Chapter One: Definitions

Chapter One: Definitions Overview This course will begin with a chapter that focuses on the terms that you will need to know to fully understand the provisions of BRRETA. This chapter should give you a solid foundation to help you comprehend the rest of the course. Definitions A to C Definitions C to F Definitions F to M Definitions M to N Definitions N to Z Learning Objectives Upon completion of this chapter, the student will be able to: Define the key terms contained in this chapter Explain how to implement these terms and concepts on the job Apply a working knowledge of terms contained in the BRRETA Definitions A to C This section lists seven terms that you will need to know: act, act of omission, agency disclosure, bona fide, breach, CC & R s and caveat emptor. Following this section there will be a very brief quiz to make sure you grasp the concepts. Agency Disclosure A signed, written explanation and agreement of employment which is to be signed by the buyer and/or seller (depending on your state s laws), in which the agent is hired to represent the principal. Bona Fide Literally means in good faith. A bona fide transaction is one conducted with all honesty and sincerity. Breach The term breach most often applies to the violation of a law or obligation. In real estate, it especially concerns the duties owed to clients and customers; a violation of a legal or moral obligation or the failure to act as the law requires. See also negligence. CC & R s Stands for Covenants, Conditions, and Restrictions usually placed on a property at the beginning of development. CC & R s place conditions on the uses, size of buildings, colors, landscaping, storage of vehicles, livestock, and any number of things that may affect the future use of the property. They may contain anything as long as it does not run contrary to existing law (for example, discrimination against a protected class would be an illegal restriction). Caveat Emptor Literally, let the buyer beware. The doctrine of caveat emptor places the burden of discovery of defects upon the buyer. There are few places in the nation where one would find a predominant reliance on this doctrine. The idea of caveat emptor does not relieve the real estate agent from duties of disclosure. Matching drag and drop Match the terms with their appropriate definitions. Act Anything done or performed; doing. Act of Omission Failure to do something; especially a neglect of duty; leaving something out; involves the breach of a legal duty to take a positive action; usually unintentional. In Good Faith Buyer Beware A violation of the law Failure to do something Place conditions on the size of a property Bona Fide Caveat Emptor Breach Act of Omission CC & R s Page 1

Definitions C to F The next section is composed of six more terms: CER- CLA, concealment, damages, default, due diligence and fraud. CERCLA The Comprehensive Environmental Response, Compensation and Liability Act passed by Congress in 1980. This was the Act setting up Superfund clean-up sites across the nation. It was updated and known as the Superfund Amendments and Reauthorization Act (SARA). Can you think of a time when you would want to have knowledge about where to find information about this legislation? Concealment Not disclosing something such as a material fact; preventing or hindering the discovery of a fact; a coverup. The act of removing from sight or notice; hiding. Encouraging a seller to paint a ceiling stained from water caused by a roof leak would be an act of concealment. In fact, it could be viewed as fraud. Be careful! Damages The amount of money owed to a person who has been judged to be harmed by an action (or inaction) on the part of another. When you review the hidden utility case, think about what you think would be fair damages for the buyer. Default In the verb form, it can mean failure to perform a duty or promise. It can also mean an omission. What are the duties you are obligated to perform under your state s listing contract and agency agreements? Remember, if you make a promise written or oral be sure you perform! Due Diligence This refers to taking the time and care to discover facts pertinent to the transaction. It could include facts about environmental, zoning, social, physical, legal, financial, or any number of considerations that would have an effect on a person s decision to buy or sell real estate. Fraud An intentional act to mislead another through purposeful omission of known facts; to cheat another so that the other person suffers a loss. Fraud not only can be cause for civil action, but may also be cause for criminal proceedings. Matching drop down The failure to perform a duty or promise Hiding a defect so that it is not found by a buyer Established Superfund cleanup sites across the country Taking time and care to discover facts pertinent to the transaction The amount owed to a person who has been judged to be harmed by another Definitions F to M Default Concealment CERCLA Due Diligence Damages Here, we will define four important terms: forbearance, justifiable reliance, liability and material fact. Forbearance Specifically denotes the act of intentionally not enforcing one s duty, see also: fraud. Justifiable Reliance As a licensee, the agent is holding him/herself out as an expert in real estate. By virtue of the license, it means a member of the public is justified in relying on the agent for all matters pertaining to real estate. The expectation is that true and correct information will be imparted in the buying/selling process. Liability Refers to an obligation owed. A real estate listing contract, for example, creates a liability to perform on the part of the agent. A purchase contract causes an obligation for all parties in the contract to perform. It may also mean the potential to incur a fine or penalty (as in an adverse judgment in a lawsuit): The real estate agent was held liable to the buyer for repairs to the home. Page 2

