Importance of Agency in Real Estate Transactions

A very critical concept in California Real Estate Law is the disclosure of agencies. In 1987 legislation was passed to protect home owners in regards to the agency status of their real estate professionals. Agency is simply the relationship between the principle (the seller or buyer) and the real estate professional. In agency, the professional has a fiduciary duty to look out for the best interests of his/her principle.


The fiduciary duty is defined as the ‘duty of utmost care, integrity, honesty, and loyalty in dealings.’ There is a form that is used called the Agency Disclosure form (or AD for short.) This is the very first form that is used in every real estate transaction. It has 1 purpose: it discloses (makes openly known) the 3 types of agency that could happen in a real estate transaction. 1.

Agent represents the seller only. In this agency the agent for the seller represents only the seller. He has a fiduciary obligation to get the seller the best price possible for his home. He also has the fiduciary duty to make sure the seller understands all the forms he must sign. The agent serves to protect and promote the seller. In a fiduciary relationship the agent has an obligation to put the needs of the seller first above his/her own needs.

He does not have a fiduciary duty to the buyer but does own the buyer the duty of fair and honest dealings. 2. Agent represents the buyer only. This is the exact same as above except the agent represents the buyer only and has the fiduciary duty to get the home for the buyer at the best price while protecting and promoting his/her best interests. He only owes the seller the duty of fair and honest dealings. 3. Dual agency: agent represents both the seller and buyer If a dual agency is formed it must be disclosed and agreed to by all parties of the transaction. A dual agency can never be done in secret. This dual status must be known because an agent will know confidential information about his principles.


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