ADVANCED PRACTICES
SECTION TWO
AGENCY
Upon completion of this section, the student should be able to:
 Describe the disciplinary procedures for licensees who fail to comply with Agency
Law and list possible consequences
 Given a situation, explain how (why and when) an agency relationship is created
and indicate how a broker might fail to comply with Agency restriction, what type
of Agency exists, the consequences of such a problem, and how to remedy the
problem.
 Explain the law as it pertains to agency disclosure including the forms involved
and/or alternative methods
THE DISCIPLINARY PROCEDURES FOR LICENSEES WHO FAIL TO COMPLY
WITH AGENCY LAW AND POSSIBLE CONSEQUENCES
DISCIPLINARY ACTIONS THAT THE DIRECTOR OF THE DEPARTMENT OF LICENSING
MAY IMPOSE IF A LICENSEE’S CONDUCT IS NOT CONSISTENT WITH THE AGENCY
DISCLOSURE REPRESENTATION
If a licensee violates any codes or laws which involve agency disclosure, the agent may be
subject to the following:
The director may refer a complaint for violation of agency disclosure before any court of
competent jurisdiction.
The prosecuting attorney of each county shall prosecute the violation in the prosecuting
attorney’s county, and if the prosecuting attorney fails to act, the director may request
that the attorney general take appropriate action.
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Whenever the director believes that there is evidence that a violation has occurred, the
director may take action in the superior court where the licensee resides. The director
may enjoin the agent from continuing the violation or continuing to engage in the act. In
this action, an order or judgment may be entered awarding a preliminary or final
injunction.
Note: Enjoin, in this reference, means to prohibit or forbid
Note: Injunction, in this reference, is a court order that requires a party to do or refrain
from doing a certain act or act
CASE STUDY ON AGENCY
John, a broker for XYZ Investments LLC, was holding an open house for the Smith’s. He
was their listing broker. Some potential clients visited the open house and wanted to buy
the property. John wrote up the offer for the buyers, but did not represent them,
because of his unique relationship with the sellers ( he was their brother-in-law). Even
though the purchase and sale agreement stated that John represented the sellers and
that the selling broker represented neither, the buyers were confused and thought that
John represented them as well and were reluctant to sign the contract.
John could have verbally explained that the buyers had no representation and added a
phrase which stated that he represented the seller only and that the buyers represented
themselves and were advised to seek independent legal counsel.
John remedied the problem by referring the buyers to another broker who could
represent them and draw up a new purchase and sale agreement for these buyers
AGENCY DISCLOSURE INCLUDING THE FORMS INVOLVED AND/OR
ALTERNATIVE METHODS AND OTHER AGENCY ISSUES
AGENCY RELATIONSHIPS AND DISCLOSURE AGREEMENTS
Agency is the relationship between the broker and the principal (the seller or the buyer).
Agency should be disclosed to the principal as soon as possible to avoid any
misunderstanding regarding the type of agency that is involved.
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SELLER AGENCY DEFINITION
The relationship is between the broker (listing broker) and the seller (owner of the
property).When a real estate broker is employed to act in the best interests of the seller
in a real estate transaction, this is referred to as Seller Agency. The broker has a
responsibility to the seller of confidentiality, loyalty, full disclosure and dedication to
purpose.
BUYER AGENCY DEFINITION
The relationship is between the buyer (or potential buyer) and the broker (buyer’s
broker). The real estate broker is employed by the buyer to act in the buyer’s best
interest and the agent has a responsibility to act in the buyer’s best interests and owes
confidentiality, loyalty, full disclosure and dedication to purpose to the buyer. The
buyer’s broker may be compensated by the buyer, the seller or both. The source of the
compensation does not change the duties that the buyer’s broker has to the buyer.
DUAL AGENT DEFINITION
Dual agency exists when a broker is representing both the seller and the buyer in the
same real estate transaction. Since the broker has promised a duty of confidentially,
loyalty, full disclosure and dedication to purpose to both parties at the same time, it is
necessary to limit these duties in this situation, if both parties agree. The dual agency
relationship may have the following limitations:
 The broker must deal with the buyer and the seller impartially
 The broker will have the duty of disclosure to both the buyer and the seller
 The broker will not disclose personal information about the buyer or the seller unless
authorized to do so in writing by the parties
 The broker will not disclose what the buyer is willing to pay or the terms that they
will agree to, and will not disclose what the seller is willing to accept or the terms that
they will agree to
 The broker will not disclose the motivation of the buyer or the seller unless
authorized to do so in writing
Note: The broker must get approval, in writing, from both the buyer and the seller to be
in a role of a dual agent.
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NON AGENCY FACILITATOR DEFINITION
When a broker is working with a buyer or seller, but not representing them, this is
referred to as non agency. The broker is, in effect, a facilitator to the transaction and is
working with a “customer” and not a “client” since no agency exists.
