What does agency in real estate mean?
Understanding agency in real estate is fundamental for anyone navigating the complexities of buying or selling property. Simply put, agency refers to the relationship between a client and their chosen real estate brokerage firm. This concept is prominently featured on the first page of both the purchase contract and the listing agreement for good reason—it forms the foundation of the entire transaction process.
In Hawaii, when a buyer or seller engages a real estate brokerage firm as their agent, they are represented by that firm and all its licensees. It's a legal requirement for real estate licensees to disclose, either orally or in writing, whom they represent to the seller and/or buyer involved. The form of representation typically falls into one of four categories:
Seller's Agent: The brokerage firm represents the seller exclusively, unless a disclosed dual agency exists. In this scenario, the firm owes the highest duties to the seller, including confidentiality, loyalty, and due care and diligence.
Buyer's Agent: Here, the brokerage firm represents the buyer exclusively, unless a disclosed dual agency exists. Similar to the seller's agent, the firm owes the highest duties to the buyer, encompassing confidentiality, loyalty, and due care and diligence.
Dual Agent: In cases where the brokerage firm represents both the buyer and seller, it becomes a dual agent. This commonly arises when licensees within the firm representing the seller have buyer clients seeking similar properties. Dual agents must maintain neutrality in negotiations and refrain from favoring one party over the other. Hawaii law mandates written consent for this arrangement.
No Agency Representation (Customer): In situations where either the buyer or seller is not represented by a brokerage firm, they are considered customers rather than clients. This often occurs in "For Sale By Owner" situations. However, disclosure by the National Association of REALTORS® Code of Ethics still applies, ensuring both parties are informed of their rights and obligations.
It's crucial for both buyers and sellers to acknowledge and understand their agency representation before signing any contracts. The National Association of REALTORS® (NAR) upholds its members to a strict Professional Code of Ethics, providing an additional layer of accountability in real estate transactions. In future articles, we will delve deeper into topics such as dual agency disclosure and consent, and The NAR Code of Ethics, providing further clarity on this essential aspect of real estate transactions. Feel free to reach out with any questions you have regarding real estate agency 808-315-1699.
Excerpt from Hawaii Association Of Realtors Listing Agreement pg.1
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