Last Update: 02/10/16
When someone in Florida wants to sell their home or condo, they (usually) hire a real estate agent to help them do so. When someone wants to buy residential real estate here in Florida, they do the same thing: they hire themselves a real estate agent.
Which means, that in most situations there are two real estate agents: one for the seller and one for the buyer. But not always.
In Florida, there are times when a real estate agent will represent both the buyer and the seller in a real estate deal. In that situation, the relationship of the realtor to the buyer and seller is not a “dual agency relationship” – that type of relationship is prohibited under Florida law.
What is legal in Florida, where the seller and buyer are both allowed to work with a single real estate agent, is the “Transactional Brokerage” relationship.
One Real Estate Agent For Both Buyer and Seller
Whenever a real estate agent is representing both a seller and a buyer in a real estate transaction, all sorts of conflicts of loyalty and duty arise. After all, the buyer wants to get the property for as low a price as he can while the seller wants to sell for the highest sales price offered. Dual agency is jumping right into the middle of that battlefield.
Florida has outlawed a real estate agent from acting as the agent for both the seller and the buyer. (This is allowed in other states, where a dual agency is legal if it meets certain legal criteria including clearly defining the dual agency in the contracts for representation.)
This doesn’t mean that a single real estate agent cannot work with both the buyer and the seller in a real estate deal. That happens all of the time.
Transactional Brokerage in Florida
Pursuant to Florida Statute 475.278, Florida real estate agents can work for both the seller and the buyer in a “transactional brokerage” that is specifically defined in the statute:
(2) TRANSACTION BROKER RELATIONSHIP.—A transaction broker provides a limited form of representation to a buyer, a seller, or both in a real estate transaction but does not represent either in a fiduciary capacity or as a single agent. The duties of the real estate licensee in this limited form of representation include the following:
(a) Dealing honestly and fairly;
(b) Accounting for all funds;
(c) Using skill, care, and diligence in the transaction;
(d) Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;
(e) Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;
(f) Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and
(g) Any additional duties that are mutually agreed to with a party.
Real Estate Agents as Transaction Brokers: No Fiduciary Duty Claims
Most Florida real estate brokers like their agents to work as transaction brokers because of liability concerns.
Why? Transactional Brokerage Relationships Limit Duty of Agent
Under Florida law, a real estate agent acts as a fiduciary to their client. However, if they enter into a transactional brokerage representation instead of a standard agency agreement, then the agent does NOT act as a fiduciary. This means it may be difficult to be successful in a breach of fiduciary claim against the agent if things go sour.
In fact, sellers and buyers need to know that in the State of Florida, real estate agents are presumed to be acting as Transaction Brokers with less liability and less confidentiality than if a standard agency agreement was in place. In fact, a buyer or seller has to specify that they want an agency agreement with a real estate agent if they want to make sure the agent is going to be acting as their fiduciary. Under Florida Statute 475.278(1)(b), it is “presumed that all licensees are operating as transaction brokers unless a single agent or no brokerage relationship is established, in writing, with a customer.”
Fiduciary Duty Is Important to Florida Buyers and Sellers
Given all the bad acts that have happened in the Florida real estate market in recent years, having an agent with the legal duty to act as a fiduciary can make all the difference in whether or not someone who has been wronged gets compensated for their damage. It is a huge limitation on the liability of a real estate agent and their broker to be able to act as a “transaction broker” instead of an agent – fiduciary.
How important that fiduciary duty may be to you will not become clear unless and until you are harmed. Many buyers and sellers won’t understand the possibility of having a real estate professional act as a fiduciary on their behalf until a catastrophe happens and they are meeting with a Florida real estate lawyer to try and find justice.
Transaction Broker relationships are popular in Florida, but unfortunately they offer a lot less legal protection for the real estate buyer or seller when they end up harmed and needing to assert claims against that “transaction broker.”
A good piece of advice is to at least speak with an experienced Florida real estate lawyer to learn about your rights. Most real estate lawyers, like Larry Tolchinsky, offer a free initial consultation (over the phone or in person, whichever you prefer) to answer your questions.
For details on suing an agent for Breach of Fiduciary Duty, read our earlier post, “Breach of Fiduciary Duty by a Florida Real Estate Agent: Can You Sue For Damages?”
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