Brokerage Vs Agency Agreement

When it comes to the world of business, agreements are essential to ensure that both parties involved are on the same page. In the real estate industry, two common agreements are brokerage and agency agreements. While the two may seem similar, they have distinct differences that you need to know about before entering into either one.

Brokerage Agreement

A brokerage agreement is a written contract between a real estate agent or brokerage and a buyer or seller, outlining the terms of their working relationship. In this agreement, the agent or brokerage will act as a facilitator between the buyer or seller and any other real estate agents involved in the transaction. The primary purpose of a brokerage agreement is to define the scope of the agent`s responsibilities and to set the commission rate.

A brokerage agreement does not establish a fiduciary relationship between the agent and the buyer or seller. This means that the agent is not legally obligated to act in the best interest of the client. Instead, they are only required to act ethically and honestly.

Agency Agreement

On the other hand, an agency agreement establishes a fiduciary relationship between the real estate agent and their client. This means that the agent is legally obligated to act in the best interest of their client and protect their interests at all times. In an agency agreement, the agent is responsible for negotiating on behalf of their client and providing advice and guidance throughout the entire transaction.

There are three types of agency agreements: buyer agency agreement, seller agency agreement, and dual agency agreement. In a buyer agency agreement, the agent represents the buyer and is responsible for finding suitable properties, negotiating the purchase price, and handling all aspects of the transaction. In a seller agency agreement, the agent represents the seller and is responsible for marketing the property and negotiating the sale price. In a dual agency agreement, the agent represents both the buyer and seller in the same transaction.

Final Thoughts

In conclusion, while both brokerage and agency agreements are commonly used in real estate transactions, it is essential to understand the differences between the two. A brokerage agreement is a non-fiduciary relationship, while an agency agreement establishes a fiduciary relationship between the agent and the client. It is important to carefully consider which type of agreement is best for your situation before entering into any contract.