A principal instructs their agent to reject all offers below $800,000, but later becomes unavailable when a $795,000 offer is received. The agent knows the principal is under financial pressure. What authority does the agent have?

Q: What is the correct answer to: A principal instructs their agent to reject all offers below $800,000, but later becomes unavailable when a $795,000 offer is received. The agent knows the principal is under financial pressure. What authority does the agent have?

The correct answer is No authority to accept any offer below the principal's specified minimum. Option C correctly identifies that agents have no authority to accept offers below the principal's specified minimum. Under Australian agency law and the Property and Stock Agents Act in various states, agents must act within their express authority as defined in the agency agreement. The principal's clear instruction to reject offers below $800,000 creates a binding limitation that cannot be exceeded, regardless of circumstances or the agent's belief about what might benefit the principal.

Q: What background knowledge is needed for this Agency Practice question?

Agency authority in real estate is governed by state Property and Stock Agents Acts and common law agency principles. Express authority is specifically granted in the agency agreement, while implied authority covers actions reasonably necessary to fulfill the agent's role. Agents owe fiduciary duties to principals including loyalty, good faith, and acting within authority. Exceeding authority can result in breach of fiduciary duty, potential liability for unauthorized contracts, and disciplinary action. The agency relationship is strictly regulated to protect consumers and maintain professional standards in real estate transactions.

Q: What is a good way to remember the answer to this Agency Practice question?

STOP: Specific instructions Take Over Personal judgment. When a principal gives specific price instructions, these STOP the agent from using personal judgment about market conditions, financial circumstances, or what might be 'best' for the principal. The specific instruction creates a red STOP sign that cannot be ignored. When you see questions about agent authority and specific principal instructions, remember STOP - the specific instruction takes precedence over any personal judgment the agent might want to exercise, regardless of circumstances.

Q: What exam tip applies to this Agency Practice question?

Look for specific dollar amounts or clear instructions from principals. These create express authority limits that agents cannot exceed, regardless of circumstances or good intentions.

Q: How does this Agency Practice concept apply in Australian real estate practice?

A vendor instructs their agent to reject offers below $750,000 for their property, then travels overseas for three weeks. During this time, the market softens and a genuine buyer offers $740,000. Despite knowing the vendor needs to sell quickly due to financial commitments and that this might be the best offer available, the agent must reject the offer and attempt to contact the vendor for new instructions rather than accepting on their behalf.

Question

Agency PracticeAgent Principal RelationshipHARD

A principal instructs their agent to reject all offers below $800,000, but later becomes unavailable when a $795,000 offer is received. The agent knows the principal is under financial pressure. What authority does the agent have?

Answer Options

A

Accept the offer as it's close to the principal's indicated price

B

Negotiate the offer up to $800,000 then accept on behalf of the principal

C

No authority to accept any offer below the principal's specified minimum

D

Authority to accept based on the principal's apparent financial circumstances