Agency Disclosure

Definition

Agency disclosure is a mandatory written explanation given to a prospective buyer or seller of real estate that outlines the role and responsibilities of the real estate broker in the transaction. The key purpose of this disclosure is to inform the client whether the broker represents the buyer, the seller, or acts as a dual agent (representing both parties) or a subagent (an agent of the seller’s broker). This information helps the prospective buyer or seller understand to whom the broker owes loyalty and ensures transparency in the real estate transaction.

Examples

Buyer Representation: A couple interested in purchasing a home consults with a real estate broker. The broker provides an agency disclosure statement indicating that they represent the buyers, ensuring the broker’s duties and loyalty lie with the buyers throughout the purchasing process.
Seller Representation: A homeowner looking to sell their property signs an agency disclosure form with a real estate broker. The form specifies that the broker represents the seller, making it clear that the broker’s primary responsibility is to the seller.
Dual Agency: A real estate broker facilitates a transaction where they represent both the buyer and the seller. The broker must provide an agency disclosure form to both parties, stating their dual role and ensuring both parties understand the broker’s duties and limitations in this scenario.

Frequently Asked Questions

Q: Why is agency disclosure important? A: Agency disclosure is crucial because it ensures that all parties involved in a real estate transaction understand the broker’s role, prevents conflicts of interest, and promotes transparency and informed decision-making.

Q: What is a dual agent? A: A dual agent is a broker who represents both the buyer and the seller in the same real estate transaction. Dual agency must be disclosed to and agreed upon by both parties involved.

Q: What is a subagent? A: A subagent is an agent who works for a broker and represents the interests of the broker’s client. For example, a subagent can work with buyers while officially representing the seller through the seller’s broker.

Q: Is agency disclosure required by law? A: Yes, in many jurisdictions, real estate laws mandate agency disclosure to ensure transparency and protect the interests of buyers and sellers in real estate transactions.

Q: How does agency disclosure affect negotiations? A: Knowing the broker’s loyalty—whether to the buyer, seller, or both—helps clients understand the broker’s potential biases and better navigate negotiations.

Fiduciary Duty: The obligation of a broker to act in the best interest of their client with loyalty, care, and confidentiality.
Exclusive Agency: An agreement where a seller works exclusively with one broker but retains the right to sell the property independently without paying commission.
Listing Agreement: A contract between a property owner and a real estate broker authorizing the broker to find a buyer or tenant for the property.
Buyer’s Agent: A real estate broker who represents and works in the best interest of the buyer in a real estate transaction.
Seller’s Agent: A real estate broker who represents and works in the best interest of the seller in a real estate transaction.

Online Resources

National Association of Realtors - A leading resource for real estate professionals providing information on various topics including agency relationships.
The Balance - Article explaining the importance of agency disclosure for buyers and sellers.
Real Estate Commission Information - A directory for accessing specific state laws and regulations regarding agency disclosure.

Suggested Books for Further Studies

The Real Estate Agent’s Guide to Agency Disclosure by Albert Williams
Real Estate Law by Robert J. Aalberts
Agency, Partnerships, and LLCs by J. Dennis Hynes and Mark J. Loewenstein

Fundamentals of Agency Disclosure: Real Estate Basics Quiz

### What is the primary purpose of an agency disclosure in real estate? - [ ] To ensure the broker gets paid - [ ] To speed up the transaction process - [x] To inform the client about the broker's role - [ ] To determine the selling price > **Explanation:** The primary purpose of an agency disclosure is to inform the client about the broker's role in the transaction, ensuring transparency and understanding of whom the broker is representing. ### Can a dual agent represent both the buyer and the seller? - [x] Yes - [ ] No - [ ] Only the buyer - [ ] Only the seller > **Explanation:** A dual agent can represent both the buyer and the seller in a real estate transaction, but this relationship must be disclosed and agreed upon by both parties. ### Who does a subagent primarily work for? - [ ] The buyer - [ ] The independent seller - [ ] The government - [x] The seller’s broker > **Explanation:** A subagent works for the seller's broker, providing services to buyers while representing the seller's interests. ### Is agency disclosure a legal requirement in real estate transactions? - [x] Yes - [ ] No - [ ] Only in some states - [ ] Only for residential properties > **Explanation:** In many jurisdictions, agency disclosure is required by law to ensure transparency and protect the interests of all parties involved in a real estate transaction. ### What information is typically included in an agency disclosure? - [ ] Property valuation details - [x] The broker's role and loyalty - [ ] The closing date - [ ] Mortgage information > **Explanation:** An agency disclosure typically includes information about the broker's role and to whom they owe their loyalty, such as whether they represent the buyer, seller, or both. ### Does the agency disclosure need to be signed by the prospective buyer or seller? - [x] Yes - [ ] No - [ ] Only the broker - [ ] Only if requested > **Explanation:** The agency disclosure needs to be signed by the prospective buyer or seller to acknowledge that they understand the role of the broker in the transaction. ### What does a buyer's agent represent in a real estate transaction? - [x] The buyer's interests - [ ] The seller's interests - [ ] Both buyer and seller equally - [ ] The local municipality > **Explanation:** A buyer's agent represents the buyer's interests in a real estate transaction and works to secure the best terms for the buyer. ### What is an exclusive agency agreement? - [x] An agreement where the seller works exclusively with one broker but can sell the property independently - [ ] An agreement involving multiple brokers - [ ] A type of mortgage - [ ] A listing without a selling deadline > **Explanation:** An exclusive agency agreement allows the seller to work with one broker exclusively but also retains the right to sell the property independently without paying a commission. ### What duty requires the broker to act with loyalty and care towards their client? - [ ] Dual Agency - [ ] Subagency - [x] Fiduciary Duty - [ ] Open Listing > **Explanation:** Fiduciary duty is the responsibility of the broker to act with loyalty, care, and confidentiality towards their client. ### Does dual agency require agreement from both buyer and seller? - [x] Yes - [ ] No - [ ] Only from the buyer - [ ] Only from the seller > **Explanation:** Dual agency requires agreement from both the buyer and the seller to ensure that both parties are aware and consent to the broker representing both sides of the transaction.

Thank you for exploring the concept of agency disclosure and testing your knowledge with our real estate quiz. Continue to build understanding and expertise in the ever-evolving field of real estate!

Agency Disclosure