Agency Relationships Through Nevada Law.pptx

Agency Relationships Through Nevada Law.pptx

1. Agency Relationships Through Nevada Law 3 Hours Agency CE.5021002-RE Classroom Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 1

2. Housekeeping No phones or texting during the class. Please make sure that you sign in. Restrooms Direct attention to instructor. Refrain from distracting activities. Breaks Instructor Evaluations Attendance sign out Certificates of Completion Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 2

3. Agency Pre-Quiz See Quiz attached Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 3

4. Nevada’s real estate brokerage statutes (NRS 645) defines “agency” as the relationship between a principal (client) and an agent (broker) arising out of a brokerage agreement in which the agent agrees to do certain acts on behalf of the principal in dealings with a third party NRS 645.0045  “Agency” defined. “Agency” means a relationship between a principal and an agent arising out of a brokerage agreement whereby the agent is engaged to do certain acts on behalf of the principal in dealings with a third party. The term does not include a relationship arising solely from negotiations or communications with a client of another broker with the written permission of the broker in accordance with the provisions of subsection 2 of NRS 645.635 . (Added to NRS by 2007, 1787 ) Agency Defined Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 4

5. Nevada Law on agency involves Real Estate brokerage representation which includes the duties and responsibilities of the broker and all licensees working under him/her. These duties and responsibilities are part of the NRS as defined above. In most cases, agency occurs with the representation by a broker of one party to a real estate transaction. Licensees are required to provide a written agency disclosure form called the Duties Owed. Nevada law does allow the broker to represent multiple parties (See Dual Agency) with conflicting interests when such representation is disclosed to, and approved of, by the parties with written approval by means of the “Consent To Act” form. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 5

6. Fiduciary Responsibilities fall on the broker and all involved licensees. The law includes specific details on the termination of broker’s agency relationship in various ways from fulfilling the terms of the brokerage contract to the death of the client. This course is a summary of Agency Law in Nevada Agency relationships cannot be established solely from a licensee’s negotiations. Once agency is established, all the duties and responsibilities of representation attach to the broker (and through the broker, to the broker-salesperson or salesperson). Those duties are found in statute (NRS), administrative regulation (NAC), and as expanded upon in case law (Nevada Reports). Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 6

7. A licensee must disclose to each party in a real estate transaction when the licensee’s relationship with any party changes . The disclosure must be made as soon as practical and must be in writing. A new Duties Owed form should be provided to each client. If a client’s consent is required (as in when acting for two or more parties to the transaction) consent must be obtained – disclosure alone is insufficient to ensure consent. The description of general agency law tells us that agency occurs when one person (the agent/broker), with the permission of another person (the principal/client), accepts the responsibility to represent and act on behalf of the principal. It is voluntary, and either expressed or implied. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 7

8. Nevada recognizes two types of agency: General agency and Special Agency General Agency: The agent is authorized under a general power-of-attorney to perform all duties for the principal to convey real property. This requires a written power-of-attorney with its special recording requirements. Special Agency: The agent is given limited authority to act for the client within certain restrictions and for specific transactions. The brokerage agreements create a special agency wherein the broker’s authority is limited to facilitating a real estate transaction for his or her principal. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 8

9. Additional Forms of Agency Single or sole agency Single agency is the most common form of agency and the one least likely to create liability for a broker. The broker represents one party only. The broker’s duty, loyalty and responsibilities are focused on promoting the interests of that client. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 9

10. Dual Agency - “Acting for More Than One Party to the Transaction” “The same person or entity may act for two parties in the same transaction when their interests do not conflict and where loyalty to one does not necessarily constitute breach of duty to the other. The state mandated disclosure form, called “Consent to Act”, outlines for the client the consequences of the licensee’s multiple representation and requires the client’s written authorization before the licensee may proceed with such representation. Every licensee must be aware of the appearance of such undisclosed representation. For example, undisclosed representation may inadvertently occur when a licensee representing a seller provides the buyer with client services such that the buyer is under the reasonable expectation that the licensee is working for him. Even though a licensee acting for more than one party to the transaction is permitted by law, the broker (and each licensee under him or her) owes to each client all of the duties required. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 10

