1. 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

Buyer Representation The practice of real estate practitioners (brokers and their agents) representing the buyer as a client The agent of the buyer 9

Evolution of Buyer Representation Seller-representation was default of most MLSs and state regulations until ’90s Became “out of sync” with realities of marketplace 9

Consumer 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

Seller 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

NAR 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

Market Trends Percentage of buyers with a buyer representation agreement 1999 – 47% 2006 – 64% 12

Parties in a Real Estate Transaction Client/principal Broker Agent Customer Transaction broker Finder 13

Agency Relationships Created by Types of Agency Relationships Express Written Agreement Implied Agreement Oral Agency Relationships Created by Single Agency Dual Agency Designated Agency Buyer OR Seller Buyer AND Seller Types of Agency Relationships Agent Represents 14

Relationships Single agency Dual agency Designated agency Transaction broker/facilitator Finder 15

Single Agency Exclusive agent of the buyer or seller All of broker’s salespeople are also agents of the buyer or seller 16

Dual 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

Designated Agency State specific Removes agency responsibility from other agents in firm Broker may/may not be a dual agent Assigned agents must not share confidential information 17

Non 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

Office Policy Know and comply with your broker’s policy on types of relationships offered and accepted No policy = undisclosed dual agency! 20

Skill Builder Tip: Creating an Agency Policy Present a brief opening statement of agency policy. Describe how the policy will be implemented. Define the types of agency relationships practiced. Include a rationale for the company’s agency policy. Explain how the consumer is treated in each relationship. Indicate what disclosures must be made. Indicate when and to whom disclosures must be made. Include standard forms licensees are required to use. Specify training the company will provide to licensees. Attorney review for policy for conformance with state laws. 21

Building 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