Agency Relationships

1. Agency and Fiduciary Relationship

2. Timely Disclosure of Agency

3. Agency Duties

4. Agency Agreements

5. Buyer Agency

6. Dual Agency

7. Buyer’s and Sellers Responsibility

8. Duty of Disclosure and Confidentiality

9. Determining Agency Status

10. Procedures:
a. Showing Property
b. Listing Appointments
c. Opportunity Time
d. Documenting

11. Designated Agency

Agency Relationships 1
 AGENCY POLICY AND PROCEDURES

A. Agency and Fiduciary Relationship

The agency relationship is based on one person representing the interest

of another person. We are licensed by the state to represent a person for
the sale or leasing of a property. The responsibility of the real estate agent
is defined by state laws relating to agents, the Realtor Code of Ethics and
general principles of agency laws.

The type of relationship formed between the agent and the client is called
a Fiduciary Relationship. A fiduciary relationship is one based on trust
because the agent owes the following duties to the client:

• Loyalty
• Diligence
• Obedience
• Disclosure
• Accounting
• Confidentiality
• Reasonable Care

The courts strictly enforce agency duties so that the client can rely on the
agent putting the client’s interest before that of anyone else. The courts
also require that the real estate agent be fair and honest in all aspects of
the transaction. The source of compensation does not, in itself, determine
agency. It can be paid by the Seller, Buyer, both, or neither. However,
there must be informed consent as to who is paying, in writing, in advance.

B. Timely Disclosure of Agency

North Carolina Real Estate Commission Rules and Standards of Practice

of the National Association of Realtors require that real estate agents
make a timely disclosure of agency relationships.

1. North Carolina Real Estate Commission Rule requires that agents

review carefully the “Working with Real Estate Agents” brochure at
first substantial contact with Buyers and Sellers.
2. Standard of Practice 21-12 states: “The Realtor, acting as the agent
of the Buyer, shall disclose that relationship to the Seller’s agent at
first contact.”

Agency Relationships 2
 3. Standard of Practice 21-13 states: “On unlisted property, the Realtor,
acting as the agent of a buyer, shall disclose that relationship to the
Seller at first contact.”
4. Standard of Practice 21-14 states: “The Realtor, acting as the agent
of the Seller or as subagent of the listing broker, shall disclose that
relationship to buyers as soon as practicable.”

C. Duties of Agencies

In addition to the duties outlined above, or enumerated in a listing contract

or other contract of employment, Beverly-Hanks & Associates and
associated Brokers owe other specific duties to their principals. More
specific examples of these duties include a duty to reveal to his principal
all relevant information pertaining to the scope of the agency.

Our company and associated Brokers are obligated to confidentially

maintain any information that might injure the principal if it were revealed.
Examples of this include disclosures that the Seller:

a) can, or must, sell his property below the listed price,

b) or correspondingly, if representing the Buyer, that said Buyer can, or will

pay more for a property that his offered price.

c) But this duty plainly does not include failure to disclose known material
defects in the Seller’s property, or to misrepresent the condition of the
property in response to the Buyer’s inquires.

One of the most fundamental duties of an Agent is the duty of loyalty.

This duty requires that an Agent act at all times, in accordance with real
estate license law, solely for the interest of his Principal with the scope of
business for which the Agent has been hired.

A corollary to this duty is that an agent should avoid any conflicts of

interest that may compromise the Agent’s undivided loyalty to his
principal’s interest. However, as a company which represents both
Buyers and Sellers as clients, a conflict of interest arises when a Buyer/
Client becomes interested in a Seller/Client’s property. Our company and
our salespersons can legally represent both the Buyer and the Seller in
a transaction, but only after full disclosure and with the knowledge and
written consent of both parties.

Agency Relationships 3
D. Agency Agreements

Prior to beginning work with each Buyer and Seller, Beverly-Hanks &
Associates Brokers will review the “Working with Real Estate Agents”
brochure and discuss our representation alternatives. The types of agency
representation are summarized as follows:

1. Seller Agency (Seller as Client). Under a listing agreement that

our firm has with the Seller (or as subagents of the listing agents
in the multiple listing service), our sales agents act as the Agent
for the Seller only and consequently have the following affirmative
obligations:

a. to act at all times solely in the Seller’s best interests;

b. to obey the Seller’s instructions and to disclose all relevant
information to the Seller;
c. to safeguard the Seller’s confidences and to act with reasonable
care and skill in representing the Seller;
d. to deal fairly and honestly with the Buyer; and
e. to disclose to the Buyer all material defects which the associate
knows concerning the Seller’s property.

As an example, under Seller agency, the agent could not, without the
express permission of the Seller, disclose to the Buyer that the Seller will
accept a price less than the listed price. Specifically, as an agent for the
Seller, we are obligated to disclose to the Seller:

1) all offers to purchase the Seller’s property;

2) the identity of all potential purchasers;

3) any facts affecting the value of the property;

4) information concerning the ability or willingness of the Buyer to

complete the sale or to offer a higher price;

5) a buyer’s intention to subdivide the property for resale for a profit;

and

6) any other information that might affect the Seller’s ability to obtain

Agency Relationships 4
 the highest price and best terms in the sale of his property.

