Real Estate Agency Relationship

For many homeowners, the expectations of buying your first home are both exciting and scary at the same time. After all, for 80% to 90% of American homebuyers, this could be the biggest purchase of your life. Unless you’re an investor, or looking to get into real property investing, it won’t be a transaction you’ll eventually get too comfortable with. Nonetheless, it is a process that is wrapped up in all the nuances of a real estate agency relationship.

With all this being said, in this article, we want to delve into why you can trust your Realtor to look out for your best interest. As well as how that trust will translate into a successful transaction, where you as the buyer or the seller, will benefit. In many cases, this will depend on the Agency agreement you have with your Realtor, Broker, or Sales Associate.

An agency agreement dictates the responsibilities owed to you by your representing agent or Broker. Depending on the state, small modifications occur to these rules, but overall, the results will tend to be the same. We will go into agency relationships below, but first, let’s start with the 3 types of agency agreements.

• Single Agency Relationship
• No Brokerage Relationship
• Transaction Brokerage Relationship

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In a single agency relationship, the Broker and their real estate sales associates owe you, as the buyer or the seller, a fiduciary duty to look out for your best interest. In the Real Estate industry, this is commonly referred to as COLD. That is because the fiduciary responsibilities that are owed to the client are listed below but are not just limited to this. However, they are some of the most important aspects of a fiduciary duty.

• Confidentiality
• Obedience
• Loyalty
• Disclosure (Full Disclosure)

In a Single Agency Relationship, the agent cannot deviate from providing you with full confidentiality in all aspects of the real estate transaction. Additionally, the agent cannot deviate from your orders in the transaction; so long as it does not break current laws. The agent can recommend their expertise and guide you towards what they believe is the best direction based on their expert knowledge. However, as the buyer or the seller, you will ultimately have the final decision.

Loyalty is a very important one, the agent cannot place any interest before your own. They cannot put someone’s interest, whether a business associate or their interest, before your own. The agent is also obligated to provide you with full disclosure of all known material facts that affect the value of the real property, whether it’s land or improvements.

Visit this article to learn “When is a Single Agency Relationship Right for Your Real Estate Transaction”.

A no-brokerage relationship is very simple, the agent owes no fiduciary duties to the customer. The buyer or seller is no longer a client as the word “client” is in context with the fiduciary duties an agent owes the buyer or seller. The “client” is now a customer and in most cases across Florida state, this will tend to be the case.

In a no-brokerage relationship, your agent should still offer some of the basic services afforded to any customer in a real estate transaction. The industry better knows these services by the acronym ADD.

• Account for all funds
• Deal honestly and fairly
• Disclose all known material facts that affect the value of the real estate property

In any real estate transaction, there are 3 services due to the customer or the client. Whether you’re a buyer or a seller of the real property.

In many cases, you may find this type of real estate relationship when the transaction is dealing with either a for sale by owner or a commercial property. This also depends on the scope of services the buyer or seller is looking to acquire from the real estate associate or Broker.

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A transaction broker has limited duties owed to the customer. When you hire a real estate agent or broker as a transaction Broker, they do not owe you the duties mentioned in a single agency relationship by the real estate sales associate or their Broker. The administrative laws of a transaction Broker may differ from State to State. However, one thing is certain about this agency relationship, they are not your fiduciary and you are not their “client”. Thus, you are their customer.

As a transaction Broker, the real estate sales associate and the Broker will still account for all funds. In addition, they shall deal honestly and fairly, and disclose all known material facts that affect the value of your real property. Thus, these duties will never change, no matter the relationship. Additionally, the transaction broker will still have added duties they must abide by, which we have listed below.

Duties to Abide by:

• Use skill, care, and diligence
• Present all offers and Counter Offers
• Exercise limited confidentiality
• Perform additional duties that are mutually agreed to

In Florida, it is assumed that the transaction broker relationship is the primary relationship for all real estate transactions unless otherwise stated in an agreement. This will differ from State to State so ask an agent in your area as to how this agency relationship best suits your needs. One question you should always ask is; is this the best representation for my transaction? That depends on the transaction, whether you’re the buyer or seller, and the parties involved.

To better organize this topic for your pleasure, we have decided to separate the details on the best times to use this type of relationship and the others listed above. The scenario for your transaction will make the difference. We have outlined some scenarios in our next article, “When to Enter a Transaction Agency Relationship”.