A relationship when a principal (buyer or seller) delegates to an agent (the real estate broker/agent) the right to act on his behalf in a home buying or home selling transaction. Creation of an agency relationship doesn't depend on a written contract, but can be implied by the acts of the parties involved. In an agency relationship, the agent owes the principal certain duties and obligations.
- Disclosure of material facts
- Personal performance
- Reasonable care
- Proper accounting of all monies such as earnest money
- Placement of principal's interests over their own
An agency relationship may be terminated at any time; However, one or more parties involved may have a claim to monetary damages if the relationship is terminated prior to the expiration date.
A situation where a real estate broker represents both principals (the buyer and the seller) in a real estate transaction. In Georgia, it is unethical and illegal to represent both parties without written consent from all parties involved in the transaction. Because the broker/agent has the responsibility to keep confidential all information about a principal as well as divulge all pertinent information to a principal, there is a conflict of interests. It is impossible to disclose all necessary information to one party while also keeping it confidential for the other. This conflict of interests creates a very difficult situation for all parties involved, but is legal provided each party has given informed consent in writing after the disclosure of dual agency. Instead of navigating this difficult legal situation, the most common solution is usually designated agency.
Agency relationship that is created when a buyer and a real estate broker enter into a buyer broker agreement (BBA). The buyer's agent represents the buyer's interests in locating, evaluating, assisting, and negotiating the purchase of property. In most instances, the buyer's agent is paid by the listing broker which comes from the seller's proceeds. In this typical situation, the seller agrees that the listing broker will share a portion of the real estate commissions paid with any buyer's broker who finds a ready, willing, and able buyer for the property. This is how many buyer's agent tout that they will work for "free". In the situation where the seller does not agree for the listing broker to share the commission, then the BBA outlines how the buyer's agent will be compensated for their work.
In situations where dual agency may occur, real estate brokers may designate another agent in their firm to represent one of the principals (buyer or seller) so that dual agency can be avoided. Both principals are still represented by the same brokerage, but by different agents. This allows the agents to carry out all their fiduciary responsibilities to their respective clients without there being a conflict of interests. In designated agency, each designated agent is prohibited from disclosing to anyone other than his broker any confidential information. The broker is also prohibited from revealing any of this information from one designated agent to the other unless the information is required to be disclosed by law.
Routine acts that don't include judgment, discretion, or advice and can be performed without creating an agency relationship. Common ministerial acts are:
- Identifying property
- Providing real estate statistics and property information
- Providing preprinted real estate form contracts
- Acting as a scribe in the preparation of form contracts
- Locating relevant professionals, such as inspectors, lender, insurance agents, and attorneys
- Identifying facilities such as schools, shopping centers, and places of worship
A transaction broker assists both parties in a real estate transaction without representing either party. The transaction broker treats both parties as customers and can only perform ministerial acts.