Real Estate

To successfully complete this assignment you must answer the following questions to demonstrate your knowledge. The assignment will be granted a result of “Competent” if the learning outcomes are achieved or “not yet competent” if not. If a result of “Not Yet Competent” is achieved you will be given the opportunity to resubmit your assignment.

Question 1: Describe the meaning of the term ‘Agency’ and identify the types of agency relationships that a real estate agent may enter into.

Definition of Agency: “Agency” means a fiduciary 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. Duties: A licensee who provides services through a brokerage agreement for a seller, landlord, buyer, or tenant is bound by the duties of loyalty, obedience, disclosure, confidentiality, reasonable care, diligence, and accounting.

AGENCY RELATIONSHIPS

A. SELLER AGENCY: A SELLER’S AGENT has the duties, as defined by law, to represent the seller’s interest in the sale of the property: this generally means a duty to seek a sale, lease, rent, or exchange at the price and terms stated in the brokerage agreement or a price and terms acceptable to the seller or landlord; present in a timely manner all offers and agreements to and from the seller or landlord; account for client funds; disclose all information relevant to the transaction as required by law to the client and maintain the client’s confidentiality. These duties may be modified only by written agreement of the parties.

B. BUYER AGENCY: A BUYER’S AGENT has the duties, as defined by law, to represent the best interests of the buyer as a client: this generally means to seek real estate at the price and terms specified by the buyer or tenant: present in a timely manner all offers to and from the buyer or tenant on real estate interest: account for clients funds: disclose all information relevant to the transaction as required by law to the client and maintain the client’s confidentiality. These duties may be modified only by written agreement of the parties.

C. SUB-AGENCY: A real estate broker, acting as agent for the SELLER or BUYER, must represent the client’s best interest in the transaction.

•The seller may also authorize subagents to represent him / her in marketing his / her property to buyers. The seller may be liable for actions of the broker and any subagents, when said actions occur within the scope of the agency relationship.

•The buyer may also authorize subagents to represent him / her in locating property. The buyer may be liable for actions of the broker and any subagents, when said actions occur within the scope of the agency relationship.

D. DISCLOSED DUAL AGENCY: (UNDISCLOSED DUAL AGENCY IS ILLEGAL) A licensee acting for more than one party whose interests may differ in a transaction with the knowledge and written consent of all parties for whom the licensee acts. If a licensee represents a BUYER in a transaction involving a property which is listed by that same BROKER, or by that BROKER’S company, then a DISCLOSED DUAL AGENCY exists. When DISCLOSED DUAL AGENCY occurs, the full range of agency duties cannot be delivered to both parties. These agency duties will be modified by agreement, so that neither client will be given an unfair advantage. DUAL AGENCY must be disclosed and agreed to in writing by both clients. A DISCLOSED DUAL AGENT may not reveal confidential information regarding, but not limited to:

1.willingness of the seller to accept less than the asking price;

2.willingness of the buyer to pay more than what has been offered;

3.confidential negotiating strategy not disclosed in the sales contract as terms of the sale; or

4.motivation of the seller for selling nor the motivation of the buyer for buying.

ANOTHER RELATIONSHIP

If a consumer does not wish to have a licensee act on behalf of that consumer either as a seller agent or a buyer agent yet wishes to enter another relationship with the real estate brokerage firm, the licensee shall clearly describe, in writing, that relationship. The written description of that other relationship shall be signed by all parties to the relationship prior to any services being rendered.

Question 2: Identify two parties who might establish an agency relationship with a real estate agent outlining the purpose of the relationships

1 – The Real Estate Act Rules require that all industry members ensure their role in a transaction is clearly understood by their clients and third parties [Real Estate Act Rules, s.41(e)]. This means mortgage borrowers must clearly understand with whom their mortgage broker has a working relationship. Real Estate Council of Alberta research into mortgage brokerage/consumer relationships has demonstrated that consumers often do not clearly understand their relationship with the brokerage, the role of the brokerage and the relationship the brokerage may have with lenders.

