuffed full of book knowledge but knew little of the practical side of the profession. Well, no more. We have worked hard to combine a solid education of the laws governing the real estate profession, but we have also endeavored to teach you the underlying principles behind the laws. We have also taken your education one step further by walking you through the whole buy-and-sell transaction, both as the listing agent and as the selling agent.

After you have completed this course, you be equipped to pass the state exam on the first try. Then once you get your license, you will be more confident as you start to work with a broker. You will know what to expect and how the process works. We will even walk you through how to fill out some of the main forms.

Now, the real estate exam is going to have two parts. There is the national test which focuses on federal laws and regulations, ethical requirements, real estate concepts, and vocabulary. Then there is the state portion. This section is going to focus on the local licensing authority and their respective commissions and departments. You will also need to know some local law. While it is not practical to include all that information on each state, we have picked the top ten states which are Arizona, California, Colorado, Florida, Illinois, New York, North Carolina, South Carolina, Texas, and Virginia. If you live in one of those states, then you just lucked out with a bonus education. If not, we encourage you to look over these state sections.

It will show you what information to look up to learn more about your state’s licensing laws and requirements.

How about we get started with the basics and take it step-by-step from there? Good, let’s begin.

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CHAPTER 1 - LICENSING AND LICENSE LAWS OBJECTIVE: The objective of this chapter is to introduce you to the real estate profession, its laws, and licensing requirements. We will discuss the history of real estate license laws and why they matter. We will also go over the steps needed to become a licensed salesperson.

DEFINITION OF KEY TERMS: Broker: a person or business entity who, with more education than an agent, is licensed as a broker to perform real estate services for others for compensation.

Broker Associate: a person qualified to be issued a license as a broker but operates as a sales associate in the employ of another. (Also called an associate broker.)

Caveat Emptor: “let the buyer beware;” a principle in commerce: without a warranty the buyer takes the risk.

Compensation: anything of value or a valuable consideration, directly or indirectly paid, promised, or expected to be paid or received.

License: a privilege granted by the state to operate as a real estate broker, broker associate, or sales associate.

Mutual Recognition: a transactional agreement between two states that provides for the recognition of each other's real estate license education.

Realtor: (1) a person who acts as an agent for the sale and purchase of buildings and land; a real estate agent; (2) a real estate agent who is a member of the National Association of REALTORS®.

Real Estate Services: real estate activities involving compensation for performing the activities for another.

Real Property: the interests, benefits, and rights inherent in the ownership of real estate.

Registration: authorization by the state to place an applicant on the register, or record, of officially recognized individuals and businesses.

Sales Associate: anyone who holds a real estate license and values, auctions, sells, exchanges, buys, or rents for compensation under the direction, control, or management of a broker or owner/developer. (Also called a real estate agent salesperson.)

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HISTORY AND PURPOSES OF REAL ESTATE LICENSE LAWS As long as there has been land, there have been people selling the land. As long as there have been people selling the land, there has been cheats, crooks, and con artists. This has given genuine real estate agents a bad rap. They have been thrown into the same category as shady used car salesmen or pushy loan sharks that will do anything to make the sale happen.

Real estate licensing laws and regulations have been established to help make sure that each licensed agent is trained in their field and upholds a high ethical standard. This has gone a long way to turning the real estate sector into a field of trusted professionals. One primary reason why it was necessary to train and license all real estate agents was Caveat Emptor.

CAVEAT EMPTOR When a seller is only focused on selling a property at all costs, you have a situation of Caveat Emptor. Caveat Emptor is a Latin expression meaning “let the buyer beware.” It means that the buyer is on his or her own and the seller cannot be relied upon to honestly disclose the true condition of the property.

Well, governments saw how this posed a risk to buyers and stepped in to remedy the situation. They created the intermediary sales agent to help protect buyers. Governments created regulations that required sellers to complete mandatory disclosure forms. And they trained licensed agents to work on behalf of the buyer to protect their interests from the seller.

CONSUMER PROTECTION While licensed real estate agents are trained to protect buyers and sellers from each other, it was also necessary to protect the public from unethical and dishonest agents.. Thus, governmental regulatory organizations were set up to oversee and mandate the actions and activities of the real estate profession.

