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Course Video #2--Agency Basics and Introduction

Travis Everette・112 minutes read

Understanding the key concept of agency in real estate is crucial, as it involves representation, advice, and protecting the best interests of clients. Differentiating between fiduciary brokers and transactional brokerage is essential, as fiduciary brokers prioritize clients' interests, while transactional brokerage focuses on closing transactions without advice or representation.

Insights

Agency in real estate is about representation, advice, and protecting the best interests of those who hire you, emphasizing the crucial role of agents in transactions.
The distinction between fiduciary brokers who represent clients and transactional brokerage focusing on transactions is vital, with North Carolina prioritizing fiduciary relationships.
Understanding the roles of agents, sub agents, clients, and customers is essential in real estate transactions to ensure proper representation and adherence to legal guidelines.
Real estate agents must prioritize their clients' best interests, even if it means advising against a transaction or sacrificing a commission, highlighting the fiduciary duty and ethical responsibilities agents uphold.

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Recent questions

What is the role of an agent in real estate?
Agents represent clients' best interests in transactions.
What is the difference between clients and customers in real estate?
Clients hire agents, while customers have not.
What is fiduciary brokerage in North Carolina?
Fiduciary brokers prioritize client interests over customers.
What is transactional brokerage in real estate?
Transactional brokerage focuses on closing deals without advice.
What are the responsibilities of sub agents in real estate?
Sub agents work under the main agent representing a party.

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Summary

00:00

Understanding Agency in Real Estate Transactions

Agency is a crucial topic in real estate classes, often considered challenging.
Starting with agency early in the course can prevent misconceptions about representation.
Agency is about representation, advice, and looking out for the best interests of those who hire you.
The key distinction in agency is being hired by someone to represent them.
An agent is a broker who has been hired to look out for a specific person's best interest in a transaction.
Clients are only referred to as such when they have hired an agent to represent them.
Agency is not exclusive to real estate; it exists in various fields where professionals are hired to provide advice and protect interests.
Coaches in sports are akin to agents in real estate, guiding and advising without directly participating in the activity.
Agents are expected to provide expert advice and protect clients from making mistakes, regardless of their knowledge.
Not everyone may want representation in real estate transactions, as some sellers or buyers may choose to be unrepresented for various reasons.

16:01

State-specific Exam Focuses on Broker Supervision

National exams include a state-specific section but primarily focus on national terminology.
In North Carolina, individuals are referred to as brokers, not salespersons.
Newly licensed individuals in North Carolina are provisional brokers and require supervision.
Once individuals are no longer provisional, they can operate independently and are referred to as brokers.
Some states allow individuals to remain in a training phase indefinitely, referring to them as salespersons.
Salespersons in Virginia need supervision from a broker to operate independently.
The term "broker" signifies independence, while "provisional broker" or "salesperson" indicates the need for supervision.
Provisional brokers do not need to advertise or have separate business cards.
Provisional brokers must be supervised by a broker, ensuring client protection.
Non-provisional brokers have the choice to operate independently or with supervision, with the client always being the ultimate decision-maker.

31:28

Clarifying Roles in Real Estate Transactions

When showing a property to a buyer, it's crucial not to assume that the buyer has hired the agent.
Always confirm if there is a formal agreement in place to hire the agent, licensee, or broker before working for them.
Verbal agreements can be made in some cases, but it's safer to have hiring agreements in writing.
The use of "ing" at the end of words signifies an action being performed, not necessarily representation.
Words ending in "ing" do not indicate who the agent represents in real estate transactions.
Listing a property does not automatically mean representing the seller; it simply implies working with the seller at that moment.
The distinction between listing and selling is crucial, as roles can change rapidly based on the parties involved.
The terms "listing agent" and "selling agent" have different implications, with the former indicating representation of the seller.
Assumptions based on actions like listing or selling can be misleading, as they do not define representation in real estate.
Understanding the roles of listing and selling agents, as well as the importance of clear agreements, is essential in real estate transactions.