Material Fact Facts about a property that, if known, would logically have an impact on a buyer s decision to purchase or a seller s decision to sell; something that may affect the value of the property. A material fact could be physical, environmental, or any number of factors that might affect value. Be careful here, though; for example, ethnic make-up of a neighborhood is NOT a material fact. Matching drop down An obligation owed A pertinent factor that impacts a property s value An expectation that an agent s words are true and accurate The act of purposefully not enforcing one s duty Definitions M to N Liability Material Fact Justifiable Reliance Forbearance This section will provide you with the definition of misrepresentation, along with its two types: unintentional misrepresentation and intentional misrepresentation. Negligence will also be defined. Misrepresentation To portray something improperly, incorrectly, or falsely; basically, making a statement that is not true. Misrepresentation can be unintentional or intentional (fraud) and can be oral (many times it is nothing more than an off-hand remark) or written. It can also be silence the omission of facts. If material facts are relied upon to make buying or selling decisions, and they are wrong or incomplete, with the result of harm to the buyer/seller, a case for misrepresentation could be made. The harmed party has only to perceive that he/she has been harmed! Unintentional Misrepresentation Also know as negligent misrepresentation. The intention to deceive is not present in the action or inaction. It is usually the result of a mistake or inattention to details, a lack of care in performing one s duty. Courts have held that agents may be held liable without having had actual knowledge that a statement of material fact, was or was not true. If the representation is innocent, it may still be actionable, as courts have held that the agent has a duty to determine the truth or falsity of a statement before it is made. Intentional Misrepresentation By any other name, this is fraud! It is the withholding of facts, for example, that would likely affect a buyer s decision to purchase. Remember that actions of fraud may carry punitive damages (like a fine for lying), which the court can treble. Always tell the truth. Negligence Negligence is the act of not exercising the care required by law to protect the interests of another person(s) who may be harmed. In real estate, you will find that almost every document you sign will obligate you to perform in a professional manner. Negligence can occur when, for example, an agent relies on statements from a seller and the statements prove to be false or incorrect. Some courts have held that the agent has the duty to determine the veracity of the statements, especially if the truth is easily discernable. Be sure to watch out for statements made by a seller that seem to be contrary to what you have observed by inspecting the property yourself. Matching drop down Match the terms with the corresponding descriptions. An improper or false portrayal of something Can also be referred to as fraud Mistakenly relaying false information Not taking the appropriate amount of care necessary to look after the interests of a client Definitions O to Z Misrepresentation Intentional Misrepresentation Unintentional Misrepresentation Negligence The chapter will conclude with a list of five more terms: opinion, oral contract, reckless disregard, statement and stigmatized property. Page 3

Opinion An opinion is the expression of one s own thoughts or beliefs. It is not considered a formal opinion unless it is put in writing. There can be a fine line between opinion and fact, so be careful what you say. If you are expressing an opinion, make sure it is understood that it is your opinion and not fact. It would probably be prudent to not offer an opinion, but rather supply the customer with the facts and let her form her own opinions. Oral Contract A contract not in writing. Generally an oral contract is still a promise to perform, but you should never make such promises unless they are in writing. Different jurisdictions will have different interpretations, so try to avoid oral contracts. Reckless Disregard Being utterly careless of the consequences of one s actions and the effect they would have on others. This is generally considered to be a conscious act, particularly in regard to omission of facts, much like property defects. Statement A statement is defined as a declaration setting forth facts and particulars. A statement may be either oral or written. An untrue statement would most certainly be construed as misrepresentation, if not fraud. Making a false statement means concealing a material fact, making a fraudulent representation, or making use of a fraudulent document (forgery). Stigmatized Property A property in which, or about which, something has happened in the past that would affect its value, marketability, or appeal (e.g. a murder). Summary In this chapter, we reviewed key definitions contained in the BRRETA in order to better understand the document and avoid future violations. This basic knowledge of the real estate lexicon is a great base to build a career upon, and is also a great tool to shore up the sides of an existing career. Page 4

Chapter Two: The BRRETA Overview This chapter will focus on the different types of agency, as well as the duties and responsibilities that correspond with each type. This will also cover what an agent cannot do under each type of agency. You will be provided with a couple of scenarios that will require you to use what you know to determine the outcome. The chapter will conclude with a discussion on unlicensed employees. 58-30,102. Definitions 58-30,103. Written Agency Agreements The Everyday Broker Seller s Agent No-No s The Buyer s Agent More No-No s 58-30,104.Termination of Relationship 58-30,105.Compensation 58-30,109.Brokerage Firm Acting as Broker; Affiliated Licensees; Designated Agents; Rules and Regulations Brokerage Firms as Transaction Brokers Designated Agency 58-30,110.Real Estate Brokerage Relationships 58-30,111.Imputed Knowledge 58-30,112.Forms;Rules and Regulations 58-30,113.Transaction Broker; Obligations of; Disclosure of Information The Transaction Broker Scenario Number One Where the Guilt Lies 86-3-27 Transaction Broker Addendum Scenario Number Two The Guilty Party 86-3-23 Submission of Offer the Purchase Activities by Unlicensed Personnel Learning Objectives Upon completion of this chapter, the student will be able to: Define the terms presented in the definitions section and use them in reference to the BRRETA Identify the duties and responsibilities associated with each type of agency addressed in the chapter Analyze past scenarios in order to gain a clear understanding of what is and is not permitted under the BRRETA 58-30,102. Definitions Affiliated Licensee Any individual licensed as a salesperson or broker under the Kansas real estate brokers and salespersons license act who is employed by a broker or affiliated with a broker as an independent contractor. Agency Every relationship in which a broker acts for or represents another, by the latter s express written authority, in a real estate transaction. Agency also means the relationship in which a broker, by verbal authorization, acts for or represents any agency of the federal government in the sale of property owned by the federal agency. Agency Agreement A written agreement setting forth the terms and conditions of the relationship between a broker and the broker s client. Broker 1. An individual who is licensed as a broker under the Kansas real estate brokers and salespersons license act and who has an agency with a seller, buyer, landlord or tenant or acts as a transaction broker; or Page 5

