Michigan Law -- As of Jan 1, 1994 Michigan law requires real estate licensees who are acting as agents of sellers or buyers of real property to advise potential sellers or buyers with whom they work of the nature of their agency relationship.
A Michigan broker or salesperson may function in any of the following capacities:
- Represent the seller as an authorized seller's agent or subagent.
- Represent the buyer as an authorized buyer's agent or subagent.
- Represent both seller and buyer as a disclosed dual agent authorized by both the seller and buyer.
- Represent neither the seller or buyer as an agent but provide services authorized by the seller or buyer to complete a transaction as a "transaction coordinator."
A firm may also practice Designated Agency:
Designated Agency is the homebuyers' & sellers' answer to a confusing question: Who does my Real Estate licensee really work for?
Scenario - You’re looking for a new home and carefully select a Real Estate licensee based on referrals and credentials. A professional and trusting relationship develops as your Real Estate licensee guides you through a confusing maze of home buying decisions, assists with financial questions and shows you home after home. A lot of confidential information is disclosed by you to your agent.
Finally, just the home you’ve been looking for is now on the market and, as luck would have it, the same real estate firm your Real Estate licensee works for has the listing. You’re thrilled since you are already comfortable with the company and know your Real Estate licensee is working hard for you. But wait, if that firm is the agent for the seller, does that mean your Real Estate licensee is also an agent for the seller? This development creates a confusing and awkward situation for the buyers and Real Estate licensee.
By practicing the new designated agency model all parties agree up front who is representing whom. Under this plan, the buyer or seller signs a buyer agency agreement at their first meeting. This means the Real Estate licensee working with the buyers agrees to work in their best interest while the Real Estate licensee listing the property is working for the seller. The agents agree not to share any confidential information about their clients and customers, and for all practical purposes, could be working for different firms rather than in the same office. This removes the confusions and questions about agency even before they can crop up.
Michigan firms are already using designated agency successfully. Proposed legislation would simply provide a standard for Real Estate licensees throughout the state specifying how this relationship may be created including a required disclosure and a written contract. Many states already have designated agency statutes in place.
Designated Agency is a written listing agreement or buyer’s broker agreement between a broker and a client may designate an individual salesperson or associate broker working through that broker as the client’s designated agent. The client benefits from clarity in the agent/client relationship and stability in service. Different agents in the same firm will be able to represent buyer and seller in the same transaction without being deemed a dual agency relationship.
With Designated Agency both buyers and sellers are assured that their agent is working for them.
With Designated Agency, supervising brokers and the real estate firm act as dual agents when the firm represents both buyer and seller just as they do now. Please know that there are two distinct advantages of this model. 1) The relationship between agent and client is clear, consistent and consumer friendly. 2) The position of the broker/owner/manager remains unchanged.
Even a two-person firm may benefit from Designated Agency provided the firm is incorporated and both licensees are brokers. Designated Agency will have no effect on one-person offices.
Under the proposed model a firm would have to specifically choose to adopt designated agency through the Listing Agreement, Buyer Agency Contracts and the Agency Disclosure Form. If the firm chooses designated agency, they must always practice designated agency. The client MUST be notified in writing of the broker's choice to practice Designated Agency.
Please Note: Agency law in Michigan is essentially unchanged from principles established over hundreds of years through common law; that is, the accumulation of hundreds of court rulings and interpretations. In its simplest form agency law determines the rights and responsibilities between parties when one party conducts business on behalf of another. Fiduciary duties such as loyalty, obedience, confidentiality, full disclosure and reasonable care are similar for many forms of industry. We cannot simply abolish agency.
The Designated Agency Law came into effect because the current agency model, while generally working, continued to cause confusion for agents and the public particularly in dual agency situations. Individual agents cannot negotiate on behalf of their clients, when the firm represents both parties in the transaction.
Seller's Agent || Top
A seller's agent under a listing agreement with the seller acts solely on behalf of the seller. A seller can authorize a seller's agent to work with subagents, buyer's agents and/or transaction coordinators. A subagent of the seller is one who has agreed to work with the listing agent, and who, like the listing agent, acts solely on behalf of the seller. Seller's agents and their subagents will disclose to the seller known information about the buyer which may be used to the benefit of the seller.
The duties that a seller's agent and subagent owes to the seller include:
- Promoting the best interest of the seller.
- Fully disclosing to the seller all facts that might affect or influence the seller's decision to accept an offer to purchase.
- Keeping confidential the seller's motivations for selling.
- Presenting all offers to the seller.
- Disclosing the identities of all buyers and all information about the willingness of those buyers to complete the sale or to offer a higher price.
Buyer's Agent || Top
A buyer's agent, under a buyer's agency agreement with the buyer, acts solely on behalf of the buyer. A subagent of the buyer is one who has agreed to work with the buyer's agent and who, like the buyer's agent, acts solely on behalf of the buyer. Buyer's agents and their subagents will disclose to the buyer known information about the seller which may be used to benefit the buyer.
The duties a buyer's agent and subagent owe to the buyer include:
- Promoting the best interest of the buyers.
- Fully disclosing to the buyer all facts that might affect or influence the buyer's decision to tender an offer to purchase.
- Keeping confidential the buyer's motivations for buying.
- Presenting all offers on behalf of the buyer.
- Disclosing to the buyer all information about the willingness of the seller to complete the sale or to accept a lower price.
Dual Agent || Top
A real estate licensee can be the agent of both the seller and the buyer in a transaction but only with the knowledge and informed consent, in writing, of both the seller and the buyer.
In such a dual agency situation the licensee will not be able to disclose all known information to either the seller or the buyer. As a dual agent, the licensee will not be able to provide the full range of fiduciary duties to the seller or the buyer.
The obligations of a dual agent are subject to any specific provisions set forth in any agreement between the dual agent, the seller and the buyer.
Transaction Coordinator || Top
A transaction coordinator is a licensee who is not acting as an agent of either the seller or the buyer, yet is providing services to complete a real estate transaction.
The transaction coordinator is not an agent for either party and therefore owes no fiduciary duty to either party. The transactional coordinator is not the advocate of either party and therefore has no obligation to negotiate for either party. The responsibilities of the transaction coordinator typically include:
- Providing access to and the showing of the property.
- Providing access to market information.
- Providing assistance in the preparation of a buy and sell agreement which reflects the terms of the parties' agreement.
- Presenting a buy and sell agreement and any subsequent counter-offers.
- Assisting all parties in undertaking all steps necessary to carry out the agreement, such as the execution of documents, the obtaining of financing, the obtaining of inspections, etc.
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