DESIGNATED AGENCY OR SPLIT AGENCY DEFINITION
Within a brokerage, a situation may arise where one licensee that is affiliated with a
brokerage is representing a seller and another licensee that is affiliated with the
brokerage is representing the buyer (in the same transaction). This situation is legal in
Washington State and the designated broker of the firm becomes a dual agent. This
scenario is known as designated agency or split agency.
Let’s take a look at some situations where a potential conflicts of interest that could
arise from each of the above relationships:
SELLER AGENCY CONFLICT
The chances of a conflict of interest with seller agency are much rarer than with other
types of agencies, but that doesn’t imply that none exist. Let’s look at an example:
John, a licensee with ABC Realty, has a listing with the Smiths and is the seller’s broker.
John also has his own home listed for sale at the same time. John’s own home is very
similar to the Smith’s. In the course of performing an open house for the Smiths, John
meets a potential buyer. John suggests to the buyer that he should view John’s home and
tells them that it is a better value and nicer neighborhood. John puts his own best
interests before that of the Smiths because he wanted to sell his own home first which is
a conflict of interest.
BUYER AGENCY CONFLICT
Paige is a buyer’s broker for the Gilberts. Paige tours a home with the Gilberts that
appears to match all of the Gilbert’s criteria. The home also is priced well under market
value. Paige discourages the Gilberts from considering the home by telling them that it is
in a heavy crime area. Paige later informs her brother that he should buy this home for
an investment and that it was a great value. Paige put her family’s best interest before
that of her buyers’ best interest which is a conflict.
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DUAL AGENCY CONFLICT
Jane is a listing broker for the Andersons. Through Jane’s advertising of the Anderson’s
property, Jane finds a buyer for the home. She has obtained written permission from
both parties to act as a dual agent. After writing the contract and before presenting it to
the Andersons, Jane learns from another broker that there will be another offer coming
in which may be very attractive. Jane hurries to the Anderson’s home and advises them
to sign the first offer where Jane was a dual agent. Jane receives both sides of the
commission, because she represented both parties. If she had waited to receive the
other offer from another broker, she would have only received the listing office portion
of the commission. This was a conflict of interest and the sellers may have been able to
receive a better offer.
NON AGENCY FACILITATOR CONFLICT
Maria is writing up an offer for the Gilberts. She has expressed that she is not
representing the Jones, both in verbally and in writing. Even though she has done this,
the Gilberts really did not understand and thought that Maria was their broker and
representing them.
DESIGNATED AGENCY OR SPLIT AGENCY CONFLICT
Tom, a licensee with ABC Realty has a listing. Pete, another licensee with ABC Realty
finds a buyer who would like to purchase this listing. Pete uses a conference room at the
brokerage to write up the offer. While doing so, Tom listens in on the conversation that
Pete is having with his clients. Tom learns about information which is considered
confidential such as the top price that the buyer’s are willing to pay. Tom relates this
information to his sellers. A major conflict of interest exists here.
Let’s look at the Revised Code of Washington (RCW 18.86.020):
RCW 18.86.020
AGENCY RELATIONSHIP.
(2) In a transaction in which different licensees affiliated with the same broker represent
different parties, the broker is a dual agent, and must obtain the written consent of both
parties as required under RCW 18.86.060. In such a case, each licensee shall solely
represent the party with whom the licensee has an agency relationship, unless all parties
agree in writing that both licensees are dual agents.
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Example: John, a licensee with XYZ Realty has a listing. Peter a licensee with XYZ Realty
finds a buyer for this listing. Designated agency allows both John and Peter to
represent their clients even though they work for the same brokerage
Let’s look at some ways in which each of these agencies might be formed:
EXPRESS AGENCY
Express agency is created by either an oral or a written agreement between the principal
and the broker. It indicates their express intent for this representational status.
In real estate, agency is normally created by either a written listing agreement with a
seller, or a buyer agency agreement with a buyer.
An agency relationship which is created after the fact when the Principal agrees to be
bound by the actions of another person who was acting without authority is known as an
Agency by Ratification and is a type of express agency.
IMPLIED AGENCY
It is also possible to create an agency relationship by the actions of the parties. If a real
estate broker takes on responsibilities that are normally those of a broker, but hasn't
signed an agency agreement, she may still be considered an agent via implied agency. By
the same token, if the customer asks the agent for advice or actions that are normally
those in agency, then an implied agency could be created. Example: if a buyer wants to
buy a broker’s listing, the buyer could become a customer or a client of the broker
depending on the broker’s actions.
AGENCY BY ESTOPPEL
Also known as Ostensible Agency. It is an agency relationship created by the actions,
behavior or statements of the Principal and/or the Broker upon which a third party relies.
Ostensible Agency may be found by a court where no agency relationship was intended
by the Principal.
Let’s look at some ways that agency relationships could be established:
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SELLER AGENCY
Let’s look at some examples where seller agency might be established:
EXAMPLE #1
Joe, of ABC Realty, sends out a flyer to 50 homeowners in a neighborhood. The flyer
offered the homeowners a complimentary market analysis. Joe gets a call from the
Barkers requesting a market analysis on their property. After performing the market
analysis, the Barkers ask Joe to list their property.