2. A corporation, partnership, association or limited liability company of which the officers and members, or persons employed by or associated with the corporation, partnership, association or limited liability company, are licensed and which has an agency with a seller, buyer, landlord or tenant or acts as a transaction broker. 3. The term broker includes the broker s affiliated licensees except where the context would indicate otherwise. If an individual broker is indicated by the context, the term broker means the supervising broker as defined by the act. Brokerage Firm The business entity of a broker, whether a proprietorship, partnership, corporation, association or limited liability company. BRRETA The Brokerage Relationships in Real Estate Transactions Act. Buyer s Agent A broker who has an agency with a buyer. The term includes the broker s affiliated licensees. Buyer agency or buyer brokers have become more popular in recent years as buyers look for exclusive representation in a transaction. Regardless of the employment arrangement, it is still required that all parties be treated honestly and fairly. Buyer s Informed Consent Informed consent for broker to act as a transaction broker in the purchase of a property. The buyer shall sign this addendum prior to writing an offer to purchase the property. Client A seller, landlord, buyer or tenant who has an agency with a broker. Commission The Kansas Real Estate Commission. Confidential Information Information made confidential by statute, rule, regulation, or instructions from the client; personal information about the client which might place the other party at an advantage over the client, unless the information is made public or becomes public by the words or conduct of the client to whom the information pertains, or from a source other than the licensee. Customer A seller, landlord, buyer or tenant in a real estate transaction in which a broker is involved, but who has not entered into an agency with the broker. Designated Agent A licensee affiliated with a broker who has been designated by the broker, or the broker s duly authorized representative, to act as the agent of a broker s buyer or seller client to the exclusion of all other affiliated licensees. Dual Agent A dual agent is one who represents more than one party in a transaction. The agent has a fiduciary responsibility to both parties. The nature of the relationship prohibits the agent from acting exclusively for one or the other principal (the buyer or seller). The agency can only be established by mutual consent of both principals. *NOTE TO REMEMBER* DUAL AGENCY IS ILLEGAL IN KANSAS! Landlord s Agent A broker who has entered into an agency with a landlord. The term includes the broker s affiliated licensees. Licensee Any person licensed under the Kansas real estate brokers and salespersons license act as a broker or salesperson. Ministerial Acts Those acts that a licensee may perform for a person that are informative in nature and do not rise to the level of active representation on behalf of a person. Examples of these acts include, but are not limited to: Responding to telephone inquiries by consumers as to the availability and pricing of brokerage services; Page 6

Responding to telephone inquiries concerning the price or location of property; Attending an open house and responding to consumers questions about the property; Setting an appointment to view property; Responding to questions from consumers who walk into a licensee s office concerning brokerage services offered on particular properties; Accompanying an appraiser, inspector, contractor or similar third party on a visit to a property; Describing a property or the property s condition in response to a person s inquiry; or Referral to another broker or service provider. Qualified Third Party A federal, state or local governmental agency or any person whom the broker, the affiliated licensee or a party to the real estate transaction reasonably believes has the expertise necessary to meet the industry standards of practice for the type of inspection or investigation that has been conducted by the third party in order to prepare a written report. Seller s Agent A broker who has an agency with a seller. The term includes the broker s affiliated licensees and subagents. Seller s Informed Consent Permission for a broker to act as a transaction broker in the sale of the property to a buyer. The seller shall sign this addendum prior to signing the contract. Statutory Agent A seller s agent, a buyer s agent, a landlord s agent, a tenant s agent or a designated agent in any real estate transaction. Tenant s Agent A broker who has an agency with a prospective tenant. The term includes the broker s affiliated licensees. Transaction Broker A broker who assists one or more parties with a real estate transaction without being an agent or advocate for the interests of any party to such transaction. The term includes the broker s affiliated licensees. Matching drop down Match the definition with the appropriate term. A seller, landlord, buyer or tenant who has an agency with a broker A seller, landlord, buyer or tenant in a real estate transaction in which a broker is involved, but who has not entered into an agency with the broker. A broker who assists one or more parties in a transaction without being an agent for the interests of any party. An agent that has been appointed by a broker to represent either the buyer or the seller in a transaction. An agent who represents more than one party in the same transaction. Client Customer Transaction Broker Designated Agent Dual Agent 58-30,103. Written Agency Agreements The Everyday Broker Except when acting as a transaction broker or solely as a seller, buyer, landlord or tenant, a broker shall act only as a statutory agent in a real estate transaction. A licensee shall not act as a dual agent or in a dual capacity of agent and undisclosed principal in any transaction. A broker may work with a single party in separate transactions pursuant to different relationships including, but not limited to: selling one property as a seller s agent and working with that seller in buying another property as a buyer s agent if the broker complies with this act in establishing the relationships for each transaction. a broker who has been working with a seller, landlord, buyer or tenant as a transaction broker may act as an agent for the seller, landlord, buyer or tenant if the broker complies with this act in establishing the agency relationship. Page 7

