Section Four: Agency in Michigan

Clerical Tasks

(aka ministerial) defined as factual-based tasks that don't require you to use your judgment as a licensee. Further, you'll also need to disclose any material facts about the transaction to a customer, as well as treat that person with honesty and professional integrity. And, of course, you'll need to properly account for any money or property you receive from a customer.

Buyer's Agent

A buyer's agent is a licensee acts on behalf of, and owes fiduciary duties to, a buyer, tenant, or lessee. Buyer agents and sub-agents are required to disclose to their buyer client any information known about the seller which may benefit the buyer.

Dual Agent

A dual agent is a licensee who represents both the buyer and seller in the same transaction. A dual agent can't perform all the fiduciary duties that a buyer's or seller's agent performs. For example, a licensee can't disclose all known information to one client if it was provided by the other client. That could breach the duty of confidentiality owed to one client. It could also give the perception of putting loyalty owed to one client ahead of another. Dual agents mustn't act in a way that puts one client at an advantage to the detriment of the other client. Dual agents do still have a duty to disclose material facts related to the property or transaction as required by law. Licensees can only act as a dual agent with written, informed consent from both the buyer and the seller.

Seller's Agent

A seller's agent is a licensee who acts on behalf of, and owes fiduciary duties to, a seller. Sellers can permit the seller's agent to cooperate with sub-agents, buyer's agents, and transaction coordinators. A sub-agent is a licensee who agrees to work with the listing agent and acts on the seller's behalf. Seller agents and sub-agents are required to disclose to their seller client any information known about the buyer which may benefit the seller.

Transaction Coordinator

A transaction coordinator is a licensee who isn't an agent of either party to the transaction. The coordinator is considered a neutral party. If a licensee is representing a seller, that same licensee can't act as a transaction coordinator for the buyer, and vice versa. A transaction coordinator doesn't represent any party in the transaction. Licensees can act as a transaction coordinator upon written notice to all transaction parties. Because of a transaction coordinator's neutral stance, he or she can't be involved in any contract negotiations between the parties. The coordinator essentially brings the two parties together, then let's the parties hash out the details of the transaction.

implied agency

An agency relationship may be created without anything in writing, or even without verbal agreement which exists when you act on behalf of a consumer in such a way that the consumer believes you are their agent Follow these guidelines to reduce your risks of implied agency and undisclosed dual agency: Make sure your firm's policies on agency and dual agency are clear, including the disclosure requirements. Clearly understand and communicate fiduciary duties as an agent. Before acting in any way as an agent, secure an express agency agreement in writing. If you're engaging in dual agency, ensure you have all parties' written consent. Provide all parties with the proper disclosures.

Prohibited Disclosures Under Dual Agency

Disclosing to a buyer that the seller will accept an amount other than the asking or listed price. Disclosing to a seller that the buyer can pay a price other than or greater than the price submitted in a written offer to the seller. Disclosing the motivation of either the buyer or the seller for selling or buying the property. Disclosing to a buyer or seller that opposing parties will agree to financing terms other than those specified in their respective offering.

Informed Consent with Dual Agency

Dual agency requires informed consent from all parties. You can't become a legal dual agent without it. Informed consent means that all parties fully understand the ramifications and purpose of dual agency. This requires foreknowledge of the fiduciary duty that will be lost when agreeing to dual agency: undivided loyalty. Dual agency must be consensual, and written consent must be received from both parties. informed consent to dual agency can be provided at any time before the licensee begins acting as a dual agent in the transaction. In other words, consent can be provided in advance or when a possible dual agency situation arises

Undivided Loyalty

I can't put my or anyone else's interests ahead of yours when I represent you.

Full Disclosure

I must tell you not only any material facts I know about the transaction, but any facts period.

Seller's Agent Duties

Invest your time and energy in marketing and selling the property. Inform the seller of the responsibility to make all required property condition disclosures. Negotiate contract terms in accordance with the seller's wishes. Ensure that the buyer's earnest money is deposited by the contracted deadline. Communicate all offers and counter-offers to the seller. When you represent a seller, you should have an express agency agreement in place. The listing agreement accomplishes this requirement and spells out the scope of your authority and agreement for compensation.

Compensation Does Not Determine Agency

It's entirely possible that in a given transaction, you'll be compensated for your brokerage services by a party other than the client for whom you work. This happens most commonly when, acting as a buyer's agent, your brokerage is paid its share of the commission by the brokerage representing the seller. Your brokerage passes on your split of the commission to you. In such a case, you're paid (indirectly) by the seller, but the seller isn't your client, and you're not the seller's agent. A signed agency agreement determines the existence of an agency relationship

Disclosure to Non-Clients

Licensees also may owe the duty of disclosure to other parties, not just the licensee's clients. However, a licensee doesn't have to disclose everything, only material facts, and a licensee must not disclose confidential information about a client to others.

CLIENT

Someone you work FOR (owed all agency duties

CUSTOMER

Someone you work WITH (owed honesty, fairness, disclosure of material facts) Whom do you represent? The client!

