Tennessee Agency Law Guide for the Real Estate Exam

# Tennessee Agency Law Guide for the Real Estate Exam

Tennessee agency law has a distinctive feature that sets it apart from most other states: dual agency is prohibited in residential real estate transactions. This is one of the most tested state-specific topics on the Tennessee PSI exam.

Tennessee's Prohibition on Residential Dual Agency

Unlike the majority of states that permit dual agency with written informed consent, Tennessee law prohibits a single licensee from representing both the buyer and seller in the same residential transaction. Each party must have their own representative.

This prohibition applies specifically to residential property. For commercial transactions, the rules differ and dual agency with consent may be permitted. Know this distinction for the exam.

Types of Agency Relationships in Tennessee

Seller's Representative (Listing Agent): Works exclusively for the seller. Owes full fiduciary duties. Must present all offers and maintain the seller's confidential information, including their lowest acceptable price.

Buyer's Representative: Works exclusively for the buyer. Must disclose any known material defects to the buyer even if the seller has not disclosed them. Negotiates in the buyer's best interest.

Transaction Broker: A neutral facilitator who assists both parties without representing either. Permitted in Tennessee. Transaction brokers do not owe fiduciary duties but must treat both parties honestly and fairly.

Fiduciary Duties in Tennessee

Tennessee recognizes the standard fiduciary duties owed by agents to their clients: - Loyalty: Place client's interests above all others, including the agent's own - Obedience: Follow lawful client instructions - Disclosure: Reveal all material facts, including known property defects - Confidentiality: Protect client's private information during and after the agency relationship - Accounting: Safeguard client funds and property - Reasonable care: Use professional skill and competence

Agency Disclosure Requirements

Tennessee law requires real estate licensees to provide written agency disclosure before providing substantive services. This disclosure must: - Identify which party the licensee represents - Explain the duties owed to that party - Be signed by the client

The TREC has approved disclosure forms. Using unauthorized forms or failing to disclose is a license law violation and grounds for disciplinary action.

Listing Agreements in Tennessee

Tennessee uses primarily the exclusive right-to-sell listing agreement. The listing broker earns a commission regardless of who procures the buyer. Key elements that must appear in a valid listing agreement: - Parties' names - Property description - Commission amount and when it is earned - Listing term (start and expiration dates) - Seller's signature

Listing agreements without a definite termination date are voidable in Tennessee.

Common Exam Traps

The exam frequently tests whether you know the residential dual agency prohibition. Scenario questions may describe a situation where one agent represents both parties and ask what the agent should do — the correct answer is always to disclose the conflict and refer one party to another licensee, not to proceed as a dual agent.