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A relationship in which the principal gives an agent the right to act on the principal's behalf and to exercise some business judgment and discretion.Agents owe very high degrees of loyalty,good faith,and confidentiality to their principals,often expressed as fiduciary obligations.Except for the agency coupled with an interest, agency relationships automatically terminate when the principal dies or becomes incapacitated. Agents do not have to receive payment for their services, and the agency agreement does not have to be in writing unless it relates to transferring an interest in real estate.The consequence is that many people enter into principal-agent relationships almost accidentally,being unaware of the responsibilities and obligations each has to the other.
• There is a great variety of agency relationships that arise in a number of ways. All states have statutes regulating real estate agents and defining their duties and responsibilities, but this is by no means the exclusive method of defining the relationship or its obligations.
• Agency by estoppel arises when a principal allows someone to engage in such activities that the public is justified in believing the person is acting as an agent, even if the person had no such authority. This becomes important when someone makes commitments he or she had no authority to make, and an innocent third party, relying on those commitments, suffers an injury. The principal will not be allowed to avoid the commitment by claiming the supposed agent had no authority, because the law will impose an agency by estoppel.
• Exclusive agency is a real estate sales relationship in which the owner of property grants a particular agent the exclusive right to market the property and secure buyers, but the owner retains the right to sell the property himself or herself and pay no commission at all. Contrast with an open listing, in which the owner agrees to pay a commission to any real estate professional who brings a buyer to the closing table. Contrast also with an exclusive right to sell agreement, in which not only does the agent have an exclusive agency, but even if the owner sells the property, the agent receives a commission.
• General agency occurs when the agent is empowered to do all acts in connection with a particular trade, business, or employment. Contrast with special agency, in which the agent is authorized to conduct a single transaction or series of transactions not involving a continuing relationship. Real estate agents are special agents.
• Agency by ratification arises when one purports to act on behalf of a principal, without true authority, but the principal later learns of the act, ratifies it, and agrees to be bound. Requires some proof that the principal made a conscious decision to ratify the act. Contrast with agency by estoppel, in which the principal becomes bound because of his or her negligence, not because of any conscious decision.
• Agency coupled with an interest is a special relationship that arises when the agent also has an interest in the property with which he or she is dealing. This agency will not automatically terminate upon the death of the principal.
• Types of real estate agency:
¦ Alisting agent represents the seller of a property.
¦ Aselling agent works with the buyer, but may be a subagent of the seller or an agent of the buyer. Real estate agents must disclose which party they are representing, before someone accidentally reveals any confidential information.
¦ Adual agent is supposed to represent both the buyer and seller, but this is virtually impossible for one person to do. The status arises most often when one real estate agent in an office represents the seller and another real estate agent in the same office represents the buyer; then the broker is technically considered a dual agent. In such situations the broker must take care that each agent not reveal confidential information to the other.
¦ Atransaction agent is technically no agent at all, but is simply a facilitator who uses superior knowledge of real estate customs and practices to assist buyers and sellers.