Termination of Agency

The client's goals were met during the agency agreement term (i.e., the sale is completed). The specified term in the agency agreement expires. The client and agent mutually agree to dissolve the relationship. The relationship ends through termination by force of law (aka by operation of law):The client or the firm's broker becomes incapacitated or dies.The property is destroyed for any reason, making the property unmarketable.The client or the firm's broker files for bankruptcy. The client revokes the agreement prior to the agreement's expiration date. Clients can revoke an agency relationship with no penalty if they lack confidence in the agency or believe the agency to be untrustworthy. If a client revokes the agreement for no specific reason or without good cause, the client may be in breach of contract. The agent renounces the agreement prior to the agreement's expiration date. Prior commitments may still need to be fulfilled when an agency agreement is terminated prior to the agreement's expiration date, especially if the client is in breach of contract. For instance: The client, agent, or both parties may be responsible for damages or liabilities incurred during the agency relationship. The client may need to pay a commission to the agent, even if the client revokes the agency relationship. For instance, if a seller terminates an agency agreement by withdrawing the property from the market prior to the expiration of the listing agreement, the agent may still be able to receive compensation if the agency agreement specified a time to complete the transaction. For open listing agreements that do not include a time limit, an agent may not be able to seek compensation. The agent may need to follow through on agency-related actions for the client until the agency relationship terminates.

Not disclosing confidential information

The duty of confidentiality never ends.

Accounting for all money and other property received during the relationship

This duty ends once all money and property have been accounted for.

Reasonable Skill and Care

This goes to my level of professionalism, training, experience, and work ethic. You can expect top-notch service from me.

Types of Dual Agency

UNDIVIDED LOYALTYIS IMPOSSIBLE UNDER DUAL AGENCY Single-license dual agency: exists when one licensee represents both the buyer and seller in a transaction. In that case, the licensee is the dual agent, and his broker is also a dual agent. Dual licensed dual agency: exists when two agents from the same brokerage represent the buyer and seller in a transaction. Designated agency:(also called appointed agency) is one way that states allow individual agents to avoid dual agency. The broker-in-charge designates two of the brokerage's agents: one to represent the buyer and one to represent the seller. In such a scenario, the two agents are designated agents, and the broker is a dual agent in the transaction. The two designated agents and the broker must generally follow rules that attempt to protect the clients' interests. This allows each client to have the benefit of single agency, but the brokerage earns the commission from both sides in the transaction.

employment agreement

You and your client may enter into an agency agreement (aka listing contract or buyer representation agreement)

The Creation of Agency

You can create an agency relationship through express agreement or implied agreement.

Estoppel

a legal doctrine that says that a person is stopped from asserting rights or facts that aren't consistent with a previous statement, position, or behavior.

transaction coordinator

a non-agent act as a facilitator to a party, basically assisting the parties with paperwork, but not acting as a fiduciary to either one. A transactional broker is sometimes referred to as a facilitator

Ratification

acceptance after the fact, sometimes in contrast to a prior agreement. Ratification may occur through contractual paperwork or the parties' actions.

Agency Disclosure in Michigan

agents are required to present sellers, buyers, landlords, and tenants of residential real property with an agency disclosure on all sales of one- to four-family dwellings and all vacant land to be used for residential dwellings or condominiums. A listing agent must provide the form to the seller or landlord prior to entering into a listing agreement, and to the buyer, buyer's agent, tenant, or tenant's agent at the first meeting or first substantive contact with that person. A buyer's agent must provide the disclosure form prior to entering into an agreement to act as the buyer's agent or tenant's agent. The buyer's agent must also provide the form to the seller, seller's agent, landlord, or landlord's agent at the first meeting with that person. In all cases, the agent should obtain a signed acknowledgment from the person receiving the disclosure before the consumer discloses any confidential information to the licensee. Licensees acting as agents must also disclose their agency relationship to the other party

non-agent

also known as a facilitator or transaction broker licensee who has a unique relationship with a consumer, generally acting as a "middle man" in a transaction. While some states allow non-agency, the exact nature of the relationship and the duties owed to the consumer vary widely from state to state. A non-agent doesn't represent the buyer or seller, isn't a fiduciary, and can provide only limited services to facilitate the transaction. The non-agent assists either or both parties with clerical or ministerial tasks.

facilitator

assisting the parties with paperwork, but not acting as a fiduciary to either one.

Single agency

firms require that the brokerage, and all the brokers and agents within that firm, act in a fiduciary capacity for either the buyer or the seller in a real estate transaction, but not for both. Single agency firms prohibit their licensees from representing opposing sides in a transaction. *It's important that you know and adhere to your firm's policies. When acting as a single agent, you owe your undivided loyalty to that client. You still owe duties of fairness, honesty, and proper accounting of funds to other parties, but that's where your obligation to them ends. You advocate in the best interests of your client, period. As a single agent, you're an advisor for your client in real estate matters. However, if your client asks for advice that's outside the scope of your expertise, your duty as a fiduciary dictates that you refer the client to an expert. It's sometimes tempting to try to be all things to a client, but acting outside your license is a mistake that can have serious repercussions. When faced with a situation that you're unsure of, refer.