A broker may be engaged as a transaction broker by oral or written agreement with the seller, landlord, buyer or tenant. A broker shall be considered a transaction broker unless: an agency relationship between the broker and the party to be represented is established pursuant to this section; or a broker works with a buyer or tenant as a subagent of the seller or landlord by accepting an offer of subagency. To establish an agency relationship with a buyer or tenant, a broker shall enter into a written agency agreement with the party to be represented no later than the signing of an offer to purchase or lease. An agency agreement shall set forth the terms and conditions of the relationship, including a fixed date of expiration, any limitation on the duty of confidentiality and the terms of compensation, and shall refer to the duties and obligations, and amendments thereto. The agreement shall be signed by the party to be represented and by the broker or a licensee affiliated with the broker. A copy of the agreement shall be furnished to the client at the time the client signs the agreement. If, at the time the client signs the agreement, the agreement is not signed by the broker or a licensee affiliated with the broker, the broker or a licensee affiliated with the broker shall furnish a copy of the agreement to the client within a reasonable time after the agreement is signed by the broker or a licensee affiliated with the broker. An agency agreement with a seller or landlord shall include any potential for the following: for the seller s agent or landlord s agent to act as a transaction broker; for an affiliated licensee to act as a designated agent for the buyer and the designated agent s supervising broker or branch broker, and an affiliated licensee if applicable, to act as a transaction broker; or for the broker to designate an affiliated licensee to act as the designated agent for the seller on the broker s personal listing An agency agreement with a buyer or tenant shall include any potential: for the buyer s agent or tenant s agent to act as a transaction broker; or for an affiliated licensee to act as a designated agent for the seller and the designated agent s supervising broker or branch broker, and an affiliated licensee if applicable, to act as a transaction broker. An agency agreement shall not contain an authorization for the broker to sign or initial any document on behalf of the broker s client in a real estate transaction, or authorization for the broker to act as attorney-infact for the client. An agency agreement with a seller shall not provide that the broker s commission be based on the difference between the gross sales price and the net proceeds to the owner. The broker shall not assign, sell or otherwise transfer a written agency agreement to another broker without the express written consent of all parties to the original agreement. Seller s Agent The seller s agent represents the seller only, so the buyer may be either unrepresented or represented by another agent. The seller s agent is responsible for performing the following duties: 1. promoting the interests of the seller with the utmost good faith, loyalty, and fidelity 2. protecting the seller s confidences, unless disclosure is required 3. presenting all offers in a timely manner 4. advising the client to obtain expert advice as to material matters about which the licensee knows but the specifics of which are beyond the expertise of the licensee; 5. accounting for all money and property received 6. disclosing to the seller all adverse material facts about the buyer that the agent knows 7. complying with any applicable federal, state and local laws, rules and regulations and ordinances, including fair housing and civil rights statutes and rules and regulations 8. disclosing to the buyer all adverse material facts actually known by the agent, including: environmental hazards affecting the property that are required to be disclosed Page 8

