28.1 AL – RECAD
Topic 28.1: RECAD (Real Estate Consumer’s Agency and Disclosure Act)
RECAD exists to reduce confusion about who a licensee represents and what duties are owed. This topic covers the key definitions, the consumer-protection purpose of the law, and how buyers and sellers choose representation.
Why RECAD matters (big picture)
Home buyers and sellers often assume a real estate licensee automatically “works for them.” RECAD was enacted to protect consumers by clearly defining brokerage relationships, agency roles, and disclosure requirements—so consumers can make informed choices before confidential information is shared or services begin.
- Goal: protect consumers by clarifying roles, duties, and representation.
- Tool: a required disclosure form (the Real Estate Brokerage Services Disclosure form) used by all licensees to explain available services and relationships.
- Important note: consumers are not required to sign the disclosure form, but licensees should encourage signatures and note refusals.
Core RECAD definitions (know these cold)
- Consumer: a person who obtains information, advice, or services from a real estate licensee regarding real estate transactions.
- Customer: a person receiving brokerage services but not a client (no signed agency agreement).
- Client: a person who has a signed agency agreement with a broker/company for brokerage services.
- Agency agreement: a written brokerage agreement that creates a fiduciary relationship between the company’s qualifying broker and the consumer (consumer becomes a client).
- Brokerage agreement: a specific written agreement establishing a brokerage relationship and the terms/conditions of services (including compensation). (This term includes both agency and transaction facilitator agreements.)
- Brokerage service: services provided by a broker/licensee that include activities requiring a real estate license (rental/property management not included here, per your text).
- Buyer’s agreement: agreement where the company assists a buyer in exchange for a fee as either a fiduciary or non-fiduciary.
- Listing agreement: agreement where the company assists an owner selling real estate in exchange for a fee as either a fiduciary or non-fiduciary (also applies to a seller’s future decision to sell).
- Single agent: represents one party (buyer or seller) in a transaction through a signed agency agreement.
- Dual agency: represents both seller and buyer in the same transaction with informed written consent of all parties.
- Transaction facilitator: assists one or more parties without being an agent, fiduciary, or advocate; without a signed agreement, facilitation remains in effect.
- Fiduciary duties: duties owed to a client under an agency agreement (includes loyalty and reasonable care).
- Informed consent: agreement based on full disclosure of facts needed to choose appropriate services.
- Material fact: a significant fact that affects a reasonable party’s decision to enter a contract.
Exam tip: The fastest way to sort relationships is: signed agency agreement = client. No signed agency agreement = customer (even if the licensee is helping).
Representing the seller and/or the buyer (what’s allowed)
After brokerage services and arrangements are explained, the consumer can choose whether to enter into an agency relationship—and which arrangement fits their needs. If the consumer chooses not to sign a brokerage arrangement, there is no agency relationship.
What can happen before an agency agreement is signed?
- A licensee may show properties to potential clients.
- A licensee may host an open house.
What requires a signed agency agreement first?
- Performing certain acts such as making offers for buyers or listing a property for sellers.
If the licensee represents the seller, the licensee negotiates for the best selling price and terms for the seller. If the licensee represents the buyer, the licensee negotiates for the best purchase price and terms for the buyer. If representing both, the licensee must strive to represent both fairly and avoid conflicts whenever possible (with informed written consent where required).
RECAD Basics
Choose the best answer for each question, then select Check Answers.
Under RECAD, when does a consumer become a “client”?
A client is a person who has an agency agreement with a broker/company for brokerage services.
Which relationship describes a licensee who helps parties without being an agent or fiduciary?
A transaction facilitator assists one or more parties without being an agent, fiduciary, or advocate.
Great job! You have the key points of this topic down.
