Agency Laws & Regulations

Since Massachusetts Real Estate Agency has changed significantly, we will be keeping the information you need for legal implementation of agency regulations at your fingertips. In addition to the most recent news and information on Agency in Massachusetts, you can also find links to the Massachusetts Agency and Non-Agency disclosure form  and information on the types of agency relationships now defined by law.

Mandatory Licensee-Consumer Disclosure | Consumer Guide To Representation

Types of Representation in Massachusetts

SELLER’S AGENT:  Massachusetts law requires that each real estate broker or salesperson who is an agent of a buyer or seller act in the client’s best interest.

Client Fiduciary Duties

  1. undivided loyalty
  2. reasonable care
  3. disclosure
  4. obedience to lawful instruction
  5. confidentiality and
  6. accounting for funds

Note: Regardless of the agency relationship, the licensee must disclose to a prospective buyer all known material defects in real estate.

  • A seller can engage the services of a real estate agent to sell his property (called the listing agent) and the real estate agent is then the agent for the seller who becomes the agent’s client. This means that the real estate agent represents the seller.
  • The agent owes the seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate.
  • The agent must put the seller’s interests first and negotiate for the best price and terms for their client, the seller.
  • The seller may authorize sub-agents to represent him/her in marketing its property to buyers, however the seller should be aware that wrongful action by the real estate agent or sub-agents may subject the seller to legal liability for those wrongful actions.

Additional Duties of a seller’s agent

  • To obtain written consent from the seller prior to offering subagency. Seller consent must include a disclosure that the seller has been advised of the risk of vicarious liability.
  • To seek an offer to purchase at a price and with terms acceptable to the seller. Unless the seller directs otherwise, the listing agent is not usually obligated to seek additional offers once the property is subject to a contract of sale
  • To present all offers forthwith (i.e. in a timely manner);
  • To obtain written consent before acting as a dual agent.

BUYER’S AGENT: Massachusetts law requires that each real estate broker or salesperson who is an agent of a buyer or seller act in the client’s best interest.

Client Fiduciary Duties

  1. undivided loyalty
  2. reasonable care
  3. disclosure
  4. obedience to lawful instruction
  5. confidentiality and
  6. accounting for funds

Note: Regardless of the agency relationship, the licensee must disclose to a prospective buyer all known material defects in real estate.

  • A buyer can engage the services of a real estate agent to purchase property and the real estate agent is then the agent for the buyer who becomes the agent’s client. This means that the real estate agent represents the buyer.
  • The agent owes the buyer undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate.
  • The agent must put the buyer’s interests first and negotiate for the best price and terms for their client, the buyer.
  • The buyer may also authorize sub-agents to represent him/her in purchasing property, however the buyer should be aware that wrongful action by the real estate agent or sub-agents may subject the buyer to legal liability for those wrongful actions.

(NON-AGENT) FACILITATOR

Fiduciary Duties

  1. disclosure
  2. obedience to lawful instruction
  3. accounting for funds
  • When a real estate agent works as a facilitator that agent assists the seller and buyer in reaching an agreement but does not represent either the seller or buyer in the transaction.
  • The facilitator and the broker with whom the facilitator is affiliated owe the seller and buyer a duty to present each property honestly and accurately by disclosing known material defects about the property and owe a duty to account for funds.
  • Unless otherwise agreed, the facilitator has no duty to keep information received from a seller or buyer confidential. The role of facilitator applies only to the seller and buyer in the particular property transaction involving the seller and buyer.
  • Should the seller and buyer expressly agree a facilitator relationship can be changed to become an exclusive agency relationship with either the seller or the buyer.

When an exclusive Seller and Buyer Agent finds a conflict in their loyalty, they must both inform and obtain consent to operate in a limited way.  A conflict occurs when a buyer client is interested in a home where their agent’s firm is also representing the seller.  Each office is structured to operate as either a Dual Agency or a Designated Agency in those circumstances.  Below explains both type of relationship in brief.  Every consumer should have a conversation with their agent at the onset of their relationship to determine exactly how they will serve in a conflicted capacity, should it arise.

