OH Agency Creation, the Agency Disclosure Statement & Dual Agency

Before you can disclose an agency relationship, it must exist. In Ohio, an agency relationship is formally created when a licensee and a client enter into an agreement for representation. Think of this as the explicit handshake that turns a member of the general public into your client, owed your highest fiduciary duties.

Source: Fiduciary duty diagram by Simonga25wiki, CC BY-SA 4.0.

However, the law imposes strict structural requirements on these agreements. Ohio law dictates that all exclusive agency agreements must be in writing. You cannot have an exclusive right to sell a property or an exclusive right to represent a buyer based merely on a spoken promise.

But what if you never sign a formal agreement? The law recognizes the reality of human behavior. Implied agency can be created purely by a licensee's actions if a consumer reasonably believes the licensee is representing them. If you begin advising a buyer on negotiation tactics or pulling comparative market analyses tailored to their financial constraints, the law may view you as their agent, regardless of what is on paper. You have inadvertently crossed the threshold.

Subagency and the Brokerage Policy

Every real estate brokerage operates differently. Because of this, Ohio real estate brokerages must have a written policy defining the types of agency relationships offered by the brokerage.

One such relationship you might encounter is subagency. Subagency is an agency relationship where a licensee acts for another broker's client. Because this extends liability across brokerage lines, a subagency relationship in Ohio requires the express consent of the client. It cannot happen by accident or assumption.

Imagine a patient walking into a hospital; before the doctor performs surgery, the patient needs to understand the types of procedures available. In real estate, the Ohio Consumer Guide to Agency Relationships serves this exact purpose. It educates the public on the available agency types and outlines the specific policies of your brokerage.

Crucial Distinction: Providing the Ohio Consumer Guide to Agency Relationships does not create an agency relationship between the licensee and the consumer. It is purely an educational roadmap.

Because its purpose is to protect consumers before they reveal their hand, Ohio law is rigorously specific about when this guide must be presented.

Trigger Points for Presentation

For Sellers: A licensee must provide the Ohio Consumer Guide to a seller prior to marketing or showing the seller's property.

For Buyers: The triggers for a buyer are designed to catch the relationship before substantive, confidential information flows. You must provide the Guide to a buyer prior to any of the following events:

1. Pre-qualifying the buyer.
2. Requesting specific financial information.
3. Showing property outside of an open house.
4. Discussing the making of an offer.
5. Submitting an offer to purchase on behalf of the buyer.

The Open House Exception: Open houses present a unique environment where buyers are freely browsing. Providing the Guide at an open house is only required if the licensee and buyer engage in substantive discussions about a specific property. Merely greeting a buyer or handing them a flyer does not trigger the requirement; sitting down to discuss how much they can afford absolutely does.

If the Consumer Guide is the syllabus, the Ohio Agency Disclosure Statement is the binding final exam. This is a state-mandated form documenting exactly who represents whom in a specific transaction. It is legally mandated by Ohio Revised Code section 4735.57.

The form itself is not arbitrary; the Superintendent of Real Estate establishes the Ohio Agency Disclosure Statement form with the approval of the Ohio Real Estate Commission.

Source: Ohio Statehouse exterior by Ɱ, CC BY-SA 4.0.

Unlike the Consumer Guide, which is broad and educational, the Agency Disclosure Statement is transaction-specific. It anchors the abstract concept of agency to a physical piece of real estate.

Anatomy of the Form

To be valid, the Ohio Agency Disclosure Statement must include:

• The specific property address.
• The names of all non-confidential buyers and sellers.
• The names of the specific licensees and brokerages involved in the transaction.
• A clear declaration of which party each licensee represents in the transaction.
• A statement advising the client to consult an attorney if the client does not understand the form.

Initiation, Timing, and Strict Liabilities

In any real estate transaction, the buyer's agent is legally responsible for initiating and completing the Ohio Agency Disclosure Statement.

When must this happen? A licensee must present the Statement to a consumer no later than the preparation of an offer to purchase or lease.

• The buyer must sign the Ohio Agency Disclosure Statement before an offer is presented to the seller.
• The seller must sign the Ohio Agency Disclosure Statement before accepting the buyer's offer.

Violations to Avoid at All Costs: The state strictly prohibits the manipulation of this form.

