CHAPT 18

Agency Relationships and Disclosures

Seller Agency

  • Definition: Seller agency is identified as the most prevalent form of agency relationship in real estate.

Subagency

  • Description: Subagency is considered to be one of the most complex forms of agency relationships.

  • Creation of Subagency:

    • Express Subagency: Created through a written agreement.

    • Implied Subagency: Established through actions or verbal agreements.

  • Local MLS Structure:

    • Subagency is commonly formed within the local Multiple Listing Service (MLS), but it is not confined to this structure.

    • It can also be offered by cooperating brokers outside the MLS system.

  • Responsibilities of Subagents:

    • When a cooperating broker accepts a subagency offer, they hold identical fiduciary responsibilities to those of the listing broker and must prioritize the seller's best interests.

    • Subagents are not acting in the best interests of the buyers they show properties to, rather they must deal honestly and ethically with all potential buyers.

  • Disclosure Obligations:

    • Subagents must disclose any pertinent information that may impact the property's value to their buyer customers.

Dual Agency

  • Definition: Dual agency occurs when a real estate firm or licensee represents both parties in a transaction — that is, the seller and buyer or landlord and tenant.

  • Disclosure Requirements:

    • Dual agency must be disclosed to both the buyer and the seller.

    • Both parties must provide written consent to the dual agency relationship.

  • Undisclosed Dual Agency:

    • If dual agency is not disclosed and agreed upon in writing, it is considered undisclosed dual agency.

    • This situation is a breach of fiduciary responsibilities and often violates state law.

Designated Agency

  • Explanation: Designated agency is a method to manage dual agency situations effectively.

  • Process:

    • A broker can designate one or more licensees exclusively to represent the seller or landlord, and different licensees to represent the buyer or tenant within the same transaction.

  • Disclosure and Consent:

    • This arrangement requires disclosure to both parties and must have written consent from both buyer and seller.

  • Protection of Client Interests:

    • While the broker holds dual agency status, this designation allows for individual representation that safeguards each client's interests.

Single Agency Relationship

  • Definition: In a single agency relationship, an agent represents only one party (either buyer or seller) within a transaction.

  • Duties:

    • The agent owes fiduciary duties solely to one principal.

    • The agent can provide advice and services specifically to this client, whereas all other parties are considered customers and receive services under the principles of honesty and fair dealing.

  • Seller Agency Agreement:

    • If an agent has an agency agreement with the seller, they become the seller's agent (the seller is the client/principal).

    • The agency relationship is formalized via a listing agreement.

  • Buyer Agency Agreement:

    • If an agent has an agency agreement with a buyer, they become the buyer's agent (the buyer is the client/principal).

    • This is also referred to as buyer brokerage.

    • The agent is accountable solely to the buyer and must inform the listing broker of their representation.

  • Exclusive Right to Represent Agreement:

    • If a buyer desires client-level services, they must sign this document to formalize the agency relationship.

Termination of Agency Relationships

  • Conditions for Termination:

    • Performance completion

    • Expiration of the agreement term

    • Mutual agreement to terminate

    • Termination by one party

  • Involuntary Termination Factors:

    • Death or incapacity of either agent or client

    • Abandonment of the agent

    • Condemnation of property

    • Destruction of property (fire, vandalism, natural disaster)

    • Client’s renunciation

    • Breach of the contract

    • Agent's bankruptcy

    • Revocation of agent’s license

Professional Conduct

  • Importance of Good Manners:

    • Demonstrating courtesy and respect is crucial in dealings with clients, fellow agents, and other professional stakeholders in real estate transactions.