(Information taken from “Working With A Realtor” brochure.)
When you choose to work with a realtor your legal relationship is referred to as agency. In the agency relationship you are the principal and your agent is the company under which an individual salesperson is licensed. In the agent relationship two things can happen: one agent acts for the buyer and one agent acts for the seller; or one agent represents both in dual agency.
One Agent Act For The Buyer, One Agent Acts For The Seller
When a seller lists his or her property with a licensee, the licensee becomes an agent to the seller. As the seller you become the principal and the licensee becomes your agent. A buyer also selects a licensee to be his/her agent. Agents are legally obligated to protect and promote the interests of their principal as they would their own. An agent has the following duties:
1) Undivided loyalty: an agent must disclose all known facts to his/her principal and protect the principal’s negotiating power at all times.
2) To obey all lawful instructions to the principal.
3) An obligation to keep the confidences of the principal.
4) To exercise reasonable care and skill in performing all assigned duties.
5) The duty to account for all property and money placed in the agent’s hands.
This occurs when the real estate company is representing both the buyer and seller at the same time. It is important to note that both buyer and seller may be represented by different licensees, but if they are employed by the same real estate company this is dual agency. This forms a conflict as the company has promised full disclosure, loyalty, and confidentiality to both parties simultaneously. With the consent of both parties, these duties can become limited by forming a limited dual agency.
This new relationship involves the following limitations:
1) The agent will deal with the buyer and seller impartially.
2) The agent will have a duty of full disclosure to both the buyer and seller except for:
a) Price: the agent will not reveal the seller’s floor price, or the buyer’s ceiling price.
b) Motivation: the agent will not disclose any particular motivation factors of either party.
c) Personal Information: the agent will not disclose personal information to either the buyer or seller unless authorized to do so in writing.
3) The agent will disclose any physical defects to the buyer of which he/she is aware.