Understanding Agency
It’s important to understand what legal
responsibilities your real estate salesperson
has to you and to other parties in the transactions.
Ask your salesperson to explain what type of
agency relationship you have with him or her
and with the brokerage company.
1. Seller's representative (also known as a
listing agent or seller's agent). A seller's
agent is hired by and represents the seller.
All fiduciary duties are owed to the seller.
The agency relationship usually is created by
a listing contract.
2. Subagent. A subagent owes the same fiduciary
duties to the agent's principal as the agent
does. Subagency usually arises when a cooperating
sales associate from another brokerage, who
is not representing the buyer as a buyer’s
representative or operating in a nonagency relationship,
shows property to a buyer. In such a case, the
subagent works with the buyer as a customer
but owes fiduciary duties to the listing broker
and the seller. Although a subagent cannot assist
the buyer in any way that would be detrimental
to the seller, a buyer-customer can expect to
be treated honestly by the subagent. It is important
that subagents fully explain their duties to
buyers.
3. Buyer's representative (also known as a
buyer’s agent). A real estate licensee
who is hired by prospective buyers to represent
them in a real estate transaction. The buyer's
rep works in the buyer's best interest throughout
the transaction and owes fiduciary duties to
the buyer. The buyer can pay the licensee directly
through a negotiated fee, or the buyer's rep
may be paid by the seller or by a commission
split with the listing broker.
4. Disclosed dual agent. Dual agency is a relationship
in which the brokerage firm represents both
the buyer and the seller in the same real estate
transaction. Dual agency relationships do not
carry with them all of the traditional fiduciary
duties to the clients. Instead, dual agents
owe limited fiduciary duties. Because of the
potential for conflicts of interest in a dual-agency
relationship, it's vital that all parties give
their informed consent. In many states, this
consent must be in writing. Disclosed dual agency,
in which both the buyer and the seller are told
that the agent is representing both of them,
is legal in most states.
5. Designated agent (also called, among other
things, appointed agency). This is a brokerage
practice that allows the managing broker to
designate which licensees in the brokerage will
act as an agent of the seller and which will
act as an agent of the buyer. Designated agency
avoids the problem of creating a dual-agency
relationship for licensees at the brokerage.
The designated agents give their clients full
representation, with all of the attendant fiduciary
duties. The broker still has the responsibility
of supervising both groups of licensees.
6. Nonagency relationship (called, among other
things, a transaction broker or facilitator).
Some states permit a real estate licensee to
have a type of nonagency relationship with a
consumer. These relationships vary considerably
from state to state, both as to the duties owed
to the consumer and the name used to describe
them. Very generally, the duties owed to the
consumer in a nonagency relationship are less
than the complete, traditional fiduciary duties
of an agency relationship.
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