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Agency Relationships: Fiduciary Duties | Real Estate Prep Exam Videos - YouTube
Channel: The Real Estate Classroom
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everybody my name is Paul the Chesky and
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welcome to the real estate classroom
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YouTube channel real quick before we get
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started give this video a thumbs up hit
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that red subscribe button click on that
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notification bell and share this video
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with somebody that's studying for their
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real estate licensing exam alright in
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today's video and probably the next two
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or three videos we're discussing a key
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concept concepts that you need to know
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for your real estate licensing exam
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it's called agency relationships and
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today's video specifically we're going
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to discuss as part of those agency
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relationships who the parties to a real
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estate transaction are and the fiduciary
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duties that each party owes each other
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so we have to understand this concept
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because in the next couple of videos
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we're actually going to talk about the
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different types of agency relationships
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and who are a part of those
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relationships and so forth but we got to
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start today with identifying who is who
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so here are the common parties involved
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in a transaction the first one is what
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we call the agent which is a real estate
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agent or sometimes called a licensee
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with two E's a licensee and agent real
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estate agent or a licensee they are the
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exact same person the only thing is you
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have to know as a student is your
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licensing exam can use these two terms
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interchangeably but they're the same
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person and it simply means that they
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have a real estate license that's it
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whether it's a broker's a salespersons
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or whatever your state has they are
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licensed they're a licensed real estate
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professional now the agent is kind of
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the core or the transaction from the
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agent they're gonna work with buyers
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sellers they're gonna work with tenants
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owners vendors then DS those type of
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things but the agent is going to owe or
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the licensees going to owe what's called
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fiduciary duties if I do she arey duties
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or sometimes called fiduciary
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obligations to their client and I kind
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of like to preface this by using the
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example of the attorney client the
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attorney is the licensed attorney in
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that state and they are representing
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their client right so the agent those
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fiduciary duties to their client or
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sometimes called a principal now once
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again client principal they are the same
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person all right you have to know that
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for your exam so the agent represents
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the client and they owe the client
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certain fiduciary duties right I know
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I'm kind of beating a dead horse here
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but I I like repetition to drive home
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the concept here the agent owes
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fiduciary duties to their client or
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principal client or principal are that's
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the party that the agent represents now
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what are those fiduciary duties that
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that agent owes to the client well
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there's six of them specifically that I
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want to talk about and the first one is
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called loyalty loyalty loyalty simply
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means that the agent is going to put the
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clients interest first they're gonna put
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the clients interest above their own or
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somebody else's so loyalty is number one
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they're going to remain loyal in that
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transaction to that client number two
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the second fiduciary duty is obedience
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now obedience means that the agent is
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going to carry out the wishes the lawful
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wishes and requests of their clients so
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if the client wants them to write up an
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extremely low ball offer on a listing
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well if the agent is representing a
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buyer client and the buyer client says I
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want to offer twenty five thousand
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dollars on a home that's for sale at a
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price of two hundred and fifty thousand
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then they have an obligation under the
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obedience provision of fiduciary duties
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to write that offer number three
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disclosure that is the third fiduciary
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duty
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not only does the the licensee or the
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agent have the requirement to disclose
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to everyone involved in the transaction
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of who the agent represents but it also
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falls under they have to disclose
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anything that's required by law so maybe
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there is a adverse material fact about
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the property
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maybe there's hidden termite damage
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that's been discovered there would be an
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obligation to disclose that to their
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client and in fact there'd be an
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obligation to disclose that to non
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clients as well but one of the fiduciary
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duties is disclosure number four skill
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as a highly trained licensed real estate
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professional you have a set of skills
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that the average person doesn't and
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you're required to use that skill to
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represent the best interest of your
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client all right now remember client or
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principal mean the same thing in a
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client or principal can be anyone in the
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transaction so your client as it might
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be a buyer a seller a landlord a tenant
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vendor it's all of those alright just
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depends on what capacity you're
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representing that client number five
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confidentiality you have to keep things
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confidential what's an example of
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confidential information that you as the
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agent might have to keep keep secret
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give you an example let's say that the
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the seller you represent you represent a
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seller as a client and the reason the
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seller is moving is they're getting a
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divorce that is a piece of information
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that a buyer might want to know because
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that's going to definitely impact that
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initial offer because the buyer is going
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to say hey the the seller is in a
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desperate situation we might as well try
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to lowball the offer and see what
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happens so that can have an impact on
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the outcome of the transaction so that
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would be considered confidential
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information now the agent cannot
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disclose confidential information
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whatsoever
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legitimate
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lawful confident confidential
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information however if the seller wants
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that information to be made provided to
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anybody then with permission of the
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client you can release that confidential
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information there have been times when I
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personally listed homes where the
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sellers were getting a divorce and
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that's the reason they're selling and to
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spark some interest they decided to
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disclose that it's a divorce situation
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so please submit your offer and then
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they decided to deal with any lowball
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offers through the negotiation process
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but as an agent a licensee I could not