Agency is a relationship established when two parties agree to have one party act on behalf of the other. In an agency relationship, the agent (the industry member) will act on behalf of its principal. In the case of mortgage brokerage, the principal may be the lender or the borrower, or the mortgage brokerage may act as an intermediary.

Relationship Options

Mortgage brokerages will typically decide between three different relationship options and stick with the chosen option, though in some cases, a brokerage may be open to different relationships with different borrowers and lenders, as the particulars of a given situation dictate.

In the case of mortgage brokerages, the brokerage may have a service relationship with the lender, the borrower or neither – in which case the brokerage would act as an intermediary between the lender and the borrower. The mortgage brokerage and its representative’s role and obligations to the borrower and the lender will vary depending on the nature of the service relationship between the mortgage brokerage and the lender or borrower.

Lender Relationships

Mortgage brokerages may choose to represent the lender and will treat the borrower as a customer of the brokerage. In this service relationship, the brokerage has an obligation to represent the lender’s best interests, and will owe to the lender general, fiduciary and regulatory obligations.

When representing a lender, the mortgage brokerage may treat the borrower as a customer of the lender. The Real Estate Act Rules defines customer as meaning a person who has contacted, but not engaged or employed, an industry member to provide services. The brokerage will treat the borrower (customer) honestly and exercise reasonable care and skill in providing information with respect to the lender’(s) mortgage options, keep the borrower informed of the progress of the transaction, complete documentation for submission to the lender and communicate information from the lender to the borrower.

For more information about lender relationships, please see RECA Information Bulletin: Mortgage Brokerage – Lender Relationships.

Borrower Relationships

Mortgage brokerages may represent (act on behalf of) only the borrower. In this service relationship, the mortgage brokerage has an obligation to represent the borrower’s best interests at all times. The mortgage brokerage has general, fiduciary and regulatory obligations to borrowers when they are clients of the brokerage. Specifically, because the brokerage is acting on behalf of the borrower, the brokerage will recommend a particular financing option(s) to the borrower, advocate on the borrower’s behalf, and provide confidential advice. The brokerage duties to the lender are to be honest and exercise reasonable care and skill.

For more information about borrower relationships, please see RECA Information Bulletin: Mortgage Brokerage – Borrower Relationships.

2 – Acting as an Intermediary

Mortgage brokerages may act as an intermediary between the borrower and the lender. In such a relationship, the brokerage is authorized to offer mortgage products from one or more lenders to borrowers who are seeking a mortgage. The brokerage duties to the borrower include the following: be honest, exercise reasonable care and skill, gather the borrower’s intended property and financial information to determine the lending options available, disclose and explain appropriate options for the borrower’s consideration, complete and submit documentation to the lender and keep the borrower informed of the progress of the application.

The brokerage duties to the lender are be honest, exercise reasonable care and skill, complete and submit documentation to the lender, disclose what steps were taken to verify information and documentation as part of the application process and keep the lender informed of the progress of the application.

If a mortgage broker industry member were to attempt to represent both the lender and the borrower in the same transaction, it is impossible for that industry member to fulfill his or her fiduciary obligations to both parties. An agent cannot be loyal to two parties in the same transaction nor can an agent act only in the best interests of one party when the interests of the other party are different.

The requirement to disclose relevant information and keep a principal’s information confidential is a conflict. Typically, an agent assumes the role of an advocate on behalf of their principal. If an agent is attempting to represent two parties in the same transaction, it is a conflict of interest and as a result, mortgage brokerages can only act on behalf of the borrower OR the lender.

For more information about mortgage brokerages acting as intermediaries, please see RECA Information Bulletin: Mortgage Brokerage – Acting as an Intermediary.

Required Relationship Disclosure

Regardless of the relationship model a mortgage brokerage chooses, the brokerage – and industry members registered with the brokerage – must ensure that any borrowers with whom they are working (either as clients or customers) understand their relationship with the brokerage and its industry members.

Question 3: Identify three different types of agency agreements an agent may use to enter into a relationship with a principal.

Actual Agency

• An actual agency agreement is one that is entered into by both the principal and the agent. It generally takes the form of a written contractbetween the two parties detailing their agency relationship. The principal will outline expectations of the agent and any limitations on the agency privileges.