DUAL AGENT

  • A real estate agent may act as a dual agent representing both the seller and buyer in a transaction but only with the express and informed consent of both the seller and buyer.
  • Written consent to dual agency must be obtained by the real estate agent prior to the execution of an offer to purchase a specific property.
  • A dual agent shall be neutral with regard to any conflicting interest of the seller and buyer.
  • Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent.
  • A dual agent does, however, still owe a duty of confidentiality of material information and accounting for funds.
  • The written consent for dual agency must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople (Board).
  • Buyer & Seller Notice of Dual Agency
  • Flyer – Dual Agency

OR

DESIGNATED SELLER’S AND BUYER’S AGENT

  • A real estate agent can be designated by another real estate agent (the appointing or designating agent) to represent either the buyer or seller, provided the buyer or seller expressly agrees to such designation.
  • The real estate agent once so designated is then the agent for either the buyer or seller who becomes their client.
  • The designated agent owes the buyer or seller undivided loyalty, reasonable care, disclosure, obedience to lawful instruction, confidentiality and accountability, provided, however, that the agent must disclose known material defects in the real estate.
  • The agent must put their client’s interests first and negotiate for the best price and terms for their client. In situations where the appointing agent designates another agent to represent the seller and an agent to represent the buyer then the appointing agent becomes a dual agent. Consequently a dual agent cannot satisfy fully the duties of loyalty, full disclosure, obedience to lawful instructions which is required of an exclusive seller or buyer agent.
  • The dual agent does not represent either the buyer or the seller solely only your designated agent represents your interests.
  • The written consent for designated agency must contain the information provided for in the regulations of the Massachusetts Board of Registration of Real Estate Brokers and Salespeople (Board).  Buyer & Seller Notice of Designated Agency

Q1. I represent a buyer who is interested in seeing a property. Another buyer whom I represent also wants to see the same property. Is it a violation of my agency duties to show it to both of them?

A. No. To make sure each buyer understands your right to do so, you may want to include language in your buyer agency agreement disclosing that you could potentially represent other buyers interested in the same property. Such a provision should explain that you will keep the confidential information of each client in confidence and not disclose it to the other party.

Q2. What is the best way for me to obtain permission from the seller to offer buyer agency, subagency, and facilitation compensation?

A. The easiest way is to include a provision in your listing contract in which the seller gives consent. The seller’s consent to subagency must specifically include a disclosure regarding the risk of vicarious liability for acts and omissions of the subagent.

Q3. Should I include a provision in my written buyer agency agreement to explain that I may receive compensation from the listing broker or seller?

A. Yes. If, however you will be requesting that the buyer pay any part of your fee, the buyer agency agreement should also spell that out.

Q4. If the listing broker or seller is offering a bonus to the selling agent, am I required to tell the buyer this?

A. Yes, you should make your client aware of anything of value that you receive from the other party to the transaction. It is recommended that you document that disclosure in your files. The license laws require that that all compensation be paid to the broker of record, not directly to a licensee who is associated with that broker.

Q5. I know I must present all offers forthwith, but what is forthwith?

A. Forthwith is generally defined as soon as possible under the circumstances.

Q6. Do I have an obligation to present verbal offers to my client?

A: Generally a contract to purchase real estate in Massachusetts must be in writing. Technically a verbal offer cannot be accepted to form an enforceable contract. There is nothing that precludes you from presenting a verbal offer, but a written agreement signed by each party is generally required by the Statute of Frauds.

Q7. When an agent finds out that a buyer has a signed Exclusive Buyer Agency Agreement with an agent with another office, what is the protocol?

