Brokerage agreements are employment contracts for the personal professional services of the sponsoring broker, not for the transfer of real estate. The various types of brokerage agreements establish the basic relationship between the parties and provide different levels of rights and responsibilities for the sponsoring broker. Perhaps most important, brokerage agreements address the essential questions of exclusivity and compensation.
A listing agreement is an employment contract between a sponsoring broker and a seller; a buyer representation agreement is an employment contract as well because it establishes the rights and responsibilities of the sponsoring broker as agent for the buyer.
A management contract sets up the relationship between the sponsoring broker and the owner of a rental property.
In Illinois, per Section 1450.195, a brokerage agreement is either a written or oral agreement between a sponsoring broker and a client for licensed real estate activities to be provided to a client in return for compensation or the right to receive compensation from another.
Brokerage agreements may constitute either a bilateral or a unilateral agreement between the sponsoring broker and the sponsoring broker’s client depending upon the content of the brokerage agreement. All exclusive brokerage agreements must be in writing.
Also in Illinois, each broker agreement must clearly state that it is illegal for either the owner or
the sponsoring broker to refuse to display or sell to any person because of one’s membership in a protected class (e.g., race, color, religion, national origin, sex, ancestry, age, marital status, physical or mental handicap, familial status, or any other class protected by Article 3 of the Illinois Human Rights Act). Employment contracts with buyers and sellers create special agency relationships between the principal/client (the person who is being represented by the sponsoring broker) and the sponsoring broker (the agent). As agent, the sponsoring broker is authorized to represent the principal/client to third parties.
Under both the law of agency and most state license laws, only a sponsoring broker can act as the legal agent to list, sell, rent, or purchase another person’s real estate and provide other services to a principal.
All sponsored licensees of a sponsoring broker may perform these acts in the name of and under the supervision of the sponsoring broker only (Designated Buyer or Seller Agent).
