What is real estate agency? Why is it important for the consumer to have a general understanding of agency relationships? The basic definition of an agency is simple.
Agency is the relationship created when one person, an agent, acts to represent another, the client or principal, in a business transaction.
This concept is not new. Agency has its roots in English common law. Over the last forty or fifty years, the U.S. economy has grown tremendously. Following the Second World War the growth in the population and the economy produced an enormous increase in the need for housing.
The clear cut, simple concept of agency has become much more complex.
Networks for marketing homes, such as the Multiple Listing Service, have been developed. The Multiple Listing Service helps market properties and exposes properties to a much greater portion of the population was possible prior to its existance. This, naturally, helps a seller obtain the highest possible sale price for their property.
An agency relationship is created by an expressed or implied agreement. A real estate agent is one who represents another (typically the principal) in dealing with third parties. However, the agent who has the authority to bind the principal and a third party is not a party to the contract.
The more complex the marketing systems become the more confusing and complicated the question becomes of just who the agent is representing. A principal needs to understand that the benefits of being represented by an agent are great. The real estate agent is a professional.
The agent possesses superior knowledge and a body of theory underlying many separate aspects of his specialty. Agents have professional authority, the sanction of the community, and are guided by a strict code of ethics.
A fiduciary relationship is established when an agent represents a principal. This relationship requires the agent to act in a manner of utmost trust and loyalty and obligates the agent to act in the principal’s best interest. An agent cannot act in a manner that is detrimental to this fiduciary relationship. A principal should always discuss their agency relationship with their agent and understand the differences between an agent representing a buyer, representing a seller, or representing both a buyer and seller at the same time.
This article was published in the San Francisco Examiner.
Articles are written by Eric Ruxton and Larry Aikins, owners of Terrace Realty, Inc. and Terrace Associates, Inc. in Redwood City. Terrace has been in business more than 55 years and in addition to being an independent Brokerage Company, also owns and operates rental properties.