2.1 Indiana Agency Relationships Overview
Key Takeaways
- Indiana agency law lives in IC 25-34.1-10; it defines client, customer, agent, and limited agent and controls every brokerage relationship.
- Indiana licenses are Broker and Managing Broker only - the salesperson license was eliminated effective July 1, 2014.
- A client relationship requires a written agency agreement; without one, the consumer is a customer owing no fiduciary duties.
- The managing broker's written office policy must be disclosed in writing before the consumer reveals any confidential information.
- An agent owes six fiduciary duties to a client; a customer receives honesty, fair dealing, and disclosure of adverse material facts only.
How Indiana Frames Agency
A threshold fact the exam loves: Indiana eliminated the "salesperson" license effective July 1, 2014. Everyone now enters as a Broker, and a Managing Broker supervises and is held responsible for affiliated brokers. If an answer choice says "salesperson," it is almost always a distractor for current Indiana practice.
Core Statutory Definitions (IC 25-34.1-10)
| Term | Indiana Statutory Meaning |
|---|---|
| Client | A person who has entered into an agency relationship with a licensee |
| Customer | A person who receives services but has not entered an agency relationship |
| Agent | A licensee representing a client (loyalty + full fiduciary duties) |
| Limited Agent | A licensee representing both seller and buyer (Indiana's dual agency) |
| Adverse Material Fact | A fact about property condition or a party's ability to perform that a reasonable party would want to know |
| Confidential Information | Information made confidential by the client or by IC 25-34.1-10 |
Client vs. Customer - The Pivot
The written agency agreement is the switch that converts a consumer from customer to client. No writing, no client, no fiduciary duties. This is heavily tested.
- Client (agency relationship): owed the six fiduciary duties - L-O-A-D-C-C: Loyalty, Obedience, Accounting, Disclosure (of material facts to the client), Confidentiality, and reasonable Care/diligence.
- Customer (no agency): owed only honesty, fair dealing, and disclosure of known adverse material facts. The licensee may perform ministerial acts (opening doors, delivering documents, providing standard forms) without creating agency.
Exam Trap: Performing ministerial acts or merely showing a property does NOT create an agency relationship. IC 25-34.1-10 also states that payment of compensation does not, by itself, create agency - a seller can pay a buyer's broker without the buyer's broker representing the seller.
Required Written Disclosure of Office Policy
Under IC 25-34.1-10-13, every managing broker must develop a written office policy describing the agency relationships licensees may have and stating whether the firm permits or rejects disclosed limited agency. A licensee must disclose that policy in writing at the beginning of the relationship - before the consumer discloses any confidential information specific to them.
| Trigger | Required Action |
|---|---|
| First substantive contact | Disclose written office agency policy |
| Before confidential info shared | Written disclosure must already be made |
| Compensation will be shared with another firm | Advise the parties of that sharing |
| Relationship changes (e.g., customer becomes client) | Redefine and disclose the new relationship |
Worked example: A walk-in tells a broker at an open house, "I have to move in 30 days and I'll go to $260,000." If the broker had not yet disclosed the office policy, that motivation and price ceiling were collected improperly. Disclose first, then collect.
Seller Agency and Buyer Agency Duties
Whether the client is a seller (landlord) or a buyer (tenant), the same six fiduciary duties apply - they just point at a different principal.
Seller (Listing) Agency
| Duty | What It Means for a Seller's Agent |
|---|---|
| Loyalty | Promote the seller's interests above all others |
| Obedience | Follow the seller's lawful instructions |
| Accounting | Account for all money and documents (earnest money in escrow) |
| Disclosure | Reveal all known material facts to the seller |
| Confidentiality | Never reveal the seller's lowest acceptable price or motivation |
| Care | Market competently and advise on offers diligently |
Buyer (Tenant) Agency
A buyer's agent owes the identical duties to the buyer and must not reveal the buyer's top price or urgency to the seller's side. A written buyer agency agreement is required to create the relationship. Note the post-2024 NAR settlement reality now tested in Indiana courses: a buyer's written agency agreement must state buyer-broker compensation as a specific, conspicuous amount, and offers of cooperative compensation are no longer posted in the MLS.
Customer-Level Service
A customer is entitled to fewer services. The licensee may still help with logistics but gives no advice or advocacy.
| Customer Service | Example |
|---|---|
| Standard forms | Hand over a state-approved sales disclosure form |
| Scheduling | Arrange showings and inspections |
| Delivering documents | Carry an offer between parties |
| Factual information | State square footage, taxes, school district - no opinion of value |
Exam Trap: A customer is still owed disclosure of known adverse material facts (a leaking roof, a failed septic). "No duty" is wrong; the licensee simply owes no loyalty or confidentiality.
Sales Disclosure (Seller's Disclosure of Property Condition)
Separate from agency disclosure, Indiana's IC 32-21-5 requires the seller of residential real estate (1-4 units) to complete a Sales Disclosure Form covering the condition of the foundation, mechanicals, roof, water/sewer systems, and known hazards. Key tested points:
- Delivered to the buyer before the buyer makes an offer (or the buyer may cancel within set limits).
- Required even when the property is sold "as is."
- Exemptions include transfers by foreclosure, estate, court order, or between co-owners/relatives, and new construction never occupied.
Putting It Together
The chain the exam tests is: disclose office policy in writing -> consumer chooses client or customer -> if client, sign a written agency agreement -> the six fiduciary duties attach. Confirm the agency relationship in writing again before or at the time the purchase agreement is signed.
A consumer walks into an open house and, before any disclosure is made, tells the listing broker they must close in three weeks and will pay full price. The broker has not yet provided the firm's written office policy. What is the broker's primary compliance failure?
Under current Indiana law, which statement about license types is correct?
A licensee shows a property and delivers an offer for a buyer who has signed no agreement and is treated as a customer. The licensee knows the basement floods every spring. What must the licensee do?