Real estate agency is a legally binding relationship between real estate agents and their clients during the buying and selling process. Each state has its own rules regarding the licensing and duties of real estate professionals, as well as how they’re allowed to work with consumers.

First, there are two levels of licensure—broker and agent. Brokers can own their own agencies and work independently, while agents must work under a broker’s supervision.  When you hire an agent, you’re really hiring the broker.

Because brokers and agents can represent either or both parties to a real estate transaction, agency relationships must be disclosed to both the seller and the homebuyer. In most states, dual agency isn’t permitted, but a broker may assign another agent in the firm to represent one of the parties as a designated agent with limited fiduciary obligations.

In some regions, new industry rules or existing state laws may require homebuyers to sign temporary or long-term representation contracts with a buyer’s agent before they can begin touring homes. The contents of these agreements vary depending on the location of the property and other factors; consult with a local broker or sales professional for more specifics.