Introducing Office Hours with Professor Bill is a multimedia learning experience covering fundamental real estate concepts.

In Episode 3, Professor Bill responds to questions about:

  • the Agency Law Disclosure and what it contains;
  • the agency rules for a buyer’s listing; and
  • the agency rules for a seller’s listing.
Read the transcript of Episode 3

What is the Agency Law Disclosure?

The Agency Law Disclosure was created by the California legislature to familiarize brokers, agents, and their principals with the uniform industry jargon.

The Agency Law Disclosure is also known as the Disclosure Regarding Real Estate Agency Relationships.

Both names refer to the same mandated disclosure, so you might hear both out in the field.

The real estate agency disclosure law addresses two separate sets of agency-related matters on real estate transactions:

  • first, an Agency Law Disclosure which sets out the “rules of agency” controlling the conduct of real estate licensees when dealing with members of the public.
  • second, an agency confirmation provision which declares the agency relationships undertaken by each of the brokers in documents signed by principals

used to negotiate the purchase of real estate or the lease of real estate for a term exceeding one year.

At its core, the Agency Law Disclosure form is a restatement of pre-existing agency codes and case law on agency relationships in all real estate transactions.

It also references the various agency roles licensees undertake on behalf of their principals and other parties in a real estate transaction.

The exact wording of its content is dictated by statute.

The Agency Law Disclosure needs to be presented to all parties when listing, selling, buying, or leasing for a term greater than one year:

  • property containing one-to-four residential units.
  • manufactured homes; or
  • commercial property.

Collectively, these are known as targeted transactions.

What does the Agency Law Disclosure contain?

The Agency Law Disclosure defines and explains the words and phrases commonly used in the real estate industry.

A buyer’s agent and seller’s agent are mentioned but not defined. Legally, an agent is a licensed real estate broker.

Thus, the word “agent,” when used in the disclosure, is not a reference to the broker’s agents.

Two sections on the face of the Agency Law Disclosure, entitled “seller’s agent” and “buyer’s agent,” address the duties owed to the seller and buyer in a real estate transaction by these otherwise undefined brokers.

The seller’s broker is correctly noted as being an agent for the seller and is also known within the trade as a listing broker or listing office.

The buyer’s broker is known as a buyer’s agent. However, peculiar to real estate brokerage, the buyer’s broker is also known as the selling agent.

Please note that this discussion is phrased primarily in the context of an agent representing a buyer or seller. However, the same rules of conduct apply for an agent of a tenant or landlord.

The Agency Law Disclosure does not mention, much less define, the broker’s role as an exclusive agent for either the buyer or seller.

Yet the separate agency confirmation provision included in all targeted transactions calls for the broker to make this distinction known to all the parties involved.

The mandated provision requires the broker to characterize their conduct with the parties as the agent of the “seller exclusively” or the “buyer exclusively.”

The agency confirmation provision declares the agency relationships each broker may have with the principals in the specific transaction underway.

With the agency confirmation included in written negotiations to purchase or lease and lease agreements, this relationship is consented to by all parties when they sign the documents.

The seller’s agent with an exclusive right-to-sell listing understands the prospective buyer may turn out to be one of their buyer clients.

This representation of opposing parties makes the broker a “non-exclusive” dual agent.

The Agency Law Disclosure states the generally accepted principles of law governing the conduct of brokers who are acting as agents solely for a seller or a buyer, or tenant or landlord.

The Agency Law Disclosure form contains the wording for the agency confirmation provision to be included in targeted transactions.

However, the confirmation provision in the Agency Law Disclosure form is not filled out since the agencies to be confirmed by each broker in the purchase agreement

or lease provisions are not known at the time of the initial employment when the Agency Law Disclosure is first presented to the principal.

What are the agency rules for a seller’s listing?

The seller’s signature acknowledges receipt of the Agency Law Disclosure at both:

  • the listing stage, as an addendum to the listing; and
  • on presentation of a buyer’s offer, as an addendum to the purchase agreement.

The Agency Law Disclosure is treated by the seller’s agent as a preliminary and compulsory listing event.

The Agency Law Disclosure is signed by the seller and handed back to the broker or their agent before settling down to finalize the listing to which it will be attached.

And remember: if the broker or agent fails to hand the seller the Agency Law Disclosure at the listing stage, the listing, and thus the agency, can be cancelled by the seller at any time.

Alternatively, the seller may cancel payment of the fee due the broker after the transaction is in escrow and the fee has been further agreed to.

Thus, all of your hard work will be for naught.

What are the agency rules for a buyer’s listing?

The buyer’s agent provides the Agency Law Disclosure to the buyer before they sign any writing that initiates negotiations contemplating a sale or lease transaction for a term greater than one year.

The law requires a buyer’s or tenant’s agent provide the disclosure form as soon as practicable prior to execution of an offer to purchase or lease.

Or in other words, as soon as possible.

As a matter of good practice, the disclosure form is provided and signed by the buyer/tenant when entering into a buyer’s listing agreement or an exclusive authorization to locate space.