Agency relationships are very confusing to prelicensing students (and even veteran real estate practitioners) mostly because real life doesn’t seem to jibe with the law.

The agency relationship refers to what duties the real estate agent owes to the client.  For example, my attorney has a duty of confidentiality.  If I tell him a secret, he is bound by law to keep that secret.  My hair stylist does not have that a duty of confidentiality.  If I am sitting in the chair and tell her my deepest, darkest secret, she can tell her next client my secret without legal recourse.

In Florida real estate, the duties owed to the client (i.e. the agency relationship) have zero to do with who is paying the commission, or to whom the commission is being paid.  In other words, the real estate broker can have a fiduciary relationship with a client and not get any money from them.  This makes more sense to people when we think of a courtroom.  The plaintiff sues the defendant related to a car accident injury.  The plaintiff wins and the defendant has to pay the plaintiff’s attorney fees.  The fact that the plaintiff didn’t pay anything and the defendant paid both parties does not change the attorney-client relationship between each party and their respective attorney.

So now that we have money out of the way, let’s talk about duties…

There are three relationships in Florida.  From best to worst, it is single agent, transaction broker, and no brokerage relationship.  Single agency is a fiduciary relationship.  Your agent has a duty of loyalty.  In other words, they will do what is in your best interest.

They have a duty of confidentiality.  If you tell them that you are moving because you are getting divorced, they will not tell that to anyone.

They have a duty of full disclosure.  If the other party says they are buying because they are going through a divorce, your fiduciary agent will tell you that.

Lastly, they have a duty of obedience to your lawful instructions.  If you tell your agent that you want him to be present for all showings – you don’t want anyone letting themselves in from the lockbox key – he is bound by law to follow your instructions.

If you have a single agent relationship with the seller, then you have no brokerage relationship with the buyer.  It’s easy to understand no brokerage relationship if we think of opposing attorneys in a courtroom.  The defendant’s attorney must cooperate with the plaintiff’s attorney as far as providing discovery evidence, scheduling depositions, etc.  But there is no doubt where each attorney’s loyalty lies.

What makes things complicated is that the relationship is not with the sales associate, it is with the broker.  So if you listed your house with Sales Associate Al of ABC Realty.  Your relationship isn’t really with Sales Associate Al; it is with ABC Realty.  If Sales Associate Barbara of ABC Realty has a buyer who wants to look at your house, this creates a problem.  ABC Realty has a fiduciary relationship with the buyer and the seller, which won’t work.  A fiduciary relationship with the buyer and seller is called dual agency, and it’s illegal in Florida.  That’s where the transaction broker comes in.

In Florida, a transaction broker functions similarly to a referee. They do not take sides; they just facilitate the game. Transaction broker relationship is the default relationship in Florida real estate.

With transaction broker, the agent represents each party in a limited capacity.  So now, ABC Realty can represent the buyer and seller in the same transaction.  This changes the duties that Sales Associates Al and Barbara have with their respective customers.  Now, neither sales associate can negotiate on behalf of their customer.  Neither agent can do what is in their customer’s best interest to the detriment of the other.

A transaction broker can present the offers, but they are not fighting to get the best outcome for you.  They are not allowed to reveal pertinent information that might affect the price, unless it affects the value of the residential property.  For example, if the roof leaks, both agents must disclose that because it affects the value of the residential property.  But, let’s say the seller is leaving the country for a job opportunity and wants to sell before they leave.  That is something that doesn’t affect the value of the property, but might affect the price the seller is willing to accept.  In a transaction broker relationship, the sales associate would be violating the law if they told you about the out-of-country move.  Neither agent can disclose the motivations for buying or selling.

A transaction broker also a duty of limited confidentiality.  Let’s say you are the buyer.  The seller slips and tells your agent that he is willing to pay up to $20,000 for a new roof.  This is not in a written offer – the seller just casually mentions it.  In a single agent relationship, your agent is required by law to disclose that to you.  In a transaction broker relationship, your agent has a duty of limited, not full, disclosure, so you won’t be learning about this $20,000.  Your agent also has a duty of limited confidentiality to the seller, which is another reason you won’t be hearing about this $20,000.

It’s important to understand this for the state exam.  It’s also important to understand this in real life. As a real estate licensee, you don’t want to disclose something that you shouldn’t have or not disclose something you should have.  You might find yourself on the wrong end of a lawsuit.

If this is still confusing, check out the state exam review classes at Demetree School of Real Estate, where we’ll explain this, plus everything else you need to know to pass the Florida real estate exam.

Please note that Karen Climer has no affiliation with Climer School of Real Estate.  Her father, Ron Climer, sold Climer School of Real Estate in 2014.  It has since been involved in several mergers and acquisitions and is owned by a large investment company.  Karen owns Demetree School of Real Estate in Orlando, Florida.