A. The Code of Ethics provides a couple Standards of Practice that REALTORS® must follow in these circumstances. Standard of Practice 16-9 requires that the agent must use “reasonable efforts” to determine whether the buyer is subject to an existing, exclusive agreement with another agent. Whenever a buyer enters into an agency agreement, the agent should ask that buyer whether they have an existing exclusive agreement with another agent. Standard of Practice 16-13 requires that, before providing a substantive service such as writing a purchase offer, an agent ask a prospect whether they have an exclusive agreement with another agent.

Q8. If I show a home that I previously had listed to my current buyer clients, am I a dual agent for that property?

A. No. When the listing expires or is withdrawn, most of your agency obligations end. The two agency obligations that continue after termination of an agency relationship are the duties of accounting and confidentiality. Although you are not a dual agent, you do have the continuing obligation to keep information of the seller confidential. It is recommended to tell your current buyer client that you previously had the property listed and that you have a duty of confidentiality to the seller.

Brought to you by the Massachusetts Association of REALTORS®.

This feature is a service to members of the Massachusetts Association of REALTORS® and is intended for educational use only. Opinion or suggestions in this publication do not necessarily represent the official policies or positions of the Massachusetts Association of REALTORS®. The Massachusetts Association of REALTORS® does not accept responsibility for any misinterpretation or misapplication by the reader of the information contained in this article. The publishing of this material does not constitute the practice of law nor does it attempt to provide legal advice concerning any specific factual situation. FOR ADVICE ON SPECIFIC LEGAL PROBLEMS CONSULT LEGAL COUNSEL.


Other Agency News:

New 2017 Mandatory Agency Disclosure Form

The Board of Registration for Real Estate Brokers and Salespersons has issued a NEW Mandatory Agency Disclosure Form. The form’s official title is the Massachusetts Mandatory Real Estate Licensee – Consumer Relationship Disclosure. The form is designed to provide the same kinds of disclosures to consumers while clarifying and simplifying some aspects of the old form.

Broker’s Lien Enforced by Buyer’s Rep

From the Desk of NAR Legal, an interesting court decision in CT’s appellate court upheld enforcement of an Exclusive Right to Buy Contract.  Here’s the story:  A Connecticut appellate court has considered whether a buyer’s representative could collect a commission from a client when the client violated the exclusive representation agreement and bought a property

Notes from the Desk of…

Shhhh…Did you Hear that Bell?

Here’s the scenario: You represented a seller as their agent through the terms of an Exclusive Right to Sell contract. The contract expired and the seller opted to list with another brokerage. You’re now working with a buyer client in a buyer agency relationship and they want to view this property. During the course of your relationship with the seller, you were told that they inherited the house so any sale would be ‘all gravy’ to them. Yes, they’d like to get fair market value for the listing but they’d also take a low-ball offer to ‘unload’ the property fast.

Can you tell your buyer client this fact?  Well…as we’ve heard agency explained before…you can’t unring that bell, so no.  Here’s a question that appeared on a quiz the office put out several years ago:

Q:  My agency relationships end….

Answers:

A.  When the deal closes

B.  If the buyer or seller ‘fires’ me [although this never happens]

C.  When the listing agreement or buyer agreement expires

D.  Agency relationships don’t end.

E.  A and C

F.  A, B and C

And the answer is F

Agency relationships end when you are no longer authorized to represent your client. This occurs when the transaction closes, if the client terminates their relationship with you or when your agreement for representation expires.

Representation should not be confused with confidentiality. Your duty to maintain confidential information does not end, expire or terminate but your representation of a party does. Think of it as doing a job for Don Corleone, even when you’re out…

the-don

For reference, the Code of Ethics – Article 1, Standard of Practice 1-9 states:

The obligation of Realtors® to preserve confidential information (as defined by state law) provided by their clients in the course of any agency relationship or non-agency relationship recognized by law continues after termination of agency relationships or any non-agency relationships recognized by law.

