Agency Relationships In Real Estate Transactions

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 What Is Real Estate And Property Law?

Real estate and property law governs a wide variety of topics, including but not limited to:

  • Buying;
  • Selling;
  • Using; and/or
  • Leasing residential or commercial property.

Some examples of the most common real estate and property law disputes include:

Real estate and property law also addresses the financial aspects of real property, such as:

What Is A Real Estate Agent?

A real estate agent is a person who is authorized to conduct real estate business in a given state. This is a licensed professional who is educated in all relevant real estate matters, and has passed a state board exam. In most states, there are significant distinctions made between the terms “agent,” “salesperson,” and “broker.” Generally speaking, an agent is a salesperson, as opposed to a broker who generally addresses higher-level real estate issues.

To further complicate matters, in some states an “agent” is called a “real estate broker,” while the broker is referred to as a “qualifying broker.” In some states, such as Colorado, all licensed real estate professionals are considered to be brokers.

Depending on their education, licensing, and certification, real estate agents may perform any number of tasks such as:

  • Handle standard client forms and questionnaires;
  • Answer basic questions that buyer or seller clients may have;
  • Review and negotiate real estate contracts;
  • Negotiate prices, up to the closing of a deal;
  • Showcase property and guide clients during walk-throughs and open houses; and
  • Provide clients with relevant information up to a certain level of knowledge and expertise.

Real estate agents or salespersons are sometimes limited in their actual work capacity when compared to others involved in real estate transactions. An example of this would be how they may need to first obtain confirmation from a supervising broker regarding more important transaction decisions.

For the majority of home buyers, this distinction does not have much of an effect on their transaction. However, for more experienced investors and commercial investors, a broker may be more preferable over a sales agent.

What Do Real Estate Agents Do For Sellers? What Do Real Estate Agents Do For Buyers?

In terms of what real estate agents do for sellers, an agent may search for local properties that match their client’s preferences and price range, which may involve searching online or scouting houses in person. Additionally, agents schedule property showings and inform clients regarding the housing market in the local area.

Once a client wishes to move forward with purchasing a home, real estate agents submit bids and negotiate on behalf of the buyer throughout the buying process. Additionally, agents can assist in scheduling home appraisals and inspections, as they often have relationships with other people in the housing industry who provide these services.

Buying a home is generally associated with a considerable amount of legal paperwork. As such, a real estate agent can guide a buyer through all of the contracts, agreements, and other necessary documents. Real estate agents will submit all paperwork on behalf of a buyer.

Homeowners who want to sell their homes frequently hire a listing agent. A listing agent provides clients with valuations of their homes, so that a listing price can be set. They may also make suggestions for home updates that will help a home sell better in the current market.
Additionally, listing agents enter homes into local listing service databases and network with other real estate agents in order to create advertisements and create open houses.

Real estate agents generally check a potential buyer’s finances before arranging a showing or accepting an offer, in an attempt to determine whether a potential home buyer can afford to purchase the home.

Most notably, real estate agents will negotiate various aspects of a home sale on behalf of the seller. They may negotiate the entire price of a home, or negotiate smaller expenses such as closing costs, warranties, and fees. If there are any legal actions that occur during the process of selling a home, the agent will handle them; some examples include, but may not be limited to:

  • Preparing;
  • Submitting; and/or
  • Filing any documents, contracts, or agreements.

What Are Agency Relationships In Real Estate Transactions?

It is important to note that all states require agents who are involved in real estate transactions to hold a valid real estate license. As either the buyer or seller, you should be aware of the duties that are required of your real estate agent. To reiterate, anything that 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.

A home buyer or seller can establish an agency relationship with a licensed real estate agent by engaging in one of the following:

  • Express Contract: A listing agreement is the most common example of a 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;
  • Implied Agency: An agency relationship could also be implied by the actions of the agent, as well as how a home buyer or seller relies on those actions. If someone acts as an agent; leads you to believe that they are acting in your best interests as an agent would; and, you think of them as your agent, then they will most likely be labeled as an agent. As such, they will be held to the standard of an agent, which is further discussed below; or
  • Gratuitous Agency: It is important to note that the payment of compensation does not determine whether an agency exists between an agent and a buyer or seller. What this means is that an agent does not have to be paid by the principal in order to be deemed their agent.

What Legal Duty Does An Agent Owe To Their Client?

An agent owes their 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 specifically, an agent’s duty to their client largely depends on which party they are representing. One requirement in all transactions is that the agent disclose to all parties which party they are representing. Because a licensee may be an agent for the buyer, the seller, or both (here, the agent is referred to as a dual agent), their duties will vary as follows:

  • Buyer’s Agent: An agent must disclose all reasonably discoverable material defects to the buyer, and represent their best interests during the transaction;
  • Seller’s Agent: An agent must retain the highest cash amount for the seller, meaning that all offers given must be presented to the seller. Agents must also refrain from disclosing facts that would compromise the seller’s position and represent the seller’s best interests in all aspects of a transaction; and
  • Dual Agent: As a dual agent, a licensed agent must perform all of the traditional duties that are owed to a buyer and seller, and must also disclose to both parties that they will be acting as a dual agent.

Do I Need An Attorney If My Agent Breaches Their Duty To Me?

If your real estate agent has breached their duty to you, you will need to consult with an area real estate attorney. An experienced and local lawyer can help you understand your legal rights and options according to your state’s specific real estate laws. An attorney will also be able to represent you in court, as needed, should any legal disputes arise.

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