Types of agency

Dual Agency Prohibited Disclosures:

1. Disclosing to a buyer that the seller will accept an amount other than the asking or listed price. 2. 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. 3. Disclosing the motivation of either the buyer or the seller for selling or buying the property. 4. Disclosing to a buyer or seller that opposing parties will agree to financing terms other than those specified in their respective offering.

Dual agency involves an inherent conflict of interest. You may only engage in dual agency if:

1. Your brokerage specifically allows it according to the specific written rules your broker has established. 2. Both the buyer and seller consent to you acting as a dual agent.

Buyer Agency

In a buyer agency relationship, you exclusively represent the buyer. In the past, buyer agency was not properly practiced in residential real estate. The licensee's commission was drawn from the sale of a property, so it was assumed that buyers didn't need to be represented in the transaction and were regarded only as customers. Of course, much has changed over the years, and it's long since been mandated that buyers can and should be protected through an agency agreement, as well.

Seller Agency

In a seller agency relationship, 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. ♦ Example: Real estate licensee Elizabeth represents Artie, who's selling a home. Elizabeth has a single agency relationship with Artie. Holly, a potential buyer, makes an offer on Artie's home. In this situation, Artie is Elizabeth's client, whereas Holly is Elizabeth's 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.

Advance informed consent to dual agency may seem obvious,

It used to be that dual agency was considered transactional in nature. As a result, clients couldn't consent to dual agency in advance of it actually occurring. For instance, when a listing agent received a request from a buyer to show the listed property, only then was dual agency brought up. But what if the seller's agent couldn't reach the seller to consent to dual agency in the event the buyer asking for the showing wanted to write an offer? This hampered many transactions, especially since it also meant that all licensees who represented consumers as a buyer's agent couldn't show any properties listed with their brokerage unless the buyers agreed to change agency relationships and have the licensee show the property as a seller's agent, or unless both the buyer and seller consented to dual agency and acknowledged this by signing the agency disclosure form. The result was that buyers were forced to change agency relationships with their licensees, losing the fiduciary duties owed by the buyer's agent, or if the sellers didn't consent to dual agency or couldn't be reached prior to the showing, buyers had to find an agent from another brokerage to show them the property. This disadvantaged the seller as well because it resulted in fewer buyers viewing the property.

Single Agency

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.

Duties Owed to Other Parties

The other party in a transaction is owed the same duties you owe to customers: You must treat them honestly and fairly and must disclose all material facts. ♦ Example: You're representing a seller, and you know that the buyer's inspection deadline is Thursday. The buyer's agent makes an offhand comment that the inspection period runs through Friday, so they've still got time to get another contractor's bid. You cannot remain silent, even if it would be helpful to your seller to have the inspection period run out. It's not your duty to do the other agent's job, but it is your duty to disclose (and in this case, correct) material facts.

Dual agency requires informed consent from all parties.

You can't become a legal dual agent without it. You can become an illegal, undisclosed dual agent quite easily without it—a situation you will want to avoid as it is a violation of both your fiduciary duty and license law.

Seller's Agent Duties

You must perform specific tasks for your seller clients (unless the seller's attorney has or will perform these tasks). These tasks include: 1. Invest your time and energy in marketing and selling the property. 2. Inform the seller of the responsibility to make all required property condition disclosures. 3. Negotiate contract terms in accordance with the seller's wishes. 4. Ensure that the buyer's earnest money is deposited by the contracted deadline. 5. Communicate all offers and counter-offers to the seller.

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.

When you act in a dual agency role,

confidential information about price, terms, motivation for pursuing a transaction, or previous offers made must remain confidential unless one party instructs you in writing to disclose specific information. Anything that is disclosed to one party that could be a disadvantage to the other is prohibited in dual agency.

Sub-agency

is when a licensee from a competing firm works under the listing agent. It's rarely seen. In fact, it's quite possible that you work for a firm that has a policy forbidding sub-agency to cooperating licensees to protect the client from additional vicarious liability (with sub-agency, the seller is liable for the actions of both the listing agent and the sub-agent). 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. In this way, the seller is still represented, and the property benefits from broad market exposure.

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: 1. Show them properties that meet their criteria and fall within their budget. 2. Ensure that they receive all required property condition disclosures from the seller. 3. Ensure that they understand the importance of due diligence, including a professional inspection of the property. 4. 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). 5. Negotiate contract terms that are fair and agreeable to them.

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. Such a transaction is often referred to as "in-house." Dual agents are required to provide all fiduciary duties to each party, except for the duty of undivided loyalty. Loyalty: yes. Undivided loyalty: no. Because both sides are represented, undivided loyalty is a legal impossibility.

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.

Dual agency relationships (also called single-license dual agency) exist when

one licensee represents both the buyer and seller. In that case, the agent is the dual agent, and his broker is a dual agent.

Dual agency (called dual licensed dual agency) or designated agency exists when

the broker assumes the role of dual agent and designates two 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. But because all agents represent the broker (they are all sub-agents of the broker), the fiduciary duty of undivided loyalty is compromised.