For any small business owner considering expansion, a thorough understanding of the law of agency is essential in picking the best real estate representative. For a business owner thinking of selling or acquiring an additional property, working with a real estate representative is a great way to alleviate the pressures of making a property transfer. Once an agency relationship is established between a seller or buyer and a broker, the parties must then select the type of agency arrangement to fit the situation.

Establishing an Agency Relationship

An agent is someone who has been granted the authority to make decisions on behalf of another person. Agents can bind a third party to a contract and negotiate on behalf of the one granting authority, known as the principal. In almost every situation, authority is expressly given to the agent by the principal either verbally or in writing. Implied agency refers to a situation in which an agent has to act outside of his express duties to perform a task for the principal's benefit. If an agent is acting on behalf of the principal without express or implied authority to do so, the law will protect the consumer or client by conferring authority upon the actor even without the principal's permission. An example of this would be if a person entered into a contract to sell the principle's property for an amount outside the agent's express authority. In order to protect the buyer from losing the contract, the agent will be considered to have apparent authority.

Seller's Broker

The seller's broker is also known as the seller's representative or listing agent. This person works exclusively on behalf of the seller to find a buyer for the listed property. The relationship is formed by an express written contract which provides that the seller's broker is the only person authorized to sell the property. Once a sale is made, the broker receives a percentage of the sale price as payment. If the broker knows information about the property that would sway a potential buyer, he must disclose this information under most state laws. The broker owes fiduciary duties to the seller, such as duty of loyalty and full disclosure.


A sub-agency involves a situation where a potential buyer would like to look at a property and his regular agent is unavailable. A sub-agent will walk the buyer through the property and provide him customer service as if he were his own client. The difference is that a sub-agent is not permitted to provide the buyer with any information or disclosures that could negatively impact the seller.

Buyer's Broker

A buyer's broker is in an agency relationship similar to that of the seller's broker, only he is working directly with interested buyers looking for property. The buyer's broker must disclose material information about a property that would likely interfere with the buyer's use and enjoyment of the property. In Arizona, this refers to information about the seller's likelihood not to sell, defects, liens or judgments on the property. The buyer's broker communicates directly with a seller's broker if the buyer makes an offer and, in most cases, is granted authority to negotiate on behalf of the buyers. Small business owners looking to acquire property should contract with a buyer's broker with commercial real estate experience as well as an understanding of the buyer's industry and needs.

Dual Agency

Dual agency refers to a situation in which a broker represents both a seller and buyer at the same time. This does not constitute a conflict of interest as long as both parties are aware of and consent to the arrangement. The dual agent is required to keep information about price, motivation or terms confidential unless expressly instructed to inform the other party about this information.