Overview of Statute

The Delaware legislature recently passed legislation that changed the agency relationship between the Realtor and the buyer and seller. A brief synopsis of the significant points of the new law is set forth below:

1. Brokers and salespersons are now “independent contractors” and are no longer considered fiduciaries.  

2. A Consumer Information Statement (CIS) must be delivered by the agent to a buyer or seller upon first contact, i.e., the first scheduled appointment or showing of the property, whichever is earlier. (unless the CIS has already been given to the buyer or seller by another agent in the transaction).

1. An agent working with a buyer who knows that the seller is working with another agent is not required to provide a CIS to that seller and vice-versa
2. The CIS should be made available to a prospective buyer at an open house but does not need to be personally presented by the listing agent and signed by that person unless he/she asks for more than factual information about the property or expresses an interest in making an offer during the open house.
3. A buyer’s agent who has a buyer that signs the CIS is entitled to a commission only when the agent finds that buyer a house.
   


3. Important changes from the old agency law:

1. The new law eliminates dual agency except in the following circumstances:



1. If the same salesperson represents both the buyer and seller in a transaction, then that salesperson, his or her broker of record and brokerage organization are all dual agents.



2. If the buyer and seller are represented by 2 different salespeople working for the same broker of record, then the broker of record and the brokerage organization are both dual agents, but the salespersons are not.



3. If the buyer and seller are represented by 2 different salespeople working for 2 different brokers of record under the same brokerage organization, then the brokerage organization is a dual agent.



Back

2. No vicarious liability.  In other words, a buyer or seller and his/her broker and designated agent are not responsible for the wrongful actions of the other unless they had actual knowledge of the wrongful act, omission or misrepresentation; however the person who was wrong is still responsible.  Please note that the new law is not intended to eliminate or otherwise limit the liability of a brokerage organization, broker owner or broker of record for an act, error, or omission of a broker or agent licensed through that brokerage organization, broker owner or broker of record


3. Notice given to a designated agent is considered notice given to that designated agent’s client. Notice given to anyone else in the agent’s office is not considered notice to that client.


4. No apparent authority.  An agent can no longer undertake certain discretionary services for a buyer or seller such as signing the HUD-1 or pest inspection, unless he/she receives authorization from their client.  If an agent wants to perform such discretionary services, it is recommended that the buyer or seller sign an “Authorization to sign settlement documents” form which would allow an agent to sign these types of documents.  This is not to be confused with a “Durable Power of Attorney” signed by a buyer or seller authorizing their agent or other designated person to sign the deed, transfer tax affidavits, note, mortgage, etc.



5. All commission agreements must be in writing but does not necessarily have to be in the listing agreement.

4. There is no longer any common law agency except when (a) buyers and/or sellers agree in a separate written agreement and (b) if that is the only service offered by that brokerage organization, e.g., the organization only represents sellers or only represents buyers.



5. Brokers and/or agents should pay particular attention as to what they must and may do as set forth on page 4 of the CIS.



6. Brokers and/or agents have a duty of confidentiality to all parties from the time of first contact.  Unless a broker and/or agent has a client’s informed consent, there is no disclosure of certain information as set forth on page 3 of the CIS.  With respect to item #7 on page 3 regarding sex offenders, agents and/or brokers should refer their client to the Delaware State Police website at www.state.de.us/dsp/sexoff/index.htm.

Back