EXAMPLE #2
Gerry, a broker with XYZ Properties LLC, canvases an area and knocks on homeowner’s
doors offering his services as a listing agent. One of the homeowners hires Gerry to list
their property.
EXAMPLE #3
A homeowner places a call to XYZ Realty to inquire about listing her property. James,
who is on floor duty and answering the phone at the brokerage takes the call, performs a
market analysis and lists the property.
The most common form of a seller agency disclosure would be a listing agreement:
See Insert Exclusive Sale and Listing Agreement Form #1A ( 2pages)
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Form 1A
Exclusive Sale
Rev. 11/09
Page 1 of 2
EXCLUSIVE SALE AND LISTING AGREEMENT
© Copyright 2009
Northwest Multiple Listing Service
ALL RIGHTS RESERVED
("Seller") hereby grants to 1
, ("Broker") 2
from the date hereof until midnight of
the sole and exclusive right to submit offers 3
to purchase, and to receipt for deposits in connection therewith, the real property ("the Property") commonly known
4
as
in the City of
5
County of
, State of Washington, Zip
and legally described as: LOT
VOL
, PAGE
, BLOCK
to be listed at $
, DIVISION
6
, 7
8
9
1. DEFINITIONS. For purposes of this Agreement: (a) "MLS" means the Northwest Multiple Listing Service; and
(b) "sell" includes a contract to sell; an exchange or contract to exchange; an option to purchase; and/or a lease
with option to purchase.
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2. AGENCY/DUAL AGENCY. Seller authorizes Broker to appoint
to act as Seller's Listing Agent(s). This Agreement creates an agency relationship with Listing Agent(s) and Broker
only, not with any other salespersons of Broker; provided, Seller authorizes Broker to appoint other salespersons
affiliated with Broker as subagents to act on Seller's behalf as and when needed, at Broker's discretion. Any broker
or salesperson, other than Broker or Listing Agent(s) who procures a prospective buyer for the Property will not be
representing Seller and may represent the buyer. Accordingly, for the purposes of this Agreement, the term
"Broker" means Listing Agent(s) including any subagents and Listing Agent's Broker, Designated Broker or Branch
Manager, unless expressly stated otherwise.
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If the Property is sold to a buyer represented by one of Broker's salespersons other than Listing Agent(s), Seller
consents to Broker acting as a dual agent. If the Property is sold to a buyer who Listing Agent(s) also represents,
then Seller consents to Listing Agent(s) and Broker acting as dual agents. Different salespersons affiliated with
Broker may represent different sellers in competing transactions involving the same buyer and that this shall not be
considered action by Broker that is adverse or detrimental to the interests of either seller, nor shall it be considered
a conflict of interest on the part of Broker. Seller has received from Broker the pamphlet entitled "The Law of Real
Estate Agency."
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If Broker acts as a dual agent, then Broker shall be entitled to the entire commission payable under this Agreement 27
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plus any additional compensation Broker may have negotiated with the Buyer.
3. COMMISSION. If (a) Broker procures a buyer on the terms in this Agreement, or on other terms acceptable to
Seller; or (b) Seller directly or indirectly or through any person or entity other than Broker, during the term hereof,
sells the Property; Seller will pay Broker a commission of (fill in one and strike the other)
%
of the sales price, or $
. From Broker's commission, Broker will offer a cooperating
member of MLS representing a buyer a commission of (fill in one and strike the other)
%
of the sales price, or $
. Further, if Seller shall, within six months after the expiration
of this Agreement, sell the Property to any person to whose attention it was brought through the signs, advertising or
other action of Broker, or on information secured directly or indirectly from or through Broker, during the term of
this Agreement, Seller will pay Broker the above commission. Provided, that if a commission is paid to a member of
MLS or a cooperating MLS in conjunction with a sale, the amount of commission payable to Broker shall be limited
to the amount of commission which would have been payable pursuant to this Agreement less any commission so
paid to another member of MLS. Provided further, that if Seller cancels this Agreement without legal cause, Seller
may be liable for damages incurred by Broker as a result of cancellation, regardless of whether Seller pays a
commission to another MLS member.
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4. NO DISTRESSED HOME CONVEYANCE. Broker will not represent or assist Seller in a transaction that is a "Distressed Home Conveyance" as defined by Chapter 61.34 RCW unless otherwise agreed in writing. A "Distressed
Home Conveyance" is a transaction where a buyer purchases property from a "Distressed Homeowner" (defined
by Chapter 61.34 RCW), allows the Distressed Homeowner to continue to occupy the property, and promises to
convey the property back to the Distressed Homeowner or promises the Distressed Homeowner an interest in, or
portion of, the proceeds from a resale of the property.