FEDERAL AND STATE REGULATORY AGENCIES Licensing and regulation of real estate agents are handled at the state level. Every state has a department that licenses and regulates all the businesses and professionals which is under the executive branch of the Governor. These state agencies wield a great deal of power.

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They can levy fines, administer disciplinary actions or even suspend or revoke a license.

STATE REAL ESTATE REGULATORY AGENCIES

Alabama

Kentucky

North Dakota

Alaska

Louisiana

Ohio

Arizona

Maine

Oklahoma

Arkansas

Maryland

Oregon

California

Massachusetts

Pennsylvania

Colorado

Michigan

Rhode Island

Connecticut

Minnesota

South Carolina

Delaware

Mississippi

South Dakota

District of Columbia

Missouri

Tennessee

Florida

Montana

Texas

Georgia

Nebraska

Utah

Hawaii

Nevada

Vermont

Idaho

New Hampshire

Virginia

Illinois

New Jersey

Washington

Indiana

New Mexico

West Virginia

Iowa

New York

Wisconsin

Kansas

North Carolina

Wyoming

When you are ready to take your state licensing exam, you will have to know the details about your state regulatory agencies. This will include knowing the names of each agency, individual level of authority, and licensing requirements.

In addition to the state requirements, the Feds have passed a minimum of twenty-three federal laws that affect the residential real estate market. You have probably heard of the 10 | P a g e

Dodd-Frank Act or the Fair Housing Act. Well, these are just a few of the legislative acts that you will need to become familiar with. But don’t worry, we’re going to walk you through all the really important ones so you know exactly what you need to do to become a great agent.

Let’s move on to the three levels of licensing that allows agents to conduct real estate transactions as a matter of business.

REAL ESTATE LICENSE CATEGORIES There are three levels of licensed real estate agents: the Sales Associate, the Broker, and the Broker Associate.

SALES ASSOCIATE A real estate sales associate is anyone who holds a real estate license and values, auctions, sells, exchanges, buys, or rents real estate for compensation. A sales associate must work under the direction of a state licensed broker. Sales associates are also called sales agents.

A sales associate license is not only limited to individuals; they can include corporations or limited liability companies. A sales associate, however, cannot be registered or licensed as a general partner, member, manager, officer, or director of a brokerage firm.

BROKER A real estate broker is anyone who has taken their education beyond the agent level and holds a broker's real estate license and values, auctions, sells, exchanges, buys, or rents real estate for compensation. A real estate broker can be an individual, a partnership, a corporation, a limited liability partnership, or a limited liability company. A broker can also act as a member, officer, general partner or director. A broker must also license each entity or business that is involved in real estate while they, as an individual, are also licensed. A broker can work individually or manage other sales associates or associate brokers.

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BROKER ASSOCIATE A broker associate is anyone who is qualified to be issued a license as a broker, but who operates as a sales associate in the employ of another broker. They are also called associate brokers.

A broker associate can be an individual, a professional corporation, or a limited liability company.

Broker associates must also work under a broker like a sales associate. Because of this, a broker associate cannot be registered or licensed as a general partner, member,

CONFUSING WORD PAIRS BROKER: a real estate sales associate is anyone who holds a real estate license and values, auctions, sells, exchanges, buys, or rents real estate for compensation.

REALTOR: a licensed real estate professional who is a member of the National Association of Realtors.

The public often uses the terms real estate agent, broker and realtor interchangeably.

manager, officer, or director of a brokerage firm.

LICENSURE REQUIREMENTS There are some basic licensure requirements which must be met before the applicant can take the state licensing exam.

AGE All licensees must be at least eighteen (18) years old.

EDUCATION All applicants must possess the minimum of a high school diploma or a GED equivalent.

They must also complete and pass the state approved pre-license course for either the sales associate or the broker license.

Some states allow exemptions to this educational requirement if the applicant is already licensed with the state bar association, have taken college courses which are equivalent to the state approved pre-license course, or hold a four-year degree in real estate.

EXPERIENCE Applicants for the sales associate license do not have to have any real estate experience.