2. Buyer Agency (Buyers as Client). Under the “Buyer Agency

Agreement” our firm and our sales agents act as Agent for the Buyer
Only and consequently have the following affirmative obligations:

a. to act at all times solely in the Buyer’s interest;

b. to obey the Buyer’s instructions and to disclose all relevant
information to the Buyer;
c. to safeguard the Buyer’s confidences and to act with reasonable
care and skill in representing the Buyer;
d. to deal fairly and honestly with the Seller; and
e. to disclose to the Seller any adverse financial information actually
known by the agent.

As an example, under Buyer Agency, the Agent could not, without the
express permission of the Buyer, disclose to the Seller that the Buyer
would pay a price greater than the initial offer. Specifically, as an agent
for the Buyer, we are obligated to disclose to the Buyer the following
information if we know it:

1) the willingness of the Seller to accept a lower price;

2) any facts relating to the urgency of the Seller’s need to dispose of

the Property;

3) the Broker’s/Agent’s relationship to or interest in the Seller or the

Property for sale;

4) any facts affecting the value of the property;

5) the length of time the Property has been on the market; and

6) any other information that would affect the Buyer’s ability to obtain
the property at the lowest price and on the most favorable terms.

Agency Relationships 5
 3. Dual Agency (Buyer and Seller as clients).
As a company who represents both Buyers and Sellers, it is not
unusual that a Buyer client may become interested in one of our
Seller client’s properties. Our company and our Brokers can legally
be the agent of both the Seller and the Buyer in a transaction, but
only with the knowledge and written consent of both the Seller
and the Buyer. Dual agency situations arise only when a Buyer
client (one who has signed a Buyer Agency Agreement) wishes
to purchase one of our in-house listings (note that we also have
a fiduciary responsibility to the Seller who has signed a listing
agreement); in these situations, our company and our Brokers have
the following affirmative obligations to both the Seller and the Buyer:

a. To act with reasonable care and skill in handling the transaction;

b. To deal fairly and honestly with the Seller and Buyer; and
c. To disclose to the Buyer all material defects which the associate
knows concerning the Seller’s property.
In representing both the Seller and the Buyer, our company and brokers
may not disclose the following:

a. confidential information that we know about the Seller and/

or Buyer (e.g. motivation to sell/buy; price/terms/negotiating
strategy), without the written permission of the Seller and/or
Buyer;
b. the price the Seller will take other than the listing price without the
written permission of the Seller;
c. the price that the Buyer is willing to pay without the written
permission of Buyer;
d. recommend or suggest a price that the Buyer should offer to pay
for the property; and
e. recommend or suggest a price that the Seller should accept or
counter.

Agency Relationships 6
E. Seller’s and Buyer’s Responsibility

The above duties of our company and our brokers in any real estate
transaction do not relieve a Seller or Buyer from the responsibility to
protect their own interests. Both Seller and Buyer will be asked to read
carefully all agreements to assure that they adequately express both
Seller and Buyer’s understanding of the transaction. Our company and
our brokers are not qualified in legal or tax matters. A Seller or Buyer are
encouraged to consult a competent attorney or tax accountant when he/
she has concerns in these specialized areas.

F. Duty of Disclosure

It is crucial that our associates understand that an agent’s duty of

disclosure to the Principal should not be confused with a real estate
agent’s responsibility to disclose to the Buyer all material defects which
the associate knows concerning the Seller’s property. Furthermore,
each associate has a duty to treat all persons honestly and fairly; this
responsibility does not depend on the existence of an Agency relationship.

G. Duty of Confidentiality

An agent is obligated to safeguard their Principal’s confidence and secrets.

A real estate broker, therefore, must keep confidential any information that
might weaken his Principal’s bargaining position if it were revealed. This
duty of confidentiality plainly does not include any obligation on a Broker/
Agent representing a Seller to withhold from a Buyer known defects
concerning the Seller’s property or to misrepresent the condition of the
property.

Agency Relationships 7
H. Agency Status Determined
Beverly-Hanks & Associates brokers shall represent the Buyer in the
following instances:

1. Our associate is buying property for their account. It is deemed

impossible for our associate to place the Seller’s interest above their
own.

2. Assisting friends, close business associates, and/or relatives in

buying property.

3. Representing a Beverly-Hanks & Associates Seller in the purchase

of a replacement home. Since your Sellers have trusted you in
completing the sale and closing of their home, it is only logical that
you represent them in a Buyer/Client relationship in the purchase of
their new home. It would be virtually impossible to shift from client
(in the listing and sale of their present home) to customer (in the
purchase of a replacement home).

4. In most instances, Beverly-Hanks & Associates Brokers should also

consider representing out of town buyers and/or first time buyers as
clients, as these buyers usually require a higher level of assistance
and advice than the buyer/customer.

Note: Beverly-Hanks & Associates Brokers may also represent any Buyer
as a client who wishes to have representation.

