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Agency:

Understanding The Concept of Agency

Information About Brokerage Services

The subject of real estate agency is so important that the Texas Real Estate Commission has promulgated a form to be signed by all real estate buyers and sellers. The goal is to ensure that everybody gets an even-handed explanation of real estate agency.

Real estate agents are required to present this form to buyers and sellers, and to maintain a file of signed forms in order to prove they are complying with the regulations. Click here to read this form.

The Legal Concept Of Agency

• An agency relationship is created when a client (the seller or buyer) authorizes another person (the real estate agent) to perform specific activities on behalf of the client.
• An agency relationship may be created by written agreement between client and agent or by verbal agreement between client and agent.
• So far as agency law is concerned, an agency relationship can be created even though no specific arrangements are made concerning the duties of the agent or the compensation to be provided by the client.
• It is even possible to create an agency relationship without any specific discussion of agency. If someone treats you like an agent, and your actions imply that you are accepting the offer of representation, the two of you may have created an agency relationship in the eyes of the law.
• In order to avoid misunderstandings, it is best for every client (whether seller or buyer) to insist on having a written agency agreement with his real estate agent.
• That is why sellers sign Listing Agreements and buyers sign Representation Agreements with the REALTORS® who serve them.

An Agent Has Well-Defined Obligations

• Loyalty - As your agent, I am legally obligated to act at all times solely in the best interest of his client, to the exclusion of all other interests, including my own self-interest.
• Obedience - As your agent, I am legally obligated to obey promptly and efficiently all lawful instructions from his client.
• Disclosure - As your agent, I am legally obligated to disclose to his client all relevant and material information that the agent knows, and that pertains to the scope of the agency.
• Confidentiality - As your agent, I am legally obligated to safeguard the client's confidences and secrets, especially any information that might weaken the client's bargaining position.

The Rise Of Buyer Representation

• Sellers have been receiving representation from real estate agents for many years, but the practice of buyer agency was not formalized until the 1980s.
• MLS rules were changed in the 1980's to make it easy for homebuyers to get full representation from real estate agents.
• A Buyer's Agent negotiates exclusively on behalf of the homebuyer. He has no agency relationship with the seller.
• Typically, the agent and the buyer sign a contract that obligates the agent to help find the right property and negotiate the best price and terms for the Buyer.
• In return, the buyer promises to do his home shopping with the agent, to allow the agent to represent him in all negotiations, and to see to it that the agent gets paid.
• The agent's fee is usually paid by the seller from the proceeds of sale.
• It is legally possible for a buyer to pay the agent directly out of his (the buyer's) own pocket, but this is seldom done in practice.

When You Visit An Open House

• When you meet the listing agent at an open house (or when you talk to him on the phone), remember he is representing the seller!
• You can have a friendly conversation, but do not disclose any information you would not want the listing agent to pass on to his seller.
• Keep in mind that the listing agent already has well-defined legal obligations to his client (the seller), and he has no agency relationship with you.
• If you tell the listing agent a "secret" he is obligated to pass that information on to his client, the seller.