How does the concept of "agency" affect real estate transactions?

The concept of "agency" plays a crucial role in real estate transactions as it defines the relationship between brokers and their clients. Agency establishes the legal and ethical obligations that a broker has towards their client, which can be a buyer, seller, landlord, or tenant. This relationship entails the broker acting on behalf of the client, with fiduciary duties including loyalty, confidentiality, disclosure, and accounting.

Understanding agency is essential because it clarifies the level of service and commitment the broker must provide. For example, when a broker enters into a listing agreement with a seller, the agency relationship means that the broker must advocate for the seller’s best interests, provide honest advice, and keep the seller informed about all aspects of the transaction.

This concept also underpins all legal responsibilities and representations that the broker is bound to uphold, impacting everything from negotiations to contract terms. Proper understanding of agency helps ensure that clients are aware of their rights and the responsibilities of their brokers, thereby fostering trust and accountability in real estate dealings.