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Agency Relationships In Real Estate Transactions

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All states require agents involved in real estate transactions to hold a valid real estate license.  As the buyer or seller of a home, it is important that you are aware of the duties required of your real estate agent.

What Is An Agent?

An agent is one who represents another (typically called the principal) in dealings with third parties. This means that anything an agent does or says while acting in the capacity of being an agent for you is as if you did it or said it yourself. Real estate agents are typically employed by brokerage firms.

Licensed Real Estate Agent Relationships

There are several methods that a home buyer or seller can establish an agency relationship with a licensed real estate agent:

  • Express Contract: Express contracts are either written or verbal. A listing agreement is the most common written contract between an agent and a home seller. When it is signed by both the principal (seller) and the licensee (the agent), an agency relationship is created. Verbal contracts are not as common, but may still be sufficient to create an agency relationship
  • Implied Agency: An agency relationship may also be implied by the actions of the agent and how a home buyer or seller relies on those actions. If someone acts like an agent, leads you to believe that he is acting in your best interests (as an agent would), and you think of him as your agent, then he will most likely be labeled as an agent and will be held to the standard of one
  • Gratuitous Agency: The payment of compensation does not determine whether or not an agency exists between an agent and a buyer or seller. An agent does not have to be paid by the principal in order to be deemed his agent.

What Duty Does An Agent Owe To His Client?

An agent owes his client specific fiduciary responsibilities. Traditionally, a fiduciary responsibility entails one of trust, confidence, loyalty, obedience, full disclosure, skill, care, diligence, and accountability. In real estate transactions, an agent's duty to his client(s) depends on which party(s) he is representing. One requirement in all transaction is that the agent disclose to all parties which party(s) he will be representing. As a licensee may be an agent for the buyer, the seller, or both (in which case the agent is referred to as a dual agent), his duties will vary as follows:

  • Buyer's Agent: An agent must disclose all reasonably discoverable material defects (meaning anything that may affect the buyer's desire to purchase the property) to the buyer and represent his best interests during the transaction.
  • Seller's Agent: Duties include retaining the highest cash amount for the seller (meaning that all offers given must be presented to the seller), refraining from disclosing facts that would compromise the seller's position (such as whether the property is overpriced, whether foreclosure is eminent, or whether the seller may be nearing bankruptcy), and representing the seller's best interests in all aspects of a transaction.
  • Dual Agent: As a dual agent, a licensed agent must perform all the traditional duties owed to a buyer and seller, and must also disclose to both parties that he will be acting as a dual agent.

Do I Need An Attorney If My Agent Has Failed To Perform His Duties?

As an agency may be established in any of the three mentioned ways, you should retain an attorney if you believe that you have been represented by an agent who has violated his duties toward you in a real estate transaction. Since an experienced real estate attorney will be familiar with the duties owed to you by your agent, he will be able to inform you whether your agent has breached his duties.

Photo of page author Ken LaMance

, LegalMatch Law Library Managing Editor and Attorney at Law

Last Modified: 07-23-2015 02:12 PM PDT

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