the physical condition of the property any material defects in the property or in the title to the property any material limitation on the seller s ability to complete the contract The seller s agent has no duty to: conduct an independent inspection of the property for the benefit of the buyer independently verify the accuracy or completeness of any statement by the seller or any qualified third party A broker intending to establish an agency relationship with a seller or landlord must enter a written agency agreement with the party to be represented, prior to the licensee engaging in any of the aforementioned acts. A licensee shall not contact the seller or landlord or negotiate a sale, exchange or lease of real estate directly with a seller or landlord if the licensee knows that the seller or landlord has an agency agreement granting an exclusive right to sell or exclusive agency to another broker. A buyer s or tenant s agent or subagent may present an offer to the seller or landlord if the seller s or landlord s agent is present. Except as provided in the above section, a seller s or landlord s agent is not required to disclose to a client or customer information relating to the physical condition of the property if a written report regarding the physical condition of the property has been prepared by a qualified third party and provided to the client or customer. A seller s or landlord s agent shall disclose to the client or customer any facts actually known by the licensee that were omitted from or contradict any information included in a written report. In performing an investigation or inspection and in making a disclosure in connection with a real estate transaction, a licensee shall exercise the degree of care expected to be exercised by a reasonably prudent person who has the knowledge, skills and training required for licensure as a broker or salesperson. A seller s or landlord s agent may provide assistance to the customer (buyer) by performing ministerial acts. Performing ministerial acts for the customer shall not be construed as violating the brokerage firm s agency with the seller or landlord and shall not be construed as forming an agency with the customer. A seller s or landlord s agent may show alternative properties not owned by the client to prospective buyers or tenants and may list competing properties for sale or lease without breaching any duty or obligation to the client. A seller or landlord may agree in writing with a seller s or landlord s agent that the broker may offer sub agency and pay compensation to other brokers. A seller or landlord may agree in writing with a seller s or landlord s agent that the broker may offer to cooperate with a buyer s or tenant s agent or to cooperate with and pay compensation to a buyer s or tenant s agent. A seller or landlord may agree in writing with a seller s or landlord s agent that the broker may offer to cooperate with a transaction broker or to cooperate with and pay compensation to a transaction broker. No-No s A licensee shall not solicit an agency agreement from a seller or landlord if the licensee knows that the seller or landlord has, with regard to the property, an agency agreement granting an exclusive right to sell or exclusive agency to another broker. A broker intending to establish an agency relationship with a seller or landlord must enter a written agency agreement with the party to be represented, prior to the licensee engaging in any of the aforementioned acts. A licensee shall not contact the seller or landlord or negotiate a sale, exchange or lease of real estate directly with a seller or landlord if the licensee knows that the seller or landlord has an agency agreement granting an exclusive right to sell or exclusive agency to another broker. A buyer s or tenant s agent or subagent may present an offer to the seller or landlord if the seller s or landlord s agent is present. A seller s or landlord s agent shall not be liable for punitive or exemplary damages for the licensee s failure to perform any of the duties set forth in this section, unless such failure is shown by clear and convincing evidence that the licensee acted toward the plaintiff with willful conduct, wanton conduct, fraud or malice. Page 9

The Buyer s Agent The buyer s agent represents the buyer only, so the seller may be either unrepresented or represented by another agent. The buyer s agent is responsible for performing the following duties: promoting the interests of the buyer with the utmost good faith, loyalty, and fidelity protecting the buyer s confidences, unless disclosure is required presenting all offers in a timely manner accounting in a timely manner for all money and property received; accounting in a timely manner for all money and property received; complying with any applicable federal, state and local laws, rules and regulations and ordinances, including fair housing and civil rights statutes or rules and regulations. advising the buyer to obtain expert advice accounting for all money and property received disclosing to the buyer all adverse material facts about the property that the agent knows disclosing to the seller all adverse material facts actually known by the agent, including all material facts concerning the buyer s financial ability to perform the terms of the transaction The buyer s agent has no duty to: conduct an independent investigation of the buyer s financial condition for the benefit of the seller independently verify the accuracy or completeness of statements made by the buyer or any qualified third party The licensee may negotiate the sale, exchange or lease of real estate directly with the buyer or tenant with the informed consent of the buyer or tenant. The informed consent shall be evidenced by a consent agreement signed by the buyer or tenant prior to any such direct negotiation. The consent agreement shall acknowledge the buyer or tenant agency agreement and that the buyer or tenant may be liable for compensation under the terms of the agency agreement. A buyer s or tenant s agent shall disclose to the client or customer any facts actually known by the licensee that were omitted from or contradict any information included in a written report. In performing an investigation or inspection and in making a disclosure in connection with a real estate transaction, a licensee shall exercise the degree of care expected to be exercised by a reasonably prudent person who has the knowledge, skills and training required for licensure as a broker or salesperson. A buyer s or tenant s agent may provide assistance to the seller or landlord by performing ministerial acts. Performing ministerial acts for the seller or landlord shall not be construed as violating the brokerage firm s agency with the buyer or tenant and shall not be construed as forming an agency with the seller or landlord. A buyer s or tenant s agent may show properties in which the client is interested to other prospective buyers or tenants without breaching any duty or obligation to the client. This subsection is intended to allow a buyer s or tenant s agent to show competing buyers or tenants the same property and to assist competing buyers or tenants in attempting to purchase or lease a particular property. A buyer or tenant may agree in writing with a buyer s or tenant s agent that the agent may receive compensation from a seller s or landlord s agent or from a transaction broker. More No-No s A buyer s or tenant s agent shall not be liable for punitive or exemplary damages for the licensee s failure to perform any of the duties set forth in this section, unless such failure is shown by clear and convincing evidence that the licensee acted toward the plaintiff with willful conduct, wanton conduct, fraud or malice. A licensee shall not solicit an agency agreement from a buyer or tenant if the licensee knows that the buyer or tenant has a written agency agreement granting exclusive representation to another broker. A licensee shall not induce any party to break any agency agreement. If a licensee knows that a buyer or tenant has an agency agreement granting exclusive representation to another broker, the licensee shall not contact the buyer or Page 10

