1-1

1. Agency Relationships1. Agency Relationships

In this chapter

Evolution of buyer representation

Parties in a real estate transaction

Types of relationships between real estate

brokerage companies and consumers

9

1-2

Buyer RepresentationBuyer Representation

The practice of real estate practitioners (brokers and their agents) representing the buyer as a client

The agent of the buyer

9

1-3

Evolution of Buyer Evolution of Buyer RepresentationRepresentation

Seller-representation was default of most MLSs and state regulations until ’90s

Became “out of sync” with realities of marketplace

9

1-4

Consumer SurveyConsumer Survey

Most buyers thought they were represented by the seller’s agent

Most buyers shared confidential information with the seller’s agent because they though the agent was working their behalf

10

1-5

Seller SubagencySeller Subagency

Any agent who brought a buyer to the transaction was considered an agent of the seller

has virtually disappeared because brokers do not offer or accept it

Vicarious liability disappearing too - by state statute or practice

10

1-6

NAR Policy ChangesNAR Policy Changes

MLS policy changed to blanket offer of “cooperation and compensation”

NAR promotion of 9-point legislative model: – clarify agency relationships– allow designated agency & clarify dual

agency duties– eliminate vicarious liability

11

1-7

Market TrendsMarket Trends

Percentage of buyers with a buyer representation agreement

1999 – 47%

2006 – 64%

12

1-8

Parties in a Real Estate Parties in a Real Estate TransactionTransactionClient/principalBrokerAgentCustomerTransaction brokerFinder

13

1-9

Express Written

Agreement

Implied Agreement

Oral Agreement

Agency Relationships

Created by

Single Agency

Dual Agency

Designated Agency

Buyer OR Seller

Buyer AND Seller

Buyer OR Seller

Types of Agency Relationships

Agent Represents

Agency RelationshipsAgency Relationships

14

1-10

RelationshipsRelationships

Single agencyDual agencyDesignated agencyTransaction broker/facilitatorFinder

15

1-11

Single AgencySingle Agency

Exclusive agent of the buyer or seller

All of broker’s salespeople are also agents of the buyer or seller

16

1-12

Dual AgencyDual Agency

Requires disclosure and informed consent Inherent conflict between full disclosure

and confidentiality Not permitted in some states

– Colorado– Kansas– Florida– New Mexico defaults to transaction facilitator

16

1-13

Designated AgencyDesignated Agency

State specificRemoves agency responsibility from

other agents in firmBroker may/may not be a dual agentAssigned agents must not share

confidential information

17

1-14

Non Agency RelationshipsNon Agency Relationships

Transaction Broker

– VERY state specific – may not apply in

your state

– Acts as an intermediary

– Not an agency relationship

– Reasonable care and accounting

Finder

18

1-15

Office PolicyOffice Policy

Know and comply with your broker’s

policy on types of relationships

offered and accepted

No policy = undisclosed dual agency!

20

1-16

Skill Builder Tip: Creating an Agency Skill Builder Tip: Creating an Agency PolicyPolicy

1. Present a brief opening statement of agency policy.

2. Describe how the policy will be implemented.

3. Define the types of agency relationships practiced.

4. Include a rationale for the company’s agency policy.

5. Explain how the consumer is treated in each relationship.

6. Indicate what disclosures must be made.

7. Indicate when and to whom disclosures must be made.

8. Include standard forms licensees are required to use.

9. Specify training the company will provide to licensees.

10. Attorney review for policy for conformance with state laws.

21

1-17

Building BlocksBuilding Blocks

What are your broker’s office policies regarding:– Types of relationships offered and

accepted?– How does the buyer benefit?– How are designated agency or dual

agency situations handled?

22