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The term “agency” is used in real estate to help determine what legal responsibilities your real estate professional owes to you and other parties in the transaction. Real estate agency is governed by state law and varies from state to state, but here are some agency terms you're likely to hear.
The buyer's representative (also known as a buyer’s agent) is hired by prospective buyers and works in the buyer's best interest throughout the transaction. The buyer can pay the agent directly through a negotiated fee, or the buyer's rep may be paid by the seller or through a commission split paid by the listing broker. The agency agreement usually is created by a signed buyer's rep agreement.
The seller's representative (also known as a listing agent or seller's agent) is hired by and represents the seller. The agent's fiduciary duties are to the seller, meaning it's the agent's job to get the best price and terms for the seller. The agency relationship usually is created by a signed listing agreement.
A subagent owes the same fiduciary duties to the agent's client as the agent does. Subagency arises when a cooperating sales associate works with the buyer but doesn't represent the buyer. Although a subagent cannot assist a buyer in any way that would be detrimental to the seller, a buyer customer can expect to be treated honestly by the subagent who is a REALTOR®, a member of the National Association of REALTORS®. That's because the REALTORS® Code of Ethics requires that all parties to a transaction be treated fairly and honestly.
A disclosed dual agent represents both the buyer and the seller in the same real estate transaction. In such relationships, dual agents owe limited fiduciary duties to both buyer and seller clients. Because of the potential for conflicts of interest in a dual-agency relationship, all parties must give their informed consent. Disclosed dual agency is legal in most states, but often requires written consent from all parties.
Designated agents (also called appointed agents) are chosen by a managing broker to act as an exclusive agent of the seller or buyer. This allows the brokerage to avoid problems arising from dual-agency relationships in situations in which licensees affiliated with the brokerage represent different parties to the same transaction. The designated agents give their clients full representation, with all of the attendant fiduciary duties.
A transaction broker (sometimes referred to as a facilitator) is permitted in states where nonagency relationships are allowed. These relationships vary considerably from state to state. Generally, the duties owed to the consumer in a nonagency relationship are less than the complete, traditional fiduciary duties of an agency relationship.