tenant and shall not initiate negotiations for the sale, exchange or lease of real estate with the buyer or tenant. Quiz A licensee cannot solicit an agency agreement from a seller, if he/she knows that the seller has an agency agreement with another broker. Exclusive An exclusive agency agreement does not allow for another broker to swoop in and steal business away from the broker with the exclusive agency. This is why it is illegal for a broker to even solicit an agency agreement with a seller when the broker knows that the seller is already engaged in an exclusive agency agreement with another broker. T or F: As a part of a seller s duty of reasonable skill and care, the agent must be ready to conduct an independent inspection for the buyer. The seller s agent has no duty towards the buyer to conduct an independent inspection on the buyer s behalf. 58-30,104. Termination of Relationships The agency relationship agreed upon shall commence at the time that the client engages the broker, and shall continue until: 1. A transaction is closed according to the agreement of the parties; or if a transaction is not closed according to the agreement of the parties, by either of the following: any date of expiration agreed upon by the parties in the agency agreement or in any amendments thereto; or any authorized termination of the relationship. Except as otherwise agreed in writing, a broker (including transaction brokers) owes no further duties to the client after termination, expiration, or the closing of a transaction according to the agreement of the parties, except: 1. To account for all moneys and property relating to the engagement; and 2. To keep confidential all confidential information received during the course of the engagement, unless: the client permits the disclosure by subsequent word or conduct; such disclosure is required by law; or the information becomes public from a source other than the broker. 58-30,105. Compensation In any transaction, the broker s compensation may be paid by the seller, the landlord, the buyer or the tenant. A broker may be compensated by more than one party for services in a transaction if the parties consent in writing to the multiple payments at or before the time of entering into a contract to buy, sell or lease. A broker may: pay a commission or compensation to any licensee affiliated with the broker for performing services under this act; with the written agreement of the seller, landlord, buyer or tenant, share a commission with another broker who acted as a transaction broker, a subagent or an agent of the other party; and pay a referral fee to a person who is licensed as a broker under the real estate brokers and salespersons license act or under the law of another jurisdiction, provided that written disclosure is made to the client of any financial interest that the broker has in the brokerage firm receiving the referral fee. 58-30,109. Brokerage Firm Acting as a Transaction Broker; Affiliated Licensees; Designated Agents; Rules and Regulations Brokerage Firms as Transaction Brokers In the absence of a designated agent, a brokerage firm may act as a transaction broker on an in-house transaction with the informed consent of the seller client and the buyer client. The informed consent shall be evidenced by a transaction broker addendum to the agency agreements and shall be signed by the buyer prior to writing the offer and by the seller prior to signing the contract. Designated Agency A broker may personally, or through the broker s duly Page 11

authorized licensed representative, specifically designate, in a written agency agreement, one or more affiliated licensees who will be acting as legal agent of the buyer client or seller client to the exclusion of all other affiliated licensees. If a buyer client of a designated agent wants to see a property which was personally listed by the broker, the broker, with the written consent of the seller, may specifically designate an affiliated licensee who will act as legal agent of the seller client to the exclusion of all other affiliated licensees. The written consent of the seller shall contain the name of the prospective buyer and shall acknowledge that the broker shall act as a transaction broker regarding any transaction with the buyer. The written consent of the seller shall be signed prior to the presentation of any offer. In any transaction involving a designated agent, the supervising broker of the designated agent shall act as a transaction broker unless both buyer and seller are represented by designated agents and the designated agents are supervised by the same branch broker. In that case, the branch broker shall act as a transaction broker. The supervising broker, or branch broker if applicable, may also appoint an affiliated licensee to act in the transaction as a transaction broker. A designated agent may disclose to the designated agent s supervising broker, or branch broker if applicable, and to an affiliated licensee appointed as a transaction broker, confidential information of a client for the purpose of seeking advice or assistance for the benefit of the client in regard to a transaction. If a buyer client of a designated agent wants to see a property owned by a seller client of the designated agent, the designated agent may act as a transaction broker with the informed consent of the seller client and buyer client. The informed consent shall be evidenced by a transaction broker addendum to the agency agreements and shall be signed by the buyer prior to writing the offer and by the seller prior to signing the contract. 58-30,110. Real Estate Brokerage Relationships The Commission shall adopt a rule and regulation prescribing language which describes a seller s agent, a buyer s agent and a transaction broker for inclusion in a brochure entitled Real Estate Brokerage Relationships. Except as provided in the following section, a licensee shall furnish a prospective buyer or seller with the brochure at the first practical opportunity. A licensee is not required to provide a copy of the brochure to a prospective buyer or seller in the following instances: the licensee is acting solely as a principal and not as an agent for another; the communication from the licensee is a solicitation of business; the transaction is regarding the sale of commercial property or the sale of residential property of more than four units; the transaction is regarding the sale of property by public auction; the licensee is only performing ministerial acts; or the customer or client has already received the brochure from the licensee s brokerage firm. Acknowledgment of receipt of the brochure by the seller and buyer shall be included in any contract for sale. Except for instances when a licensee is providing information through an advertisement or other form of public notice of the licensee s representation of a client, a licensee representing a client in a proposed real estate transaction shall disclose the representation at the time of the initial contact with another licensee representing the other party. The disclosure may be made orally or in writing. Each time a licensee is contacted by another licensee who requests permission to show property to a prospective buyer, the licensee shall inquire whether or not the licensee represents the buyer. The disclosure of the brokerage relationship between all licensees involved and the seller and buyer shall be included in any contract for sale and in any lot reservation agreement. 58-30,111. Imputed Knowledge A client or customer shall not be liable for a misrepresentation or omission by the client s statutory agent or the transaction broker arising out of the agency or transaction broker agreement unless the client or customer knew of the misrepresentation or omission. Page 12

