Brokerage Relationships

Posted by PRO Tue, 16 Jan 2007 19:59:00 GMT

In 1997, Florida passed the Brokerage Relationship Act.  The Act set up three brokerage relationship types which could operate in Florida in interaction with consumers.  The types are:

 

Transaction Broker Relationship

 

A transaction broker (with limited representation) is a non-agency relationship and as such allows the licensee to represent both parties in the transaction in a limited capacity.  There are seven duties associated with Transaction Brokerage that are owed to the customer.  (They are not considered Fiduciary duties.)  The duties are:

  1. Dealing honestly and fairly;
  2. Accounting for all funds;
  3. Using skill, care, and diligence in the transaction;
  4. Disclosing all know facts that materially affect the value of residential real property and are not readily observable to the buyer;
  5. Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;
  6. Limited confidentiality, unless waived in writing by a party.  This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and
  7. Any additional duties that are entered into by this or by separate written agreement.

Single Agent Relationship

 

A single agent is an agency relationship which allows the licensee to represent one party, either the seller or the buyer, but not both in the same transaction.  There are nine duties associated with Single Agency and these duties are called Fiduciary duties as the licensee pledges complete allegiance to the client.  The duties are:

  1. Dealing honestly and fairly;
  2. Loyalty;
  3. Confidentiality;
  4. Obedience;
  5. Full disclosure;
  6. Accounting for all funds;
  7. Skill, care, and diligence in the transaction;
  8. Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing; and
  9. Disclosing all known facts that materially affect the value of residential real property and are not readily observable.

No Brokerage Relationship

 

A no brokerage is a relationship where the licensee does not represent the customer but will perform the administrative function and owes the consumer three duties.  (Like the transaction broker these are not Fiduciary duties.)  The duties are:

  1. Dealing honestly and fairly;
  2. Disclosing all known facts that materially affect the value of residential real property which are not readily observable to the buyer.
  3. Accounting for all funds entrusted to the licensee.

Dual Agency

 

Dual Agency in any form is strictly prohibited in the state of Florida.  A licensee cannot represent both parties in the same transaction in a single agent role.

 

Disclosure

 

The three ways of operating apply to all types of real estate transactions; however, disclosure of how a broker is working is only required in residential transactions.  A residential transaction is defined as the sale of improved residential property of four or fewer units, the sale of unimproved residential property of four or fewer units, or the sale of agricultural property of ten or fewer acres.  The disclosure form must be given either just prior to the signing of an employment contract or the showing of residential property whichever comes first.  If the disclosure is not given, by Florida law, it is presumed that the licensee is acting as a Transaction Broker.  If the consumer wants to be represented in an agency relationship or wishes not to be represented at all the fact must be established in writing.

 

Transition to Transaction Broker

 

Of all the disclosure forms required in residential transactions, the Consent to Transition to Transaction Broker form is the only one that absolutely requires a signature.  The other disclosure forms, if not signed, can be annotated with a note that the individual received the disclosure and declined to sign on a particular date.

 

Termination of a Brokerage Relationship

 

A brokerage relationship between a principal, or a customer, and a broker may be terminated for any of the following reasons:

 

  • Expiration of employment agreement
  • Mutual Agreement
  • Fulfillment of the employment contract
  • Broker renounces with notice
  • Principal withdraws (could be withdrawal fee and direct expenses to that point)
  • Death of the Principal or the Broker (as long as contract is binding on heirs)
  • Destruction of Property or Condemnation by Eminent Domain
  • Bankruptcy of Principal or customer

Disclosure Forms

 

Sample brokerage relationship disclosure forms, can be found at the Realtor Resources menu item Forms Basic in the file folder, Listing Brokerage Disclosures and Commission Forms at the Florida Association of Realtors (FAR) website, www.floridarealtors.org.  Also, above the form file folders is a very helpful Link, “…description of FAR Forms.”  However, a broker should have any written agreements reviewed by legal counsel to ensure their appropriateness for their intended usage.