Agency is the relationship formed between a consumer and a Realtor/Broker who is hired to assist and represent that consumer in a legal real estate transaction. The type of relationship formed between the Broker and the Client is called a fiduciary relationship. A fiduciary relationship is one based on trust between both parties. The fiduciary (consumer) is owed loyalty, diligence, confidentiality, reasonable care, disclosure, and accounting. Agency duties are enforced so that the Clients can rely on their interests being placed before those of anyone else by the Broker.
In Real Estate Transactions, an Agency relationship is formed between the Real Estate Broker and the Client.
*The Client may be either a Buyer or a Seller.
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In traditional real estate transactions, a home seller agrees to list a specific property with a specific Broker. This creates an agency relationship between the Seller and the Broker (the Seller has become a Client). Under the agreement, the Broker is responsible for representing the best interest of the Seller at all times during the sale process. All agents involved in the transaction represent the Seller.
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Seller's Agents & Sub-Agents
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These agents represent the Seller only. Price negotiations and information about the Seller of a personal nature are confidential between the Seller and Seller's/Sub Agents. The same implied loyalty, trust, disclosure and confidentiality are owed to the Seller whether the agent is the actual listing Broker or a Sub-Agent, even if they bring in a Buyer. The Seller's Agent may offer Sub-Agency and terms of Sub-Agency through the Multiple Listing Service. Sub-Agents are also known as cooperating Brokers.
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Buyer Agency is designed to allow the Buyer an opportunity to have a Broker represent him or her rather than the Seller. Through Buyer Representation the Buyer becomes the Client instead of a Customer, and the Buyer's Broker works with the Buyer's best interest in mind.
When a Buyer is represented by a Broker, all the fiducairy duties are owed by the Broker to the Buyer rather than the Seller. The Buyer has the freedom to discuss the value of the property, negotiating strategies and personal finances with the Broker. The Buyer may obtain the opinion and advice of the Broker concerning the condition of the property, the structure of the offer, the Seller's motivation for selling, and a variety of information which a Seller's Broker could not provide.
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If you do not wish to be represented by a Buyer's Broker as a client and you simply wish to purchase a property with an agent you will be a Buyer Customer. As a valued customer you will be assisted in your property search, however the Broker will not be acting as your Broker and you will not be receiving Broker represntation. If you choose this route, it is important to remember that the agent you are working with is actually a Sub-Agent working in the best interests of the Seller.
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When a broker lists a property, an agency relationship is created between the Seller and the Broker. Throughout the listing period the Seller develops a level of trust in the Broker, who is obligated to put the Seller's interest first. On occassion the Broker may also form an Agency relationship with Buyers whereby the Broker is obligated to put the Buyers' interest first.
When a Broker (*)has a relationship with two Clients, one wanting to sell and the other wanting to buy, Dual agency is formed. When this happens the Broker is responsible to notify and receive consent from both Clients. At this point the Clients and Brokers agree to modify the Agency relationship to neutral representation. The Brokers must not disclose information to either party that is confidential or would create a negotiating advantage for either Client. Dual agency limits the capacity of the Broker's who begin to act more as facilitators or mediators.
*Broker in this case refers not to the Realtor, but to the office or company. Any time multiple agents from the same company have clients involved in a sale together Dual Agency is created.
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