2.1 South Dakota Agency Relationships
Key Takeaways
- South Dakota recognizes three brokerage relationships: single agency, limited agency (dual agency), and appointed agency, all governed by SDCL chapter 36-21A
- A single agent represents only the buyer OR only the seller and owes that client undivided loyalty, confidentiality, obedience, accounting, and reasonable care
- Limited agency lets one brokerage represent both buyer and seller, but only with prior written consent and with neutrality on price and negotiating terms
- Under appointed agency the responsible broker designates one affiliated licensee to each party so each keeps a full advocate inside the same firm
- Every licensee owes minimum duties to ALL parties: honesty, disclosure of known material facts, and accounting for trust funds, regardless of who the client is
How South Dakota Defines Brokerage Relationships
South Dakota real estate licensing is governed by South Dakota Codified Law (SDCL) chapter 36-21A and the South Dakota Real Estate Commission's administrative rules in ARSD article 20:69. The law recognizes exactly three brokerage relationships, and the exam tests whether you can match the correct relationship to the facts and to the written disclosure each one requires.
Single Agency
A single agent represents only one side of the transaction and owes that client full fiduciary-style duties. South Dakota summarizes these with the acronym OLD CAR:
| Duty | What it means in practice |
|---|---|
| Obedience | Follow the client's lawful instructions |
| Loyalty | Put the client's interests above the licensee's own |
| Disclosure | Tell the client all known facts that affect the deal |
| Confidentiality | Protect the client's negotiating position and motives |
| Accounting | Account for all money and documents handled |
| Reasonable care | Exercise the skill expected of a competent licensee |
Worked example. Sara lists her Sioux Falls home with Broker Lee. Lee is Sara's single agent. A buyer-customer asks Lee, "Will the seller take $10,000 less?" Lee may not reveal Sara's bottom line (confidentiality) but must still answer the buyer honestly about known defects (a duty owed to all parties, below).
Limited Agency (Dual Agency)
Limited agency is South Dakota's term for what most states call dual agency. It exists when one brokerage represents BOTH the buyer and the seller in the same transaction. Because the brokerage cannot give undivided loyalty to two opposing parties, its duties are reduced.
- It arises when one licensee works with both parties, or when two licensees in the same firm represent opposite sides and no appointed-agent policy applies.
- The licensee must stay neutral on price and terms and may not disclose what one party will accept or pay.
- It requires the prior written consent of both buyer and seller before it can exist.
Appointed Agency (Designated Agency)
Under appointed agency, the responsible broker names one affiliated licensee to represent the seller and a different affiliated licensee to represent the buyer. Each appointed agent then owes full single-agent duties to their own client, so advocacy is preserved even though both sit in the same brokerage. The broker must give the client written notice of the firm's appointed-agent policy before the agreement, and may not appoint agents in a transaction governed by a pre-existing exclusive single or limited agency agreement without the client's written consent.
Duties Owed to ALL Parties
No matter which relationship applies, South Dakota imposes a floor of duties that a licensee owes to every party, client or customer alike. These cannot be waived by an agency agreement:
| Universal duty | Example |
|---|---|
| Honesty and fair dealing | No false statements to anyone in the deal |
| Disclose known material facts | A cracked foundation must be revealed to a buyer-customer |
| Disclose adverse facts about ability to perform | A buyer's financing falling through must be told to the seller |
| Account for trust funds | Earnest money goes to the correct trust account |
| Comply with all license law and fair-housing rules | Equal service regardless of protected class |
Common trap: Students confuse confidentiality with concealment. A licensee may keep a client's negotiating motives confidential, but may NEVER conceal a known material defect from the other side. Material-fact disclosure beats confidentiality every time.
Creating, Disclosing, and Changing the Relationship
South Dakota requires the relationship to be reduced to writing. Standard Commission forms and agreements include:
- Agency Agreement - Seller (creates seller representation / a listing)
- Agency Agreement - Purchaser (creates buyer representation)
- Limited Agency Consent (documents written consent to dual representation)
- Appointed Agent disclosure (notifies a client of the firm's policy)
Transition and timing rules
- Before substantive contact, a licensee should disclose in writing which relationship is being offered.
- A limited (dual) relationship may form only after both parties give prior written consent — never retroactively at closing.
- A licensee may not accept compensation from more than one party without full written disclosure to, and consent from, all parties. A buyer-paid fee plus a seller-paid commission requires written disclosure to both.
Scenario. Broker Nguyen lists a duplex (seller client). A buyer working with Nguyen's firm wants to write an offer on it. The firm can proceed three ways: (a) refer the buyer out, (b) obtain written limited-agency consent from both, or (c) if the firm has an appointed-agent policy, designate a second affiliated licensee for the buyer. Choosing limited agency without written consent would be an unauthorized relationship and a license-law violation.
Quick comparison
| Feature | Single | Limited (Dual) | Appointed |
|---|---|---|---|
| Parties represented by firm | One | Both | Both (one agent each) |
| Loyalty | Full to one | Neutral | Full per appointed agent |
| Written consent of both required | No | Yes | Yes (policy notice + consent) |
| Price/terms confidentiality kept | Yes | Limited | Yes, per agent |
What type of agency exists when one South Dakota licensee represents both the buyer and seller in the same transaction?
Under South Dakota's appointed agency, how does a brokerage preserve full advocacy for both the buyer and seller in one in-house deal?
A buyer-customer asks a seller's single agent whether the basement has ever flooded, which it has. What must the agent do?
When may a South Dakota brokerage lawfully accept compensation from more than one party in the same transaction?