Which of the following statements correctly describes a standard feature of a buyer-agency agreement?

A buyer-agency agreement is a formal employment contract that establishes an agency relationship between a prospective buyer (the principal) and a real estate brokerage (the agent). The fundamental purpose and legal effect of this agreement is to create a fiduciary relationship. This relationship legally obligates the agent to act in the buyer's best interests, upholding specific duties such as loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care. This fiduciary duty is the cornerstone of the buyer-agent's role and distinguishes them from other licensees in a transaction.

A. A buyer-agency agreement is an option rather than an employment contract.

This is incorrect. A buyer-agency agreement is a type of employment contract where the buyer hires the broker. An option is a unilateral contract giving the right to purchase a property.

B. A retainer fee is normally paid at the time the agreement is signed.

This is incorrect. While a retainer fee can be part of the agreement, it is not a standard or "normal" feature. Compensation is negotiable and often paid from the seller's proceeds.

C. The source of compensation determines the agency relationship.

This is incorrect. Agency is created by the express agreement between the principal and the agent, not by who pays the commission. A buyer's agent's fiduciary duty is to the buyer, even if they are compensated via a commission split from the seller.

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1. New Jersey Administrative Code, Title 11, Chapter 5, Section 6.9 (N.J.A.C. 11:5-6.9(d)): This regulation mandates the use of the Consumer Information Statement (CIS), which explicitly defines a "Buyer's Agent." The official CIS form states that a buyer's agent "has a fiduciary duty to you, the buyer... This means that a buyer's agent works in your best interest." This directly confirms that establishing a fiduciary relationship is a core feature.

2. Forward, D. C., Ruckman, D. N., & Ruckman, D. S. (2023). New Jersey Real Estate for Salespersons and Brokers (16th ed.). OnCourse Learning. In Chapter 5, "Agency," the text clarifies that an agency relationship is a fiduciary relationship. It states, "The relationship between a principal and an agent is a fiduciary relationship... The agent owes the principal the duties of care, obedience, accounting, loyalty, and disclosure." (p. 68). The text also explicitly states, "The source of compensation does not determine agency." (p. 71).

3. Galaty, F. W., Allaway, W. J., & Kyle, R. C. (2022). Modern Real Estate Practice (21st ed.). Dearborn Real Estate Education. Chapter 4, "Agency," defines the creation of agency and fiduciary responsibilities. It explains that an "express agreement," such as a buyer representation agreement, establishes the agency relationship and that this relationship is fiduciary in nature, imposing specific duties on the agent to the principal. (pp. 58-61).