Agency Agreements Explained
July 26, 2019 |
As real estate agents continue to evolve in how they represent clients and how they are compensated, the types of agency relationships and agreements remain unchanged. Understanding the duties and obligations that come with each type of agency relationship is important when evaluating how your practice will advance in an ever-changing real estate landscape.
Three different types of agency agreements are discussed below. For each one, the agreements must have a definite expiration date, the fair housing statement, the blockbusting statement, the HUD logo and a place for the broker and seller to sign.
The most common is the Exclusive Right to Sell or Lease Listing Agreement. The means there is an agency agreement between the seller and the broker, granting the broker the exclusive right to represent the seller in the sale or lease of the seller’s property. The agreement also provides that the broker will be compensated if the broker, the seller, or any other person or entity produces a purchaser or tenant in accordance with the terms specified in the listing agreement or if the property is sold or leased during the term of the listing agreement to anyone other than to specifically exempted persons or entities.
The Exclusive Agency Agreement grants the broker the exclusive right to represent the seller in the sale or lease of the seller’s property, but changes how the broker will be compensated. Under this agreement, the broker must produce a purchaser or tenant in accordance with the terms specified in the agreement. If the property is sold or leased solely through the efforts of the seller, the broker would not be entitled to compensation.
An Exclusive Buyer Agency Agreement grants the broker the exclusive right to represent the buyer in the purchase or lease of property. The broker is compensation if a property is purchased or leased during the term of the agreement, unless the property is specifically exempted. Thus, if Buyer is a party to an Exclusive Purchaser Agency Agreement with Broker A, (assuming the agreement has not expired or otherwise been terminated) Broker A will be compensated even though Buyer may ultimately purchase through the efforts of Broker B. The Exclusive Purchaser Agency Agreement specifies who is entitled to compensation, which may be different than who is representing the buyer.
Under any type of agency agreement, a Broker may enter into a relationship with a client whereby the client agrees to waive certain duties that would otherwise be performed by the Broker. These are sometimes referred to as Flat Fee Listings or Limited Service Agreements. In this regard, clients must complete a Waiver of Duties statement identifying those duties being waived, keeping in mind certain duties that are not waivable. As discuss above, although the compensation owed the Broker may vary depending on the type of agency agreement, the duties cannot vary unless the client consents in writing.
The varying types of compensation arrangements and ability to specifically define what duties are owed and which are not, in an agency relationship, provide flexibility for agents to tailor their practice to meet client preferences. As the real estate industry continues to develop new ways of servicing clients, agents will be increasingly challenged to utilize both agency agreements and defined fiduciary duties to grow their practice beyond traditional agency agreements. More on agreements, read what I’ve previously written about Residential Lease Agreements as well as Pre and Post-Closing Possession Agreements.