2.1 Massachusetts Agency Relationships

How Agency Works in Massachusetts

An agency relationship is created when a real estate licensee acts on behalf of a client (the principal) in dealing with a customer (the third party). The client receives full fiduciary duties; the customer receives only honesty and fair dealing. Massachusetts agents memorize fiduciary duties as OLD CAR: Obedience to lawful instructions, Loyalty (client's interest above the agent's own), Disclosure of all known material facts, Confidentiality of the client's bargaining position, Accounting for money and documents, and Reasonable care and diligence.

Unlike many states, Massachusetts does not create agency by implication from helpful conduct. The 2005 agency regulations (254 CMR 3.00) made the facilitator the default relationship: if no written agency agreement is signed, the licensee is presumed to be a facilitator, not an agent. This trips up candidates who assume "showing a buyer houses" automatically makes you a buyer's agent.

Trap: Confidentiality survives the end of the relationship; the duty to disclose a known material defect (a leaking roof, a failed septic) is owed to everyone and is never waived by confidentiality.

The Four Relationships

A seller's agent (listing broker) owes OLD CAR to the seller and must get the highest price and best terms for that seller. A subagent is a cooperating broker who also works for the seller through the listing broker; subagency is now rare and requires the seller's consent. A buyer's agent owes the same OLD CAR duties to the buyer and must negotiate the lowest price and best terms for the buyer.

The client/customer distinction drives the whole exam. A client is the principal who hires the agent and receives full fiduciary loyalty; a customer is the unrepresented third party who receives only honesty, fair dealing, and disclosure of known material defects. A listing agent's customer is the buyer; a buyer agent's customer is the seller. Calling the wrong person the "client" is a classic distractor, the buyer is not the seller's agent's client just because the agent is helping the buyer sign paperwork.

Another MA-specific point: an agency relationship can be created without any commission changing hands. Compensation does not determine agency. A buyer's agent paid out of the seller's listing fee still owes full fiduciary duties to the buyer, not the seller. Conversely, a seller paying a cooperating broker does not make that broker the seller's agent if a buyer-agency agreement is in place.

The Massachusetts Facilitator

The facilitator (sometimes called a transaction broker) is Massachusetts's signature non-agency role. A facilitator helps a buyer and seller reach an agreement but represents neither. A facilitator can show properties, supply standard forms, transmit offers and counteroffers, explain financing options, and coordinate the closing. A facilitator cannot advocate, recommend an offer price, reveal one side's motivation or bottom line, or give one party an advantage.

Even without fiduciary duties, a facilitator still owes three things: (1) to account for all funds and property received, (2) to exercise reasonable care and skill, and (3) to disclose known material defects in the real estate. So "no duties" is wrong on the exam, no fiduciary duties is correct.

Worked scenario: A licensee meets unrepresented walk-in buyers at an open house, has signed no agreement, and helps them write an offer. She is a facilitator. If the buyers ask "How low will the seller go?" she may not answer, but if she knows the basement floods, she must disclose it.

Dual Agency and Designated Agency

Dual agency occurs when one licensee (or one brokerage) represents both buyer and seller in the same transaction. It is legal in Massachusetts only with prior written informed consent from both parties. A dual agent must remain neutral, may not disclose either side's confidential price or motivation, and forfeits the duty to advocate. The dual agency disclosure must be signed before the agent begins acting for both.

Designated agency is the broker's escape hatch: the supervising broker designates one salesperson to the seller and a different salesperson to the buyer. Each designated agent gives full OLD CAR representation to their own client, while the appointing broker becomes a neutral dual agent overseeing both. Designated agency also requires written consent.

Remember the hierarchy: no written agreement defaults to facilitator; a signed listing or buyer agency creates single agency; representing both sides triggers dual or designated agency with consent.

A licensee may also convert relationships, but only with proper notice. A buyer's agent who later finds the buyer wants to bid on the agent's own listing must either obtain written dual-agency consent from both parties or step back to facilitator status for that property. The conversion and any new consent must be documented before negotiations on that property continue, never after an offer has already been written. Failing to convert correctly is one of the most common ways an agent slides into an undisclosed dual-agency violation, which is also a Chapter 93A and license-discipline exposure covered later in this chapter.