Understanding Agency… What Does That Even Mean?

When you first speak with real estate agents about your goals to buy or sell a home, they should start talking about “agency” and ask you to sign an agency brochure disclosure with them. This is both a good and necessary thing, so it is important that you know what agency really means.

"Agency" refers to a real estate professional's obligations to a client as theiragent. The term “agent,” in the legal sense, means a “fiduciary.”

  • A fiduciary’s primary duty is to put the interest of his/her client first, above the interests of others & of his/herself.  (Doctors, lawyers, and accountants are all examples of fiduciaries. You go to these professionals with the understanding that they will give you support and advice that will be only in your best interest.)
  • The courts have ruled that when real estate licensees act on behalf of others and represent them in real estate transactions, they are also fiduciaries.  This means they are held to the standards of a fiduciary.  In real estate terminology, this fiducuary relationship is call agency.
  • Only when you have signed an Agency Agreement (not a brochure) are you owed a fiduciary relationship.  However, before you sign an agency agreement with any real estate agent (not to be confused with the brochure), you are not yet owed fiduciary.

In North Carolina, as in many other states, real estate agents are required to provide Buyers & Sellers with an “agency disclosure” brochure, to make sure the Buyer/Seller understand how agency works.  It is also to disclose whether that Agent the Buyer/Seller is talking to will be assisting the Buyer/Seller as a Seller’s Agent, Buyer’s Agent, or some type of Dual Agent.

  • Every time you meet with an agent, you should require him/her to provide an agency disclosure brochure and explain his/her role in the potential transaction you are discussing. (See sample of Working With Real Estate Agents brochure.)
  • The brochure you are presented and will be asked to sign is not a contract. It is merely verification that the Agent provided you information about Agency laws in this state and that you understand what it means and what role that agent will be playing for you.

Note: An Agency Agreement is a binding agreement between the Buyer/Seller and the Agent in which they agree to work together for a certain period time and for a certain amount of compensation during a real estate transaction. 

Until you sign an Agency Agreement, you are still a customer to that agent, not a client, and that agent is not yet bound to put your interests first.

While all agents are bound to treat customers and clients with fairness and honesty, they are not required to keep customers’ secrets or personal information to themselves until they have an agency agreement together.

 

Following is the actual brochure that you would be asked to sign: Working with Real Estate Agents.