From there, the agent is free to negotiate and enter into contractual relationships with third parties that bind the principal, even if the principal isn’t present for any discussions. If a breach of contract arises, the third party can sue the principal under the contract terms.

Apparent Agency

• An apparent agency agreement is one in which the pact between the principal and the agent is implied under the law. Sometimes, a principal will “hold out” an agent as someone who possesses the authority to bind the principal under contracts entered into by the agent.

There will be no written agreement between the two parties, but circumstances would lead any reasonable third party to believe the agent was in a position to negotiate and contract for the principal. If the court finds this belief reasonable, it will likely hold the principal liable under a theory of implied agency, even though no written and signed agency agreement exists.

Employment

• Respondeat superior is a Latin term meaning “let the master answer.” This is a legal concept in which employers can be held liable for the activities of their employees under a theory of agency. Three general questions must be answered in the affirmative for an employer to be held liable to the injured third party for the acts of the agent.

First, was the employee’s activity within the scope of the employee’s employment? Secondly, was the activity within the employee’s job responsibilities? Last, was the agent acting with an intent to benefit the principal? If the answer is “yes” to these inquiries, the principal will likely be held liable to the injured third party for the agent’s negligentacts.

Question 4: Identify three main duties and responsibilities of each of the following key personnel: Licensee-in-charge: Each place of business must be in the charge of a licensee, who is responsible for the proper supervision of the business carried on there and for the actions of all employees.

An individual licensee is responsible for the supervision of their own place of business. A licensee who has more than one place of business must employ a licensee to be the person in charge at each other place of business. A corporation that holds a corporation licence must employ licensees to be in charge of each of the corporation’s places of business.

A licensee cannot be in charge of more than one place of business or act for more than one licensee at a place of business. In very limited circumstances, the Commissioner for Fair Trading may grant an exemption from the licensee-in-charge requirements.

A licensee cannot be employed to be in charge of a place of business if they are also the licensee-in-charge of another place of business.

A licensee-in-charge of a place of business must hold a licence in the category relevant to the type of business carried on there. For example, a person in charge of a real estate agency business must hold a real estate agent’s licence.

In limited circumstances, the Director General may grant an exemption from the requirement that each separate agency office be under the charge of a separate licensee. For more information refer to the Exemptions to licensee-in-charge-rule.

Property Manager: There are a multitude of specific duties which a property manager needs to fulfill in the role of their employment. The first duty related to being a property manager is the leasing or selling of a real estate property. In order to engage in the leasing or selling of theproperty, the property manager must make necessary marketing contacts to have the property listed so that the general public can show interest in leasing or buying the property. Once prospective tenants or purchasers have responded to an ad placed by the property manager, that individual is then responsible for showing the property to the interested parties and relaying all of the pertinent information regarding the property to those individuals.

The property manager also must deal with a great amount of paperwork in their position. Some pertinent documents which need to be completed by the property manager include lease agreements, purchase and sale agreements, rules and regulations, and contract work documents such as maintenance and repair work orders. Once the paperwork is completed the property manager must then be sure to file the documents with necessary parties and keep records thereof in a neat, orderly manner.

An individual who is a property manager will also be responsible for analyzing quite a bit of pertinent data. There are many documents and information which property managers review on a daily basis. Items such as zoning regulations, tenant laws, federal laws, tax information, property values and more are all things which a property manager should review on a frequent basis. This will aid the property manager in doing their job to the best of their ability and ensuring that they are up to date on all current information relating to their property and real estate in general.

The property manager is also in charge of employees that work at the specific property. This includes leasing agents, maintenance workers and more. The property manager will oversee the work that these individuals do, address any complaints or concerns issued by the employees and take care of payroll for such employees. This individual is the head of the property office in many cases and is the one which other employees at the property must answer to.

With regard to tenants and owners at the property, the property manager is whom they will most likely address their concerns with should they have any issues which arise concerning their tenancy or ownership at the property.Some issues which the property manager will need to address with the tenants and/or owners include maintenance, security and overall functioning of the property.

