Understanding New York Real Estate Agency Law
It's important to understand what legal responsibilities your real estate salesperson has to you and to other parties in your real estate transaction. Ask your REALTOR® to explain what type of agency relationship you have with him or her and with the brokerage company.
- Seller's Agent (also known as a listing agent). A seller's agent is hired by and represents the seller. All fiduciary duties are owed to the seller, including reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and a duty to account. Cooperating agents from the same office as the seller's agent, who are not representing the buyer as a buyer's agent, are also seller's agents. The agency relationship usually is created by a listing contract.
2. Broker's Agent. A broker's agent cooperates with or is engaged by the seller's agent to help find a purchaser for a property. Broker's agency arises when a cooperating sales associate from another brokerage, who is not representing the buyer as a buyer's agent or operating in a non-agency relationship, shows property to a buyer. In such a case, the broker's agent works with the buyer as a customer, and in dealing with the buyer, should exercise reasonable skill and care, disclose all facts known to the agent materially affecting the value or desirability of the property except as otherwise provided by law, and deal honestly, fairly and in good faith. A broker's agent cannot assist the buyer in any way that would be detrimental to the seller. It is important that broker's agents fully explain their duties to buyers.
3. Buyer's Agent. A real estate licensee who is hired by prospective buyers to represent them in a real estate transaction. The buyer's agent works in the buyer's best interest throughout the transaction and owes fiduciary duties to the buyer, the same as the seller's agent owes to the seller. The buyer can pay the licensee directly through a negotiated fee, or the buyer's agent may be paid by the seller or by a commission split with the listing broker.
4. Disclosed Dual Agent. Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to the clients. Instead, dual agents owe limited fiduciary duties to both parties. Because of the potential for conflicts of interest in a dual-agency relationship, it's vital that all parties give their informed consent. In many states (including NY), this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.
5. Designated Agent (also called, among other things, appointed agency). This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees within the same company. The designated agents give their clients full representation, with all of the attendant fiduciary duties, with the exception of undivided loyalty. The broker still has the responsibility of supervising both groups of licensees, and remains as the dual agent.
6. Non-Agency Relationship (called, among other things, a transaction broker or facilitator). Some states permit a real estate licensee to have a type of non-agency relationship with a consumer (NY does not allow this). These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. Very generally, the duties owed to the consumer in a non-agency relationship are less than the complete, traditional fiduciary duties of an agency relationship.
Reprinted in part from NYSAR and REALTOR Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS.