Definition of Agency
Agency is any relationship based on an explicit or implicit contract where one person is authorized to act on behalf of his or her client. In real estate, an agent is legally allowed to act on behalf of a client. Agency is the relationship between the real estate agent and the buyer or seller he or she is working with to buy or sell a home. This is why a licensed Realtor is also known as a real estate agent.
Why is this term important?
In an agency relationship, where a professional is acting on behalf of their client, there is an implied fiduciary relationship between the real estate agent and the client. This fiduciary duty assumes that the real estate agent will act in the best financial interests of the client.
The agency relationship is not reserved for real estate transactions but can occur whenever a business or organization provides a particular service, typically one that involves organizing transactions between two other parties.
If you decide to list your home with a real estate agent, you and the agent enter into a relationship of agency. The same applies if you decide to use the services of a Realtor to help buy a home, as both you and the agent also enter into a relationship of agency.
Examples of term
There are three common forms of agency in Canada. The first is a real estate agent, who performs services related to buying, selling and leasing residential and commercial real estate. The second is an attorney, who represents clients in legal matters through the judicial system. The third is a stock broker or a discretionary financial advisor, who make financial purchases and sales of stock and other financial investments on behalf of their clients.