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Understanding Broker Agency
in Real Estate
 It’s important to understand what legal
responsibilities your real estate salesperson has to you and to
other parties in the transactions. Ask your salesperson to explain
what type of agency relationship you have with him or her and with
the brokerage company.
1. Seller's representative (also known as a listing agent or
seller's agent). A seller's agent is hired by and represents the
seller. All fiduciary duties are owed to the seller. The agency
relationship usually is created by a listing contract.
2. Subagent. A subagent owes the same fiduciary duties to the
agent's principal as the agent does. Subagency usually arises when a
cooperating sales associate from another brokerage, who is not
representing the buyer as a buyer’s representative or operating in a
nonagency relationship, shows property to a buyer. In such a case,
the subagent works with the buyer as a customer but owes fiduciary
duties to the listing broker and the seller. Although a subagent
cannot assist the buyer in any way that would be detrimental to the
seller, a buyer-customer can expect to be treated honestly by the
subagent. It is important that subagents fully explain their duties
to buyers.
3. Buyer's representative (also known as a buyer’s agent). A
real estate licensee who is hired by prospective buyers to represent
them in a real estate transaction. The buyer's rep works in the
buyer's best interest throughout the transaction and owes fiduciary
duties to the buyer. The buyer can pay the licensee directly through
a negotiated fee, or the buyer's rep may be paid by the seller or by
a commission split with the listing broker.
4. Disclosed dual agent. Dual agency is a relationship in
which the brokerage firm represents both the buyer and the seller in
the same real estate transaction. Dual agency relationships do not
carry with them all of the traditional fiduciary duties to the
clients. Instead, dual agents owe limited fiduciary duties. Because
of the potential for conflicts of interest in a dual-agency
relationship, it's vital that all parties give their informed
consent. In many states, this consent must be in writing. Disclosed
dual agency, in which both the buyer and the seller are told that
the agent is representing both of them, is legal in most states.
5. Designated agent (also called, among other things,
appointed agency). This is a brokerage practice that allows the
managing broker to designate which licensees in the brokerage will
act as an agent of the seller and which will act as an agent of the
buyer. Designated agency avoids the problem of creating a
dual-agency relationship for licensees at the brokerage. The
designated agents give their clients full representation, with all
of the attendant fiduciary duties. The broker still has the
responsibility of supervising both groups of licensees.
6. Nonagency relationship (called, among other things, a
transaction broker or facilitator). Some states, including
Pennsylvania, permit a real estate
licensee to have a type of nonagency relationship with a consumer.
These relationships vary considerably from state to state, both as
to the duties owed to the consumer and the name used to describe
them. Very generally, the duties owed to the consumer in a nonagency
relationship are less than the complete, traditional fiduciary
duties of an agency relationship.
Reprinted from REALTOR® Magazine Online by permission of the
NATIONAL ASSOCIATION OF REALTORS®
Copyright 2005. All rights reserved.
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