Real Estate Agency

A relationship between the parties involved in a real estate transaction requires a wide range of legal and ethical requirements to protect the Seller, the Buyer, and the transaction itself. 

Real Estate Agency
By Pierre Mouchette | Real Property Experts LLC

A relationship between the parties involved in a real estate transaction requires a wide range of legal and ethical requirements to protect the Seller, the Buyer, and the transaction itself.  Agency is the word used to describe this unique relationship governed by common law and statutory law (state statute).
The law of agency defines the rights and duties of the parties in a real estate transaction

• Principal - an individual (client) who hires the Agent (Buyer or Seller of real property)
• Agent - the firm’s Broker or their authorized licensee (General Agent).  The principal authorizes the agent to act on their behalf.
• Client - the Principal.
• Customer - the third party or non-represented consumer for whom some level of service is provided.
• Non-agent - a facilitator or middleman between a Buyer and a Seller

 
Agency is the fiduciary relationship between the Principal and the Agent.  The types of agency are:

• Express Agency is an agency created by either an oral or written agreement between the principal and the agent.  It indicates their express intent for this representational status.  An agency is typically made in real estate by either a written listing agreement with a seller or a buyer agency agreement with a buyer.  Some states allow verbal agreements, but most do not.
• An implied Agency is an agency created by a relationship or the actions of the parties.  Suppose a real estate agent takes on responsibilities but has not signed an agency agreement.  In that case, they may still be considered an agent via an implied agency.  If the customer asks the agent for advice or actions typically provided in an agency through the same proviso, an implied agency is created.

Some states have created specific legislation that states that no agency can exist without a written agency agreement.  This helps to avoid accidentally implied agency. 
 
Types of Agency Relationships
An agent’s enablement to represent the principal depends solely on the authorization to do so.

• General Agent – represents the principal in a broad range of matters related to a business or activity.
• Special Agent is a limited agent authorized to represent the principal in one specific act or business transaction.  A real estate Broker is a Special Agent (transaction brokerage)
• Universal Agent - a person with the authority to do whatever the Principal could personally do.  This is a broad scope of power in a real estate transaction.

 
Termination of Agency
Agency can be terminated for any of the following reasons

• Breach of contract
• Completion of the purposes for which the agency was created
• Death or incapacity of either party
• Mutual agreement by all parties
• Operation of law