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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