1. No Blank Checks: Signing a blank or incomplete Ohio Agency Disclosure Statement violates Ohio license law. For example, a listing agent having a seller sign an incomplete Agency Disclosure Statement at the time of listing—before a buyer is even known—is a direct violation of Ohio license law.
2. No Post-Signing Alterations: Altering a signed Ohio Agency Disclosure Statement without having all parties initial the changes violates Ohio law. If the representation dynamic changes, the paperwork must meticulously and transparently reflect that change.

In traditional agency, your allegiance is undivided. But what happens when the gravitational pull of a transaction brings two of your clients together? Dual agency occurs when a brokerage or licensee represents both the buyer and the seller in the same real estate transaction.

Under Ohio Revised Code section 4735.71, dual agency is permitted only with the informed, written consent of both the buyer and the seller. This consent must be formally documented on the Ohio Agency Disclosure Statement.

The Physics of Neutrality

When you become a dual agent, your role fundamentally shifts from an advocate to a neutral facilitator. You are balancing on a tightrope, and the law strips away several of your traditional tools to ensure fairness.

A dual agent is legally prohibited from:

• Advocating on behalf of either the buyer or the seller.
• Negotiating on behalf of either the buyer or the seller.
• Suggesting specific terms to either the buyer or the seller.
• Disclosing the price a buyer is willing to offer.
• Disclosing the price a seller is willing to accept.

What a dual agent MUST do:

• Maintain the confidentiality of any information that would adversely affect a party's negotiating position.
• Disclose known latent material defects to the purchaser. (Neutrality does not exempt you from the duty to protect a buyer from hidden physical dangers in the property).
• Prepare and present all offers and counteroffers at the direction of the parties. You become the conduit for their decisions, not the architect of them.

Split Agency (Designated Agency)

To mitigate the severe constraints of dual agency, Ohio law allows a broker to assign one licensee to represent the buyer and another licensee to represent the seller in the same transaction. This is known as split agency or designated agency.

In a split agency transaction, the assigned licensees act as single agents for their respective clients. They can fully advocate and negotiate. However, because both agents operate under the same broker's umbrella, the broker and management-level licensees act as dual agents.

Management-Level Nuance: A management-level licensee becomes a dual agent if they supervise both the buyer's agent and the seller's agent in the same transaction.

What if a brokerage does not utilize designated agency? If two agents from the same brokerage represent opposite sides of a transaction without designated agency in place, the brokerage itself acts as a dual agent, and both agents are bound by the strict neutrality rules of dual agency.

An agency relationship is not eternal. Like all mechanical processes, it eventually comes to a halt. Termination occurs through either automatic triggers or voluntary acts.

Automatic Termination

The universe can terminate an agency agreement without the consent of either party. An agency relationship terminates automatically upon:

1. Death of either the principal or the broker. (Note a vital distinction: the death of a real estate salesperson does not terminate the agency relationship between the client and the brokerage, because the contract is technically with the broker).
2. Destruction of the property (e.g., the house burns to the ground).
3. Bankruptcy of either the principal or the broker, which immediately terminates the relationship.
4. Expiration of the term stated in the agency agreement.
5. The successful completion of the transaction.

Voluntary Termination

Humans can also choose to sever the bond, though it may carry consequences.

• Mutual Agreement: The principal and the broker can terminate an agency relationship at any time by mutual agreement.
• Revocation by Principal: A principal always has the power to revoke an agency agreement at any time. However, revoking an exclusive agency agreement before the agreement's expiration date may expose the principal to a breach of contract lawsuit. They have the power, but perhaps not the legal right without penalty.
• Renunciation by Broker: A broker may renounce (fire) an agency relationship if the client refuses to cooperate, or critically, if the client instructs the broker to act illegally (such as violating Fair Housing laws).

The Eternal Survivor

While the active duties of obedience, disclosure, and accounting fade when the relationship ends, one element of the agency bond acts like background radiation, persisting forever. The fiduciary duty of confidentiality in an Ohio agency relationship survives the termination of the agency relationship. Even if your listing agreement expires, or the transaction closes, you may never weaponize the private knowledge you gained about your client during the course of your representation.

Source: Cloud chambers played an important role of particle detectors by Nuledo s.r.o., CC BY-SA 4.0.