What is implied agency in real estate?

Implied agency word cloudWhat is implied agency? Unless you are a real estate licensee, it’s likely that you never heard that term before.  If you are in the realty business, you need to understand this concept.  What is it?

Implied agency and agency relationships

Before explaining implied agency, it’s best to start with what an agency relationship is or means. If you hire a real estate licensee or Realtor to assist  you in buying or selling a home, normally you and he or she create an agency relationship.

In California, a licensed real estate professional can be a buyer’s agent, a seller’s agent, or, if disclosed, a dual agent – representing both parties, both buyer and seller. The agent, by the way, references both the individual real estate licensee as well as the broker. If the same broker of record represents both the home buyer and seller, it’s a dual agency situation, even if there are different Realtors involved.

Here, we use a disclosure form (see link at bottom of article for the full text of it) which spells out the agency relationship and duties – it is statutory, meaning that the state dictates the words to be used on the form, whether it’s published by the California Association of Realtors, the Peninsula Real Estate Date Services or any other entity. An agency relationship means several things, but above all, it means that the real estate professional has fiduciary obligations to the seller or buyer being represented, including those of  of “utmost care, integrity, honesty, and loyalty” to that client.

Most of the time, when an agency relationship has been created, there’s a meeting of the minds between consumer and real estate professional that they will be working together.   The relationship is not accidental, but intended and explicit.

Sometimes, though, in the course of casual conversation, it may be possible to accidentally create an agency relationship.  If this happens, it is referred to as “implied agency“. How can this be?  This may occur when the real estate professional casually provides the type of guidance and advice that would be reserved for clients, but that consumer relies upon that advice. (more…)