AGENCY the legal relationship between a principal and his AGENT arising from a contract in which the principal engages the agent to perform certain acts on the principal's behalf. Example: Under the law of agency, agents must be loyal to their employers. Therefore broker Roberts submits to employer Davis all offers on property.
AGENCY DISCLOSURE a written explanation, to be signed by a prospective buyer or seller, explaining to the client the role that the broker plays in the transaction. The purpose of disclosure is to explain whether the broker represents the buyer or seller or is a dual agent (representing both) or a subagent (an agent of the seller's broker). This allows the customer to understand to which party the broker owes loyalty. Example: The agency disclosure agreement submitted by Bob Broker to the prospective buyer for his signature stated that Bob Broker is a subagent of the seller's agent and will be paid by the selling broker. This puts the buyer on notice that Bob Broker's loyalty is to the seller. Without this disclosure, the prospective buyer might have mistakenly thought that Bob Broker was working for him.