A Real Estate Agency Relationships Disclosure (Agency Agreement) is a written agreement that formally defines the type of relationship or representation a licensed Broker/Agent agrees to provide to their client, while performing duties relating to real estate transactions.
Agency Agreements are required for every single real estate transaction, no exceptions. A signed Listing Agreement does not replace an Agency Agreement. An Agency Agreement is required for a Broker/Agent to engage in written and verbal communication with a client regarding a real estate transaction. This includes phone calls, in-person conversations, email, and written correspondence with the client. Agency Agreements are required prior to a Broker/Agent sharing properties with a client and certainly before any fees or commissions are paid out.
There are different types of relationships that can form between a Broker/Agent and their client. One type of relationship is a single Broker/Agent representing a Seller/Landlord or Buyer/Lessee. In this case, the Agency Agreement defines the Broker/Agent’s responsibility to show reasonable skill and care to the Seller/Landlord or Buyer/Lessee and promote their interests as they pertain to the real estate transaction.
The second type of relationship that can occur between a Broker/Agent and their client is Dual Agency. In this type of arrangement, the Agency Agreement defines the Broker/Agent’s responsibility to show reasonable skill and care to parties on both sides of the real estate transaction. Additionally, in this arrangement, the Broker/Agent is prohibited from disclosing information that would disadvantage either party. An example of a Dual Agency relationship is a single Broker/Agent representing both the Landlord and the Tenant in the same real estate transaction.
The third type of relationship created between a Broker/Agent and their client is Appointed Agency. Under this type of arrangement, the Broker may appoint one or more agents within their firm to exclusively represent different clients in the same real estate transaction. The Agency Agreement defines the duty and care to each party, no internal discussion except with the broker, but none that could disadvantage either party.
The overall objectives of the Agency Agreement are to protect the client’s interests while disclosing and ensuring understanding by all parties of the role and standards to be performed by the Broker/Agent before working with the client on a real estate transaction.
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For more helpful information check out our blog posts like this one titled: Stepping Through the Lease Process.
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