Agency
Agency defines the relationship between a licensee and the people they serve. This topic covers how agency is created, the fiduciary duties owed to a client, the difference between clients and customers, and the forms agency can take.
Creating Agency and Fiduciary Duties
An agency relationship makes the licensee (agent) a fiduciary of the principal (client). It is usually created by an express agreement (a listing or buyer-broker agreement) but can arise by implication or ratification. The agent owes the client fiduciary duties, often remembered as OLD CAR: Obedience (to lawful instructions), Loyalty (putting the client's interests first), Disclosure (of material facts), Confidentiality, Accounting (for money and documents), and Reasonable care and diligence.
Clients vs. Customers
A client is the party the agent represents and owes full fiduciary duties. A customer is the other party, to whom the agent owes honesty, fair dealing, and disclosure of known material defects, but not loyalty or confidentiality. Confidential information about the client, such as the client's motivation or the highest price a buyer will pay, must be protected. All parties are owed honesty and disclosure of material facts affecting the property.
Types of Agency
A special agent is hired for a specific task (a listing agent selling one property); a general agent has broad authority (a property manager). Single agency means representing only one party. Dual agency means representing both buyer and seller in the same transaction and is allowed only with the informed written consent of both because of the conflict of interest. Some states allow a designated agency where different agents in one brokerage represent each side, or a non-agency 'transaction broker' who facilitates without representing either party.