The property manager is also the individual who is responsible for inspecting the property to ensure that everything is in working order and contact repair workers should anything need to be fixed on the property. The property manager should be able to take a proactive role with regard to fixing items and making frequent inspections to see that everything is working in a safe and appropriate manner.

Lastly, the property manager is one who acts as a liaison between tenants and the building owners or employees and the building owners. The specific duty of the property manager in this regard is to ensure that all parties correspond appropriately and work out any misunderstandings or grievances when necessary to do so.

Salesperson: It’s important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transactions. Ask your salesperson to explain what type of agency relationship you have with him or her and with the brokerage company.

Seller’s representative (also known as a listing agent or seller’s agent). A seller’s agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.

Subagent. A subagent owes the same fiduciary duties to the agent’s principal as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not representing the buyer as a buyer’s representative or operating in a nonagency relationship, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treatedhonestly by the subagent. It is important that subagents fully explain their duties to buyers.

Buyer’s representative (also known as a buyer’s agent). A real estate licensee who is hired by prospective buyers to represent them in a real estate transaction. The buyer’s rep works in the buyer’s best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer’s rep may be paid by the seller or by a commission split with the listing broker.

Disclosed dual agent. Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to the clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it’s vital that all parties give their informed consent. In many states, this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.

Question 5: Identify the three main forms of business ownership

1 – Risks and Liabilities : In large part, the best ownership structure for your business depends on the type of services or products it will provide. If your business will engage in risky activities — for example, trading stocks or repairing roofs — you’ll almost surely want to form a business entity that provides personal liability protection (“limited liability”), which shields your personal assets from business debts and claims. A corporation or a limited liability company (LLC) is probably the best choice for you.

To learn more about the advantages and disadvantages of each type of business structure, see Ways to Organize Your Business, a chart that compares the pros and cons of each.

Formalities and Expenses

Sole proprietorships and partnerships are easy to set up — you don’t have to file any special forms or pay any fees to start your business. Plus, you don’t have to follow any special operating rules.

LLCs and corporations, on the other hand, are almost always more expensive to create and more difficult to maintain. To form an LLC or corporation, you must file a document with the state and pay a fee, which ranges from about $40 to $800, depending on the state where you form your business. In addition, owners of corporations and LLCs must elect officers (usually, a president, vice president, and secretary) to run the company. They also have to keep records of important business decisions and follow other formalities.

If you’re starting your business on a shoestring, it might make the sense to form the simplest type of business — a sole proprietorship (for one-owner businesses) or a partnership (for businesses with more than one owner). Unless yours will be a particularly risky business, the limited personal liability provided by an LLC or a corporation may not be worth the cost and paperwork required to create and run one.

2 – Income taxes :Owners of sole proprietorships, partnerships, and LLCs all pay taxes on business profits in the same way. These three business types are “pass-through” tax entities, which means that all of the profits and losses pass through the business to the owners, who report their share of the profits (or deduct their share of the losses) on their personal income tax returns. Therefore, sole proprietors, partners, and LLC owners can count on about the same amount of tax complexity, paperwork, and costs.

Owners of these unincorporated businesses must pay income taxes on all net profits of the business, regardless of how much they actually take out of the business each year. Even if all of the profits are kept in the business checking account to meet upcoming business expenses, the owners must report their share of these profits as income on their tax returns.

In contrast, the owners of a corporation do not report their shares of corporate profits on their personal tax returns. The owners pay taxes only on profits they actually receive in the form of salaries, bonuses, and dividends.

The corporation itself pays taxes, at special corporate tax rates, on any profits that are left in the company from year to year (called “retained earnings”). Corporations also have to pay taxes on dividends paid out to shareholders, but this rarely affects small corporations, which seldom pay dividends.

This separate level of taxation adds a layer of complexity to filing and paying taxes, but it can be a benefit to some businesses. Owners of a corporation don’t have to pay personal income taxes on profits they don’t receive. And, because corporations enjoy a lower tax rate than most individuals for the first $50,000 to $75,000 of corporate income, a corporation and its owners may actual have a lower combined tax bill than the owners of an unincorporated business that earns the same amount of profit.

