An agent with limited authority to act on behalf of the principal is known as a

There are many careers that require people to act on behalf of another individual or government or corporate entity. There are even legal situations where a person might need to act as an agent for someone in their family. So, as you can imagine, there are many kinds of agents, and many ways in which that role can be satisfied. In this lesson, we’ll be discussing all of the types of agents, as well as the different permutations in which a real estate salesperson or broker may fulfill their specific role as an agent.

There are three major types of agent. While you’ll mostly only be one of these kinds of agents as a real estate salesperson, it’s a good idea to understand what each type of agent means, how their roles are defined, in order to most clearly understand your own role as an agent. So, let’s take a look at all three broad categories of types of agents.

First let’s look at the Universal Agent. The universal agent has full authority over any activity related to the principal. You may have encountered this when you’ve heard of the concept of “power of attorney.” In that case, one person has signed a piece of paper that has bestowed another person with the legal right to act fully in all of their affairs. A universal agent even has the right to make medical decisions for the principal! Of course it’s very rare for a person acting in the real estate industry to be granted these agency powers unless the real estate agent in question was the principal’s son or daughter for example. As a person in the real estate industry, this is where you may encounter this type of agency.

For example, an older person is moving to a retirement community and needs to sell their home. They might make one of their children their universal agent, bestowing them with all the legal rights needed to fully execute the sale of the house. The principal, the person moving to the retirement community, doesn’t need to be consulted in any decision regarding the sale of the house, they don’t need to sign a single piece of paper, and they don’t need to be present at the closing. The universal agent may do all of those things instead. In that specific example, it’s common for the real estate salesperson to never even meet the principal; instead they conduct all business with the universal agent, although ownership and all profits from a subsequent sale still are the full property of the principal.

Next, let’s take a look at the General Agent.

A general agent will be granted full authority over a single property. A general agent is much more common of a role to see amongst professionals within the real estate industry. One of the most common jobs for which a general agent is used is for that of a property manager. If a property owner, who has an investment property, doesn’t wish to have hands on role, or have the hassle of dealing with tenants at all, they may hire a property manager to take care of the property. By making them the general agent for the property in question, the general agent is then authorized to make many of the legal decisions pertaining to the property and the business that is conducted there. For instance, the property manager may be able to approve tenants for a vacant apartment without consulting with the principal, and they might be authorized to sign the lease, so even though the actual owner does not sign the lease, the property manager, acting as their general agent for the property, has entered the property owner into the legally binding contract of the lease, for which they are just as fully liable as if they had signed it themselves.

Finally, let’s talk about the Special Agent.

A real estate broker or salesperson operates as a special agent which is the type of agent that is most common for a real estate salesperson or broker to be. The special agent is one who is only granted limited authority to act on behalf of the principal. A special agent in real estate will only be authorized to act on behalf of the principal when conducting very specific business transactions and these will most likely all be clearly laid out in a listing contract signed by both the agent and the principal. For example, most listing contracts will authorize the special agent to conduct advertising to market the property. All of the business which a special agent may perform on behalf of their principal should be spelled out in the contract that begins the official business transaction between a real estate broker and their client.

While universal agency does not have much application within the real estate agency, in certain situations, the difference between general agency and special agency can be extremely important. With special agency, the agent is only authorized by the principal to act on their behalf in carrying out specific activities. Usually these are all defined carefully in a written contract. If the special agent conducts business that is not covered by the scope of that contract, even if it is to benefit the principal, they are no longer acting as the principal's agent and are solely liable for any damage or illegal activity that might be associated with their activity. However, when a general agent is carrying out illegal activity to benefit the principal, without the principal's knowledge, for example illegally evicting a non-paying tenant, then the principal, or property owner might still be held liable. There are instances where a court decides a special agency has transformed into a general agency relationship. This would mostly happen in cases of fraud. If a broker commits fraud on behalf of their principal as a special agent, they will be solely liable. However, a court may decide that the principal knew the fraud was being committed or should have known that they were benefitting from fraud, so that though the broker was acting outside of the special agent relationship, the relationship had changed into one of general agency, and the principal may also be held legally liable for the fraud.

Now, let’s take a look at the different iterations of agency which a real estate salesperson and broker can take.

The most common type of agency that allows a brokerage to sell a client’s property is called single agency. In this instance, a broker will sign a listing agreement with the client, for this example, let’s use a property owner. The listing agreement will clearly lay out all of the responsibilities that the broker takes on, as a special agent, in agreeing to carry out these property agreements. And as a single agent, the broker also agrees that they will only act as the agent for the client, they will not act as an agent for any other competing interest. Their first loyalty will always remain undivided with the property owner.

The next type of agency is known as sub-agency. The most common example of a sub-agent is a real estate salesperson or associate broker working under a sponsoring broker. The sub-agent will work on behalf of the agent who has charged them with the responsibilities, in order to serve the best interests of the principal. So, while the broker is the single agent who has made an agreement with the principal, the salesperson or associate broker will be tasked with also fulfilling that agreement in the same way that the broker would, to serve the best interests of the principal.

The next type of agency is dual agency. As opposed to single agency, where a broker agrees to represent a buyer or a seller as the principal, but never both at the same time in the same transaction, a dual agency sets up a situation where a person enters into an agency relationship between two principals who are on opposing sides of a single transaction. In real estate, this primarily occurs when a broker or salesperson simultaneously acts as the agent of both the seller of a property and the buyer of that same property.

As you can well imagine, this can get complicated very easily. Because the entire purpose of an agent is to always act in the best interests of their principal, if an agent has agreed to serve the best interest of more than one principal, then conflicts of interests might arise. And if the two principals are on opposing sides of a single transaction, conflicts of interest will undoubtedly arise. It is always in the seller’s interest to receive the highest price for a sale. It’s always in the buyer’s interest to pay the lowest price. How can a single agent work to achieve those two goals simultaneously? Obviously, that’s not possible, but there are situations where it’s possible to properly fulfill fiduciary responsibility to both parties, and there are situations where it’s not possible. Because of the complex nature of dual agency, there are many states that have made that agency role outright illegal. In those states, to be a dual agent is to fail at fiduciary responsibility.

In states where dual agency is legal, the dual agency must be disclosed in-writing. Disclosed dual agency is what allows a single agent to represent two competing principals while still fulfilling their fiduciary responsibility. Most often, the disclosure will require that both principals give written consent that the brokerage will represent the two principals, making sure that both principals are fully aware of the arrangement. In order for dual agency to be practiced responsibly, a broker will often assign two different sub-agents in the office to each principal. The sub-agent assigned to the seller will treat them as though they are the single principal, while the sub-agent assigned to the buyer will treat the buyer the same way. These sub-agents are known as designated agents.

Undisclosed dual agency, where a broker has an agency relationship with two competing principals, but does not inform them of this is always illegal in every state. And while it might seem simple enough to avoid, a dual agency relationship may be formed unintentionally. Remember from the previous lesson, while it’s always best to define an agency relationship through a written contract, it’s also possible for an agency relationship, that is legally admissible in court, to be formed simply based on implication. Yes, that’s right; it can take less than an oral agreement to form a binding agency relationship! This is why it’s so important to be careful with dual agency. If you were to imply to a customer, a potential buyer, that you were there to serve their best interests first, then you might create a relationship by implication. If your brokerage has already entered into a single agency agreement with the seller of the property, then this has the potential to accidentally create an undisclosed dual agency. In order to avoid this, it’s a good idea to make clear, in writing, that when you are showing a customer a property, you are an agent of the seller or owner and must serve their best interest first.

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