For a sales associate to advance to a broker’s license, however, she must have at least twenty12 | P a g e

four (24) months of real estate experience within a five (5) year period. She must also have been licensed as a sales associate and worked with a broker or governmental agency for at least two (2) years out of the previous five (5).

MUTUAL RECOGNITION If a sales agent is licensed but wants to work in another state, she may be able to apply the education and experience acquired in the other state towards obtaining an equivalent license in the new state. This is called mutual recognition. The state will require, however, that the licensee pass their state exam.

NATIONALITY All applicants for a real estate license must have a United States Social Security number, but they do not have to be a United States citizen.

CHARACTER The applicant must be honest, truthful, trustworthy, of good character, and have a good reputation for fair dealing.

COMPETENCE The applicant must also be competent and qualified to manage real estate transactions and be able to conduct negotiations with anyone whom the applicant has a relationship of trust and confidence.

GETTING LICENSED Once you have completed the educational requirements, there are a few more steps you will need to take before you can become a licensed real estate agent.

REGISTRATION AND APPLICATION After you complete your pre-licensure course and pass the course’s final exam, you will be required to submit an application to obtain a real estate salesperson license with the state. The state will require that you meet all the application requirements.

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STATE EXAMINATION After your state application is approved, you will need to take and pass the state licensing exam. This is the scariest part of the licensing processed, but don’t worry, we’re going to help you pass the exam on the first try.

ACTIVATE THE LICENSE Once you have passed the state exam, the next step is to activate your license.

Most states will have you do this online. Your real estate license will not be valid until it has been activated – like when you receive a new credit card in the mail.

INACTIVE STATUS Now, once you get licensed, you will need to maintain an active status. There are two levels of an inactive license.

An INVOLUNTARILY INACTIVE LICENSE classification occurs if the license is not renewed at the end of the license period. Usually, this happens when an agent fails to complete their continuing education on time. If too much time passes before you renew your license, you could lose your license altogether and then must go through all the pre-licensure education again.

A VOLUNTARILY INACTIVE LICENSE is a status given to licensees who are not actively practicing real estate and are not affiliated with a broker. A real estate salesperson cannot perform a real estate transaction unless they are working under the guidance of a broker.

If you want to get your license, but you do not plan on working in the real estate business for a while, you can place your license in the voluntarily inactive status. This must be registered with the state. If you keep up with your continuing education and renewal fees, you will not have to repeat your pre-licensure education when you reactivate your license.

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CONTINUING EDUCATION Each state will require that their licensees receive continuing education. Some states require a certain number of classroom hours each year, and others will require a cumulative total during the licensure period. You will also have to pay a renewal fee.

REASONS A LICENSE COULD BE DENIED Just because an individual takes the state-approved classes and passes the final exam, which is not an absolute guarantee that she can obtain a real estate license. There are some reasons why a license could be denied: •

Absenteeism: If the applicant was absent from class more than ten (10) percent of the time then she could be denied.

•

Prior License Denied, Revoked or Suspended: If the applicant has been denied registration of a license for real estate or any related profession or the license was revoked or suspended, an applicant may be denied until she meets the state requirements.

•

Guilty of Wrong Conduct: If an unlicensed applicant has engaged in and was found guilty of wrong conduct, a license may be denied.

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Practicing Without a License: If an unlicensed applicant has performed actions or duties of a licensed real estate agent within the past year, the applicant may be denied a license because she illegally worked in the real estate profession.

•

Under Investigation: If an applicant is under

DID YOU KNOW? Many real estate wholesalers are unlicensed. Their business is based on the premise that they are selling a contract and not real estate.

Many states are cracking down and prosecuting unlicensed wholesalers for practicing real estate without a license.

investigation in any state or foreign country, the application will be denied until the investigation is complete, and any disciplinary proceedings have been terminated.

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LAWS COVERING LICENSING The real estate division within each state is responsible for creating specific laws and requirements that every licensed real estate agent is subject to follow. Let’s take a moment and review the underlying principles behind these laws.

•

It is illegal to work as a sales associate or a broker without having a valid and active license.

