Licensee Don answered several questions from potential buyer Rachel, but no relationship has been established. In this situation, what brokerage relationship is presumed to exist?
(a) No brokerage relationship (nonrepresentation)
(b) Single agent
(c) Transaction broker
(d) Designated sales associate
The correct answer and explanation is:
The correct answer is (a) No brokerage relationship (nonrepresentation).
Explanation:
In this scenario, the broker or agent, Don, has answered several questions from potential buyer Rachel, but no formal relationship has been established between them. This indicates that Don is simply providing information and not representing Rachel in any capacity. According to real estate laws in many jurisdictions, when an agent provides information but does not enter into a formal agreement to represent a client, the relationship that exists is considered “nonrepresentation.”
In a nonrepresentation scenario, the broker or agent does not owe the typical fiduciary duties to the potential client. These fiduciary duties include duties like loyalty, confidentiality, and full disclosure. Instead, the agent is merely answering questions as a neutral party and is not obligated to act in the best interest of the potential buyer.
This contrasts with other types of brokerage relationships, such as:
- Single agent: This type of relationship exists when a broker or agent is legally and formally representing a client in a transaction, offering full fiduciary duties and putting the client’s interests first.
- Transaction broker: A transaction broker facilitates the transaction but does not owe the full fiduciary duties to either party. They act as a neutral third party, ensuring that the transaction proceeds smoothly without advocating for either side.
- Designated sales associate: In some states, this relationship exists when a brokerage designates a specific agent to represent a client, ensuring that the agent acts in the client’s best interest while other agents at the brokerage may serve as transaction brokers.
Since Don has not established a formal agreement with Rachel and is simply answering her questions, the relationship between them defaults to “no brokerage relationship,” meaning Don has no formal obligations to represent or advocate for Rachel.