Creation of Agency and Agency Agreements

Agency is created when a principal authorizes an agent to act on their behalf.

• Express Agreement
  • Clearly stated, written or oral
  • Most real estate agencies are created in writing

• Implied Agreement
  • Created by conduct of the parties
  • Actions imply consent and authority

• Ostensible (Apparent) Agency
  • Created by principal’s words or actions to a third party
  • Third party reasonably believes agency exists

• Agency by Ratification
  • Principal approves an agent’s unauthorized act after it occurs
  • Approval makes the act binding

• Agency by Estoppel
  • Principal prevented from denying agency
  • Third party relied on principal’s representation

Agency agreements define the scope and terms of representation.

Contracts between seller and broker.

• Open Listing
  • Multiple brokers may represent seller
  • Only the procuring cause is paid
  • Seller may sell without paying commission

• Exclusive Agency Listing
  • One broker authorized
  • Seller may sell without paying commission

• Exclusive Right-to-Sell Listing
  • One broker authorized
  • Broker paid regardless of who sells
  • Most common listing in California

Contracts between buyer and broker.

• Defines scope of representation
• May specify compensation
• Creates fiduciary duties to buyer

Allows broker to represent both buyer and seller.

• Requires informed written consent
• Must disclose agency relationships
• Fiduciary duties are limited

Agency ends by operation of law or agreement.

• Completion of purpose
• Expiration of agreement
• Mutual agreement
• Death or incapacity of principal or agent
• Destruction of property
• Bankruptcy of principal