Agent Essentials

Real Estate Agent Blog

Agency Relationships in Real Estate: What You Need to Know
March 11, 2020

Agency Relationships in Real Estate: What You Need to Know

by The CE Shop Team

The Facts About Agency Relationships in Real Estate

Working as a real estate agent, you will need to understand your fiduciary duties. One of these many responsibilities will be properly representing your clients by agreeing to an agency relationship.

What Is an Agency Relationship?

An agency relationship is formed when the agent and a buyer or seller sign an agency disclosure or agreement form. In many cases, the client does not legally have to agree to sign anything.

The agreement or disclosure states that the agent is acting on behalf and in the best interest of the client. This includes keeping their clients’ information confidential and providing exclusive representation.

When it comes to agency relationships, there are several items you must fully understand for both the real estate exam and your career.

What Is Single Agency

Single agency is when an agent represents a client (either the buyer or the seller) and is solely responsible for representing them with their best interests in mind.

The buyer’s agent and the buyer will sign a buyer’s broker agreement, and the listing agent and seller will sign a listing agreement. Both of these agreements (or disclosures in certain states like California) list out the duties the agent must adhere to. These duties are usually but not limited to: Performing care and due diligence, disclosing all material facts, and being transparent and honest.

When in a single agency agreement, the buyer’s agent will solely represent the buyer and vice-versa for the listing agent. However, this situation is not always the case.

What Is Dual Agency?

With dual agency, the buyer and listing agent are from the same brokerage. This circumstance requires only the brokerage to be the same and other variables, like office location and familiarity, to be irrelevant.

Dual agency is a state-by-state issue. In some states, dual agency must be agreed upon in writing between both parties.

There are three specific situations of dual agency that are worth noting.

Dual Agency With Two Agents

As discussed, this situation is when the buyer and listing agent are from the same brokerage. They must work on behalf of their client and not the brokerage. Because of this common association, agents must be careful to follow their duties.

Dual Agency With the Same Agent

Although rare, an agent can represent both the buyer and the seller in a homebuying transaction. The agent in this situation must treat both parties fairly and equally.

When this occurrence happens, the agent cannot share confidential information or provide any sort of advice, including home prices, or negotiate. This makes sense when you consider an agent cannot ethically or fairly negotiate amongst her or himself.

Because of these restrictions in place, most agents choose to either specialize in being a buyer’s agent or selling agent and not represent both parties.

Transaction Agents

Transaction agents help overcome any self-interests when in dual agency. These agents are a third-party entity that facilitates the transaction and is an effective way of helping both agents fulfill their duties without losing credibility in representation.