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AGENCY RELATIONSHIP

As established, the agency identifies the relationship between a principal and an agent. This relationship may be based on a written or oral agreement, and as such, be recognized as an express agency or it may result, by the informal actions of either the agent or the principal, to form an implied agency. However, we have not identified authority for specific activities that are authorized by agency law. The specific “to do’s” or acts that an agent can do are dependent on the type of agency selected.

Three levels of authority used to form the basis of activities carried out in an agency relationship include:

  1. Universal
  2. General
  3. Special

Fill in the Blank
Agency identifies the relationship between a principal, and an  

Universal

Under universal agency relationships, the agent may do all those things that the principal could do, provided such activities are ethical, honest, and lawful. This means that the field of possible activities is wide open. It offers the greatest level of authority for agents; however, for this very reason, it is also the least common of the three types of agency used. Simply put, this level of authority exceeds the general needs of principals. It is commonly created via a power of attorney and gives an agent attorney level responsibility and authority. For instance, it gives agents the ability to obligate the principal in a contract without the principal’s consent. For these kinds of reasons, only under special situations, and for unique relationships, is this agency purposeful.

Quick Quiz

Fill in the Blank:
It is commonly via a power of attorney and gives an agent attorney-responsibility and authority.

General

A general agent represents a principal’s general needs, much like the relationship most salespeople share with their brokers and that property owners share with their property managers. Agents can contractually bind a principal to a contract within the scope of the general agent.

Some suggest that the rights of agents under this type of agency is too restrictive; however, it should be noted that the authority given to agents under this pretense more than meets the needs of most agency relationships, and therefore adequately serves agents in facilitating effective transactions on behalf of their principals. Typical activities performed under general agent include, but are not limited to:

  • Acquiring listings
  • Establishing buyer representation agreements
  • Marketing properties
  • Negotiating offers
  • Showing properties

Quick Quiz

Fill in the Blank:

Agents can contractually a principal to a contract within the scope of the general

Special

In most cases, real estate brokers are “special” or “limited” agents. Special agents operate under specific scope with specific limitations. When representing a buyer, for instance, the agent is limited to finding properties that fall within specified criteria identified by the buyer; for example, how much money the buyer is willing to spend, specific neighborhoods that will work, acceptable floor plans, requested amenities by the buyer, etc. Suppose you ask your best friend to take your car to a tire store to get new tires installed. Assuming your friend is willing to help, under this guise, he has become your general agent because you have only limited his activity to purchasing tires. That is, he still has the right to go to the tire store of his choice, has the right to spend as much or as little as he wants, and he has the right to select the brand and size of the tires he wants. Depending on your friend’s personal tastes, you may wish to reduce the risk of your car being returned with tires that do not match your interest by providing him with further limitations. For instance, you may wish to limit his choices further by restricting him to a particular store, accurate cost, specific brand, and specific size. Adding these additional restrictions would change the basis of your relationship with your friend from “general” agent to “limited” agent.

Fill in the Blank
Most cases, real estate brokers are “” or “limited” “”.

The buyer’s agent did not provide an agency disclosure during the transaction.

Issue:

Is the Real Estate Agency Disclosure and Election form a required form in a real estate transaction?

Answer:

No: A real estate agent should discuss agency issues with their client at the beginning of the representation and confirm his/her representation in writing before any contracts are executed.  The AAR Real Estate Agency Disclosure and Election (“READE”) form is designed to help agents explain agency issues to their sellers, buyers, landlords, and tenants and to provide those discussions in writing.  The agent’s broker may require the READE.  However, the use of the READE form is not required by law.

ISSUE:

The purchase contract provides that the buyer has ten days after the physical inspection to notify the seller in writing of any defects. The buyer told the listing broker of the defects, but could not locate the seller. Does notice to the listing broker constitute notice to the seller?

ANSWER:

Yes. Under Arizona law, notice to an agent constitutes notice to a principle. In Re Milliman’s Estate, 101 Ariz. 54, 415 P.2d 877 (1966). On these facts, since the listing broker was notified in writing of the defects, this notice is imputed to the seller. 

Arizona REALTOR® Digest April 1999; Reviewed May 2004

Quick Quiz

Fill in the Blank:
A real agent should discuss agency issues with their client at the beginning of the representation and confirm his/her representation in writing before any contracts are .