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Agency Law Real Estate Terms and Examples

By Edited Sep 8, 2016 0 0

1)    Agent-

Definition:  A person that can represent a client in a third party transaction.

Example: Gary hired Ann, who is a realtor, to help him buy a house. Ann has rights to speak to Tom, the realtor of a house that Gary wants to buy, on Gary’s behalf. She may discuss prices that Gary is willing to pay for the house.

Elements:

a)     A person who represents- Ann represents Gary in real estate transactions.

b)    Client- Gary is Ann’s client.

c)     Third Party- Tom is the third party that Ann can talk to on Gary’s behalf.

 

2)    General Agent-

Definition: A person that can represent a client for all matters related to a specific principle.

Example:  Tom is a property manager that handles all marketing and maintaining of a property. He has the right to deal with any and all matters that deal with marketing and maintaining of a property.

Elements:

a)     A person who represents- Tom is a property manager that has the right to represent        deals with the property.

b)    Specific principle- Tom is able to represent transactions dealing with the marketing and maintaining of the property.

c)     Represents all transactions- Tom is able to represent the property when dealing with all transactions related to the property.

 

3)    Special Agent-

Definition: A person that can represent a client for a specific reason or for a specific transaction.

Example: Ann is a real estate agent that can handle all transactions for her clients that deal with real estate. Ann signs a contract with George that says Ann has the right to represent him in all real estate transactions until he buys a house in 2009.

Elements:

a)     A person that can represent another- Ann represents George.

b)    Specific area- Ann can only represent transactions for George dealing with buying a home.

c)     Contract- Ann’s contract says she can only represent real estate transactions for George until he buys a house in 2009.

 

4)    Ratification-

Definition: The act of approving one’s actions for another person by the person who was spoken for.

Example: Tom tells his friend John, a real estate agent, that he would consider selling his home if it were priced right. Without Tom’s permission, John shows Tom’s house to perspective buyers and receives a high offer for the property. John shows Tom the offer and Tom accepts it.

Elements:

a)     One acting on behalf of another without permission- John tries to sell Tom’s home without asking for permission.

b)    No agency- John did not ask permission to sell Tom’s house because Tom said he would only sell it for the right price.

c)     Approval of another’s actions- Tom accepts the offer showing he approves of John selling the house.

 

5)    Commingling-

Definition: When a broker mixes his or her trust fund money with his personal money.

Example: Ned is a real estate broker that collected earnest money from his client Joe.  Ned put Joe’s earnest money in his broker’s general account. Ned accidentally used some of Joe’s earnest money to run his broker’s business. As a result Ned got his license suspended until Joe received all his money back.

Elements:

a)     Broker- Ned is the broker that collected the money.

b)    Money collection- Ned collected the money and did not put in into his trust fund.

c)     Mixing of money- Ned placed the money in his broker’s general account, which is where all the money for his business fees is paid.

 

6)    Exclusive right to sell-

Definition: A broker has a right to commission from a property during a specific listing term no matter who sells it.

Example: Lucy lists her house with John, a real estate broker, and signs a contract for 3 months. If the house sells within the three months John is entitled to commission from Lucy’s property.

Elements:

a)     Broker agreement- Lucy agrees to have John as her broker.

b)    Specific time period- The contract is for three months.

c)     Right to commission- John has the right to commission if the house sells within the three months of the contract.

 

7)    Exclusive Agency-

Definition: A broker has the right to commission from the property during a specific listing term unless the seller finds a buyer by himself.

Example: Lucy lists her home with John, a real estate broker, and signs a contract for 3 months. During this time John is entitled to a commission if he brings Lucy a buyer. If Lucy finds a buyer on her own, John will not receive commission.

Elements:

a)     Broker agreement- Lucy agrees to have John as her broker.

b)    Specific time period- The contract is for three months.

c)     Limited right to commission- John must bring Lucy her buyer for John to receive commission.

 

8)    Procuring Cause-

Definition: The real estate agent that is responsible for bringing a buyer to a property and starting the transaction.

Example: Peter listed his property as an open listing. Three brokers all brought potential buyers to the property. Only one of the three brokers, Donna, submitted an offer from her buyer. Donna is responsible for bringing the buyer and starting the sales transaction.

Elements:

a)     Brings a buyer- Donna brought a potential buyer to Peter’s property.

b)    Start of transaction- Donna submitted an offer from her client for Peter’s property.

c)     Right to commission- Since Donna is the procuring cause of the real estate transaction she has a right to commission.

 

9)    Open Listing-

Definition: A broker only has the right to commission if he or she is the procuring cause the sale of a property.

Example: Mary and Ron are both real estate brokers. They both show Gabe the same property, but Mary is the one who gets Gabe to submit an offer. Mary would be entitled to the commission from the property because she was the procuring cause of the sale.

Elements:

a)     No contract- Mary and Ron both have the right to show the same property.

b)    Open to all brokers- Mary and Ron both had an equal opportunity to show the home and receive commission for the sale.

c)     Procuring cause- Mary submitted the offer for Gabe, so is therefore entitled to the commission.

 

10) Finder’s Fee-

Definition: Compensation for bringing two people together for purposes of a transaction, such as a buyer to a seller.

Example: Cindy introduces Bob, a perspective buyer, to Ken who is selling his home. Bob puts an offer on Ken’s home and Ken accepts it. Cindy in turn receives compensation for introducing Bob to Ken because it resulted in the selling of Ken’s home.

Elements:

a)     Introduction- Cindy introduces Bob to Ken.

b)    Business transaction- Bob ends up buying Ken’s home.

c)     Compensation- Cindy receives compensation because she introduced Bob to Ken and it resulted in the house being sold.

 

 

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