11. Sub-Agency Created when one broker, usually the seller’s agent, appoints another broker (with the seller’s permission) to help perform client-based functions on the principal's behalf. Assigned Agency To lessen the conflict-of-interest impact created when a broker represents more than one party in a transaction, the law provides an “Ethical Wall” wherein the broker is allowed to assign a separate agent to each client. Upon this assignment the broker does not need to use the “Consent to Act” disclosure form nor receive the approval of the clients. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 11

12. Nevada Law on Required Forms and Agency When an agency relationship is established, the broker is required to provide the client with a state mandated disclosure form called the “Duties Owed by a Nevada Real Estate Licensee” . Should the broker at any point in a transaction be deemed to represent more than one party, the broker must also provide the parties with a “Consent to Act” form and receive their permission before proceeding with the representation. The appropriate agency disclosure form (Duties Owed or Consent to Act if applicable) must be used in all real estate agency relationships regardless of the type of representation The Duties Owed form must also be given when a licensee is a principal in a transaction. The forms are prepared and distributed by the Real Estate Division and reflect not only the requirements of statute (NRS 645.252(1)) but also of the real estate administrative code (NAC 645.637). Each form must be fully filled-in, signed and kept in the broker’s transaction file for five years . Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 12

13. It is important to note that an agency relationship is not created because a party signs either a Duties Owed or Consent to Act form. These forms are strictly disclosure documents. Each form specifically states that it does not constitute a contract for services nor an agreement to pay compensation. Accordingly, it is irrelevant whether a brokerage agreement is oral or written, or whether a licensee is acting on his or her own behalf, a Duties Owed form or Consent to Act form, must be given to and signed by the licensee’s client. Additionally, if a party is unrepresented the broker must keep that party’s signed form with their client’s transaction file. A substantial number of division disciplinary hearing cases concern agency disclosure form violations. These violations include forms not given to clients, forms not completed correctly, and those lacking required signatures or missing necessary information. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 13 More on Duties Owed and Consent to Act

14. Compensation does not create agency in itself because the agent may be compensated by someone other than the agent’s client Agency can exist even if no compensation is involved (gratuitous agency) Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 14 Compensation and Agency

15. Duties Owed and Consent to Act See forms attached Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 15

16. Duties Owed and Consent to Act Forms in Detail Duties Owed By A Nevada Real Estate Licensee form – The Duties Owed By A Nevada Real Estate Licensee form (Duties Owed) is divided into three main sections and several subsections. 1. A box for the identification of the licensee, his or her license number, the client’s name, the broker’s and brokerage’s names, and finally, the name of client who the licensee is representing, e.g., seller, buyer, landlord, or tenant. 2. Summary of statutes outlining the licensee’s duties to all parties in the transaction and those duties specific to the licensee’s representation of the client. There is a single sentence reference to a licensee’s duty of confidentially under assigned agency and a notice of the activities which require the licensee to provide the client with the Consent to Act form. 3. Client signature acknowledging receipt of a copy of the form. The client, in signing the acknowledgement, also attests that he or she has read and understands the disclosure. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 16

17. The Consent to Act form – the Consent to Act form is used when a broker (broker-salesperson or salesperson), is acting for two or more parties to a transaction. The form is divided into approximately seven parts. 1. Information Section for the property address, licensee’s name and license number, brokerage, seller’s and buyer’s names. 2. Recites the legal authorization that allows a broker to act for more than one party in a real estate transaction and states the requirement for written client authorization. 3. Same as part 1. 4. Identifies the licensee’s conflict of interest, the duty of confidentiality, and the requirement for each client to have also received a Duties Owed form. 5. Tells the client that he or she is not required to consent to this type of representation. 6. Client’s acknowledgment of receipt of the form and a statement that consent is being granted without coercion. 7. Clients Signatures Box Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 17 Duties Owed and Consent to Act Forms in Detail