3 – Unlike other business forms, the corporate structure allows a business to sell ownership shares in the company through its stock offerings. This makes it easier to attract investment capital and to hire and retain key employees by issuing employee stock options.

But for businesses that don’t need to issue stock options and will never “go public,” forming a corporation probably isn’t worth the added expense. If it’s limited liability that you want, an LLC provides the same protection as a corporation, but the simplicity and flexibility of LLCs offer a clear advantage over corporations. For more help on choosing between a corporation and an LLC, read the article Corporations vs. LLCs.

Question 6: Identify in which statutory documentation you would find the ‘Rules of Conduct’?

The Rules of Conduct

Contained within the PSBA Regulations are the “General Rules of Conduct applying to all licensees and registered persons”. These are minimum standards that the agent must follow. Some of the requirements are that agents must:

• have knowledge of the Act and Regulation

• comply with the Act and Regulation

• conduct their business with honesty, fairness and professionalism

• exercise reasonable skill, care and diligence in their dealings

• follow clients’ instructions and act in their best interests at all times

• refrain from employing high pressure tactics, harassment or harsh conduct

• avoid any act that would place their interests in conflict with the client’s interests.

Also contained in the Regulation to the Act are rules specific to different categories of agent, for example real estate salespersons, stock and station agents and strata managers.

Question 7: If you are employed as a real estate agent, you must hold a licence or certificate of registration. Name three (3) other roles in the property industry where you must hold a licence or certificate of registration

real estate agent

real estate salesperson

registered manager

Question 8: How old do you need to be before you can hold a Real Estate agents licence?

18 years old

Question 9: Under what circumstances should a receptionist hold a certificate of registration? Explain your answer with examples.

A receptionist is someone in a clerical and secretarial position that involves serving as the face and voice of a company, while coordinating communication between a company’s customers and its employees. In a real estate company, a real estate receptionist must exhibit excellent telephone skills and an attention to detail required by the nature of the business. The educational requirements of a real estate receptionist include the minimum of a high school diploma, while many have additional training. Combined, a real estate receptionist’s responsibilities can be roughly categorized as customer service, clerical, organizational; he or she may also act in some official capacities, such as acting as a notary public for certain documents.

Customer service and excellent telephone skills are some of the major responsibilities of this position. A real estate receptionist is often a customer’s first official contact with a real estate office, even if it is only in the form of a voice. In a solo or a multi-agent office, a real estate receptionist keeps up with agent locations, listings and the status of contracts. He or she takes messages from involved parties — potential buyers, sellers, title firms, law practices and other agents — and relays them to the appropriate individuals.

Receptionists also keep track of the multiple appointments necessary in real estate, notifying the involved parties to ensure smooth operation of the business. Depending upon the size of the real estate office and the number of practicing real estate agents within it, a real estate receptionist may also be responsible for basic clerical duties and word processing. These activities may include typingcontracts for buyers or sellers, and managing outgoing agency correspondence. He or she may also be responsible for updating home listings for publication, either online or in a newspaper; in some offices, the responsibility of the real estate receptionist may extend to updating an agency’s website and online listings as well. Clerical duties might also include the organization and ordering of general office supplies as well as those related to the trade such as outdoor signage, target brochures and business cards. Receptionists are often also responsible for receiving and sorting incoming mail to specific agents, the office manager or agency owner and the office accountant for any company bills of fees owed.

Most employed in this role have a minimum of a high school diploma. Many receptionists have an educational background in secretarial skills, and a significant percentage have certificates or associates degrees in a related area. While a certification as a real estate agent is not usually necessary, it can also be helpful for candidates applying to these positions.

Question 10: What is the purpose of Continuing Professional Development (CPD)?

Growth and success in the ever-changing world of work is increasingly about individuals taking responsibility for their personal development. Our evolving culture requires that individuals be accountable for self-direction, to practice self-management of their own learning and to actively search for wider experience and opportunity. This does not take place in isolation. The self-development process should also bring direct benefit to the team in which the individual works and the organisation as a whole.

As part of the Advanced Professional Qualifications for Business Change Professionals a Continuing Professional Development programme has been developed which runs in parallel with the organisation’s own performance management and appraisal sys