Beverly-Hanks & Associates shall treat the following prospects as

customers (acting as an agent of the Seller).

1. Open house attendees.

2. Ad call prospects, etc.

3. Any prospect that declines representation.

4. When a listing agent has a prospect for his or her listing, that
prospect should preferentially be treated as a customer. In the event
that the listing agent has already established a client relationship
with the prospective buyer, the agent should consult with their
broker-in-charge prior to any negotiation or formal expression of
interest by the Buyer.
Agency Relationships 8
I. Beverly-Hanks & Associates Procedure for
Showing Property to Buyers

1. Review the “Working with Real Estate Agents” brochure with the
prospect at first substantial contact. If the prospect falls into one of
the categories that should be treated as a client, or if the prospect
desires representation, execute the Beverly-Hanks Exclusive Buyer
Agency Agreement. Discuss the fact that our firm also carries a
large inventory of listings and obtain permission for our firm to act as
dual agents by executing the “Dual Agency Addendum”, and initialing
the Buyer Agency Agreement. If the prospect does not wish to give
us permission to act as dual agents, see your Broker-in-Charge.
Management approval is required prior to execution of any agency
agreement for exclusive representation. If the prospect falls into one
of the categories who should be treated as a customer or declines
representation, the prospect should initial the box on the tear off card
on the “Working with Real Estate Agents” brochure.

2. Confirm that the listing agency will compensate Beverly-Hanks &

Associates as per the commission split stated in the multiple listing
service.

3. When writing an Offer to Purchase on a Beverly-Hanks & Associates

listing for a Buyer/Client, be sure that both parties have initialled a
dual agency addendum at the time of employment of our firm.

J. Beverly-Hanks & Associates’ Agency Procedures at

Listing Appointment

During the listing presentation, review the “Working with Real Estate
Agents” brochure, and discuss with the Sellers that our firm represents
large numbers of Buyers as clients, and, therefore, it is our policy to advise
Seller/Landlord clients that it is in their best interest to cooperate fully
with subagents, Buyer/Tenant agents, and DISCLOSED DUAL AGENTS
to maximize the exposure of their property. Obtain permission for our
firm to act as dual agents by executing the “Dual Agency Addendum”
and by initialing the “Exclusive Right to Sell Listing Agreement,” NCAR
Standard Form. If the client does not wish to give us permission to act
as dual agents, see your Broker-in-Charge. Management approval is
required prior to execution of ANY agency agreement for EXCLUSIVE
REPRESENTATION.
Agency Relationships 9
K. Beverly-Hanks & Associates Agency Procedures for
Opportunity Time

1. When speaking with a prospect by phone, if the prospect should

begin to divulge information which may be confidential in nature
or harmful to his future bargaining position, you should stop
the conversation and attempt to either discuss our agency
representation alternatives or make an appointment to do so.

L. Beverly-Hanks & Associates Procedures for

Documenting Files of Agency Agreements

1. Buyer Agency Agreements and “tear-off” cards form “Working with

Real Estate Agents” brochure shall be kept on file in each office filed
alphabetically by Agent’s last name. These documents should be
turned in to the MLS secretary at the time of execution and will be
merged into an “under contract” file when an Offer to Purchase is
executed and accepted.

2. Each Exclusive Right to Sell Listing Contract shall be maintained

in the office “listing file” as usual. Listing agents are reminded,
however, that any information which may be deemed confidential
in nature or could harm the client’s negotiating position should be
maintained in the Listing Agent’s personal file and not in the office
listing file.

3. Not accepted, canceled, or voided contracts should not be placed in

the active listing file but turned in to the MLS secretary to be filed in
a separate “Canceled Contract” file.

Agency Relationships 10
 The First Meeting with Buyer Prospects

“Mr. and Mrs. Buyer, before we discuss your wants and needs regarding a
home (or property, etc.), the Law says I must first discuss something with
you called Disclosure. As you can see here (the plastic stand on each
conference table), the Law says that every real estate licensee MUST
provide “Agency Disclosure” BEFORE providing property information.
What I must discuss with you is called “Working with Real Estate Agents”
brochure. The Laws are in place to protect YOU, the consumer, so that
you are sure to be treated fairly. Let me show you the agent duties and
relationships now and then you can tell me how you would like our working
relationship to proceed. I can work with you as either a Buyer Agent or a
Seller Subagent. Let me show you what that means and then I will just
need your acknowledgement that shows I did discuss Agency Duties and
Relationships with you and which way you prefer for us to work together.”

Proceed with presenting agency in a clear and concise manner and get
their “acknowledgement” either on the buyer agency form or by initialing
the sub-agent “box” on the tear off card on the “Working with Real Estate
Agents” brochure.

When this is presented properly, involving them in the picture, you will
automatically command respect in such a way that they WANT to work
with you. Practicing this presentation is what makes it easy to do. The
higher your comfort level with this information, the more they will respect
your knowledge and the more they will trust you.

Upon completion of this step, proceed to “Setting the Stage for Your Real
Estate Purchase”.

Agency Relationships 11