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Types of Agency Relationships

Types of Agency Relationships

Sole Agency

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Sole Agency occurs when one brokerage, its broker, associate brokers and associates (the Seller's Agent) represent the seller in a real estate transaction and another brokerage, its broker, associate brokers and associates (the Buyer's Agent) represent the buyer. Each Agent owes its Client the duties described above.

In addition, depending on whether you are a buyer or a seller, there are specific statutory obligations listed in the brokerage service agreement that will be presented to you if you choose to enter into an agency relationship with the brokerage.

Dual Agency

Dual Agency arises when one brokerage represents both the buyer and seller in a transaction. Dual Agency occurs whether one individual in the brokerage is working for both the buyer and the seller or different representatives from the same brokerage are working for the buyer and the seller. The brokerage, including its broker and all its associate brokers and associates, is the Dual Agent.

Dual Agency makes it difficult for the brokerage to discharge the fiduciary obligations owed to the buyer and the seller respectively, in particular the obligations of:

 

  • utmost loyalty to the buyer and to the seller (acting solely in the best interests of the buyer and of the seller; and avoiding conflicts of interests that may arise between the buyer and the seller);
  • confidentiality of information obtained from the buyer or from the seller; and
  • full disclosure of all facts that may influence the decisions of the buyer or the seller.

Because the fiduciary obligations must be limited, by law Dual Agency is only permitted with the fully informed and voluntary consent of both the buyer and the seller. Once you have read this guide, you can, if you wish, agree in principle to dual agency representation. However, the Agent must obtain your written consent before an offer is made, at a time when the identity of the other party and circumstances of the transaction are known to you.

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The Dual Agent will assist the buyer and the seller with the transaction, but the Dual Agent is limited to providing services that do not require:

 

  • exercising discretion or judgment;
  • giving confidential information or advice; or
  • advocating on behalf of either party.

Moreover, the limitations mean that the brokerage, including all its representatives cannot disclose:

  • that the buyer may be prepared to offer a higher price or terms other than those contained in the offer to purchase;
  • that the seller may be prepared to accept a lower price or terms other than those contained in the Seller Brokerage Agreement;
  • the motivation of the buyer or the seller wishing to purchase or sell the property; and
  • personal information relating to the buyer or the seller and other information disclosed at any time in confidence by either party to the Dual Agent.

What will be disclosed, however, are material facts known to the Dual Agent. The Dual Agent will disclose:

 

  • to the buyer any material latent defects affecting the property;
  • to the seller any material facts relevant to the buyer's ability to purchase the property.
  • Finally, the Dual Agent will fulfill all other obligations to each Client if they do not conflict with the other Client's interests.

Customer Status

A buyer or seller who is not in an agency relationship with a brokerage is a customer. Members of the public at first point of contact with a brokerage representative (e.g., attending an open house, asking about or arranging to view a listed property) are customers. Customers may eventually want to enter into an agency relationship with a brokerage. Until they do they are customers, not clients.

Even at the point of an offer on a property, the buyer or seller might be in a customer status relationship. For example:

If a buyer client wants to negotiate with an owner selling his or her own property, the seller will be a customer.
When an agent is representing a seller with whom the agent has a long-standing relationship (e.g. a developer, a relative), the buyer should be in a customer relationship with the agent. (Such buyers always have the option of choosing another brokerage to represent them, however.)
Customer status may also be required when existing clients are faced with a dual agency transaction and Dual Agency is not an acceptable option.

Customers are entitled to know that the brokerage is not their agent and does not owe any fiduciary duties to them. The brokerage will perform services needed to assist the customer to complete a transaction as long as the services do not require the exercise of discretion or judgment, the giving of confidential advice or advocating on behalf of the customer.

For more information please visit: Agency Relationships from the Real Estate Council of Alberta