Part of your role as a North Carolina real estate broker is to act on behalf of clients in what’s called “agency.” However, there are legal limits to what a broker can do based on the type of agency granted by the client or “principal.”
Your pre-licensing education will cover the various types of agencies in detail, so in this article, we’ll provide a brief overview of three types of real estate agencies you should know as a prospective real estate broker.
Key Takeaways
- General Agency: This type allows brokers to act on behalf of clients on an ongoing basis. It’s common in situations like property management or for real estate investors handling multiple properties, where continuous decision-making is needed without frequent consent.
- Universal Agency: Grants the agent broad authority, including the ability to sign legal documents and conduct financial transactions. It’s rare and typically used for trusted individuals, such as family members of a principal who is unable to make decisions due to illness or cognitive decline.
- Special Agency: This type of agency provides limited authority for specific transactions or tasks. Most real estate brokers work under this type of agency, which typically involves handling a single property transaction or a defined set of tasks according to a detailed agreement with the client.
- Agency Agreements: Understanding the type of agency agreement you have with your clients is crucial, as it defines the scope of your authority and responsibilities in real estate transactions.
What Is General Agency?
General agency allows real estate brokers to act on behalf of a client on an ongoing basis. With general agency, the agent is free to take action within the confines of the principal’s business.
A common example is a property manager who manages a client’s property. Since property managers need to make many decisions and actions on a daily basis, it would be cumbersome and inefficient to get written consent for each decision, which is why the client grants the property manager general agency. Another example is if a client is buying or selling multiple properties (such as a real estate investor) and wants to partner with a real estate broker as a general agent since the nature of the business relationship is ongoing.
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What Is Universal Agency?
Universal agency grants the agent the authority to act on behalf of the principal in a broad range of actions. Often, universal agents have power of attorney, which allows them to sign legal documents and authorize financial transactions. Because this agency has a considerable amount of power, it is quite rare and usually only delegated to trusted family members if the principal cannot make important decisions, such as someone experiencing cognitive decline or other limiting illnesses.
What Is Special Agency?
A special agent has limited authority to perform a single transaction (or a specific series of transactions) on behalf of the principal. Real estate brokers commonly fall under this agency type since most clients typically want to buy or sell a single property. Moreover, clients sign a special agency agreement with their broker, which stipulates precisely the types of duties or tasks that the broker is authorized to do.
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