A statutory agent or transaction broker shall not be liable for a misrepresentation or omission by the agent s client or the transaction broker s customer arising out of the agency or transaction broker agreement unless the licensee knew of the misrepresentation or omission. A statutory agent or transaction broker shall not be liable for an innocent or negligent misrepresentation in information provided to the seller or landlord or to the buyer or tenant if the licensee does not have personal knowledge of the error, inaccuracy or omission that is the basis for the claim of misrepresentation. 58-30,112. Forms; Rules and Regulations The Commission shall provide sample forms of agency agreements and, by rules and regulations, provide such other prohibitions, limitations and conditions relating thereto as the Commission may prescribe. Quiz Agent Mike is representing Alex in the sale of Alex s home. Alex tells Mike that a pest inspection was done when no inspection actually took place. Mike tells the buyers that a recent inspection cleared the property of pests and the buyers bought the home only to find out that the inner walls are infested with rodents. Is Mike guilty of misrepresentation? Yes or no Mike relayed incorrect information to the buyer and we know from our definitions that this is unintentional misrepresentation. Agent Brandi is representing Rich in the sale of Rich s home. Rich informs the buyer that a new roof was recently put on the property. However, the roof is old and leaky. The buyers make the purchase and later discover the leaky roof. Would agent Brandi be guilty of misrepresentation in this case? Yes or No Kansas law does not hold an agent liable for a misrepresentation that is made by a seller, if the agent is not aware of the misrepresentation. The difference between the two scenarios that we showed you is the action by the agent. In the first scenario, Mike was the one to relay the information to the buyer and would be held responsible. This is because an agent must take ownership of his/her statements and do everything necessary to make sure that any information given to a party is accurate. 58-30,113. Transaction Broker: Obligations of; Disclosure of Information. The Transaction Broker The transaction broker is not an agent for either party, so the transaction broker does not advocate the interests of either party. The transaction broker is responsible for performing the following duties: 1. exercising reasonable skill and care 2. presenting all offers in a timely manner 3. advising the parties regarding the transaction 4. suggesting that the parties obtain expert advice 5. accounting for all money and property received 6. keeping the parties fully informed 7. assisting the parties in closing the transaction 8. disclosing to the buyer all adverse material facts actually known by the transaction broker, including: environmental hazards affecting the property that are required to be disclosed the physical condition of the property any material defects in the property or in the title to the property any material limitation on the seller s ability to complete the contract 9. disclosing to the seller all adverse material facts actually known by the transaction broker, including all material facts concerning the buyer s financial ability to perform the terms of the transaction The transaction broker protects the confidences of both parties: 1. if the transaction is the sale of one to four residential units or the sale of agricultural real estate, the following information shall not be disclosed by a transaction broker without the consent of all parties: that a buyer is willing to pay more than the purchase price offered for the property that a seller is willing to accept less than the asking price for the property Page 13

