The Subtle Art of Real Estate: What Does ‘Agency’ Mean in Real Estate?

In the world of real estate, “agency” is a crucial concept that governs the relationship between real estate professionals and their clients. Whether you’re buying or selling a home, agency plays a significant role in how property rights are transferred and how ownership is legally conveyed. It’s one of those concepts that many people have heard but few fully understand, especially when it comes to complex transactions like pre-sales and probate sales.

This blog will dive deep into what agency means in real estate, how it affects the process of transferring ownership, and the unique factors to consider in special cases like pre-sales and estate sales. By the end, you’ll not only have a clear understanding of the term but also appreciate the subtle art of navigating real estate transactions with the help of an experienced agent.

What is Agency in Real Estate?

At its core, agency refers to the legal relationship between a real estate agent and their client, whether the client is a buyer or seller. In this relationship, the agent acts on behalf of their client in the transaction. This agency relationship is governed by duties, responsibilities, and expectations that are legally binding.

In British Columbia, for example, the Real Estate Services Act outlines specific duties agents owe their clients, including loyalty, confidentiality, and full disclosure of information. Essentially, your agent acts as your advocate, representing your best interests during the purchase or sale of property. This agency relationship is a form of fiduciary duty, which means the agent is legally obligated to prioritize your needs over their own, offering you expert advice, negotiating on your behalf, and managing the paperwork and legalities involved in transferring property rights.

Types of Agency Relationships

There are different forms of agency in real estate, and understanding them is key to knowing how your interests are being represented.

1. Single Agency: In a single agency relationship, the agent exclusively represents either the buyer or the seller in a transaction. This type of agency ensures that the client’s best interests are protected without any potential conflict of interest. For example, if you’re selling your home, your agent’s sole focus is on maximizing the sale price and ensuring a smooth transaction.
2. Dual Agency: Dual agency occurs when the same agent represents both the buyer and the seller in a real estate transaction. While this may seem convenient, it can create a conflict of interest because the agent must balance the needs of both parties. In some provinces, dual agency is restricted or even prohibited because of the potential for conflicting responsibilities. However, in places where it is allowed, full disclosure and informed consent are required from both parties.
3. Designated Agency: In cases where dual agency is not permitted, designated agency provides an alternative. A brokerage can designate one agent to represent the seller and another to represent the buyer, ensuring each party has a dedicated representative without conflicts of interest arising from a single agent managing both sides of the deal.

Agency and Transferring Ownership and Property Rights

The agency relationship plays a critical role in transferring property ownership and rights. When you buy or sell a property, it’s not just about handing over keys; it involves legally transferring title and ownership rights. Here’s where an agent’s expertise comes into play.

Your real estate agent will guide you through the due diligence required in property transactions, which includes ensuring that the property title is free of any encumbrances (such as liens or claims) that could complicate ownership transfer. They’ll also help coordinate legal documents like the contract of purchase and sale, disclosure statements, and title documents, ensuring everything is properly executed and legally binding.

Pre-Sales: Understanding Agency in New Developments

Pre-sales involve purchasing a property—typically a condo or townhome—before it’s fully constructed. The agency relationship is especially important in pre-sale transactions because there are additional complexities that come with buying a property that doesn’t physically exist yet.

When you engage an agent in a pre-sale transaction, they act as your advocate in reviewing the contract with the developer. Pre-sale contracts are often packed with clauses and fine print that buyers may not fully understand, especially when it comes to timelines, cost increases, and construction delays. Your agent will ensure you are aware of any risks associated with buying a pre-sale property, including potential changes in the market value by the time the property is complete.

In addition to helping you understand the contract, your agent will also manage important aspects such as assigning the contract (should you wish to sell your interest in the pre-sale before completion) or advising on the developer’s warranty and insurance obligations. Because pre-sales are governed by specific regulations, including the Real Estate Development Marketing Act (REDMA) in BC, an experienced agent’s guidance is invaluable.

Agency in Estate Sales

Estate sales add another layer of complexity to real estate transactions. An estate sale occurs when a property owner passes away and the property is sold to settle the estate. In these cases, the court, administrator or the estate or an estate lawyer typically oversees the transaction, ensuring that all legal requirements are met and that the property is sold for its fair market value.

In an estate sale, the agent representing the estate is tasked with listing the property and finding a buyer, but unlike a typical sale, there’s an extra layer of legal oversight involved. Once an offer is accepted, it may need to go through court approval or wait for the “grant of probate”, which can prolong the transaction process. The agent has to ensure that all parties—including the beneficiaries of the estate—are in agreement with the sale and that the court receives all necessary documentation.

From the buyer’s perspective, an estate sale can be a good opportunity to acquire a property below market value. However, these transactions often take longer than standard sales and may not have seller disclosures regarding the property. A real estate agent with experience in estate sales will help buyers navigate the uncertainty and understand the legal intricacies involved.

Key Responsibilities of Real Estate Agents in Agency Relationships

Whether you’re dealing with a pre-sale, estate, or traditional sale, real estate agents have a set of key responsibilities as part of their agency relationship:

• Loyalty and Confidentiality: Agents must act in your best interest, keeping your personal information confidential and negotiating on your behalf.
• Full Disclosure: Agents are required to disclose any information that could affect the transaction, such as defects in the property or issues with title.
• Reasonable Care and Diligence: Your agent is expected to act with professionalism, ensuring that all legal requirements are met and that the transaction progresses smoothly.
• Accounting: Real estate agents must keep detailed records of any financial transactions, including deposits and commissions, providing transparency throughout the process.

Conclusion

In real estate, agency is much more than just a formal relationship between you and your agent—it’s the foundation upon which trust, guidance, and successful transactions are built. Whether you’re dealing with a standard sale, a pre-sale, or an estate transaction, having a knowledgeable real estate agent in your corner ensures that your rights are protected, the paperwork is handled correctly, and the transaction proceeds as smoothly as possible.

Understanding agency is part of mastering the subtle art of real estate. After all, whether you’re transferring ownership in a traditional sale or navigating the complexities of pre-sales and probate, having the right agent makes all the difference. And when it comes to real estate, knowing who has your back is just as important as knowing which property to buy. Because in this game, there’s a subtle art to getting it right—and the experts at Nest Real Estate Group are the masters of that art.