Brokerage Practice and Agency Relationships
How agency is created
Express agreement (written or oral), implication from conduct, ratification of an unauthorized act, or estoppel when a party is held out as an agent. Agency is separate from compensation: a broker may be paid by the seller while representing the buyer, provided the relationship is disclosed.
Types and duties
- Seller agency, buyer agency, dual agency, designated agency, and state-specific non-agency or transactional brokerage.
- Fiduciary duties: care, obedience to lawful instructions, loyalty, disclosure, accounting, confidentiality.
- Confidentiality protects the client's bargaining position but never allows concealment of a material fact from the other side.
Supervision and liability
The responsible broker supervises associates, reviews advertising, and maintains transaction and trust records. The broker is generally liable for associates' acts within the scope of the agency.
Termination
Expiration, performance, mutual agreement, revocation, death or incapacity, and in some states bankruptcy. Confidentiality and accounting duties survive termination.
Worked example
A buyer signs a buyer-broker agreement and tours a home listed by another firm. The buyer asks the agent, "Does the seller need to move fast?" Because the agent represents the buyer, the answer cannot draw on confidential information from an earlier relationship with that same seller. If the agent previously represented the seller, the prior relationship should be disclosed and the seller's confidences kept sealed.
Traps that cost marks
- Assuming dual agency is lawful everywhere; it requires informed written consent and is barred in some states.
- Believing compensation determines who the agent represents.
- Believing confidentiality expires with the listing or the buyer agreement.