48:55

Understanding Roles in Real Estate Transactions

Differentiating between personal information about a seller and property information
Emphasizing the importance of providing property information when selling
Clarifying the distinction between actions and representation in real estate transactions
Identifying actions such as talking to a seller or showing a property as selling
Highlighting the significance of understanding the roles of listing and selling agents
Explaining the role of a selling agent in bringing buyers to a transaction
Stressing the importance of not making assumptions in real estate transactions
Illustrating the concept of dual agency and its implications
Emphasizing the importance of knowing who agents work for in transactions
Using soundtracks to differentiate between actions and agency in real estate dealings

01:06:24

Real Estate: Results Over Representation for Profit

In real estate, the focus is on producing results rather than representation to earn money.
The seller and buyer are the key players in a transaction, with the agent getting paid for producing results for both.
The agent already receives all the money by representing both parties, eliminating the need for additional representation.
The analogy of a server in a restaurant is used to explain the concept of getting paid for producing results.
Representation in real estate is distinct from listing and selling, with the latter being the primary money-making activities.
Clients are the individuals who hire agents, while customers are potential clients who have not yet hired them.
Agency vocabulary is crucial in understanding the relationships between clients, agents, and customers in real estate.
Fiduciary brokerage in North Carolina prioritizes acting in the best interest of the client, even if it means making decisions that may not benefit customers.
The agent's advice and actions differ based on whether they are dealing with a client or a customer in a fiduciary relationship.
Transactional brokerage, practiced in some states like Florida, is not permitted in North Carolina due to its focus on transactional rather than fiduciary relationships.

01:23:35

Transactional Brokerage in Real Estate Transactions: North Carolina's Approach

Transactional brokerage is a different approach to real estate where everyone is a customer, not a client, and decisions are based on what's best for the transaction.
In North Carolina, real estate brokers must represent either the buyer or the seller as a fiduciary, not practice transactional brokerage.
The Real Estate Commission in North Carolina has discussed transactional brokerage but is unlikely to move towards it in the future.
Transactional brokerage involves not giving advice to either party, only focusing on closing the transaction without representing the interests of the buyer or seller.
Giving advice to customers is illegal in North Carolina, and real estate agents should not provide advice to non-clients.
Transactional brokerage is not practiced in North Carolina, where agents must have clients and represent their interests.
The distinction between fiduciary brokers and transactional brokerage is crucial, with fiduciary brokers representing clients and providing advice, unlike transactional brokers.
Real estate agents in North Carolina should not introduce themselves as agents unless they have been hired by a party in the transaction.
Sub agents in real estate are essentially agents of the seller or buyer, working under the main agent representing that party.
Understanding the difference between agents, sub agents, and clients is essential in real estate transactions to ensure proper representation and adherence to legal guidelines.

01:37:53

Real Estate Agents and Subagents: Legal Responsibilities

Sub agents have the same legal responsibilities as the agents they work for.
When a buyer hires an agent, all sub agents in the office work for that buyer.
The office is considered the agent, and all individuals in the office are sub agents.
If a contractor works alone without subcontractors, they are considered an agent.
Sub agents are hired by the buyer or seller through the office.
Differentiating between clients and customers is crucial as different responsibilities are owed to each.
Obedience to clients involves following lawful commands, but not breaking the law.
Disclosing terms of a buyer's offer without written permission is illegal in North Carolina.
Violating laws related to real estate transactions can lead to severe disciplinary actions.
Loyalty to clients is essential, but it does not mean blindly following instructions that break the law.

01:54:34

Real estate agents' loyalty and fiduciary duty.

Loyalty is a significant test for real estate agents, as giving advice in the best interest of clients may not always align with closing deals.
Sometimes the best advice for a client is not to close a deal, even if it means sacrificing a commission.
Fiduciary duty requires always prioritizing the client's best interests, even if it means advising against a transaction.
Pricing a property lower can sometimes be more beneficial for a quick sale, even if it means a lower commission.
Agents must disclose all information to their clients, including any negative aspects of a transaction or the parties involved.
Confidentiality is crucial, and agents must keep personal information about clients private.
Handling money on behalf of clients requires a separate trust account with no personal or company funds mixed in.
Co-mingling occurs when personal or company funds are mixed with client funds in a trust account.
Conversion is when funds from a trust account are used for personal or unauthorized purposes.
Property managers must have a trust account for handling rent payments, while sales agents may not necessarily need one.

02:11:34

Real Estate Agents: Trust Account Responsibilities

Due diligence monies and earnest money are two equal violations in real estate, both indicating mishandling of money, which is a serious concern for the real estate commission.
Real estate agents must maintain trust accounts accurately to the penny, as the real estate commission can audit them at any time, leading many offices to opt out of having trust accounts due to the added responsibility. Agents must also ensure they provide expert advice within their area of expertise to best serve their clients, avoiding taking on tasks beyond their skill level.

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