Line 1: Always your Broker Firm name.
Line 2: Agent’s Name
Agency is the FIRST document that should be presented to the client.
Why? BECAUSE A CLIENT HAS THE RIGHT TO KNOW WHO IS REPRESENTING THEM AND ACTING IN THEIR BEST INTERESTS. ALSO, THE DUTIES OWED TO EACH PARTY MUST BE ESTABLISHED UP FRONT.
What are the types of Agency?
- BUYER BROKER (BUYER’S AGENT)
- SELLER’S BROKER (LISTING AGENT)
- LIMITED REPRESENTATION (DUAL AGENT)
Buyer’s Broker (Lines 6-11)
Agent represents the Buyer exclusively regardless of the fact that compensation may be paid to the broker by the Seller.
Agent owes the Buyer fiduciary duties. Including:
Agent owes the Seller the following duties:
Buyer is aware that Broker may also be representing other buyers who may be interested in similar or same properties as the Buyer.
Seller’s Broker (Lines 12-14)
Agent owes fiduciary duties to the Seller. Seller is aware that Broker may also be representing other Sellers who are interested in selling properties that are similar to the Seller’s property.
Representing both the Buyer and Seller is commonly known as:
- CONSENT to LIMITED REPRESENTATION
- LIMITED DUAL
- DUAL AGENCY
Dual Agency may only be entered into with the INFORMED CONSENT of both the Buyer and Seller. The READE form does not sufficiently meet the requirements necessary to establish informed consent and therefore a separate CONSENT to LIMITED REPRESENTATION must be completed once dual agency becomes a legitimate possibility.
Without WRITTEN AUTHORIZATION, the Broker may not disclose to the Seller that the Buyer is willing to pay more than offered or that the Seller is willing to accept less than asked in the MLS.
There are inherent conflicts in fiduciary duties in dual agency transactions. What are some examples of these conflicts?
Loyalty Example: Behaving less aggressively in requesting repairs
Obedience Example: Seller doesn’t want Buyer to know they will make the roof repair unless the Buyer asks for it.
Confidentiality Example: Doesn’t want the Buyer to know the Seller MUST sell.
Disclosure Example: Buyer doesn’t want Seller to know they were declined by the first lender they approached for approval.
Regardless of representation Brokers are required to exercise reasonable SKILL and CARE in the performance of the Broker’s duties and shall be truthful and honest to both the Buyer and Seller and shall DISCLOSE all know facts which MATERIALLY and ADVERSELY affect the consideration to be paid by any party. A.R.S §32-2156 specifically exempts certain disclosures. What are they?
- NATURAL DEATH
- OWNED OR OCCUPIED BE AN INDIVIDUAL EXPOSED TO AIDS
- LOCATED IN THE VICINITY OF A SEX OFFENDER
The general rule is that purchase offers are not confidential and may be disclosed to third parties unless otherwise agreed in writing. Therefore the Buyer is advised that there may be disclosure, and confidentiality should not be expected.
It is important to note that this language shares the responsibility of the transaction with the client and the Broker however; it does not entirely shift the burden away from the Broker.
When representing the Buyer, the appropriate boxes to check are lines 34 and 36. If line 36 is not checked, the real estate agent is PROHIBITED from showing any same broker listings. This section also sets forth the requirement that if agency shifts from single agency to dual agency that the Consent to Limited Representation must be executed.
When representing the Seller, the appropriate boxes to check are lines 41 and 42. If line 42 is not checked, the Broker may not allow any of its real estate agents to show the property to prospective buyers. As referenced in the section above, this section also sets forth the requirement that if agency shifts from single agency to dual agency that the Consent to Limited Representation must be executed.
Line 45 confirms the role of the party signing the agency form as either the buyer or the seller. If clients are married, as a general rule, BOTH husband and wife must sign the Real Estate Agency Disclosure and Election Form. While property can be purchased as sole and separate property, the majority of the time the property falls under community property, even if only one name is on the note and/or the deed. Therefore, to avoid pitfalls later in the transaction, it is best to obtain signatures from both the husband and wife at the onset of the transaction.
If the property is being sold by an LLC, only the managing member is required to sign the READE. The title company will require copies of the articles of organization to ensure that the appropriate person is signing on behalf of the entity.