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Seller
Seller
Form 1A
Exclusive Sale
Rev. 11/09
Page 2 of 2
EXCLUSIVE SALE AND LISTING AGREEMENT
© Copyright 2009
Northwest Multiple Listing Service
ALL RIGHTS RESERVED
5. KEYBOX. Broker is authorized to install a keybox on the Property. Such keybox may be opened by a master key
held by all members of MLS and their salespeople. A master key also may be held by affiliated third parties such as
inspectors and appraisers who cannot have access to the Property without Broker's prior approval which will not be
given without Broker first making reasonable efforts to obtain Seller's approval.
6. SELLER'S WARRANTIES AND REPRESENTATIONS. Seller warrants that Seller has the right to sell the Property
on the terms herein and that the Property information on the attached additional pages to this Agreement is correct.
Further, Seller represents that to the best of Seller's knowledge, there are no structures or boundary indicators that
either encroach on adjacent property or on the Property. Seller authorizes Broker to provide the information in this
Agreement and the attached additional pages to prospective buyers and to other cooperating members of MLS who
do not represent the Seller and, in some instances, may represent the buyer. Seller agrees to indemnify and hold
Broker and other members of MLS harmless in the event the foregoing warranties and representations are
incorrect.
7. CLOSING COSTS. Seller agrees to furnish and pay for a buyer's policy of title insurance showing marketable title
to the Property. Seller agrees to pay real estate excise tax and one-half of any escrow fees or such portion of
escrow fees and any other fees or charges as provided by law in the case of a FHA or VA financed sale. Rent,
taxes, interest, reserves, assumed encumbrances, homeowner fees and insurance are to be prorated between
Seller and buyer as of the date of closing.
8. MULTIPLE LISTING. Broker shall cause this listing to be published by MLS. Seller authorizes MLS to distribute the
Property information on the attached additional pages to third parties that provide services to Broker and other
members of MLS. Broker may refer this listing to any other cooperating multiple listing service at Broker's
discretion. Broker shall cooperate with all other members of MLS, or of a multiple listing service to which this listing
is referred, in working toward the sale of the Property. Regardless of whether a cooperating MLS member is the
agent of the buyer, the Seller, neither or both, the member shall be entitled to receive the selling office’s share of
the commission. IT IS UNDERSTOOD THAT MLS IS NOT A PARTY TO THIS AGREEMENT AND ITS SOLE
FUNCTION IS TO FURNISH THE DESCRIPTIVE INFORMATION ON THE ADDITIONAL PAGES ATTACHED TO
THIS AGREEMENT TO ITS MEMBERS, WITHOUT VERIFICATION AND WITHOUT ASSUMING ANY
RESPONSIBILITY FOR SUCH INFORMATION OR IN RESPECT TO THIS AGREEMENT.
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9. DISCLAIMER/SELLER'S INSURANCE. Neither Broker, MLS, nor any members of MLS or of any multiple listing
service to which this listing is referred shall be responsible for loss, theft, or damage of any nature or kind whatsoever to the Property and/or to any personal property therein, including entry by the master key to the keybox
and/or at open houses. Seller is advised to notify Seller's insurance company that the Property is listed for
sale and ascertain that the Seller has adequate insurance coverage. If the Property is to be vacant during
all or part of the term of this listing, Seller should request that a "vacancy clause" be added to Seller's
insurance policy.
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10. BROKER'S RIGHT TO MARKET THE PROPERTY. Seller shall not commit any act which materially impairs
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Broker's ability to market and sell the Property under the terms of this Agreement. In the event of breach of the
foregoing, Seller agrees to pay Broker a commission in the above amount, or at the above rate applied to the listing 86
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price herein, whichever is applicable. Broker shall be entitled to show the Property at all reasonable times. Broker
need not submit to Seller any offers to lease, rent, execute an option to purchase, or enter into any agreement other 88
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than for immediate sale of the Property.
11. SELLER DISCLOSURE STATEMENT. Unless Seller is exempt under RCW 64.06, Seller shall provide to Broker as 90
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soon as reasonably practicable a completed and signed "Seller Disclosure Statement" (Form17 (Residential) or
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Form 17C (Unimproved Residential)). Seller agrees to indemnify, defend and hold Broker harmless from and
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against any and all claims that the information Seller provides on Form 17 or Form 17C is inaccurate.
12. DAMAGES IN THE EVENT OF BUYER'S BREACH. In the event Seller retains earnest money as liquidated
damages on buyer's breach, any costs advanced or committed by Broker on Seller's behalf shall be paid therefrom
and the balance divided equally between Seller and Broker.
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13. ATTORNEYS' FEES. In the event either party employs an attorney to enforce any terms of this Agreement and is
successful, the other party agrees to pay reasonable attorneys' fees. In the event of trial, the successful party shall 98
be entitled to an award of attorneys' fees and expenses; the amount of the attorneys' fees and expenses shall be
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fixed by the court. The venue of any suit shall be the county in which the property is located.
100
DATED THIS
DAY OF
,
Are the undersigned the sole owner(s)?
YES
NO 101
BROKER (COMPANY)
SELLER
102
BY
SELLER
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Please take note that paragraph #2 deals with Agency and Dual Agency in its’ entirety.
