Agency, Representation and Client Relationships
What this domain tests
This domain tests whether you can establish, define, and terminate agency relationships correctly, and whether you can explain the resulting duties to clients and customers. Expect questions on creation of agency, types of agency, implied duties, and the transition from client to customer.
Core rules and concepts
- Agency is created by agreement, usually a written representation agreement, but can arise from conduct. The brokerage, not the individual salesperson, holds the agency; the salesperson acts on the brokerage's behalf.
- Types of agency: seller/landlord representation, buyer/tenant representation, and dual (multiple) representation. Each creates different duties to each party.
- Duties to clients: care and skill, loyalty, confidentiality, full disclosure, obedience to lawful instructions, and accounting for money and documents.
- Duties to customers: honesty, fairness, disclosure of material facts, and no misrepresentation - but no fiduciary loyalty or confidentiality.
- Confidentiality survives termination; the duty not to use a former client's confidences does not end when the agreement ends.
- Termination occurs by expiry, completion, mutual agreement, or breach; the agreement should state the term, the commission entitlement, and any holdover clause.
- Designated agency allows different salespersons in one brokerage to represent opposing parties, but the brokerage must have written consent and internal safeguards.
Worked example
A buyer client tells their salesperson, "I'll pay up to $700,000, but offer $650,000." The listing side asks the salesperson what the buyer can afford.
Reasoning: the buyer's ceiling is confidential client information and cannot be disclosed to the seller's side without consent, even though it would help close the deal. The salesperson may confirm the buyer is qualified, but not reveal the ceiling. If the salesperson represented both sides, the answer would be different only if both parties gave informed written consent to multiple representation - and even then, the salesperson could not use one party's confidences against them.
Traps that cost marks
- Saying the salesperson represents the client - the brokerage does.
- Assuming confidentiality ends at termination.
- Believing a customer is owed the same loyalty as a client.
- Overlooking that a holdover clause can entitle the brokerage to commission after expiry.
- Confusing designated agency with dual agency by the same salesperson.