Accounting

for any funds or property I'm entrusted with on your behalf. This includes paperwork and money, and, like confidentiality, this duty survives the end of our relationship; if anything remains outstanding after the closing or termination of our agency relationship, such as paperwork or property, I must account for it to you.

Confidentiality

if you tell me something, provided it's not a material fact that I'm required to disclose, such as the presence of termites or the fact that the roof leaks, I have to keep it confidential. I can't divulge your confidential information to any prospective buyers or their agents, colleagues, or anyone else except under court order.

Firewall

keeps each party's confidential information strictly separated, even though both agents work for the same brokerage.

Designated Agent

licensee who's appointed by the brokerage's broker to represent one party. This form of agency allows two parties to a transaction to be represented by a single brokerage. The broker appoints one licensee to act as the designated agent for one party (the buyer, for example), and a different licensee to act as the designated agent for the other party (the seller). In these situations, only the licensee appointed to the client owes fiduciary duties to that client, and the broker becomes a dual agent. In some states, a designated agent is known as an appointed agent, or assigned agent.

Dual agency

means that a real estate brokerage firm, and all the brokers and agents for that firm, can act in a fiduciary capacity for both the buyer and seller in the same transaction. Dual agents are required to provide all fiduciary duties to each party, except for the duty of undivided loyalty. Anything that is disclosed to one party that could be a disadvantage to the other is prohibited in dual agency. Dual agents may not advocate for one party to the detriment of another. Dual agents owe to both the seller and buyer fiduciary duties that include utmost care, integrity, honesty, and confidentiality. 💥You may only engage in dual agency if: State law allows it, and you follow the state law Your brokerage specifically allows it according to the written rules your broker has established. Both the buyer and seller consent to you acting as a dual agent.

fiduciary

person who's in a position of trust and owes loyalty to another. the fiduciary duties spell OLD CAR.

Agency

refers to the type of relationship between a buyer or seller and a real estate licensee.

customer

someone involved in the transaction, but whom you don't represent

Agent

someone who acts on someone else's behalf, at that person's request Agency relationships require agreement from both parties. In other words, a consumer can't compel you to be his or her agent without your consent, and vice versa. You both have to agree. Once you do, the consumer becomes your client, and you become the client's agent and fiduciary

Universal Agent

someone who is empowered to do anything the principal could do personally. This type of agent has the most authority; in fact, a universal agent's authority is virtually unlimited As a real estate agent, it is highly unlikely you'd be appointed as a client's universal agent.

principal

this term has two meanings The common definition is that a principal is a client—someone who's represented by a real estate professional. The term principal may also refer to a party to a transaction (e.g., the buyer or seller, whether or not they're represented by an agent).

Obedience

whatever you ask of me, if it's within my scope as your agent, and it doesn't break the law, I must do it. If you give me instructions that I believe are contrary to your best interests, I will tell you, but the decision is always yours.

Sub-agency

when a licensee from a competing firm works under the listing agent. It's rarely seen A licensee who works for one firm but who is engaged by another firm to perform agency functions on behalf of that firm's client. If you're the buyer's agent, you can't be a sub-agent in the same transaction in which you represent the buyer, and you must make your status as the buyer's agent clear to the seller's agent before showing the seller's property. Instead of a unilateral offering of sub-agency, listing brokers and sellers usually offer commission share to cooperating agents

special agent

where you have limited authority to act on your client's behalf In most transactions involving a buyer or seller, you'll act as a special agent. A special agent is also known as a limited agent.

general agent

with responsibility for all of the dealings of a specific piece of your client's property

express agreement

you and your client agree to and understand the relationship. Express agreements may be written or unwritten. Written express agreements are ideal: They establish an agency relationship because they write out the duties and responsibilities for both you (the agent) and your client. This allows you and your client to understand expectations required for each party.

limited agent

you don't make any decisions or enter into any contracts on your client's behalf, but simply act as an intermediary, liaison, and negotiator, conveying and representing your client's wishes. In addition, a special agent doesn't offer continuity of service. Once the transaction is complete, your role as an agent ends.

Buyer Agency

you exclusively represent the buyer When you represent buyers, it's your responsibility to advocate for your clients' interests and seek the best price available or a price that's acceptable to them. As a fiduciary, you're obligated to complete certain tasks for your buyers over the course of a transaction, such as: Show them properties that meet their criteria and fall within their budget. Ensure that they receive all required property condition disclosures from the seller. Ensure that they understand the importance of due diligence, including a professional inspection of the property. Review transaction documents with them, clarifying anything that could be confusing, without stepping outside the scope of your license (in other words, refer buyers to an attorney for interpreting any legal consequences or language). Negotiate contract terms that are fair and agreeable to them.

Seller Agency

you represent the seller It's your duty to advocate solely for the seller and seek a sale of the property at the best price available or a price that's acceptable to the seller. The buyer, when you represent the seller in a single agency relationship, is your customer. You must disclose to the buyer that you don't represent her. Obtain the buyer's acknowledgment of this fact in writing. This can best be done by use of the mandatory disclosure form. Note that when you're representing a seller, you may list other properties for sale, even if they're competing.