•

It is illegal to work as a broker if you only have a sales associate license.

•

It is illegal for a broker to employ a sales associate who is not licensed.

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It is illegal for a broker to operate under an unregistered or unlicensed trade name, partnership, or corporation.

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It is illegal to attempt to obtain or renew a license by bribery or misrepresentation.

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It is illegal for a sales associate to collect money related to a real estate transaction unless it is in the name of the broker or the name of the licensed business.

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It is illegal to work in the real estate profession in a way that is fraudulent, deceptive, untrue, or misleading.

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It is illegal to share a commission or pay compensation to an unlicensed person for any services that would require that person to have a real estate license. That would include the referral of real estate business, clients, prospects, and customers.

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It is illegal to practice real estate that is beyond what is permitted under their license level.

•

It is illegal to become involved in a real estate transaction when the licensee knows they are not competent or qualified to perform it.

•

It is a license violation if a real estate agent renders an opinion on the salability of the title of a property without first consulting with a licensed attorney.

•

It is a license violation if the real estate agent fails to immediately place in escrow any monies that have been entrusted to the agent while practicing real estate.

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It is a license violation if an agent fails to report in writing to their state board or department that the licensee has been convicted or found guilty of a crime in any jurisdiction.

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•

It is a license violation to exercise influence on a client for financial gain for the licensee or a third party.

DISCIPLINARY ACTION If a licensee is found guilty of any of these aforementioned laws and regulations or any other ones that have been set by their state, the licensing authority has the right to deny the renewal of a license; place the license on probation; suspend the license for up to ten (10) years; revoke the license entirely; or even impose a large fine on the licensee. This means that all licensees need to be familiar with all the individual state laws that govern the real estate profession and follow them to the letter.

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BECOMING A BROKER If you are planning on making real estate your career, then I would like to encourage you to consider getting your broker’s license. It is going to mean that you will need more experience and more education, but I believe that it is well worth the effort. Let’s go over some of the main reasons why getting your broker’s license is a good business move.

WHY BECOME A BROKER The primary reason why you should advance from being a licensed sales agent to becoming a real estate broker is the fact that you can work for yourself. You could throw out a shingle and start your own real estate business. There would be no more split commissions or desk fees. You will run the show.

Another reason is that you will be more recognized as a real estate professional. Brokers have more experience and education. Hence, they are trusted more by the public. You can take on larger clients as well as commercial listings.

The downside is that you will not have a broker to consult with. You will also be one hundred percent (100%) responsible for your own actions. You will not be able to hide behind the skirts of a managing broker.

All in all, I would say that the benefits of getting your broker’s license outweigh the disadvantages. Even if you decide to stay with your original real estate firm, having a broker’s license is still advantageous.

SPONSORING BROKER LIABILITY If you get your broker’s license, this also means that you could have other salespersons working underneath you and building up your business. Just as your broker is responsible for you a licensed agent, if you become a broker, you will be liable for the activities of the members of your firm.

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CHAPTER 1 QUIZ Print out this ten-question quiz and then select the most appropriate answer from the choices given. The answers are provided on the next page.

1. What does caveat emptor mean? a. A forewarning to leaders. b. Let the buyer beware. c. Let the seller be cautious d. Let the agent work hard.

2. What are the duties of the state’s real estate department? a. To license real estate agents. b. To regulate the profession. c. To administer disciplinary actions. d. All of the above.

3. What are the three levels of real estate licensing? a. Sales Associate, Broker, Broker Associate b. Sales Broker, Broker Associate, Sales Agent c. Sales Associate, Associate Agent, Broker d. Broker Agent, Sales Agent, Broker

4. True or False. All real estate applicants must be United States citizens? a. True b. False

5. A license must be at least ______ years old. a. 17 b. 18 c. 21 d. 25

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6. An agreement between two states that provides for the recognition of each other's real estate license education is called _________________________. a. license sharing b. mutual respect c. mutual recognition d. licensing recognition

7. An Involuntary Inactive License classification occurs if… a. A licensee does not renew their license at the end of the license period. b. A licensee has not closed on a sale within the past 12 months. c. The agent’s broker has fired the licensed salesperson. d. The licensee is unemployed.

