Agency and Non-Agency Relationships
Core idea
Agency is a fiduciary relationship created when a principal authorizes a broker to act on the principal's behalf. In Tennessee, candidates should distinguish clients from customers, and agency from non-agency (transaction-broker) service. Fiduciary duties are often remembered as COLDAC: care, obedience, loyalty, disclosure, accounting, and confidentiality. The broker must disclose material facts, account for money, follow lawful instructions, and keep confidences even after the relationship ends.
Relationship types and traps
Learn seller agency, buyer agency, dual agency, designated agency, and transaction broker. Compensation does not create agency; a commission paid by the seller does not automatically make the buyer's broker the seller's agent. Dual agency must be disclosed and consented to in writing; a dual agent cannot advocate for one side over the other. Designated agency assigns different agents within one firm to each side; it is not the same as dual agency. A transaction broker assists without representing either party and owes honesty and fairness, not full fiduciary loyalty. Traps include assuming an oral relationship, failing to disclose whom you represent at first substantive contact, confusing subagency with buyer agency, and revealing confidential information after termination.
Worked rule
If a buyer calls a listing agent and asks, “Can you help me buy this house?” the agent should not quietly become the buyer's advocate. The agent explains the brokerage relationship in writing-seller agent, buyer agent, dual agent, or transaction broker-before substantive help. Rule of thumb: “Disclose first, represent in writing, and never let a commission check decide agency.”