Another common disclosure agreement would be the Agency Disclosure form.
See Insert Agency Disclosure Form # 42 (1 Page MUST SAY SELLER)
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41
Form 42
Agency Disclosure
Rev. 1/97
Page 1 of 1
©Copyright 1997
Northwest Multiple Listing Service
ALL RIGHTS RESERVED
AGENCY DISCLOSURE
Washington State law requires real estate licensees to disclose to all parties to whom the licensee
renders real estate brokerage services whether the Licensee represents the Seller (or Lessor), the
Buyer (or Lessee), both the Seller/Lessor and Buyer/Lessee, or neither.
1
YOU ARE ADVISED THAT THE UNDERSIGNED IS THE AGENT OF THE Buyer/Lessee (select 1)
UNLESS OTHERWISE STATED HERE:
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5
THE UNDERSIGNED REPRESENTS:
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Seller,
2
3
THE UNDERSIGNED BUYER/LESSEE OR SELLER/LESSOR ACKNOWLEDGES RECEIPT OF A
COPY OF THE PAMPHLET ENTITLED “THE LAW OF REAL ESTATE AGENCY”
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8
BUYER
DATE
9
DATE
10
DATE
11
DATE
12
(Signature)
BUYER
(Signature)
SELLER
(Signature)
SELLER
(Signature)
LICENSEE
13
(Print/Type)
LICENSEE’S SIGNATURE
14
COMPANY NAME AS LICENSED
15
(Print/Type)
On this form, it states:
“THE UNDERSIGNED REPRESENTS” SELLER
Seller agency disclosure can also be found on page one of the NWMLS Residential
Purchase and Sale Agreement paragraph # 17 Agency Disclosure
See Insert Page 1 Only of Form #21 Residential PSA and Highlight Paragraph # 17
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BUYER AGENCY
Let’s look at some examples of how buyer agency could be established:
EXAMPLE #1
Jack, a broker for ABC Real Estate, receives permission from a broker from XYZ Realty to
advertise XYZ’s listing. John procures a buyer from his advertising and represents the
buyer.
EXAMPLE #2
Betty does a massive mailing of “Just Listed/Just Sold” cards to the neighborhood where
she specializes. A potential buyer read one of these cards and is impressed with how
many homes that Betty has sold in the neighborhood. They contact Betty and ask in she
will represent them as buyers.
EXAMPLE #3
Buyer agency could also be established by the actions of the parties as implied agency.
The most common form to disclose a buyer agency agreement is shown below. It is a
sound practice for all brokers to secure this contract with all potential buyers.
When a potential buyer agrees to sign this document, they are stating their intentions of
loyalty to their broker. And in turn, the broker is stating their loyalties to the buyer.
In the event that there is a dispute between agents regarding procuring cause (who
brought the buyer to the transaction), this agreement could be used as proof of
representation.
See Insert Form #41A Buyer’s Agency Agreement (two pages)
COPYRIGHT © TAPE ED – REALESTATESCHOOL.ORG
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45
© Copyright 2009
Northwest Multiple Listing Service
ALL RIGHTS RESERVED
Form 41A
Buyer's Agency Agreement
Rev. 3/09
Page 1 of 2
BUYER’S AGENCY AGREEMENT
This Buyer's Agency Agreement is made this
and
between
1
("Broker")
2
("Buyer").
3
1. AGENCY RELATION CREATED. Broker appoints
("Agent") 4
to represent Buyer. This Agreement creates an agency relationship between Buyer, Agent, and Agent’s Broker,
5
Designated Broker, or Branch Manager. This Agreement does not create an agency relationship or responsibilities 6
between Buyer and any other broker or salesperson licensed with the company named above; provided Buyer
7
authorizes Broker to appoint other salespersons affiliated with Broker as subagents to act on Buyer's behalf as and 8
when needed, at Broker's discretion. Any other broker or salesperson licensed to the company named above will
9
not be representing the Buyer and may represent the Seller. Accordingly, for purposes of this Agreement, the term 10
"Broker" means Agent including any subagents and Agent's Broker, Designated Broker, or Branch Manager, unless 11
expressly stated otherwise. Buyer acknowledges receipt of the pamphlet entitled "The Law of Real Estate Agency." 12
2. EXCLUSIVE OR NON-EXCLUSIVE. This Agreement creates a
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sole and exclusive;
non-exclusive (nonexclusive if not checked) agency relationship between Buyer, Agent, and Agent’s Broker, Designated Broker, or
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Branch Manager.
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3. AREA. Agent will search for real property for Buyer located in the following geographical areas:
(unlimited if not filled in) (“Area”).
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4. BROKER'S LISTINGS/AGENT'S OWN LISTINGS/DUAL AGENCY. If Broker locates a property that is listed by
one of Broker's salespersons other than Agent, then Buyer consents to Broker acting as a dual agent. Further, if
Broker locates a property listed by Agent then Buyer consents to Agent and Broker acting as dual agents. Different
salespersons affiliated with Broker may represent different buyers in competing transactions involving the same
property and that this shall not be considered action by Broker that is adverse or detrimental to the interests of
either buyer, nor shall it be considered a conflict of interest on the part of Broker.