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disclose that information until I had
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permission of my client to do so now
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this confidential information as I said
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has to be number one has to be lawful so
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if there's something that is required to
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be disclosed so for example let's say
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that a buyer I represent the buyer I'm
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an agent and I discover that the buyer
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is having a hard time getting final
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approval for the loan that's germane to
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the transaction so I do have to disclose
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that to the listing agent even though
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the seller is not my client because it's
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not considered confidential information
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we'll talk about those type of scenarios
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in a different video a little bit more
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detailed the other thing to know about
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confidentiality it's perpetual even
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after the transaction is closed or been
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terminated if there's confidential
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things that I know about my client I can
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never disclose that without their
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permission number six and the last one
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here is accounting I have to account for
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any monies or anything like that that
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are sensitive information even that
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comes into my possession so things like
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earnest money security deposits rent
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money those type of things I have to i'd
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have to adhere to state law and
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processes and account for all that money
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in a lawful way so those are the
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fiduciary duties that I owe my client or
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principal in a real estate transaction
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in there are all right the next party I
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want to talk about is what we call a
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customer or sometimes called an
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unrepresented person
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in fact I've even seen some of the
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licensing exams column a third party
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again this can be like the client or
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principal this can be a buyer a seller
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an owner a tenant a vendor it doesn't
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matter it just means that I the licensee
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or agent I'm working with a customer
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that means they are not represented
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meaning I don't owe them the fiduciary
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duties that I owe a client but I still
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owe them certain duties all right I'll
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give you an example where this probably
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the most common let's say that I'm the
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listing agent and I have the sellers
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house up for sale the seller is my
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client and this person walks through my
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open house it says hey Paul I want to
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write up an offer can you do it and I
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say sure but guess what I have to
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disclose I represent the seller so I'm
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gonna be working with you as a customer
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now what does that mean well I owe you
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some certain duties I owe the client my
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seller client these these fiduciary
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duties but here's what I have to here's
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the duties I owe you all right number
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one is I have to disclose disclosure I'm
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gonna disclose to the club the customer
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here that that I represent the seller
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and the seller is my client that's the
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first thing number two all right number
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two I want to get it right here no
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misrepresentation no misrepresentation I
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cannot misrepresent any fact about that
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property all right in a way that what's
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gonna bolster my clients position I have
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to be truthful I either have to be
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truthful about the facts or if it falls
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under a confidential situation I have to
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say I can't disclose it because it's
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confidential information so I have to be
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truthful in you know if they ask about
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the age of the roof or that when the
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home was built or are there covenants or
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things like that
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number three the next duty that I owe a
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customer is present all offers
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I have to present all offers and I have
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to do so in a timely manner
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so the person that's coming through my
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open house they want to write up an
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offer well I'm gonna write it up and
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then I'm gonna present it in a timely
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manner to my client who is in our
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scenario here the seller number four
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provide good service good customer
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service I have an obligation to do that
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honest good customer service and the
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last one is provide information I have a
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duty to provide information not only
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about the house or things that are
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relevant to the transaction that aren't
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confidential information about my my
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client where we might see this is
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information so for example again about
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the house how many bedrooms how many
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bathrooms how many garage bays are there
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information about covenants and so forth
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but also let's say that the buyer that
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came through the open house they don't
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have a lender and they say hey Paul you
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know a couple of good lenders you could
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refer me to or you know and I need some
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information on a home warranty those are
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all things that I can provide a customer
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it's not if I do shiri duty it's just
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part of that good service and all right
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the last party I want to talk about here
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is called a transactional broker
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transactional broker and the reason I
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bring it up is because many students as
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of late has been saying that this has
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been on their licensing exam so what is
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a transactional broker well it involves
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an agent or a licensee and typically
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where we would see this is a seller is
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selling their home for sale by owner
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they have found their own buyer and they
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come to you as the licensee and say hey
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can you put the paperwork together and
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get this thing closed and you say great
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that's what I'm gonna do for X amount of
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dollars in the seller agrees that's the
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most common and a transactional broker
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simply means that you're doing the deal
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and all parties are customers so we have
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customer on customer so the buyer in our
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scenario the buyer and the seller are
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both customers that is the relation
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ship between the licensee and the buyer
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and the seller that means the agent does
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not owe any fiduciary duties to either
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one of these but they do owe these five
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duties to each one of them so they're
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basically just brokering the transaction
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real quickly remember in most stage
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transactional brokerage is illegal
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including here in Nebraska where I am
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typically in most states the agent has
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to represent at least one of the parties
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as a client and then they can hat treat
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the other one as a customer but in
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states that allow it this is where
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they're just transactional and and
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though parties are customers you're
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gonna continue study and check out this
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video right here and please do me a
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favor if you have not subscribed to the
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channel yet I appreciate it if you would
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click on the little circle to my left
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here I'll see you in the next video
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