18. Agency Responsibilities – Nevada Law NRS 645.254  Additional duties of licensee entering into brokerage agreement to represent client in real estate transaction.   A licensee who has entered into a brokerage agreement to represent a client in a real estate transaction:       1.  Shall exercise reasonable skill and care to carry out the terms of the brokerage agreement and to carry out his duties pursuant to the terms of the brokerage agreement;       2.  Shall not disclose confidential information relating to a client for 1 year after the revocation or termination of the brokerage agreement, unless he is required to do so pursuant to an order of a court of competent jurisdiction or he is given written permission to do so by the client;       3.  Shall seek a sale, purchase, option, rental or lease of real property at the price and terms stated in the brokerage agreement or at a price acceptable to the client; Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 18

19. Agency Responsibilities – Nevada Law       4.  Shall present all offers made to or by the client as soon as is practicable, unless the client chooses to waive the duty of the licensee to present all offers and signs a waiver of the duty on a form prescribed by the Division;       5.  Shall disclose to the client material facts of which the licensee has knowledge concerning the transaction;       6.  Shall advise the client to obtain advice from an expert relating to matters which are beyond the expertise of the licensee; and       7.  Shall account for all money and property he receives in which the client may have an interest as soon as is practicable.       (Added to NRS by 1995, 2073; A 2007, 1788 ) Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 19

20.       NRS 645.255  Waiver of duties of licensee prohibited.   Except as otherwise provided in subsection 4 of NRS 645.254 , no duty of a licensee set forth in NRS 645.252 or 645.254 may be waived.      (Added to NRS by 2007, 1787 )         NRS 645.257  Action to recover damages suffered as result of licensee’s failure to perform certain duties; standard of care. 1.  A person who has suffered damages as the proximate result of a licensee’s failure to perform any duties required by NRS 645.252 , 645.253 or 645.254 or the regulations adopted to carry out those sections may bring an action against the licensee for the recovery of his actual damages. 2.  In such an action, any knowledge of the client of the licensee of material facts, data or information relating to the real property which is the subject of the real estate transaction may not be imputed to the licensee. 3.  In an action brought by a person against a licensee pursuant to subsection 1, the standard of care owed by a licensee is the degree of care that a reasonably prudent real estate licensee would exercise and is measured by the degree of knowledge required to be obtained by a real estate licensee pursuant to NRS 645.343 and 645.345 .       (Added to NRS by 1995, 2073; A 2001, 2893 ) Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 20

21. Agency Responsibilities The agent’s fiduciary relationship of trust and confidence with the principal means that the broker owes the principal certain specific duties. These are not just Moral or Ethical – they are the Law. A real estate licensee when performing real estate related activities is subject to certain duties and legal responsibilities to the client, broker, peers, the public, and the Real Estate Division. Whether implied, expressed, or written, there are certain duties owed as licensees when dealing with clients and customers. These items come into play when dealing with other agents in discussion about the transaction itself. Under the common-law of agency, an agent owes the principal the six duties of care, obedience, loyalty, disclosure, accounting and confidentiality as shown next: Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 21

22. CARE The agent must exercise a reasonable degree of care while representing the principal or customer. Skill falls into this category as well. In always having the principal’s best interest, there must be a level of skill involved in the transaction. If the licensee is not knowledgeable in a particular area, such as a short sale, he or she needs to investigate all reasonable means to service the transaction (such as involving an experienced short sale agent or consulting with the broker). The agent should make themselves aware of all pertinent facts involving the principal and the transaction. OBEDIENCE The fiduciary relationship obligates the agent to act in good faith at all times, obeying the principal’s instructions in accordance with the contract. These do not include instructions that are unlawful or unethical. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 22

23. LOYALTY The duty of loyalty requires that the agent place the principal’s interests above those of all others, including the agent’s own self-interest. Dual Agency can be difficult as it may be difficult to be loyal to both parties equally. DISCLOSURE It is the agent’s duty to keep the principal informed of all facts or information that can affect a transaction. This includes what the agent should know or “should have known”. Presenting all material facts, all offers (unless a waiver has been signed), and relationships of parties in a transaction (such as a relative). Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 23