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5. TERM OF AGREEMENT. This Agreement will expire
(120 days from signing if not filled in) or by prior
written notice by either party. Buyer shall be under no obligation to Broker except for those obligations existing at
the time of termination.
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6. NO WARRANTIES OR REPRESENTATIONS. Broker makes no warranties or representations regarding the value 29
of or the suitability of any property for Buyer's purposes. Buyer agrees to be responsible for making all inspections 30
and investigations necessary to satisfy Buyer as to the property’s suitability and value.
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7. INSPECTIONS RECOMMENDED. Broker recommends that any offer to purchase a property be conditioned on
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Buyer's inspection of the property and its improvements. Broker and Agent have no expertise on these matters and 33
Buyer is solely responsible for interviewing and selecting all inspectors.
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8. COMPENSATION. Buyer shall pay Broker compensation as follows:
a. Exclusive. If the parties agree to an exclusive relationship in Paragraph 2 above and if Buyer shall, during the
course of this Agreement, purchase a property located in the Area, then Buyer shall pay to Broker the compensation provided for herein. If Buyer shall, within six (6) months after the expiration or termination of this Agreement, purchase a property located in the Area that was first brought to the attention of Buyer by the efforts or
actions of Broker, or through information secured directly or indirectly from or through Broker, then Buyer shall
pay to Broker the compensation provided for herein.
b. Non-Exclusive. If the parties agree to non-exclusive relationship in Paragraph 2 above and if Buyer shall, during
the course of or within six (6) months after the expiration or termination of this Agreement, purchase a property
that was first brought to the attention of Buyer by the efforts or actions of Broker, or through information secured
directly or indirectly from or through Broker, then Buyer shall pay to Broker the compensation provided for
herein.
Buyer
Buyer
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Form 41A
Buyer's Agency Agreement
Rev. 3/09
Page 2 of 2
© Copyright 2009
Northwest Multiple Listing Service
ALL RIGHTS RESERVED
BUYER’S AGENCY AGREEMENT
c. MLS. Broker will utilize a Multiple Listing service to locate properties and MLS rules may require the Seller to
compensate Broker by apportioning a commission between the Listing Agent and Broker. Broker will disclose
any such commission or bonuses offered by the Seller prior to preparing any offer. Buyer will be credited with
any commission or bonus so payable to Broker. In the event that said commission and any bonus is less than
the compensation provided in this Agreement, Buyer will pay the difference at the time of closing. In the event
that said commission and any bonus is equal to or greater than the compensation provided for by this
Agreement, no compensation is due to Broker herein. If Broker acts as a dual agent, then Broker shall receive
the listing and selling commission paid by the Seller plus any additional compensation Broker may have
negotiated with the Seller. All such compensation shall be credited toward the fee specified above.
9. VA TRANSACTIONS. Due to VA regulations, VA financed transactions shall be conditioned upon the full commission being paid by the Seller.
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10. NO DISTRESSED HOME CONVEYANCE. Broker will not represent or assist Buyer in a transaction that is a "Distressed Home Conveyance” as defined by Chapter 61.34 RCW unless otherwise agreed in writing. A "Distressed
Home Conveyance" is a transaction where a buyer purchases property from a "Distressed Homeowner" (defined
by Chapter 61.34 RCW ), allows the Distressed Homeowner to continue to occupy the property, and promises to
convey the property back to the Distressed Homeowner or promises the Distressed Homeowner an interest in, or
portion of the proceeds from a resale of the property.
11. ATTORNEYS' FEES. In the event of suit concerning this Agreement, including claims pursuant to the Washington
Consumer Protection Act, the prevailing party is entitled to court costs and a reasonable attorney’s fee. The venue
of any suit shall be the county in which the property is located.
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12. OTHER AGREEMENTS (none if not filled in).
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Buyer has read and approves this Agreement and hereby acknowledges receipt of a copy.
Buyer
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Broker (Company)
Buyer
Date
By: (Agent)
Address
City, State, Zip
Phone
E-mail Address
Fax
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THE LAW OF REAL ESTATE AGENCY
The booklet below titled The Law of Real Estate Agency specifically describes a client’s rights
when dealing with a real estate broker. This pamphlet is used for both buyers and sellers. A copy
of this pamphlet should be given to a client just as soon as possible. Have the client initial two
copies. Give the client one copy and keep the other copy for your records. A more detailed
analysis of this disclosure is discussed in section # 10 of this chapter. If an agent expressed
verbally that he/ she represented a buyer and gave them this booklet, a buyer agency would be
formed.
DUAL AGENCY
Let’s look at some examples of the establishment of dual agency:
EXAMPLE
Fred, with ABC Realty, has advertised one of his listings very extensively over the internet. A
potential buyer contacts him to view the property. After viewing the property, the potential
buyer would like Fred to represent them in the sale. Fred will need to receive written consent
from both the buyer and the seller to be a dual agent.
