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Agency.

What is it?

The concepts of agency and fiduciary duty are quite old, being derived from Common Law. According to Civil Code Section 2295 (enacted in 1872), An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency. In an agency relationship, the principal delegates to the agent the right to act on his or her behalf, and to exercise some degree of discretion while so acting.

From the CA Dept. of Real Estate

In California, there are three types of agency in Real Estate: Buyer Agency, Seller Agency, and Dual Agency.

The California Civil Code Section 2079.16 spells out agency obligations and duties in each of the above agency situations. I’m going to start with a discussion of dual agency, as it is the most controversial form of agency and the terminology often confuses people.

Who’s Your Agent?
Your agent is the brokerage representing you in the transaction. It is not the individual agent you are working with. For example, if you chose to have Britton or me represent you in a transaction, your legal agent is Zephyr Real Estate. For the purposes of the law, Britton and I are categorized as Salespersons, and we act under the “supervision” of our brokerage. This is true even if the individual you are in regular contact with is a Managing Broker or Broker Associate. Again, for clarity: Your Agent is the brokerage. Not the individual.

Pop quiz: I represent you as a buyer. You go to an open house, fall in love with a house listed by a different Zephyr Real Estate Agent, and decide to make an offer. Is this dual agency?

Yes, absolutely! It does not matter if I know the other Zephyr Real Estate agent. It does not matter if we are in the same physical office or different offices. It doesn’t matter if I like them or don’t like them. It doesn’t matter that I’ve never met the seller or spoken with them. If Zephyr is the brokerage for both parties in the transaction, then it is dual agency.

Dual Agency vs. Double-Popping
Double-popping, for lack of a better term, is a very specific form of dual agency. In a transaction that is double-popped, the same individual(s) represent both the buyer and seller. Since it is the same person(s) working for only one brokerage, this is obviously a form of dual agency.

When many people think of dual agency, what they are really thinking of is double-popping.

I’ll save my thoughts about the ethics of dual agency and double-popping for another post since this one is already running past 1,000 words, but needless to say double-popping is the most controversial form of dual agency. I’ll be direct – I have double-popped transactions. I’ll tell you what I tell the buyers and sellers in that situation – all I can do is attempt to facilitate a meeting of the minds. If you feel that to win in a real estate transaction the other side has to lose, then you should absolutely positively never choose a situation that involves double-popping.

Why Does Agency Matter?
Forgive the sports analogy, but when you go out and play a team sport you obviously need to know who is on your team and who isn’t on your team. Since Real Estate Agents don’t suit up in soccer cleats, shinguards, and shiny synthetic fabric jerseys before writing up a purchase offer or listing agreement, it can sometimes be a little difficult to distinguish who represents who in a real estate transaction.

Understanding who represents who, though, is incredibly important. While California law requires a Real Estate Agent to act with “a duty of honest and fair dealing and good faith” to all of the parties in the transaction, those terms – unfortunately – tend to take on different meanings depending on your perspective.

For your enjoyment, I present:

California Civil Code Section 2079.16

DISCLOSURE REGARDING

REAL ESTATE AGENCY RELATIONSHIP

(As required by the Civil Code)
When you enter into a discussion with a real estate agent regarding a real estate transaction, you should from the outset understand what type of agency relationship or representation you wish to have with the agent in the transaction.

SELLER’S AGENT
A Seller’s agent under a listing agreement with the Seller acts as the agent for the Seller only. A Seller’s agent or a subagent of that agent has the following affirmative obligations:
To the Seller: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Seller.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent’s duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties.
An agent is not obligated to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above.

BUYER’S AGENT
A selling agent can, with a Buyer’s consent, agree to act as agent for the Buyer only. In these situations, the agent is not the Seller’s agent, even if by agreement the agent may receive compensation for services rendered, either in full or in part from the Seller. An agent acting only for a Buyer has the following affirmative obligations:
To the Buyer: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Buyer.
To the Buyer and the Seller:
(a) Diligent exercise of reasonable skill and care in performance of the agent’s duties.
(b) A duty of honest and fair dealing and good faith.
(c) A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties.
An agent is not obligated to reveal to either party any confidential information obtained from the other party that does not involve the affirmative duties set forth above.

AGENT REPRESENTING BOTH SELLER AND BUYER
A real estate agent, either acting directly or through one or more associate licensees, can legally be the agent of both the Seller and the Buyer in a transaction, but only with the knowledge and consent of both the Seller and the Buyer.
In a dual agency situation, the agent has the following affirmative obligations to both the Seller and the Buyer:
(a) A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either the Seller or the Buyer.
(b) Other duties to the Seller and the Buyer as stated above in their respective sections.
In representing both Seller and Buyer, the agent may not, without the express permission of the respective party, disclose to the other party that the Seller will accept a price less than the listing price or that the Buyer will pay a price greater than the price offered.
The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect his or her own interests. You should carefully read all agreements to assure that they adequately express your understanding of the transaction.
A real estate agent is a person qualified to advise about real estate. If legal or tax advice is desired, consult a competent professional.
Throughout your real property transaction you may receive more than one disclosure form, depending upon the number of agents assisting in the transaction. The law requires each agent with whom you have more than a casual relationship to present you with this disclosure form. You should read its contents each time it is presented to you, considering the relationship between you and the real estate agent in your specific transaction.

Important Disclosure: Agency is a legal topic. I am not an attorney, nor do I have any plans to become one. If you are seeking legal advice about agency, consult a qualified attorney. If you do not understand the agency relationships in your specific situation, do not rely upon this article to clear things up. Consult an attorney! Whatever you do, don’t just take the blog posts you stumble across from an internet search as the gospel truth.

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