8. A voluntarily inactive license classification occurs if… a. A licensee does not renew their license at the end of the license period. b. The licensee has not completed their continuing education at the end of the license period. c. The licensee is not affiliated with a broker, developer or real estate company. d. None of the above.

9. True or False. It is legal to work under a real estate broker if you are not licensed. a. True b. False

10. True or False. It is illegal to share a commission or pay compensation to an unlicensed person for any services that would require that person to have a real estate license. a. True b. False

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CHAPTER 1 QUIZ ANSWERS 1. What does caveat emptor mean? b. Let the buyer beware. – This is a Latin-based principle in commerce that means without a warranty the buyer takes the risk.

2. What are the duties of the state’s real estate department? d. All of the above. – The duties of the state’s real estate department includes licensing, regulating and administering disciplinary action.

3. What are the three levels of real estate licensing? a. Sales Associate, Broker, Broker Associate – A sales associate can also be called a sales agent.

4. True or False. All real estate applicants must be United States citizens? b. False – An applicant must have a social security number but does not have to be a U.S. citizen.

5. A license must be at least ______ years old. b. 18 6. An agreement between two states that provides for the recognition of each other's real estate license education is called _________________________. c. mutual recognition 7. An Involuntary Inactive License classification occurs if… b. A licensee does not renew her license at the end of the license period.

8. A voluntarily inactive license classification occurs if… c. The licensee is not affiliated with a broker, developer or real estate company.

9. True or False. It is legal to work under a real estate broker if you are not licensed. b. False 21 | P a g e

10. True or False. It is illegal to share a commission or pay compensation to an unlicensed person for any services that would require that person to have a real estate license. c. True

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CHAPTER 2 - TYPES OF AGENTS AND AGENCY RELATIONSHIPS OBJECTIVES: The objective of this chapter is to help you to understand the different types of real estate agents. You will also learn the ins and outs of agency relationships and disclosure requirements.

DEFINITION OF KEY TERMS: Agency: the relationship and accountability that is formed when an agent is working on behalf of that client in all matters pertaining to a specific real estate transaction.

Agent: a real estate licensee (including brokers and sales associates) acting in an agency relationship as defined by state law or regulation.

Client: the persons or entities with whom a real estate agent and their firm have an agency or legally recognized non-agency relationship.

Common Law: a law that has been developed based on preceding rulings by judges.

Customer: a party to a real estate transaction who receives information, services, or benefits but has no contractual relationship with an agent or the agent’s firm.

Designated Agent or Designated Sales Agent: an agent designated by the managing broker to be the agent for the buyer or the seller to the exclusion of all other agents in the brokerage, real estate office, or firm.

Dual Agent: a broker who represents both the prospective buyer and the prospective seller as a fiduciary in a real estate transaction. (Not allowed in some states.)

Fiduciary Duties: the duties and responsibilities of a real estate agent or broker to a buyer or seller while acting in a single agency relationship during a transaction.

General Agent: an agent who is authorized by the principal to perform any and all acts associated with the on-going operation of a job or business.

Limited Representation: when a buyer or seller gives up their rights to the undivided loyalty of the agent.

Non-representation or No Brokerage Relationship: a real estate agent relationship in which an agent does not represent either the buyers or the sellers in the transaction.

Prospect: a purchaser, seller, tenant, or landlord who has not entered into a representation relationship with an agent or the agent’s firm.

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Principal: the persons or entities with whom a real estate licensee has entered into a Single Agent Relationship.

Single Agent: an agent who provides a buyer or seller with exclusive representation which establishes fiduciary duties.

Special Agent: an agent who has limited and/or temporary authority granted to them by a principal.

Statutory Laws: written laws passed by legislature and governments of a country and those laws which have been accepted by society.

Sub Agency: a client representation relationship between a listing agent and another real estate agent whereby a licensed salesperson is the agent of the agent.

Transaction Broker: an agent who provides a limited form of representation to a buyer, a seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent.

Universal Agent: an agent who is authorized by the principal to perform all acts which are not limited to real estate transactions.

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