EXAMPLE
Sherry, with ABC Real Estate, is holding an open house on one of her listings. A potential buyer
visits the property and asks if Sherry will represent them. Again, Sherry will need permission from
the seller and the buyer to do this.
EXAMPLE
John, a listing broker with Mac Investment Properties, has a commercial listing and just posted a
“For Sale” sign on the property. A potential buyer calls John after viewing the sign and would like
John to represent him. A dual agency would be established as soon as John gets permission from
both parties.
Dual agency could be disclosed through a statement in paragraph # 17 on page one of NWMLS
Form # 21 Purchase and Sale Agreement . It could also be established by filling out an agency
disclosure form such as NWMLS Form #42 as we saw previously. And another method would be a
separate addendum, signed by both the buyer and the seller serving as their consent to dual
agency.
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NON AGENCY FACILITATOR
A non agency or facilitator situation can often be found in new construction where the
on-site employees represent the builder, but will write up offers for buyers who visit the
site. The broker/employee represents the builder and not the buyer(s).
Another common way that a non agency is established is during an open house.
The listing agent represents the seller and chooses not to be a dual agent.
Even though the agent writes up an offer for the buyer he/she does not represent them.
Here is a scenario which can establish a non agency as well: A licensee has listed her own
property for sale. She is the principal. When holding an open house, she procures a buyer
for the property. She must represent herself, but cannot be a dual agent since she is the
owner/agent and the principal.
This agency can be disclosed in paragraph # 17 on page one of NWMLS Form #21
Purchase and Sale Agreement, on an agency disclosure form such NWMLS Form # 42
DESIGNATED AGENCY (SPLIT AGENCY)
Let’s look at some example of how split agency might be established:
EXAMPLE
John, with ABC Realty, has a listing with the Smiths. Laura, also with ABC Realty, finds a
party who would like to purchase the Smith’s property. This situation can be described as
split agency or designated agency where John and Laura both work for the same
brokerage. The designated broker for the brokerage will become the dual agent.
EXAMPLE
Bill, with XYZ Realty, has listed his own home for sale. Susan, also with XYZ Realty, has
procured a buyer for Bill’s property. Since they work for the same brokerage this is
considered designated or split agency.
EXAMPLE
Don, with ABC Real Estate, has a listing with the Browns. The designated broker with ABC
Real Estate has a friend that would like to purchase the Brown’s home and have the
designated broker be their buyer broker. Since Don and the designated broker work for
the same brokerage, this makes the designated broker a dual agent. Since the designated
broker cannot be both a dual agent and a buyer’s agent at the same time, the designated
broker will need to refer his friend to another broker.
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THE RELATIONSHIP BETWEEN REAL ESTATE DESIGNATED BROKERS OR BRANCH
MANAGING BROKERS AND THEIR AFFILIATED LICENSEES RELATING TO AGENCY
RELATIONSHIPS
Licensees are agents for their broker. The licensee is referred to as having a sub agency
relationship with the designated broker or branch managing broker and is considered to
be a general agent. Let’s look at three types of agents:
 Universal Agent
 General Agent
 Specific Agent
UNIVERSAL AGENT
Universal agents are licensees that are granted the power to handle all of the affairs of
the principal. The best example of this would be an agent who represents a professional
athlete and has the permission to handle all of the athletes’ affairs (which would include
such things as: finances, purchasing real property, negotiating contracts, negotiating
compensation for promotional advertisements, etc.) The Universal agent has the
broadest range of authority to represent their client
GENERAL AGENT
A general agent has the authority to represent many of the affairs of the principal, but
not all of them. The relationship between the designated broker and their affiliated
licensee is the best example of this general agency. The licensee has the authority to act
for the broker in many aspects such as:
 Obtaining listings
 Completing contracts for the purchase of a property
 Providing real estate information to the public
 Leasing or rental services
 Handling of earnest monies
SPECIFIC AGENT
A specific agent usually has the authority to represent their client in only one “specific”
area. The best example of this would be a licensee who has taken a listing for a seller.
The licensee has the authority to represent the client for just a specific parcel of
property.
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The agency relationship between the broker and their affiliated licensee carries
responsibilities for both the broker and the licensee.
The designated broker, branch manager or managing broker has the responsibility of
supervising the licensee and reviewing all paperwork generated in the course of
performing real estate functions. The designated broker, branch manager or managing
broker may also be responsible for the actions of his or her licensees and for the
adherence of all federal, state and local laws.
The licensee has the responsibility to adhere to the rules and wishes of the broker and to
adhere to all federal, state and local laws.
The duties of both the: licensee and the designated broker/ branch manager/ managing
broker are discussed in further detail later in this chapter.
