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The state of California wants you to be aware of how agency works before you begin working with an agent. According to a Del Mar Transaction Coordinator, “There is a two-page disclosure form by the California Association of Realtors® that helps agents fulfill this disclosure requirement before going to work for a client. Sellers should receive this disclosure form from the listing agent before signing a listing agreement (AD-1), and buyer’s agents should be giving this form to prospective clients before representing them as a buyer’s agent (AD-2).”

The purpose of the agency disclosure form (entitled Disclosure Regarding Real Estate Relationships) is to make sure that every person who hires a Realtor® in the state of California is given an opportunity to learn how agency works. The form reviews the three types of agency.

1. Seller’s Agent. The seller’s agent has the legal duty to act in the best interest of his or her client, the seller. It discusses “fiduciary duty” (that the seller must always work in the best interest of the seller). The seller’s agent, although he or she has the obligation to treat the seller with honesty and integrity, must always act in the best interest of the seller. Additionally, the seller’s agent is required to disclose to the buyer any material fact that may affect the value of the property. Although, the seller’s agent is required to disclose these things to a buyer, the seller’s agent is not required to act as a fiduciary in helping the buyer make sense of disclosures.
2. Buyer’s Agent  In many cases, it is the seller that pays the buyer’s agent commission; however, the buyer’s agent is not an agent of the seller. The buyer agent’s fiduciary duties are to the buyer only. The job of a buyer’s agent is to act in the best interest of the buyer, to help the buyer get the lowest price possible and the best terms, and help the buyer review all disclosures, reports, inspections, and other documents to determine whether buying the property at the agreed-price is in the buyer’s best interest.
3. Dual Agency. “Dual agency” is created when the same agent represents both the buyer and the seller on the same transaction. While some states do not permit dual agency, California does. However, many agents, buyers, and sellers believe that it is difficult for a single agent to work in both the best interest of the buyer and the best interest of the seller at the same time.

Agents often use the AD-1 and AD-2 forms and place a circle on the document to identify the type of agency in the specific transaction. This is not required as the disclosure purely provides definitions and information about the different forms of agency in the state of California. According to this Del Mar Transaction Coordinator, the following should advice should be heeded: “Keep in mind that the Disclosure Regarding Real Estate Relationships must be signed before listing agreements and purchase agreements, and should not be competed weeks down the road when you are already half way through the escrow period.”

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