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Real Estate Agency Duties and Disclosures Terms and Examples

By Edited Oct 16, 2016 0 0

1)            Dual Agent-

Definition: An agent that represents both the seller and the buyer in a real estate transaction.

Example:  Tom listed his house for $350,000 through his real estate agent Pam. Nicole was driving by Tom’s house one day and saw the sign and called Pam to put an offer in.  Nicole told Pam she did not have a real estate agent and Pam offered to represent Nicole with her offer and Nicole agrees.


a)    Real estate transaction- Tom lists his house for sale.

b)   Agent- Pam is the real estate agent in the transaction.

c)    Represent both sides- Pam is the agent for both Tom, the seller, and Nicole, the buyer.


2)            Fiduciary-

Definition: A relationship built on trust where one person represents another person for a benefit.

Example: Ray listed his property with Fern, a real estate agent. Fern is expected to represent Ray with integrity, honesty and loyalty. Fern follows suit and the house is sold within 2 months.


a)    Relationship- Ray and Fern have a real estate relationship.

b)   Integrity, honesty, loyalty- Fern stays true to integrity, honesty and loyalty and the house transaction goes smoothly.

c)    Benefit- Ray and Fern create a relationship to sell Ray’s house.


3)   Reasonable skill and care-

Definition: The degree of skill and care that the real estate agent is expected to possess in real estate transactions.

Example: Paul lists his house through Carrie, a real estate agent, who is selling the house to Mr. and Mrs. Smith. Mr. Smith could not be at the signing and Carrie tells Mrs. Smith it is ok because one spouse’s signature legally binds the other spouse.  The next day Paul and Carrie receive a better offer than Mr. and Mrs. Smith’s offer. Carrie returns the deposit check to Mr. and Mrs. Smith telling them they received a better offer. Mr. and Mrs. Smith find out they cannot enforce the purchase agreement because legally both spouses were suppose to sign.


a)    Skill- Carrie clearly did not know the laws associated with the purchase agreement.

b)   Care- Carrie mislead Mr. and Mrs. Smith, which eventually made them lose the house.

c)    Mistakes- Carrie made the mistake of telling Mr. and Mrs. Smith incorrect information, which led to her violation of both reasonable skill and care.


4)   Secret Profit-

Definition: Any profit that is made by an agent that the principal is unaware.

Example: Sally agreed to sell Robert’s townhouse. Sally received an offer from her Uncle for $15,000 below asking price. Sally convinced Robert to accept the offer. At the close of escrow, Sally and her Uncle remodeled the whole townhouse and sold it for $50,000 over Robert’s asking price.  Sally and her Uncle split the profit.


a)    Seller unaware of potential profit- Robert thought that Sally’s Uncle was the buyer, but in fact Sally was also a part of the deal.

b)   Undisclosed information- Sally never told Robert that she intended to flip his house for more money, and she convinced him to sell his townhouse lower than asking, so she could later make a profit.

c)    Profit- Sally received profit from the remodeled flip of Robert’s house.


5)   Self dealing-

Definition: When a real estate agent sells a property to him or herself, or a family member or friend without telling the seller of the property.

Example: Sue lists Edward’s property.  Sue receives an offer from her sister and presents it to Edward without telling him it is an offer from her sister. Edward accepts the offer. Sue later moves into the home she sold for Edward.


a)    Sold to a family member- Sue sold Edward’s house to her sister.

b)   Undisclosed information- Sue did not tell Edward that the house was bought from her sister.

c)    Benefit- Sue later benefited from the sale because she got to live in the house.


6)   Actual Fraud-

Definition:  When a real estate agent intentionally misrepresents any part of a real estate transaction.

Example: Ted a real estate agent is selling a house where he knows there is a mold problem.  The buyers had an inspection done and there was no mold detected. Ted doesn’t tell the buyer there is a mold problem to make the real estate transaction move faster.


a)    Problem with the property- There is a mold problem with the house.

b)   Misrepresentation of the problem- Ted does not tell the buyers about any problems with house.

c)    Intentionally hiding a problem- Ted does not tell the buyer about the mold problem to move the real estate transaction move faster.


7)   Negligent Misrepresentation-

Definition: When a real estate agent assumes something to be true without sufficient evidence and relays this to the buyer.

Example: Sarah is a real estate agent selling a house to a farmer. Sarah looked at the soil the house is on and thought it looked like rich enough soil to plant vegetables. Sarah tells this to the potential farmer buyer and he buys the property with the assumption he can run his farm on the land.


a)    Assumption- Sarah assumes that the soil is rich enough to plant vegetables.

b)   No evidence- Sarah did not have the soil tested, she just assumed it looked rich.

c)    Misrepresents property to the buyer- Sarah tells the farmer that the soil is rich enough to plant vegetables even though she does not have sufficient evidence.

8)   Compensatory damages-

Definition: Where an injured party is compensated for any money loss in a real estate transaction.

Example: Donald is a real estate agent that sold a house for Wallace. Wallace did not pay Donald his full commission at the end of the sale.  Wallace took Donald to court to get him to pay the remaining amount. The court awarded Wallace the rest of his commission.


a)    Real estate transaction- Wallace and Donald worked on a real estate transaction together.

b)   Injured party- Wallace did not receive his full commission his contract entitled him to.

c)    Compensation- Wallace was rewarded by the judge the rest of his commission that he was entitled to.


9)   Punitive Damages-

Definition: When a wrong doing party is punished for doing fraud, oppression or malice.

Example: Holly is a real estate agent that works for the broker Ron. Holly sold a house and did not tell Ron the correct selling price so she could keep a bigger cut of her commission. Ron took Holly to court for messing with the system. The judge revoked Holly’s real estate sales person license.


a)    Wrong doing- Holly fakes the sales price of houses to her broker Ron.

b)   Court- Ron takes Holly to court for messing up transactions with his clients.

c)    Punishment- The judge revokes Holly’s real estate license.


10)          Code of ethics-

Definition: The book of morals and rules for real estate agents to follow.

Example: Most real estate agents are required to follow the National Association of Realtors code of ethics (NAR’s). NAR’s requires all real estate agents to be ethical and competent. Following NAR’s will allow for real estate agents to work more efficiently.


a)    A book- NAR’s is the guide that most real estate agents are expected to follow.

b)   Morals and rules- NAR’s require all agents to be ethical and competent.

c)    Efficient agents- Following NAR’s allows for agents to work more efficiently.





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