Note: This tip about Oregon’s new statute requiring buyer representation agreements, NOT about the NAR settlement requirement that, when working with a buyer, written agreements must be in place prior to touring a home. The NAR requirement applies regardless of whether there is an agency relationship between the buyer and the real estate licensee.
As of January 1, 2025 Oregon law requires that real estate licensees have written representation agreements with buyers. Clearly, written agreements aren’t required for every potential buyer that a real estate licensee interacts with, and one of the most common questions we get is where to draw the line between when an agreement is required and when it is not. To answer this question we must dive further into the details of the law.
The law has both a precondition and a timing requirement.
The precondition is that the requirement only applies when a licensee is representing the buyer. The language of the statute is “A real estate licensee representing a buyer is required to act under a written representation agreement with the buyer.” (emphasis added)
Only if the precondition is met, the timing requirement comes into play. The timing requirement is that the agreement must be entered into “before, or as soon as reasonably practicable after, the licensee has commenced efforts to assist the buyer in purchasing real property or in identifying real property for purchase.”
The timing requirement is relatively straightforward. If you were representing the buyer, then you’d need to have the written agreement in place either before or soon after you took any actions to help them identify properties, such as sending them listings.
The more difficult question is “when does representation begin?” This is a question that is not specific to buyer representation agreements, but to all duties real estate licensees owe their clients, such as the duty of loyalty. It’s an old question, with a new application to buyer representation agreements.
Do you owe a duty of loyalty to a person who merely signed up on your website to receive emails about properties but otherwise has not indicated that they want to hire you to be their agent? The answer is of course, no. Otherwise, there would be thousands of people running around with accidental agency relationships. The same answer applies to the need for a buyer representation agreement.
So, when does representation (aka agency) begin?
Agency is the fiduciary relationship that arises when one person (a “principal”) manifests assent to another person (an “agent”) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act. Restatement of Agency (Third)
This mutual manifestation of assent doesn’t need to be in writing, but it has to happen for there to be representation, and for the accompanying duties, including the duty of loyalty and the duty to operate under a written representation agreement, to apply.
One way to think about this is to ask, at what point would a reasonable buyer and a reasonable real estate licensee believe that they had entered an agency relationship? If the buyer was asked “do you have an agent,” would the buyer say “yes?” If the real estate licensee was asked “are you representing that buyer?” would the real estate licensee say “yes?”
A reasonable person who has done nothing more than signing up on a brokerage website to receive automated emails about properties would not say that they hired an agent. Same goes for the reverse: a reasonable real estate licensee, when asked if that person was their client would say “no.”
On the other hand, if a buyer walks into a real estate licensee’s office (or calls or emails ) and says “I’m looking for a real estate agent to help me buy a house and I want to work with you” and then the licensee starts sending the buyer properties, it would be reasonable to say that those two parties had reached the mutual assent required to form an agency relationship.
Of course, there is a lot of grey area between these two scenarios, but we don’t live in a world of black and white. The only way to create certainty about when an agency relationship (and therefore representation) begins would be to amend Oregon law to say that the existence of the buyer representation agreement itself is what creates the agency relationship. Some states operate that way, and a buyer is considered a “customer” until they sign an agreement at which point they become a “client.” The duties owed to customers are lesser (e.g. to deal honestly) than to clients (e.g. confidentiality, loyalty, etc.).
This might be a good approach for Oregon to explore in the future, but that is not the law currently. For now, we are living in the grey area where real estate licensees must deploy their common sense and use their communication skills to determine if a potential buyer wants them to be their agent or is just wanting to receive general information.
Note: This tip about Oregon’s new statute requiring buyer representation agreements, NOT about the NAR settlement requirement that, when working with a buyer, written agreements must be in place prior to touring a home. The NAR requirement applies regardless of whether there is an agency relationship between the buyer and the real estate licensee.