SERVICES THAT A LICENSEE CAN PROVIDE TO A PROSPECTIVE PURCHASER THAT
WOULD ESTABLISH AN AGENCY RELATIONSHIP
Signing a Buyer’s Agency Agreement and Showing a Potential Buyer Some HomesAgency had been established by the signing of the Buyer’s Agency Agreement
Giving Real Estate Advice about Market Conditions and Actions Which Imply AgencyThis implied agency was established by the actions of the parties.
When a Third Party Assumes That You Are an Agent for the Principal and the Principal
Does Not Make an Outward Statement to the Contrary – this agency was formed when
the principal failed to correct an assumption by a third party. This is also known as :
Agency by Estoppel or as Ostensible Agency
Writing a Purchase and Sale Agreement for a buyer and stating that you represent the
buyer.
Stating to a listing agent that you represent the buyer
Disclosure Requirements When a Licensee is Acting as a Principal
As a real estate professional, you have more education and experience about real estate
than the general public. When you are acting as a principal in a transaction (you are the
buyer or the seller), there is the possibility that the general public could be at an unfair
disadvantage.
Washington State requires that a licensee, disclosure in writing, that they are a licensed
broker when acting as a principal.
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RCW 18.85.230
DISCIPLINARY ACTION — GROUNDS. (EFFECTIVE UNTIL JULY 1, 2010.)
(21) Buying, selling, or leasing directly, or through a third party, any interest in real
property without disclosing in writing that he or she holds a real estate license.
WHEN IMPLIED BUYER’S AGENCY DOES NOT EXIST
According to the Revised Code of Washington –RCW 18.86.020 (1) an implied agency
would not exist when:
(1) A licensee who performs real estate brokerage services for a buyer is a buyer's agent unless
the:
(a) Licensee has entered into a written agency agreement with the seller, in which case the
licensee is a seller's agent;
(b) Licensee has entered into a subagency agreement with the seller's agent, in which case the
licensee is a seller's agent;
(c) Licensee has entered into a written agency agreement with both parties, in which case the
licensee is a dual agent;
(d) Licensee is the seller or one of the sellers; or
(e) Parties agree otherwise in writing after the licensee has complied with
RCW 18.86.030(1)(F).
WHY AN AGREEMENT TO PAY COMPENSATION DOES NOT NECESSARILY
CREATE AN AGENCY RELATIONSHIP
Compensation for real estate services rendered does not automatically create an agency
relationship. The most common example of this is a buyer’s broker who is representing
the buyer solely and receiving the compensation from the seller.
LET’S LOOK AT AN EXAMPLE:
The buyer’s broker, Henry, is representing the buyer solely. The sellers are paying one
half of their commission to the listing broker and one half of their commission to Henry
who brought them the buyer. While Henry is being compensated by the seller, he does
not represent the seller.
Below is RCW 18.86.080 regarding compensation.
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RCW 18.86.080
COMPENSATION
(1) In any real estate transaction, the broker's compensation may be paid by the seller,
the buyer, a third party, or by sharing the compensation between brokers.
(2) An agreement to pay or payment of compensation does not establish an agency
relationship between the party who paid the compensation and the licensee.
(3) A seller may agree that a seller's agent may share with another broker the
compensation paid by the seller.
(4) A buyer may agree that a buyer's agent may share with another broker the
compensation paid by the buyer.
(5) A broker may be compensated by more than one party for real estate brokerage
services in a real estate transaction, if those parties consent in writing at or before the
time of signing an offer in the transaction.
(6) A buyer's agent or dual agent may receive compensation based on the purchase price
without breaching any duty to the buyer.
(7) Nothing contained in this chapter negates the requirement that an agreement
authorizing or employing a licensee to sell or purchase real estate for compensation or a
commission be in writing and signed by the seller or buyer.
NOTE:: That if the broker is being compensated by more that one party in the transaction
then the broker must get the consent of all the parties in writing at or before the time of
signing an offer.
ALSO NOTE: That all compensation received by a broker must be paid through the
broker’s designated broker. A broker cannot receive money directly from the public or
from the closing agent for real estate services rendered.
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PROVIDING SALES COMPARABLES TO A BUYER
During your real estate career, you may find it beneficial to provide comparables
property data “comps” to a potential buyer. A potential buyer may even ask that you do
so.
This practice could create a buyer’s agency, but it does not necessarily do so. There are
different circumstances and scenarios which might determine agency. Let’s look at some
examples:
CASE STUDY
Jack was on floor duty at his brokerage. A couple walked in and said that they wanted to
buy a “for sale by owner” home directly from the seller. They asked if Jack would pull up
some comparables. Jack did so. Because Jack provided some comparables to these folks,
this does not necessarily mean that he had an agency relationship with them.
CASE STUDY
Betty was holding an open house on her listing for the Andersons. A couple visited the
open house and were potentially interested in buying it. They asked if Betty could
provide comparable sales in the neighborhood for them. Betty referred the couple to
another broker to get the comparables. She did this for the following reasons:
 She had prepared the comparable for the seller and thought that it would be a
violation of agency
 She also thought that a conflict of interest could exist as she may want to provide
comparables which would support her listing
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