Agency Broker

The definition of agency broker that can be found in Combley's Cambridge Business English Dictionary, states that agency broker is "a person or organization that buys and sells shares or property for another person or organization" (2011).

Agency broker's job is to act in the best interest of their clients. Agency broker's actions are guided by professional standards of care. The main goal of agency broker is to satisfy his or her clients. That includes: finding lowest prices in the best terms and follow orders given by the client. This task has to be carried out with a great knowledge about managed properties and/or shares, which includes knowing if repair procedures, inspections and others should be included in the terms of the financial offer. Agency brokers are being employed to find suitable purchasers for sellers or the other way around (Hopper, 1992).

Single vs. dual agency broker

There are two kinds of agency brokers, single agency broker and dual agency broker. They differ in that single agency broker represents either a buyer or a seller and dual agency broker represents both at the same time.

Single agency broker has the advantage of having lower risk of misunderstanding. That is, because one way broker is responsible only for one side of a deal, so the possibility of agency broker's actions being affected by any conflict of interest is drastically reduced. Whereas, dual agency broker is responsible for both sides, so the risk of being accused of conspiring is higher.

Real estate broker activity areas

Real estate broker is usually an independent contractor who's job revolves around (Anderson, 2000):

1. Mobile-home sales
2. Residential income property
3. Commercial properties
4. Industrial properties
5. Property management
6. Land and farm brokerage
7. Lot sales
8. Loan brokerage
9. Auction sales
10. Mortgage loan activities
11. Business opportunities
12. Appraisal
13. Leasing agent

Law requirements

As soon as a broker is representing an individual, he or she needs to make an early disclosure of who is being represented by them. It is done by writing a note that also should include sales contract.

Both selling and listing brokers have to prepare two disclosures of their agency representation. It needs to be done for both a buyer and a seller. The first disclosure is needed before signing any documents and the second one needs to be done when final documents are being signed.

Licensee, prepared by agency broker who provides appropriate representation has to include full disclosure concerning his or her representation. This needs to be confirmed with written consent by both sides.

Agency broker's duty is to conduct full and faithful inspection of the property and to make a disclosure of any material defects to the client before closing the deal (Hopper, 1992).

Agency brokers working system rules

Agency brokers are regulated by (Laby, 2010):

• rules urged by the Financial Industry Regulatory Authority (FUNRA)
• Securities Exchange act of 1934
• self-regulatory organization (sro) specialized for broker-dealers (Laby, 2010)

Examples of Agency Broker

• Banks: Banks are often used as agency brokers when buying or selling stocks or properties for their customers.
• Brokerage Firms: Brokerage firms are professional services that specialize in buying and selling shares and properties on behalf of their clients.
• Investment Firms: Investment firms are professional services that specialize in managing investments on behalf of their clients.
• Insurance Companies: Insurance companies often act as agency brokers, buying and selling stocks and properties for their customers.
• Hedge Funds: Hedge funds are professional services that specialize in managing investments for their clients.
• Real Estate Agents: Real estate agents are professional services that specialize in buying and selling properties on behalf of their clients.

Advantages of Agency Broker

Agency brokers offer a number of advantages in the trading of securities and other financial instruments. These include:

• Access to a Wide Range of Markets: Agency brokers provide access to a wide range of markets, enabling clients to access different types of investments, such as stocks, bonds, options, futures, and other financial instruments.
• Expertise and Guidance: Agency brokers offer clients valuable guidance, advice and trading strategies. They are able to provide expert advice on the best strategies for trading in different markets, taking into account the current market conditions.
• Lower Costs: Agency brokers generally charge lower commission rates than other brokers, helping to reduce trading costs for clients.
• Transparency: Agency brokers provide clients with a clear view of their trading activities, providing information on commissions and other fees, as well as detailed performance reports.
• Access to Market Research and Analysis: Agency brokers often provide their clients with access to market research and analysis, helping them to make informed trading decisions.

Limitations of Agency Broker

Agency brokers provide valuable services to many people and organizations, however there are certain limitations associated with their services that should be taken into consideration. These limitations include:

• Cost - Agency brokers typically charge a commission for their services, which can be expensive depending on the size of the transaction.
• Risk - Agency brokers are not responsible for any losses incurred due to their advice or services, so clients must be aware of the risk associated with their investment.
• Conflict of Interest - Agency brokers may have a conflict of interest if they receive additional compensation from a company whose stock they are selling.
• Lack of Expertise - Agency brokers may not have the necessary expertise in certain areas, such as specialized stock options or derivatives.
• Time - Agency brokers may not be able to respond quickly to changing market conditions or client requests.
• Limited Services - Agency brokers may not provide services such as financial planning or portfolio management.

Other approaches related to Agency Broker

Agency brokers are also known for their diverse approaches to the industry. These approaches include:

• Purchasing and selling of securities on behalf of the customer: Agency brokers, when working with a customer, will look to purchase and sell securities on behalf of the customer. This could include stocks, bonds, mutual funds, and other types of investments.
• Researching and analyzing various investment opportunities: Agency brokers will research and analyze various investment opportunities for their customers in order to make informed decisions about their investments.
• Providing access to capital markets: Agency brokers are also able to provide access to capital markets for their customers, allowing them to invest in different securities and asset classes.

In summary, agency brokers have a variety of approaches to the industry, including purchasing and selling securities, researching and analyzing investments, and providing access to capital markets. These approaches allow them to help their customers achieve their financial goals.

Agency Broker — recommended articles

Sub broker — Selling away — Mercantile agent — Commercial mortgage broker — Investment counsel — Chartered wealth manager — Insurance intermediary — Daily money manager — Land agent — Quality of equipment

References

• Anderson, L., Otto, D. S., & Pivar, W. H. (2000). California Real Estate Practice. Dearborn Trade Publishing.
• Bressman, L. S., & Thompson, R. B. (2010). Future of agency independence, Vand. L. Rev., 63, 3.
• Combley, R. (Ed.). (2011). Cambridge business English dictionary. Cambridge University Press.
• Gardiner, J. N., Heisler, J., Kallberg, J. G., & Liu, C. H. (2007). The impact of dual agency, The Journal of Real Estate Finance and Economics, 35(1), 39-55.
• Gedicks, F. M. (2005). Suitability Claims and Unrecommended Securities Purchases: An Agency Theory of Broker-Dealer Liability.
• Hopper, B. L. (1992). The selling real estate broker and the purchaser: assessing the relationship, Byu L. Rev., 1135.
• Kroll, R. E. (1982). Dual Agency in Residential Real Estate Brokerage: Conflict of Interest and Interests in Conflict, Golden Gate Ul Rev., 12, 379.
• Laby, A. B. (2010). Fiduciary Obligations of Broker-Dealers and Investment Advisers, Vill. L. Rev., 55, 701.
• Williams, J. T. (1998). Agency and brokerage of real assets in competitive equilibrium, The Review of Financial Studies, 11(2), 239-280.

Author: Mateusz Fudala