Real Estate Agency Explained

Posted On: March 26, 2012
By: ffdadmin

Real Estate agency relationships in a purchase or sale define who is responsible to who, and for what. It’s an important (but often confusing) topic, so I wanted to take some time to explain it. I’ve written in the past about agency and dual-agency. This article is going to focus on the basics of real estate agency.

Here’s the most important thing I can tell you about agency: Who pays the commission has nothing to do with agency. Yes, in San Francisco the entire real estate commission is normally paid by the seller. The commission is then split between the buyer’s agent and seller’s agent, usually equally although sometimes not. However, just because the commission comes from the seller’s funds does not mean that the buyer’s agent is in any way responsible or owes any duty to the seller.

Let’s start by clearing up some confusing terminology:

  • buyer’s agent and the selling agent are the same person. They represent the buyer in a real estate transaction.
  • The seller’s agent is also often referred to as the listing agent. They represent the seller in a real estate transaction
  • People often confuse “selling agent” with “seller’s agent” – don’t be that person! The selling agent is the agent who brought the offer to purchase the home. Unless the deal is being double-popped, the selling agent is a different person than the seller’s agent  (listing agent).
The second most confusing issue is that your legal agent is not your real estate agent.
  • Your legal agent is the brokerage where your personal real estate agent hangs their license.
  • Your real estate agent is – obviously – the person you have daily (hourly?) contact with when finding and purchasing your home.
  • Agency relationships are based upon who your legal agent is, not who your personal real estate agent is.
For example, Britton and I hang our licenses at Zephyr Real Estate. If we meet you and start writing offer’s on your behalf as a buyer’s agent then we are your real estate agents and Zephyr Real Estate is your your legal agent. Why does this matter? Consider these situations:
  • You find a house that you love. It is being sold by Ms. Mona Lisa of Coldwell Banker. In this situation, my relationship to you is governed by buyer agency because Zephyr Real Estate represents the buyer and Coldwell Banker represent the seller.
  • You find another house that you love. It is being sold by Mona Lisa who has now gone to work for Zephyr Real Estate. In this situation, my relationship to you is governed by dual agency because Zephyr Real Estate is the legal agent of both the buyer and the seller. It does not matter if Ms. Mona Lisa and I have ever met. It doesn’t matter if I know the sellers or not. It doesn’t matter if Ms. Mona Lisa is in the same office or a different Zephyr office. Because the legal agent is the same for both sides, it is a dual agency transaction.
  • You find another house that you love. It is being sold by Britton and me. This is (obviously) also dual agency, and this particular type of dual agency is sometimes called double-popping, or being on both sides of a transaction.

California law allows for three types of agency in a real estate agency relationships: buyer agency, seller agency, and dual agency. I will explore what the duties are for each of these types of agency in the coming days!

Important Disclosure: Agency is a legal topic. I am not an attorney, nor do I have any plans to become one. If you are seeking legal advice about agency, consult a qualified attorney. If you do not understand the agency relationships in your specific situation, do not rely upon this article to clear things up. Consult an attorney! Whatever you do, don’t just take the blog posts you stumble across from an internet search as the gospel truth. 

Mona Lisa image in the above graphic is used under a CC license –