Agency Relationships

### Section: Agency Relationships Estimated study time: 45 minutes Content: Agency law governs the relationship between a real estate broker (the agent) and the client (the principal) who hires the broker to represent their interests in a transaction. In Massachusetts, agency relationships are created by written agency agreements — the listing agreement (broker represents the seller) or the buyer agency agreement (broker represents the buyer). The broker, as a fiduciary, owes the client the highest duties of loyalty, confidentiality, obedience, disclosure, accounting, and reasonable care (LCODAR mnemonic). A seller's agent (listing agent) owes fiduciary duties to the seller and must work to obtain the best possible price and terms for the seller. A buyer's agent owes fiduciary duties to the buyer and must work to protect the buyer's interests, including advising on negotiating strategy and identifying property defects. Massachusetts agency law underwent a significant change with the mandatory buyer agency disclosure law, effective January 1, 1998. Under 254 CMR 3.00 and the implementing statute (M.G.L. Chapter 112, §87AAA), a real estate salesperson or broker must provide a written "Mandatory Licensee-Consumer Relationship Disclosure" form to prospective buyers at the first personal meeting to discuss a specific property. This form explains whether the agent represents the seller, the buyer, or both parties (dual agency). The buyer is informed whether the agent they are speaking with is a listing agent (seller's agent), a buyer's agent, or a facilitator (non-agent). The disclosure must be signed and a copy retained by the broker for three years. Dual agency occurs when the same broker…