Have you ever wondered what the term real estate "agent" means? That single word - "agent" - has great significance, and does far more than just designate an individual who holds a real estate license

The real estate brokerage business is governed by a body of law called "the law of agency". The word "agency" refers to the relationship which exists "when one person is employed to act for another".

In real estate, the most common form of agency is when homeowners employ a real estate broker to act on their behalf to secure a buyer for the property. The term "act on their behalf" is important in that it refers to the broker's responsibility to look after the best interests of the owners.

Once homeowners have listed their home for sale with a broker, the broker becomes their agent. The owners become the broker's client (or principal).

The duties of the broker to the sellers include: 1) loyalty, 2) obedience, 3) skill, care & diligence, 4) disclosure of information, and 5) accounting. These duties are said to be fiduciary in nature, meaning that there exists a trust relationship between the client (usually the sellers) and the agent (the broker).

The broker, acting as agent, is obligated to be loyal to the best interests of the sellers, and obedient to their objectives, i.e. to perform brokerage services faithfully to the sellers' objectives. The broker is also required to use the highest levels of skill, and to carefully and diligently protect the sellers' real estate interests.

The broker's duty of disclosure relates to keeping the client informed. Because the broker's loyalty is to the client, the broker is obligated to disclose any knowledge in his or her possession about potential buyers, their intentions, their abilities to make a purchase, and changes in the real estate market in general. They are also required to provide a complete accounting of their activities, and of the final transaction itself.