Understanding Agency
by Don Dunning, ABR, CRB, CRS
DRE Lic. #00768985
Originally appeared in Hills Publications, July 31, 1998

Few buyers and sellers truly understand what agency means and how it effects their purchase or sale of real estate. Most people think of residential real estate agents as salespeople who make big commissions by listing and selling homes. An agent, however, is much more than this.

Since 1988, state law requires clients to be given a written explanation of agency relationships in sales, exchanges or long-term leases of residential properties, yet misconceptions continue.

Disclosure before proceeding

Prior to you signing a purchase contract as a buyer, or a listing agreement or contract as a seller, an agent is supposed to first explain, and then have you sign, a standard "Agency Disclosure" form. Too often, as the listing agent representing a seller, I have seen the buyer’s agent from a cooperating office fail to make this mandatory disclosure to the seller before presenting an offer.

Even when the disclosure form is provided, it is long and difficult to read. That is why agents are obligated to spell out what it means. Unfortunately, not all agents recognize or can clearly verbalize the critical importance of real estate agency relationships.

Agent represents you

The mere fact of possessing a salesperson’s or broker’s real estate license does not make that individual an agent. This is true even though licensees are usually called agents. To complicate the matter, the terms agent and Realtor are incorrectly used interchangeably.

A Realtor is a licensee who is also a member of a professional trade organization, the National Association of Realtors, and its state and local chapters. An important attribute of Realtors is their adherence to a strict code of ethics. Not all licensees are Realtors.

Simply put, an agent is someone who represents another (the principal) in dealings with third parties. Although clients generally think of one person from a real estate firm as their agent, it is actually the broker (the company), and not the salesperson, who is the agent.

3 kinds of agency

Three basic types of agency relationships are covered in the Agency Disclosure form. These relationships can change during the transaction.

  • Buyer’s agent. The agent represents the buyer alone; the seller has a different agent.

  • Seller’s agent. The agent represents the seller alone; the buyer has a different agent.

  • Dual agent. The agent represents both the buyer and the seller in the same sale. This can occur if a listing salesperson writes an offer for a buyer on his own listing. It may also happen if an agent from the same office as the listing agent writes an offer for a buyer.
  • Dual agency concerns

    Before an offer is written, both the seller and buyer should be asked how they feel about dual agency. Some people are uncomfortable with a dual agency scenario where the same salesperson represents both buyer and seller. They feel a conflict of interest exists, therefore, the agent can be effective for only one side of the transaction. Interestingly, a number of people who take this stance have no problem with a contract between two different agents from the same office, also dual agency.

    Any salesperson with questionable ethics can jeopardize your position whether he is a dual or single agent. The bottom line is always the professionalism, experience and integrity of your agent.


    In representing clients, agents have high liability for everything they do. Conversely, buyers and sellers also may have liability for actions of their agent as, by definition, the agent is acting for them.

    Agency and compensation

    Compensation and agency are two distinct concepts. Compensation does not create agency. I frequently provide consulting services for an hourly fee. In those instances, although I am getting paid for my real estate expertise, I am not acting as an agent.

    Final thoughts

    Buyers think of an agent as someone who finds them a house; sellers see an agent as the one who markets their home and finds a buyer. These are some activities of what we call agents, but they do not sufficiently convey the most important thing agents do for clients — represent them. Agents owe their clients "a fiduciary duty of utmost care, integrity, honesty and loyalty" (Agency Disclosure form).

    The form goes on to say: "The above duties of the agent in a real estate transaction do not relieve a Seller or Buyer from the responsibility to protect his or her own interests." Your best protection will come from a competent professional who cares about what is best for you and will keep your interests ahead of his own. That is an agent.

    My thanks to real estate trainer Ted Highland, whose fine Agency course and booklet provided some of the background for this article.

    Related Articles: How To Interview Agents, Part 1 and Part 2

    Don Dunning has been a full-time, licensed real estate agent since 1979 and a broker since 1982 and is past president of the Oakland Association of Realtors. He provides sales and hourly listing or consulting services with Wells & Bennett Realtors in Oakland and is an expert witness in real estate matters. Call him at (510) 485-7239, or e-mail him at , to put his knowledge and experience to work for you.


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