If you are involved in any California Real Estate transaction, one of the first forms you will be asked to sign is form AD “Disclosure Regarding Real Estate Relationships” otherwise known as the “Agency” form. At first glance, this form may look to you like a bunch of lawyers got carried away. But it is a very important form — so important, in fact, that it is one of the few forms to have a place to put the time as well as the date of signing because this can become very important in the event of a lawsuit.
The reason for the Agency Disclosure form is due to past problems with Real Estate law and compensation, In the past, as now, Sellers paid both the Listing Broker and the Selling Broker’s commissions. However, some court cases ruled that because the Seller had paid the Selling agent ( representing the Buyer), then the Selling Agency (think Brokerage) was actually a sub-agent of the Seller! This left the Buyer technically without legal representation — NOT a good situation.
Thus, the California Board of Realtors and the California State Legislature got together and created the Agency portion of the Civil Code. This allows the Seller to still traditionally pay all the commissions, but makes it clear to all parties exactly who works for whom. By getting everything disclosed up front BEFORE a contract is signed by anyone, a lot of problems can be avoided.
There are now three kinds of Agency — Seller’s Agency, Buyer’s Agency, and Dual Agency, where the same Agent (remember, this means the same as the Brokerage and not just the individual Realtor) is representing both sides in the transaction. If a Seller was not comfortable with Dual Agency, they could say so up front and avoid having Buyers brought to the property who were represented by the same Brokerage who was listing the property. LIkewise, if a Buyer was uncomfortable, then they could say they did not want to see properties listed for sale by that Brokerage.
Of course, in actual practice, almost no one refuses to consider Dual Agency — after all, when South Bay Brokers is one of the larger firms in the area, why would a Buyer or a Seller want to eliminate many of the properties or potential buyers by refusing Dual Agency? Simply understanding the ethical guidelines that govern Dual Agency usually helps most people to be comfortable with this concept.
The Agency Disclosure Form calls out the responsibilities of the Agent under any of the three types of Agency — all types have in common that the agent shall have “a Fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings… and have the obligation of the “diligent excercise of reasonable skill and care in performance of the agent’s duties, a duty of honest and fair dealing and good faith, and a duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of the parties.”
In other words … The Golden Rule ( or a lawyer’s version of it, anyway!)
If you’d like more information on this or any other Real Estate form, please contact me, as I’m happy to help!