24. ACCOUNTING Agent must be able to provide an accounting report of all funds received from or on behalf of the principal (such as in an advanced fee or commission) CONFIDENTIALITY An agent may not disclose any confidential facts about the principal without expressed permission. This includes general conversation with other agents. In doing so, the agent could hurt the buyer or seller’s chances of obtaining or selling a property or qualifying for a short sale. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 24

25. Creating Agency Historically, an agency relationship could have been created in several ways: by expressed statement, wherein both the client and the broker agreed to the agency; or by unintentional or implied agency. Unintentional agency is where the licensee did not intend to create or continue with the representation of the client, however the client reasonably assumed the licensee was representing him or her. Implied agency is where the licensee acts as the agent of the client with the intention of representation and the client accepts those services even though there is no expressed (oral or written) brokerage agreement. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 25

26. Creating Agency To create an agency relationship, there must first be a brokerage agreement. As brokerage agreements may be oral, there is the possibility that a licensee’s conduct may lead a party to the reasonable expectation that an oral brokerage agreement exists and therefore, the licensee is that party’s agent. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 26

27. Agent of the Seller through Written Consent: This relationship is created through the Listing Agreement where the Seller is the principal and the broker is the agent. The licensee working on behalf of the Broker is the Sub-Agent who owes fiduciary duties to the Seller through the broker. Agent of the Buyer through Written Consent: This relationship is created in the Buyer Brokerage Agreement where the Buyer is the Client and the Broker is the Agent. The licensee working on behalf of the Broker is the Sub-Agent who owes fiduciary duties to the Seller through the broker. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 27

28. Agent of the Buyer and Seller through Written Consent: This relationship is created through the Duties Owed and Consent To Act forms consenting to Dual Agency Expressed agency: A Formal Agreement between the parties – Oral or Written Implied Agency: Results from the behavior of the parties Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 28

29. Termination of Agency Nevada has no specific statute that provides which event or action terminates agency. An agency relationship may end but each party may continue to have certain rights stemming from that relationship. Some of those rights, such as the licensee’s duty of confidentiality, are statutorily identified as extending past the revocation or termination of the brokerage agreement - in the case of confidentiality it is one year. Most special agency relationships, such as real estate agency, terminate when the object of the agency ends. In real estate, this is usually when there has been a successful transaction and the object for which the agency was created, the sale or lease of real property, has been fulfilled. Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 29

30. Agency may also end when the brokerage agreement has an end or termination date, and that date comes and goes without the broker’s efforts procuring a successful transaction. Object of agency is fulfilled (such as closed listing or sale) – The most desired. Destruction of the property Expires due to contract date – No Closed Transaction Mutual agreement – Example: Principal decides to hold onto their home, broker agrees to allow them an unconditional withdraw to end the listing contract. Breach of Contract – unfulfilled obligations by either party (the breaching party may still be liable for damages) Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 30 Termination of Agency

31. Death of either broker or client Upon the death of a licensee (broker, broker-salesperson, or salesperson) his or her real estate license automatically expires. Without a valid real estate license, there can be no legal representation. Since the brokerage agreement is with the broker if a broker-salesperson or salesperson dies, the brokerage agreement continues in place. It is then between the broker and client to determine if the brokerage agreement should continue with the services of a different broker-salesperson or salesperson or whether the brokerage agreement will be canceled. If the broker dies, the broker’s agency representation as evidenced by the brokerage agreement ends. By operation of law – Such as in a bankruptcy or foreclosure Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. 31 Termination of Agency

32. 32 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved. Agency Relationships Through Nevada Law - Quiz-

33. 1. The fiduciary responsibility in which the agent is held in a position of special trust and confidence by the principal is called: A. Transactional Coordinator B. Agency C. Care D. Subagent 33 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

34. 2. An agent of an agent is called: A. Transactional Coordinator B. Subagent C. Client D. Principal 34 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

35. 3. A Principal is: A. The client B. The Listing Agent C. The Selling Agent D. The Broker 35 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

