San Diego Real Estate Agency Relationships

Agency Relationships

Understanding Agency

What is Agency?

Agency is the relationship of one who represents another in dealings with third parties. Agency is a legal relationship between a principal (client) and an agent (the broker and salesperson) that arises when the principal delegates authority to the agent to perform acts on the principal’s behalf and the agent consents to the delegation.

How is an Agency relationship created?

An Agency relationship may be created by an express contract or may be implied by the actions of the parties.

In general, what duties do agents owe to their principals (clients)?

Once an agency relationship is created, it becomes a fiduciary relationship. A fiduciary relationship creates the highest duties known under the law owed by the agent to his/her principal. This obligation of diligent and faithful service is the same as that of a trustee. Specific fiduciary duties include loyalty, obedience, disclosure, confidentiality, reasonable care and diligence, and accounting.

What is the Agency disclosure law?

In general, the agency disclosure law (AB 1034-California Civil Code §§ 2372-2382) is a law requiring real estate licenses to provide written disclosures to both seller and buyer of the Agency relationship options available, to secure their agreement to a particular form of Agency, and to confirm that agreement in writing, when the licensee is involved in the following real estate transactions:

  • Sales, exchanges, installment land sales contracts, and leases for more than one year.
  • Mobil homes sold through a real estate licensee.
  • Residential properties with 1-4 dwelling units.

Types of Agency-Brokerage Relationships With Consumers

Seller’s Agent

Also known as a listing 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 evidenced by a listing contract. Once a property is listed, the seller’s agent either can attempt to sell it or, in addition, may be permitted by the seller to cooperate with another licensee who will attempt to find a suitable buyer for the property. A seller’s agent negotiates the best possible price and terms for the seller. The agent represents the seller’s best interest throughout the transaction.

Buyer’s Agent

A real estate licensee is hired by a prospective buyer as an agent to find an acceptable property for purchase and to negotiate the best possible price and terms for the buyer. The agent represents the buyer’s best interest throughout the transaction. The buyer can pay the agent directly through a negotiated fee, or the buyer’s agent may be paid by the seller or a commission split with the listing agent.

Disclosed Dual Agent

Dual agency is a relationship in which the brokerage represents both the buyer and the seller in the same real estate transaction. Dual agency relationships don’t carry with them all of the traditional fiduciary duties to the clients; instead, dual agents owe limited fiduciary duties. The fiduciary duty of loyalty to the client is limited. This focuses on confidentially and the negotiation process. Because of the potential for conflicts of interest in a dual agency relationship, it’s vital that all parties to the dual agency relationship give their informed consent. In many states, this must be in writing. Disclosed dual agency is legal in most states.

Non-Agency Relationship

Called, among other things, a transaction broker, or facilitator. Some states permit a type of non-agency relationship with a consumer. These relationships vary considerably from state to state, both as far as the duties owed to the consumer and the terminology used to describe the relationship. Very generally, in these relationships, the duties owed to the consumer are less than the complete, traditional fiduciary duties, but in most states which allow for this type of relationship, the licensee still owes the consumer some fiduciary duties.

SOURCE: Graduate REALTOR® Institute Series - Course 100

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