"Agency" ... What is it?
Agency is a relationship in wwich one party (the agent) acts for (represents) another (the principal).
Agency involving real estate is normally defined by a document that is signed by the agent and the principal, such as a listing agreement, or a Buyer-broker Agreement.
In Arizona, such documents establish a relationship
between the principal and the "designated broker"
for the real estate company.
It is the designated broker who is legally the "agent" for the principal.
The person generally referred to as a "real estate agent",
is technically a licensed "salesperson", who is "associated" with the designated broker.
In all circumstances, brokers and salespersons are legally obligated
to be honest and truthful with all parties.
To their Buyer or Seller Client they also have the fiduciary duties of
loyalty, obedience, disclosure, confidentiality, and accounting.
Brokers and salespersons are also obligated to disclose all known facts that might materially and adversely affect the consideration that would be paid - except that - Arizona law excludes from such disclosure that the property is or has been
- the site of a death or felony
- occupied by a person having a disease not known to be transmitted by common occupancy, or
- located in the vicinity of a sex offender.
For an Arizona real estate transaction, there are three possible agency relationships:
- Buyer's Broker
- Seller's Broker, or
- a Broker providing limited representation to both the buyer and the seller
Limited representation of both Buyer and Seller in a transaction, which is also referred to as "dual agency", is allowed only with the knowledge and written consent of both principals. There are limitations and conflicts in broker duties with dual representation.
However, without written permission:
- a broker/agent can not disclose any confidential information
- a broker/agent can not disclose that the Seller will accept a price or terms other than as stated in the listing
- a broker/agent can not disclose that the Buyer will accept a price or terms other than as offered
Since advice during negotiations could be indirect disclosure of confidential information, brokers and salespersons in dual representation situations generally refrain from giving any advice during negotiations.
What does all this mean to ... The Buyer
The Buyer can almost always benefit, sometimes greatly, from insights
that a Buyer's broker can provide. Such insight would likely be
restricted from a broker who is also representing the seller.
The buyer should usually require/engage the services of a Buyer's broker.
This is particularly true when buying a new home. The builder's salesperson is limited, by
agency regulations and builder policies,
in the advice that can be given to the buyer. In fact,
builders universally require buyers to sign a form acknowledging
that the salesperson represents the builder and is restricted
in the advice and information that can be given to the buyer.
What does all this mean to ... The Seller
The Seller engages a broker to get a property sold. If you ask most sellers,
they will say this means to "find a buyer" ... which would have the broker
in a dual representation situation, although most seller do not think
of it this way.
A seller would benefit from the advice of a Seller's broker during
negotiations,
but such advice cannot be give in a "dual agency" situation.
Also, listing brokers often agree to a lower total commission
if none of the commission is to be paid to other brokers,
so the seller has justification to consent to dual representation.
Of course, the seller is usually most knowledgeable of the property.
So there are fewer issues. More importantly, much of the advice concerns
"standard procedures" and can be given by the agent to the
seller during establishment of the listing,
well before any buyer is involved.