36. 4. A Transactional Coordinator is an example of: A. The Listing Agent B. A Subagent C. A Client D. A Non-agent 36 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

37. 5. An oral agreement is a sample of: A. Implied Agency B. Expressed Agency C. Dual Agency D. Designated Agency 37 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

38. 6. A written agreement would be: A. Expressed Agency B. Dual Agency C. Designated Agency D. Implied Agency 38 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

39. 7. A Buyers Contract would create the following kind of relationship? A. Dual Agency B. Designated Agency C. Implied Agency D. Expressed Agency 39 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

40. 8. A For Sale By Owner pays $100 to a licensee to place a For Sale Sign in their yard. This creates Agency. A. True B. False 40 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

41. 9. An agent is duty-bound to inform the principal of certain material facts. Which of the following duties best fits this obligation? A. Care B. Obedience C. Disclosure D. Accounting E. Confidentiality 41 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

42. 10. A seller has listed his home with a brokerage. He instructs the agent to list the home for exactly $149,999. Which duty would the agent be following when completing this task? A. Care B. Obedience C. Disclosure D. Accounting E. Confidentiality 42 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

43. 11. An Agency where an agent represents only one party in a transaction is called: A. Dual Agency B. Expressed Agency C. Single Agency D. Sub-agency 43 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

44. 12. Death of a broker or client ends agency. A. True B. False 44 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

45. 13. Termination of agency may be accomplished by: A. Completion of purpose B. Destruction or Foreclosure C. Breach of Contract D. None of the Above E. All the Above 45 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

46. 14. An agent, when showing a property, notices a water stain on the ceiling. By pointing this out to the client - She is best performing which duty? A. Skill B. Disclosure C. Loyalty D. Obedience 46 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

47. 15. A Non-agent may represent a principal in a transaction. A. True B. False 47 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

48. 16. An agent has a listing that fits the criteria his buyer is interested in. He shows it to him. In this case, which form should be given to the customer? A. The Duties Owed B. Consent to Act C. Both D. None of the Above 48 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

49. 17. The agent is given limited authority to act for the client within certain restrictions and for specific transactions. The brokerage agreements create a special agency wherein the broker's authority is limited to facilitating a real estate transaction for his or her principal. This agent is a: A. General Agent B. Dual Agent C. Designated Agent D. Special Agent 49 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

50. 18. Acting for More Than One Party to the Transaction" is a definition of: A. General Agency B. Universal Agency C. Sub Agency D. None of the Above 50 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

51. 19. The Consent to Act Form is required in which of the following: A. A seller hires a broker to sell his home. Another brokers’ buyer purchases it. B. A listing agent sells his listing to a buyer he also represents C. A Buyer wants to view a property listed by his hired agent D. Both B & C 51 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

52. 20. A Duties Owed form is required in which of the following? A. A Listing Contract B. A Buyer Brokerage Agreement C. Both A & B D. None of the Above 52 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

53. 21. A Duties Owed form creates which type of agency? A. Single Agency B. Dual Agency C. Implied Agency D. Expressed Agency E. None of the Above 53 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

54. 22. This form of agency is designed to lessen the conflict-of-interest impact created when a broker represents more than one party in a transaction, the law provides an "Ethical Wall" wherein the broker is allowed to assign a separate agent to each client. Upon this assignment the broker does not need to use the "Consent to Act" disclosure form nor receive the approval of the clients. A. Dual Agency B. Single Agency C. Assigned Agency D. Special Agency 54 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

55. 23. Agency can exist even if no compensation is involved. A. True B. False 55 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

56. 24. Agency may be created… A. In Writing B. Verbally (Expressed) C. Through Compensation D. A & B 56 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.

57. 25. A buyer tells an agent that he would like him to show him houses and may make an offer if he finds something he likes. He also tells her that he is not working with any other agents and does plan to buy in the next month. Does this create Agency? A. No. B. Yes through written agency. C. Yes through implied agency. 57 Copyright 2021 Real Estate School of Nevada, Inc. All Rights Reserved.