what the motivating factors are for any party buying or selling the property that a seller or buyer will agree to financing terms other than those offered; or any information or personal confidences about a party to the transaction which might place the other party at an advantage over the party unless the disclosure is required by law or failure to disclose such information would constitute fraudulent misrepresentation; 2. if the transaction is the sale or lease of commercial property or residential property of more than four units, the transaction broker shall not disclose any information or personal confidences about a party to the transaction which might place the other party at an advantage unless failure to disclose such information would constitute fraudulent misrepresentation. The transaction broker may disclose the following information unless prohibited by the parties: that a buyer or tenant is willing to pay more than the purchase price or lease rate offered for the property that a seller or landlord is willing to accept less than the asking price or lease rate for the property what the motivating factors are for any party buying, selling or leasing the property; or that a seller, buyer, landlord or tenant will agree to financing terms other than those offered. The transaction broker has no duty to: conduct an independent inspection of the property for the benefit of any party conduct an independent investigation of the buyer s financial condition independently verify the accuracy or completeness of statements made by the seller, buyer, or any qualified third party A transaction broker shall disclose to the party any facts actually known by the transaction broker that were omitted from or contradict any information included in a written report. Except as provided in the previous paragraph, the transaction broker is not required to disclose to any party to the transaction information relating to the physical condition of the property if a written report regarding the physical condition of the property has been prepared and provided by a qualified third party. A transaction broker shall disclose to the party any facts actually known by the transaction broker that were omitted from, or contradict any information included in, a written report. In the case that the transaction broker advised the parties to obtain expert advice as to material matters about which the transaction broker knows but the specifics of which are beyond the expertise of the transaction broker, no cause of action for any person shall arise against the transaction broker pertaining to such material matters. In any transaction regarding the sale or lease of real estate other than commercial property or residential property of more than four units, the following information shall not be disclosed by a transaction broker without the consent of all parties: 1. Except as provided in the above paragraph, in any transaction regarding the sale or lease of commercial property or residential property of more than four units, the following information may be disclosed by a transaction broker unless prohibited by the parties: That a buyer or tenant is willing to pay more than the purchase price or lease rate offered for the property; that a seller or landlord is willing to accept less than the asking price or lease rate for the property; what the motivating factors are for any party buying, selling or leasing the property; or that a seller, buyer, landlord or tenant will agree to financing terms other than those offered. 2. Any information or personal confidences about a party to the transaction which might place the other party at an advantage over the party shall not be disclosed unless the disclosure is required by law or failure to disclose such information would constitute fraudulent misrepresentation. A transaction broker has no duty to conduct an independent inspection of the property for the benefit of any party to the transaction and has no duty to independently verify the accuracy or completeness of statements made by the seller, landlord, buyer, tenant or qualified third party inspectors. A transaction broker has no duty to conduct an independent investigation of the buyer s or tenant s financial condition or to verify the accuracy or completeness of any statement made by the buyer or tenant. Page 14

A transaction broker may do the following without breaching any obligation or responsibility: Show alternative properties not owned by the seller or landlord to a prospective buyer or tenant; list competing properties for sale or lease; show properties in which the buyer or tenant is interested to other prospective buyers or tenants; and serve as a single agent or subagent for the same or for different parties in other real estate transactions. Information known to a transaction broker shall not be imputed to any party to the transaction or to any licensee within the brokerage firm engaged as a transaction broker. A transaction broker may cooperate with other brokers or cooperate and pay compensation to other brokers, but shall not engage any subagents. Here s a scenario that might help to clear up any questions that you may have about what the transaction broker can and cannot do. This scenario is based on an actual event that resulted in disciplinary action against the agent. Scenario Number One David is a salesperson employed by Cactus Jack s Realty. As the supervising broker, Cactus Jack has set a policy that requires all of his agents to do their personal and investment banking through his firm. David has formed a corporation with three of his friends, who are unlicensed, so that they can make enough money to take a cruise. David knows that he has to list and buy properties through Cactus Jack s firm, so after finding and fixing up a property for resale, David listed it with Cactus Jack s Realty. David found a buyer and later closed the sale. Some months later, an auditor from the Kansas Real Estate Commission showed up at Cactus Jack s to perform an audit. While going through the files, the auditor found the records of David s property sale. The contract in the transaction contained a disclosure to the buyers that David was one of the sellers and that he indeed had a real estate license in the state of Kansas. The brokerage relationship disclosure section of the contract stated that the listing agent was functioning as a transaction broker and the selling agent was functioning as a buyer s agent. The closing statement indicated that a 3 percent commission was paid to the real estate firm that had produced the buyer and that another 3 percent was granted to the firm that listed the property. Now think about how exactly David had violated the BRRETA? David disclosed the fact that he was a licensed realtor to the buyer David claimed to be a transaction broker while acting as the listing agent He did not violate BRRETA David claimed to be a transaction broker while acting as a listing agent. This cannot be. A transaction broker does not represent either party, while a listing agent represents the seller with all duties of agency owed. Where the Guilt Lies David was in violation of the BRRETA because essentially he tried to do the impossible. As we learned earlier in the chapter, the BRRETA defines a transaction broker as not being an agent for either party, so the transaction broker does not advocate the interests of either party involved. It was impossible for David to act as the transaction broker and the listing agent. 86-3-27 Transaction Broker Addendum A transaction broker addendum (TBA) form is used when a firm is representing both the buyer and a seller in a potential transaction. As you know, dual agency is illegal in Kansas. So, in order for a firm in Kansas to continue representing both the buyer and seller, an amendment must be made to the agency relationships. That s why we have transaction broker addendums. There are different types of TBAs and we will cover them in this section. Each broker shall use a transaction broker addendum form (TBA-RES) approved by the commission on April 10, 1997, which is hereby adopted by reference, to obtain the informed consent of a seller client and a buyer client for the broker to act as a transaction broker, on a contemplated transaction between the buyer and the seller, for the sale of a residential property of four or fewer units. Each broker shall use a transaction broker adden- Page 15