The Agency Disclosure Explained

The Agency Disclosure Explained

Buying a home is an exciting time, but without the right help it can be a stressful and scary time as well. That’s usually where real estate agents come in to help. With lots of qualified agents in the South Bay, it may be easy to choose a good one, but knowing how they work for you is just as important as finding the right agent. In real estate practice, the fiduciary duties of an agent are clearly defined as they represent the full interests of their client. This relationship between agent and client is called an agency, and whether your buying or selling in Manhattan Beach, Hermosa Beach, or anywhere in California for that matter, the State wants you to be aware of how agency works before you begin working with an agent. In fact, it’s the law! There is a two-page disclosure form entitled Disclosure Regarding Real Estate Agency Relationship that realtors are required to fulfill before working with a client. So here is how it works:

When is the Disclosure Given to Clients?

Sellers should receive the disclosure paperwork from the listing agent prior to signing the listing agreement, with ample time to read and review it. And although buyer’s agents should also give this form to their clients before representing them in a real estate transaction, buyers should ideally receive, review, and sign this disclosure before an agent even starts to show them houses. This way the buyer is fully aware of the responsibilities their agent has so they can keep them accountable.

What is the Purpose of this Disclosure?

The purpose of the agency disclosure form is to protect the client. Upon signing, there is no contractual obligation to exclusively work with that agent, however, this document does make sure that everyone who hires a real estate agent understands the full scope of their relationship dynamic. After reading this form you should understand which types of real estate agents are looking out for your best interests, and which types of real estate agents cannot legally do so.

Levine Homes Real Estate is dedicated to helping both buyers and sellers in the South Bay navigate the real estate market with ease and direction, so we take this disclosure paperwork and our duty to our clients very seriously. As a local homeowner myself, I recommend that you get familiar with this form, and remember it is not a contract, just simply a disclosure.

What does this Disclosure Include?

This form lists the three different types of agency:

1. Seller’s Agent
2. Buyer’s Agent
3. Agent Representing Both Seller and Buyer

I will further explain the contexts of each agency, but first it is important to stress the emphasis this disclosure puts on fiduciary duty. This is the legal obligation to act in the best interest of the client by their representing agent. Both buyer’s and seller’s agents must uphold this duty to their respective clients in accordance with this disclosure.

Seller’s Agent

Under this disclosure the seller’s agent, also known as the listing agent, must act in the best interest of the seller. This means that they are loyal to the seller and must work diligently to find the best price and terms for them. However, the seller’s agent also has certain duties that he or she must uphold with both the buyer and seller. Namely, a seller’s agent must act fairly and honestly with reasonable skill and care. Additionally, they are obligated to disclose all material facts affecting the value or desirability of the property. Which facts are deemed material is up to the discretion of the buyer so when in doubt, disclose! And although this requirement to disclose is in place, the seller’s agent is not required to act in any fiduciary manner towards the buyer, such as helping them make sense of disclosures, nor can they reveal any nonmaterial information that may aid the buyer in negotiations.

Buyer’s Agent

According to the disclosure, the buyer’s agent, also known as the selling agent (slightly confusing, I know), must conversely act in the best interest of the buyer. Even though the buyer’s agent’s compensation may be coming from the seller, they are still bound by their fiduciary duty to the buyer and must act in accordance to help them get the lowest price and best terms. Additionally, they must review all disclosures, reports, inspections, and other documents to determine if purchasing the home at the agreed price is in the buyer’s best interest.

 Dual Agency

Dual agency is when one agent represents both the buyer and the seller in the same real estate transaction. This can only be done with the knowledge and consent of both parties, and despite the seeming conflict of interest, the agent must still follow through with his or her fiduciary obligation to both clients, albeit limited.  Although the duty of loyalty is diminished in this agency, the agent must still maintain confidentiality to each client and negotiate in the mutual best interest of both.