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:

I’m a Buyer’s Agent…Or Am I?

A few years ago, we included a post in the Friday Recap about becoming a buyer’s agent and the steps involved.  It’s more than showing up at a listing appointment and having a Mandatory Consumer-Licensee form signed.  But, do you know all that it entails?  Please see below the full details of that previous post, and take special heed of beginning a relationship electronically!:

Mandatory Steps in Establishing a Client Relationship with a Buyer

  • Mutual Agreement between the broker and buyer
    Numero uno, if you want to work for a buyer, the buyer has to want to work with you too.  They should, having met you and heard what outstanding services you will provide, elect to work with your firm and have you represent their real estate interests.  For a day or for a year. On a specific property or in all of their real estate needs.  This can be agreed upon verbally or in writing, but you cannot represent someone who doesn’t hire you. And you don’t usually get paid either.
  • Explanation of Agency Options in Massachusetts
    Explaining the relationship between the parties is a great icebreaker.  The licensee-consumer disclosure form is there to help you explain the roles of the agents in a transaction. You should clarify the services the buyer can expect to receive (or not receive) from the various types of agents, and what agents will/will not maintain their confidential information.  And you should disclose the type of service that you are offering to provide them. Which leads to…
  • Obtain Signed Consumer-Licensee Disclosure
    Pièce de ré·sis·tance… the MANDATORY form needs to be signed at the first personal meeting to discuss a specific property.  And did you know that the Code of Ethics takes it one further and obligates you to make sure the nature and terms of a contractual relationship are disclosed prior to being established, if handled electronically? Creating a relationship via email or text from an online lead? Yes, this means you have to explain and agree to the nature of your relationship before beginning work on their behalf.
  • Advise of company policies of compensation
    The Code of Ethics mandates that when entering into buyer/tenant agreements, Realtors® must advise potential clients of your company policies regarding cooperation and compensation, how fees are paid, who is responsible to pay fees, etc. Kind of important for them to know going in, right?
  • Use reasonable efforts to determine if buyer is working with another agent
    The Code also advises that it is your affirmative responsibility to “use reasonable efforts” to make sure the buyer isn’t already working with another agent. So that’s a great question to ask them!

Then, after you’ve done your job, established a fiduciary relationship with a buyer client, you can make appointments on their behalf – but PLEASE making sure to IDENTIFY YOURSELF as a buyer’s agent with your firm when first speaking to a listing agent.

Extra HELPFUL steps, not required

  • Complete an Identification Form to secure in your office for safety purposes.
    Follow your office policy if you’re required to complete a client identification form for every buyer, at a neutral location (office, coffee shop etc…).  It’s imperative that you meet all prospects in a public location and obtain basic information to protect yourself.  Also, it gives you a chance to meet someone face-to-face to talk about the items listed above. Experts from Universal Buyers Agents Sunshine Coast always adhere to it. If you complete an Identification Form and you are not at your office, email to it your office.  This form should contain a copy (take a photo) of the buyer’s drivers license, as well as their car and contact details.  If this policy exists and is applied for all new clients, it protects all agents in your office (1) from those who wish to remain anonymous / untraceable to do harm (2) allows police to follow up if there is a theft or issues arise from a showing (3) ensures there is no discriminatory behavior when applied uniformly.
  • Consult with buyer on qualifications, get pre-approval from a local lender
    Don’t waste your time, the co-broker’s time, or seller’s time and appear unprofessional without a basic discussion about the buyer’s financial qualifications and help in obtaining a pre-qualification letter.  This is a simple step that not only protects your time, but also promotes the safety of those around you.
  • Review how Buyer Clients should handle inquiries, appointment setting, open house attendance.
    It’s a confusing process, and the internet has made it more so for buyers to navigate!  Explain how you expect buyers to operate, outline your role in the search process, and it will go a long way to helping improve the system. (example: “If you go to an open house, here are a bunch of my business cards. Please make sure to give one to the agent showing the home…” OR, “if you want more information about a home, don’t click a button on Zillow to get more information but instead go to the MLS Portal I created for you”, etc…) It’s an easy way to establish ‘good practices’ and show yourself off as the professional you are!
  • Obtain a dual/designated agency consent form if your office offers both seller/buyer agency
    If your office offers more than one form of agency, it’s good to have a discussion up front on how your office handles conflicting fiduciary duties.  You can also get the buyer to agree, in advance, on how those situations will be handled. You don’t want to wait until the buyer falls in love with an in-house listing to discover they want a FULL buyer’s representative and won’t agree to dual agency.
  • Have a signed Buyer Agency agreement that outlines the above terms of agreement.
    We love a buyer’s agency agreement to firmly set the obligations and expectations in writing, but if nothing else, those items should be verbally discussed and agreed. Are you exclusive? How will you be paid? Are you representing them on this house or many? Do they want client services such as MLS portal access, email updates, etc…A buyer’s agency agreement is a beautiful thing – it establishes everything in writing so there are no questions later about how the relationship will go and aligns expectations.  Pretty please won’t you consider it?

Special thanks the MAR Legal Team for helping to make sure the information was accurate and clearly presented.  You rock!

Does Commercial real estate require an agency disclosure?

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

Do you have a NY RE License?

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

Disclosure of Representation

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

Agency Disclosure, when?

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

We Don’t Want to Be Dual Agents

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

New 2017 Mandatory Agency Disclosure Form

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

Broker’s Lien Enforced by Buyer’s Rep

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

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.