Home > Buyers' Guide > Types of Agency Relationships

What is Agency?  Why should I sign a Buyer Agency?  Why should I commit to a REALTOR®?

REALTORS® are governed by the legal concept of “agency”.  An agent is legally obligated to look after the best interests of the person he or she is working for. The agent must be loyal to that person.

A real estate brokerage may be retained as your agent, if so, you must clearly establish this relationship with a REALTOR®.  But often, you may assume such an obligation exists when it does not.

REALTORS® believe it is important that the people they work with understand when an agency relationship exists and when it does not – and understand what it means.

In Real Estate, there are different possible forms of agency relationship:

Seller Representation
When a real estate brokerage represents a seller, it must do what is best for the seller of a property.
A written contract, called a listing agreement, creates an agency relationship between the seller and the brokerage and establishes seller representation.  It also explains services the brokerage will provide, establishes a fee arrangement for the REALTORS® services and specifies what obligations a seller may have.
A Seller’s agent must tell the seller anything known about a buyer.  For instance, if a seller’s agent knows a buyer is willing to offer more for a property, that information must be shared with the seller.
Confidences a seller shares with a seller’s agent must be kept confidential from potential buyers and others.
Although confidential information about the seller cannot be discussed, a buyer working with a seller’s agent can expect fair and honest service from the seller’s agent and disclosure of pertinent information about the property.

Buyer Representation
A real estate brokerage representing a buyer must do what is best for the buyer.
A written contract called a buyer representation agreement, creates an agency relationship between the buyer and brokerage and establishes buyer representation.  It also explains services the brokerage will provide, establishes a fee arrangement for the REALTOR®’s services and specifies what obligations a buyer may have.
Typically, buyers will be obliged to work exclusively with that brokerage for a period of time.
Confidences a buyer shares with the buyer’s agent must be kept confidential.
Although confidential information about the buyer cannot be disclosed, a seller working with a buyer’s agent can expect to be treated fairly and honestly.

Multiple Representation
Occasionally a real estate brokerage will represent both the buyer and the seller.  The buyer and seller must consent to this arrangement in writing.  Under this multiple representation arrangement, the brokerage must do what is best for both the buyer and the seller.
Since the brokerage’s loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a multiple representation relationship be properly documented.  Representation agreements specifically describe the rights and duties of everyone involved and any limitations to those rights and duties.

Customer Service
A real estate brokerage may provide services to buyers and sellers without creating buyer or seller representation.  This is called customer service.
Under this arrangement, the brokerage can provide many valuable services in a fair and honest manner.  This relationship can be set out in a buyer or seller customer service agreement.
Real estate negotiations are often complex and a brokerage may be providing representation and/or customer service to more than one seller or buyer. The brokerage will disclose these relationships to each buyer and seller.

As you can see, it’s very important to understand who the REALTOR® is working for. If both parties are represented under an agency agreement, they both have someone working on their behalf to promote their interests.

Some buyers choose to contact the seller’s agent directly. Under this arrangement it is important to know that the REALTOR® is working for the seller, and must do what is best for the seller, but may provide valuable services to the buyer while being ethical, fair and honest, unless you enter into a dual agency relationship where you are both represented by the same REALTOR®.

REALTORS® believe it is important that buyers and sellers alike understand who works for whom. That’s why agency disclosure is included in the REALTOR® Code of Ethics.

The Code requires REALTORS® to disclose in writing the type of relationship they are entering into with buyers and sellers and to obtain written acknowledgement of that disclosure.

The Code also requires REALTORS® to enter into a written agency agreement with any sellers or buyers they are representing.


Like this Article? You might also be interested in:

Get a REALTOR on Your Side

Growth in our Area

Insurance