Realtors® shall not knowingly, during or following the termination of professional relationships with their clients:

  1. reveal confidential information of clients; or
  2. use confidential information of clients to the disadvantage of clients; or
  3. use confidential information of clients for the Realtor®’s advantage or the advantage of third parties unless:
    1. clients consent after full disclosure; or
    2. Realtors® are required by court order; or
    3. it is the intention of a client to commit a crime and the information is necessary to prevent the crime; or
    4. it is necessary to defend a Realtor® or the Realtor®’s employees or associates against an accusation of wrongful conduct.

Information concerning latent material defects is not considered confidential information under this Code of Ethics. (Adopted 1/93, Amended 1/01)

 


Under Agreement, Pending…What’s with that Listing?

There have been queries, there have been frustrations and there have been complaints and fellow REALTORS® working with their buyers are starting to feel foolish. Those active properties that they’ve sent to their buyers are really pending ‘and have been for a while’. So, let’s go over the rules about under agreement and pending:

Within 2-business days of a signed purchase and sale contract, the Multiple Listing Service must be updated to reflect a change in the property status. Leaving the property unchanged as active is not an option. You do, however; have two options, and which you choose is based on what the seller is willing to do.

Do they want to continue displaying their listing on the web and do they wish to show the property, and take back up offers? YES? Then, active with a contingency is the status for you. This allows listings to be marketed on websites such as realtor.com, Trulia, Zillow and IDX sites and apprises fellow REALTORS® that you’ll set up showings and take back up offers. If you are  not setting up showings when you receive inquiries, then you need to move along to pending. Pending is used when the purchase and sale has been firmed up and closing is imminent or when the seller will no longer show the property. Pending removes the property from all web advertising.

Please remember, the Code of Ethics says that you shall work in the best interest of the seller. However, the seller cannot direct you to violate the rules and regulations of the MLS. Additionally, the Code of Ethics specifies under Article 12 that REALTORS®shall be honest and truthful in their real estate communications and shall present a true picture in their advertising, marketing and other representations…

The MLS Board of Directors reviewed and confirmed the current MLS Rules and Regulations and Submission Policies relative to status changes, including but not limited to:

MLS Rules & Regulations – Section 1 Listing Submission: Section 1.6 Contingencies Applicable To Listings:   Any contingency or conditions of any term in a listing shall be recorded on the Property Data form, to be noticed to the Participants.

 MLS Submission Policies – Modifications to Listing Submission:  All listing modifications must be submitted to the MLS Service within two (2) business days.

The Board revised the fine structure, to the brokerage, associated with a failure to report a status change to mirror a failure to submit the listing into the MLS:

  • First Offense, Warning
  • Second Offense, $50 fine
  • Third Offense, $200 fine
  • Fourth Offense, $400 fine
  • Beyond Fourth Offense, filing with the MLS Board of Directors for administrative review

We’re interested in helping you through the process of adding / removing contingencies or determining what your next, correct step is so please don’t hesitate to contact the staff for assistance.

 

 

 

NAR Legal Pulse 2Q 2014 Highlights

  In the video featured here, Finley Maxon, NAR Senior Counsel, discusses the Second Quarter 2014 Legal Pulse Newsletter. This video covers highlights from the newsletter, including cases and statutes related to Agency, RESPA, Property Condition Disclosure, and Ethics issues. “The Legal Pulse is a quarterly newsletter by NAR that analyzes trends in the previous quarter that

Berkshire REALTORS on Facebook!

  Stay ahead of the crowd! Follow us on Facebook to receive the most current Real Estate information, event reminders, issues that affect YOU, and so much more!   Like our Facebook page: https://www.facebook.com/berkshirerealtors And, join our Facebook group (private): https://www.facebook.com/groups/BerkshireRealtors/

HUD Delays Implementation of Dual Agency Ban

In a Mortgagee Letter issued on September 27, 2013, the Department of Housing and Urban Development delayed implementation of a ban on dual agency in FHA short sales. Mortgagee Letter 2013-34 states that implementation of the provision in Mortgagee Letter 2013-23 has been delayed “until further notice.” Mortgagee Letter was designed to reduce the incidence
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