The law of agency in a real estate transaction defines the legal relationship between real estate professionals and their clients. Each state has its own agency laws that set forth the duties that real estate professionals owe to their clients and what disclosures need to be made to the clients. Traditionally, most states relied upon the common law of agency to define the scope of the agency relationship, but in recent years some states have adopted the “transactional brokerage model” where the agency relationship is defined by statute. A majority of states allow a real estate professional to represent both sides in the transaction as a “dual agent” if the clients consent to the relationship.
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Agency Disclosure Facts From NAR's 2013 Legal Scan (aka “Legal Trends Report”)
- 37% of the survey respondents reported a moderate or higher level of current disputes involving Agency issues.
- 22% of the respondents believe there is a significant need for training on Agency issues in general.
About Agency Disclosure
5 Things You Need to Know about Real Estate Disclosures, (Zillow Blog, Sept. 24, 2016).
Explaining Single Agency, Dual Agency and Transaction Broker Relationships, (Tough Nickel Blog, May 25, 2016).
Real Estate Agents and the Closing Disclosure (CD), (National Association of REALTORS®, Dec. 8, 2015).
Manage the Controversy Around Dual Agency, (REALTOR® Magazine, Apr. 15, 2014).
Dual Agent: A Misunderstood Concept, (RealtyTimes, Nov. 25, 2013).
Understand Agency Relationships, (REALTOR® Magazine, n.d.).
The Riskiest Business, (REALTOR® Magazine, Sept. 2011).
Real Estate Brokerage Research in the New Millennium, (Journal of Real Estate Literature, 2011). E
A Critical Examination of Broker Minimum Service Laws, (Journal of Housing Research, 2010). E
Must I Disclose My Client Relationship? (REALTOR® Magazine, Sept. 2010).
Walking the Fine Line: Distinguishing Between Tokens of Appreciation and Bribes, (Journal of Property Management, Nov./Dec. 2010). E
Brokers Must Reveal More, (Wall Street Journal, Sept. 2, 2010).
Agency Disclosure in the Real Estate Transaction and the Impact of Real Estate Policies, (The Journal of Real Estate Research, July/Sept. 2009). E
Mitigating disclosure risk starts with solid recordkeeping practices. Knowing which materials to keep and how to store them is the challenge. The articles below offer some ideas for best practices and procedures. You can also take a page out of libraries' books and subscribe to the LOCKSS method (Lots of Copies to Keep Stuff Safe). Keep in mind neither digital nor print are impervious to the perils of disaster—maintaining copies in various formats and locations can often provide the greatest longevity for your records. However, ensuring the security and privacy of all copies of materials is an important factor to consider.
Fighting the Frivolous, (REALTOR® Magazine, Oct. 2012).
National Clean Off Your Desk Day: 6 Easy Tips, (REALTOR® Magazine, Jan. 2012).
Standing at the Altar, (Journal of Business Case Studies, July/Aug. 2011). E
Contact a legal professional (such as someone on your state Association of REALTORS®’) legal hotline to learn about the disclosure and recordkeeping requirements specific to your state. Here are some examples for Ohio and North Dakota:
Record Keeping, (Ohio Association of REALTORS®, n.d.).
Guidelines for Record Keeping, (North Dakota Real Estate, 2008).
According to the NAR State Issues Tracker, as of June 2013, “a great majority of the jurisdictions [surveyed] (91 percent)* allow dual agency with appropriate disclosures and accompanying consents” and “Several states' rules require specific forms or language to be included in a dual agency agreement.”
Of course, the law is a living and breathing organism that is always changing, so be sure to check with your state or territory’s statutory code for the most up-to-date information on agency laws in your state. Or, if you are a REALTOR®, contact your state association of REALTORS®’ legal hotline. To find your state association, please visit this page and select your state from the list.
*The jurisdictions surveyed include the 50 U.S. states, District of Columbia, Guam, Puerto Rico, and the U.S. Virgin Islands.
What Is Dual Agency? Know When It’s Right, and When to Beware, (realtor.com®, Oct. 4, 2016).
Dual vs. Single Agency Relationships in Real Estate, (The Balance Blog, Aug. 6, 2016).
What Is Dual Agency? (And Why You Should Beware), (Trulia Blog, July 20, 2016).
Dual Agency Can Be a Good Thing, (Realty Times, Apr. 25, 2016).
Newly amended dual agency disclosure law: Much ado about nothing, (San Diego Source, Jan. 14, 2015).
Rathbun REALTORS® Talk About Real Estate, (Daily Iowegian, May 23, 2014).
Dual Agency is Controversial Among Brokers, (Philadelphia Inquirer, Apr. 13, 2014).
HUD Delays Dual Agency Ban on FHA Short Sales, (REALTOR® Magazine, Sept. 26, 2013).
Dual Agency Representation: Incentive Conflicts or Efficiencies?, (The Journal of Real Estate Research, 2013). E
Commission Splits of Real Estate Agents with Affiliated Firms, (Journal of Housing Research, 2013). E
Dual Agents and the Double Duty of Loyalty, (Social Science Research Network, Mar. 5, 2012).
Disclosure Materials From Your State
The laws and regulations for agency disclosure may vary from state to state. As a member of the National Association of REALTORS®, you can contact your State Association of REALTORS® for specific details on your state's disclosure requirements. The National Association of REALTORS® collects information on state specific legal issues in the State Issues Tracker:
National Association of REALTOR®'s State Issues Tracker, (See: Agency).
Some state real estate commissions have included helpful materials on their websites regarding agency disclosure. A few examples:
Or run this search to find more government resources:
Agency Legal Cases
Dual agency case heads to California’s highest court, (Inman, Sept. 7, 2016).
Contract Incentives and Effort, (Journal of Real Estate Research, Oct.-Dec. 2010). E
Broker Awarded Commission from Failed Transaction, (Mich. Ct. App., Nov. 20, 2008).
Broker Cannot Collect Undisclosed "Consulting Fee" (2003), (National Association of REALTORS®, Letter of the Law).
eBooks & Other Resources
The following eBooks and digital audiobooks are available to NAR members:
Real Estate Salespeople, Beware! (Adobe eBook)
Get It Together (Adobe eReader)
The Real Estate Entrepreneur (Adobe eReader)
Books, Videos, Research Reports & More
The resources below are available for loan through Information Services. Up to three books, tapes, CDs and/or DVDs can be borrowed for 30 days from the Library for a nominal fee of $10. Call Information Services at 800-874-6500 for assistance.
Digest of Real Estate License Laws and Current Issues, (Lake City, UT: Arello (published annually). HD 1383 N21d
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