Understanding real estate agency can be complex, but here we provide an easy-to-read overview of the real estate market players, as it pertains to navigating in Illinois.
Let’s first look into what agency actually is. Agency is, as defined by Merriam-Webster.com, “an establishment engaged in doing business for another”. Agency, therefore refers to the over-arching legal framework for which agents (of the agency) are able to operate.
Agency law is based on common law, which is the basis of each state’s legal system (except for Louisiana). The law of agency concerns any principal-agent relationship and is based on the Latin phrase “Qui facit per alium, facit per se.” Common law is in force unless modified by statute or a state’s constitution, and most states have adopted laws and regulations dealing with specific professions, including real estate sales and appraisals. These rules and regulations may supersede the common laws of agency that apply in other situations, and there is also a written agreement between the broker and the principal.
In Illinois, Designated Agency is the prevailing legal framework; As defined by the Illinois Real Estate License Act (RELA) of 2000,which was reviewed, revamped & re-signed into law through Public Act 101-0357 by Governor J.B. Pritzker in August 2019.
So what is Designated Agency? To answer this question, we must first provide understanding of how the common law agency functions. In common law, agents were agents of the sellers. Even if an agent assisted a buyer participant, that agent still had fiduciary duties & responsibilities to the seller. Illinois laws provides that each agent is designated to a specific market participant, or conversely, each market participant is appointed one (or more) designated agent(s) by the agency. This designation can be explicit or implicitly created. Caveat emptor! Therefore it is extremely important NOT to share any personal and/or confidential information with ANYONE until you have a clear understanding of who you are engaging in business with. We’ll discuss ways agency relationships are created shortly.
An agent is the person who acts on behalf of the agency for a specific identified purpose. The principal is the market participant who is engaging in the purchase or sale of real estate, either for themselves or through use of a proxy, such as a Power of Attorney. The principal will work directly with the designated agent of the agency (or real estate brokerage company). When entering into an explicit agency relationship, the principal will have an agreement with the agency, NOT the agent! The written agreement will name the designated agent(s) that is/are associated with the agency, and can be modified by mutual agreement between the principal and agency, at anytime.
Under RELA, designated agents have specific statutory duties. These include performing the terms of the written (exclusive brokerage) agreement, promote your best interest in seeking a transaction that meets your requirements, presenting all offers, disclose all material facts, account for all money/property received on your behalf, obey your lawful instruction, exercise reasonable skill & care in the performance of services, keep all confidential information confidential and complying with all federal, state, local laws & ordinances.
Furthermore, Agency Disclosure is required. No later than entering into a brokerage agreement, either implied or explicit, the agent MUST inform you as to 1) the fact that an agency relationship exists, 2) the name of your designated agent(s) in writing, and 3) What the brokerage company will be paid & the company’s policy regarding payment to other brokerage companies that might be involved in your transaction.
EXCLUSIVE BROKERAGE AGREEMENTS
This means that you are agreeing to work only with the real estate brokerage company and designated agent(s) named in the agreement to the exclusion of other real estate firms and agents. Why would I want to do this?! Here’s Why.
If you are the seller, the contract will likely be called an Exclusive Right to Sell or an Exclusive Agency Agreement (also sometimes called an Exclusive Seller Representation Agreement)
If you are the buyer, the contract will likely be called an Exclusive Right to Acquire, Exclusive Right to Purchase or Exclusive Buyer Agency Agreement (sometimes called an Exclusive Buyer Representation Agreement)
Under an exclusive brokerage agreement, the designated agent(s) is required by the Act to provide certain minimum services. These services generally include: Accepting and presenting offers and counteroffers Assisting you in the preparation of offers, counteroffers etc., and Answering your questions related to negotiations in a real estate transaction.
Additionally, A principal can either be a client or a customer to a real estate agent. What’s the difference? The level of duties, responsibilities and service received from the agent. Under RELA, an agent must provide specific disclosures to customers. Customers are market participants who are not represented by an agent. These participants will receive bare-minimum services, called ministerial acts. As a customer, you should receive a disclosure of No-Agency to define your relationship, to satisfy RELA.
If you have wisely chosen to select a REALTOR® to be your real estate agent, then a higher standard of service and professionalism is required. Click here to see the ethical standards your REALTOR® is held to, curtesy of the National Association of REALTORS®.
This information is being provided in accordance with the Illinois Real Estate License Act of 2000 (the Act) to help you be more informed in the buying, selling or leasing of real estate. In whatever manner you choose to be represented, the goal is generally the same. The real estate licensee is trying to assist you in the sale, purchase or lease of real estate on the terms acceptable to all parties. For additional information, contact the Illinois Department of Financial and Professional Regulation Real Estate Division at 8884734858. Source: Illinois Association of Realtors