Types of Agency-Brokerage Relationships With Consumers



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. In general, an agency agreement should be in the form of a
written contract, but this isn’t essential unless it is required by state law.

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.

Subagent
•A cooperating agent who works for a listing broker-salesperson in the sale of a property. The subagent
represents the seller, and therefore, works with the buyer, but not for the buyer. The subagent owes
fiduciary duties to the listing broker and to the seller. Although subagents can’t assist the buyer in any
way that would be detrimental to their client the seller, a buyer-customer working with a subagent can
expect the subagent to treat him honestly. A subagent generally may provide the buyer with certain
types of services, often called ministerial services, which are factually based and do not require the
licensee’s judgment.

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.

•The NATIONAL ASSOCIATION OF REALTORS® encourages state associations to work toward

comprehensive agency relationship legislation.

Designated agent
•Also called, among other things “appointed agency,” this is a brokerage practice that allows the
managing broker to designate which licensees in the brokerage will act as agents of the seller, and which
will act as agents of the buyer, without the individual licensees being dual agents. The designated agents
mop daa give their clients full representation, with all of the attendant fiduciary duties. To use
designated agency, it specifically must be permitted by state law. State laws vary, and in some states
permitting this practice, the managing broker also is not a dual agent.

Nonagency relationship
•This relationship is called, among other things, a transaction broker, or facilitator. Some states permit a
type of nonagency 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 fiduciary duties to the consumer.