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An agency relationship in real estate refers to a legal and fiduciary arrangement where one party, known as the agent, is authorized to act on behalf of another party, known as the principal, in various real estate transactions. This relationship is built on trust, loyalty, and the agent’s duty to act in the best interests of the principal.
Within this relationship, the agent is obligated to provide expertise, advice, and services related to real estate matters, such as property buying, selling, leasing, or managing, while upholding their fiduciary duties of loyalty, confidentiality, disclosure, accountability, and obedience. The principal grants the agent the authority to negotiate, make decisions, and execute contracts within the scope defined by the agency agreement.
There are two main types of agency relationships in real estate:
Seller’s Agency: In this arrangement, the agent represents the seller and works to secure the best possible terms and price for the sale of the property. The agent owes the seller fiduciary duties and strives to market the property effectively, negotiate offers, and guide the seller through the transaction process.
Buyer’s Agency: Here, the agent represents the buyer’s interests and helps them find suitable properties, evaluate them, and negotiate favorable terms for purchase. The agent is duty-bound to provide the buyer with relevant market information and assist in all stages of the buying process.
In addition to these primary agency relationships, there are variations such as dual agency, where an agent represents both the buyer and seller in the same transaction. However, this can raise ethical concerns and potential conflicts of interest.
Overall, the agency relationship in real estate establishes a legal framework that defines the roles and responsibilities of the parties involved, aiming to ensure transparency, protection, and competent representation in real estate transactions.