Agency Relationships

Seller's Agent (Listing Agent)

Represents the seller in the transaction and owes fiduciary duties to the seller.

Tip: The listing agreement creates this agency relationship.

Buyer's Agent

Represents the buyer in the transaction and owes fiduciary duties to the buyer.

Tip: A buyer agency agreement formalizes this relationship.

Dual Agent

Represents both the buyer and seller in the same transaction. Requires informed written consent from both parties.

Tip: Dual agency is illegal in some states. Always check your state laws.

Designated Agent

The broker assigns individual agents within the same brokerage to separately represent the buyer and seller.

Tip: Also called "appointed agency" in some states. Allows full advocacy for each party.

Transaction Broker

Facilitates the transaction without representing either party. Provides limited services and owes fairness and honesty to both sides.

Tip: Common in states like Colorado and Florida. No fiduciary duties owed to either party.

Subagent

An agent who assists the listing agent and owes fiduciary duties to the seller, even when working directly with the buyer.

Tip: Subagency has declined significantly since the rise of buyer agency agreements.

Obedience

Follow all lawful instructions from the client. An agent must carry out the principal's directions as long as they are legal and within the scope of the agreement.

Tip: An agent must NOT obey instructions that are illegal, such as refusing to present offers based on race.

Loyalty

Put the client's interests above all others, including the agent's own interests. The agent must act solely for the benefit of the client.

Tip: An agent cannot buy a client's property without full disclosure and consent.

Disclosure

Reveal all material facts that could affect the client's decisions. This includes known property defects, conflicts of interest, and relevant market information.

Tip: Material facts must be disclosed even if the client doesn't ask about them.

Confidentiality

Protect the client's private information, including financial situation, motivation to buy or sell, and negotiating strategies.

Tip: Confidentiality survives the termination of the agency relationship.

Accountability

Handle all funds and documents properly. The agent must account for all money and property entrusted to them.

Tip: Commingling (mixing client funds with personal funds) is a serious violation.

Reasonable Care

Use professional skill, knowledge, and diligence when performing duties. The agent must exercise the competence expected of a real estate professional.

Tip: This includes staying current on market conditions, laws, and best practices.

Express Agency

Created by a written or oral agreement between the principal and agent. Examples include listing agreements and buyer agency agreements.

Tip: Written agreements are preferred and often required to earn a commission.

Implied Agency

Created by the actions or conduct of the parties rather than a formal agreement. Can arise when an agent acts on behalf of someone without an explicit agreement.

Tip: Agents should be careful not to accidentally create implied agency through their behavior.

Agency by Ratification

The principal approves or accepts the agent's unauthorized actions after the fact, retroactively creating the agency relationship.

Tip: The principal must have full knowledge of the agent's actions to ratify them.

Agency by Estoppel

A third party reasonably relies on the appearance of an agency relationship. The principal is prevented from denying the agency if their conduct led others to believe it existed.

Tip: This protects innocent third parties who acted based on the apparent authority of the agent.

Disclosure Timing

Agency relationships must be disclosed at first substantive contact with a prospective buyer or seller. Most states require written agency disclosure forms.

Tip: Substantive contact means any discussion beyond basic property information (price, location, features).

Dual Agency Consent

Written informed consent is required from both parties for dual agency in most states. Both buyer and seller must understand and agree to the limited representation.

Tip: Some states (e.g., Alaska, Colorado, Kansas) prohibit dual agency entirely.

Completion of Purpose

The agency relationship ends when the objective has been accomplished, such as the successful closing of a sale.

Expiration of Term

The agency ends when the time period specified in the agreement expires. All listing agreements must include a definite termination date.

Tip: Automatic renewal clauses are illegal in many states.

Mutual Agreement

Both the principal and agent agree to end the relationship. This is the cleanest form of termination.

Revocation by Principal

The principal (client) cancels the agency. The principal always has the power to revoke, but may face liability for breach of contract.

Tip: Power to revoke exists even if the right to revoke does not. Damages may be owed.

Renunciation by Agent

The agent withdraws from the relationship. The agent may be liable for damages if the withdrawal breaches the agreement.

Tip: Proper notice should be given to minimize liability.

Death or Incapacity

The agency automatically terminates upon the death or incapacity of either the principal or the agent.

Tip: This is an operation of law -- no notice is required.

Destruction of Property

If the subject property is destroyed (e.g., fire, natural disaster), the agency relationship terminates because the purpose can no longer be fulfilled.

Bankruptcy of Principal

If the principal files for bankruptcy, the agency terminates because the principal may no longer have authority over the property.

Tip: Bankruptcy of the agent does not necessarily terminate the agency.