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.
