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Do Not Act Without Authorization!

Agency agreements authorize a real estate firm and its associates to act on behalf of their clients — to market a seller-client’s property, to search for and assist a buyer-client with purchasing a suitable property or to manage an owner’s rental property. All agency agreements authorize agents to perform certain duties, but they do not give the agents unlimited authority to act on behalf of clients or to make decisions for their clients or customers. The following is a partial list of services for which agents must obtain authorization.

1 A listing agent may not advertise a seller’s property or perform any service on behalf of a seller-client without first entering into a written listing agreement with the seller.

2 A listing agent should not advertise a seller’s property at any price other than the price selected by the seller.

3 A listing agent must not decide on his or her own whether an offer is acceptable. The agent must deliver the offer to the seller to enable the seller to decide whether the offer is acceptable. [Note: Even when an offer is negotiated via telephone, the listing agent must send or deliver any written offer to the seller for review.]

4 A listing agent or buyer agent should refrain from giving a buyer or prospective buyer keys or possession of a seller’s property without first obtaining the seller’s express permission. If a closing occurs so late on a Friday afternoon that the new deed will not be recorded until the following Monday or later, then the agents must obtain the seller’s permission before giving keys to the buyer and should recommend that the parties enter into a written agreement to permit the buyer’s possession before closing. (Remember, the standard form Offer to Purchase and Contract defines “closing” as the date and time the deed is recorded.)

5 A listing agent or buyer agent should avoid signing closing statements or other documents on behalf of a client without first obtaining written authority, preferably in the form of a power of attorney. Agents should avoid signing anything for customers.

6 A listing agent or buyer agent should not contract for services (e.g. repair services, inspections, closing attorneys, surveys, termite treatments, etc.) on behalf of a client or customer without first obtaining authorization from the client or customer. Otherwise, the agent may be held responsible for paying for the services rendered.

7 A listing agent or buyer agent should refrain from advising clients and customers that a contract has been formed or that they have a “done deal” until all parties have signed the offer, initialed all changes made to it and communicated to all parties that the offer has been signed and initialed by all parties. Until then, agents must refrain from using the term, “verbal contract,” as it falsely implies that a valid, binding agreement has been formed.

8 A property manager must refrain from entering into a lease containing terms not authorized by the owner including the lease rate and lease term.

9 A property manager may not permit a tenant to use a property for any purpose other than that which is authorized by the owner, by restrictive covenants and by zoning restrictions.

10 A property manager may not permit a tenant to have pets or to exceed the occupancy limit set by the owner without first obtaining the owner’s permission.

Real estate agents must act in the best interests of their clients at all times and should avoid taking any action for which they have not received express authority from their clients and customers. A real estate agent’s duty is to communicate information to the parties involved so that they can make informed decisions rather than the agent making them alone. Complaints received by the Commission alleging any of the ten items listed above may result in disciplinary action. Therefore, to protect your license, obtain authorization before acting on behalf of someone else.

This article came from the February 2002-Vol32-4 edition of the bulletin.