Frequently Asked Questions
What agency relationships are available in Montana?
There are four basic relationships available under the Real Estate Licensing Act. Those four relationships are seller agency, buyer agency, dual agency and statutory brokerage. The Real Estate Licensing Act, in particular Montana Code Annotated §37-51-102 and 313, describe how these relationships are created and what each entails.
A seller agency relationship is established in one of two ways, either by a broker entering into a listing agreement with the seller or by a broker accepting an offer of subagency from the listing agent.
Similarly, a buyer agency relationship is established in one of two ways, by the broker entering a buyer's broker agreement (Agreement to Locate Real Property) with the buyer or by the broker accepting an offer of subagency from the buyer's broker. It is worth noting that the statutory definition of buyer agent (Montana Code Annotated §37-51-102(8)) anticipates that a written buyer broker agreement will exist between the buyer broker and the buyer. It is this buyer broker agreement that creates the relationship, not the statutory disclosure.
A dual agency relationship may arise in the situation where the broker is both the agent of the seller (pursuant to a listing or accepted offer of subagency from the listing agent) and the agent of the buyer (pursuant to a buyer's broker or accepted offer of subagency from the buyer's broker). As a prerequisite to a dual agency relationship arising, the seller and buyer must review the mandatory disclosure form and consent to the dual representation.
A statutory broker relationship is presumed to exist, unless the broker has entered into a listing with the seller, a buyer's broker agreement with the buyer or has disclosed a relationship other than that of a statutory broker. The statutory broker relationship was designed as the default relationship. It automatically arises unless a seller agency, buyer agency or dual agency relationship is established in the manner as is described above. Neither the Real Estate Licensing Act, nor any interpretations of it with which I agree, prohibits a statutory broker, from dispensing advice or making recommendations. The only limitation on that is the advice and recommendations have to be given while the statutory broker is exercising reasonable skill, diligence, and care. Thus, a statutory broker does not change his or her relationship with a buyer or seller by giving advice or making recommendations.
What are In-House Designations?
Prior to the effect of the 1995 amendments to the Real Estate Licensing Act, which brought about these various agency options, a concern was present, that if a broker took a listing that all other brokers in his or her office were deemed the agent of the seller. This often led to a real or perceived need to act as a dual agent on in-house transactions (i.e. those transactions in which an associate in the office took the listing and another associate was working as a buyer's agent). In order to provide an avenue other than dual agency on in-house transactions, the statutes were amended to provide for the designation of a particular broker or salesperson in an office to serve as a "in-house seller agent designate" and another to serve as an "in-house buyer agent designate" thus avoiding the creation of a dual agency relationship. The designations are made by the broker-owner in the office designating one broker or salesperson as the in-house seller agent designate and another as the in-house buyer agent designate. Such designation can be best memorialized by a memorandum to the files detailing the designations. After the designation and throughout the transaction, the two in-house designates, despite being in the same office, will represent the buyer and seller individually.
Should a broker use a buyer broker agreement to create a buyer agency relationship?
Montana Code Annotated §37-51-102(8) defines a buyer agent as "a broker or salesperson who, pursuant to a written buyer broker agreement, is acting as the agent of the buyer in a real estate transaction and includes a buyer subagent and an in-house buyer agent designate." The first important element of this definition is the phrase "pursuant to a written buyer broker agreement." This language anticipates that a buyer agency relationship is established by a written contract, the buyer broker agreement. Thus, much like the way a seller agency relationship is created by entry into a listing contract, a buyer agency relationship is created by entry into a buyer broker agreement.
Montana Code Annotated §37-51-102(9) defines a buyer broker agreement as "a written agreement in which a prospective buyer employs a broker to locate real estate of the type and with terms and conditions as designated in the written agreement." Two buyer broker agreements are published by the Montana Association of REALTORS®. These are the Agreement to Locate Real Property and the Agreement to Locate Real Property - Short Form. The agency disclosure forms are not buyer broker agreements and while necessary as disclosures, they are not designed to create a buyer agency relationship.
What happens when a seller agency, buyer agency or dual agency terminates?
When one of these relationships is terminated (i.e. when a listing expires or is terminated, when a buyer broker agreement expires or is terminated or when a transaction is closed), so do the majority of the agent's duties. Montana Code Annotated §37-51-313(9) provides the broker's duties upon termination of an agency relationship. In particular, this subsection states as follows:
(9) Upon termination of an agency relationship, a broker or salesperson does not have any further duties to the principal, except as follows:
- to account for all money and property of the principal;
- to keep confidential all information received during the course of the agency relationship that was made confidential at the principal's direction, except for:
- subsequent conduct by the principal that authorizes disclosure;
- disclosure required by law or to prevent the commission of a crime;
- the information being disclosed by someone other than the broker or salesperson; and
- the disclosure of the information being reasonably necessary to defend the conduct of the broker or salesperson, including employees, independent contractors, and subagents.