There are agents, and then there are agents. Yes, it sounds confusing. That’s because the term “agent” is often used in a casual manner, referring to any real estate practitioner. But agent also refers to someone with whom you’ve established a formal agency relationship—someone who represents your best interests in a real estate transaction and owes you fiduciary responsibilities. Agency relationships are usually established in writing with buyer agency agreements, and require:
- Reasonable care and diligence
THE BIRTH OF BUYER AGENCY
For many years, real estate was practiced in such a manner that agency relationships were only extended to sellers. Any real estate agent who brought a buyer to the table was actually working as a sub-agent to the seller.
This all began changing in the 1980s, when buyer agency started gaining momentum in residential transactions. Today, agency laws still vary from state to state. But even if you live in a state that recognizes buyer agency, you can’t assume that you will automatically receive fiduciary responsibilities from the agent you’re working with as a potential home buyer.
That’s why it’s vitally important to talk to the agent or broker early in your working relationship about his/her agency status. You may also want to consult your state association of REALTORS® to gain a better understanding about agency laws in your particular state, or contact the agency charged with regulating real estate professionals in your state, often referred to as the state real estate commission.
Details vary from one state to another, and each brokerage has its own contract terms within these broader guidelines. But for purposes of illustration, this table outlines how your status may affect the level of service to which you are entitled:
Are you a buyer-customer or a buyer-client?
Services will vary, depending on your agency status*
If you are a CLIENT (agency relationship), your agent will:
- Pay full attention to your needs
- Tell you all that they know about the seller/buyer
- Keep information about you confidential
- Focus on choices that satisfy your needs
- Provide material facts as well as professional advice
- Provide price counseling based on comparable properties and their professional insights
- Protect and guide you
- Negotiate on your behalf
- Attempt to solve problems to your advantage and satisfaction
If you are a CUSTOMER (no agency relationship), an agent will:
(Generally this applies to buyers working with a real estate agent as they may or may not have an agency relationship with that particular real estate agent.)
- Maintain loyalty to the seller’s need
- Tell the seller all that they know about you
- Keep information about the seller confidential
- Focus on the seller-client’s property
- Provide just the material facts
- Only provide price information that supports the seller’s listing price
- Protect the seller
- Negotiate on behalf of the seller
- Attempt to solve problems to the seller’s advantage and satisfaction
YOU MAY NOT KNOW IF YOU’RE A CUSTOMER OR A CLIENT.
Depending on the laws in your state, you may find yourself working with someone who is actually negotiating for the seller, not you the buyer. The best way to be certain your interests are being considered and protected is to sign a buyer agency agreement with a trained buyer’s agent, which clearly establishes client-level services and spells out what services you can depend upon.
WHAT ABOUT DUAL AGENCY?
In some cases, it will become necessary for your real estate professional to deviate from the single agency model. For example, a buyer-client may become interested in a house that also happens to be offered for sale by a seller-client of their buyer’s rep, or by the same brokerage firm. How can a buyer’s rep, in this instance, maintain complete loyalty to their buyer if he or she also owes complete loyalty to the seller?
Obviously, they can’t. But, depending on the real estate license laws in your state, and your status with the brokerage firm, the manner in which this situation is handled will vary. To get concrete answers, you should read and discuss the brokerage services disclosure statement, which should reflect your state’s agency law. If your agent hasn’t supplied a disclosure statement, you should ask for it. It spells out the different categories of agency services they provide and how they address dual agency.
Almost all states require disclosure of dual agency and often require that a buyer’s rep (or his or her brokerage firm) only act as a dual agent with the written consent of all parties to the transaction. In such a situation, the brokerage agrees to endeavor to be impartial between both parties and will not represent the interest of either party to the exclusion or detriment of the other party. Neither will they share the confidential information of one party with the other party. This is how brokerage firms and their agents strive to create win-win situations for everyone involved. There are a few states that prohibit dual agency even with disclosure and consent.
OTHER TYPES OF RELATIONSHIPS
Some states also allow different types of relationships beyond agency relationships. For example, a transaction broker assumes responsibility to facilitate the transaction, rather than represent one side over the other. Further obligations may also be set forth in a written contract with a client.
Even though the laws concerning agency can vary from one state to another, one thing that is constant throughout the U.S. is the obligation for all REALTORS® to comply with the National Association of REALTORS® Code of Ethics
ISSUES TO DISCUSS WITH A BUYER’S REPRESENTATIVE
Real estate agency relationships, like all business relationships, can be formed in a number of ways. In order to help talk through your options, here are several questions to ask your buyer’s rep:
- Do you represent buyers, sellers or both?
- What services are provided to (or excluded from) me, based on my status as a buyer-customer or buyer-client?
- When does representation begin? When does it conclude?
- If I’m not ready to commit to your normal term, can you offer me a one-day buyer agency agreement or a 24-hour opt-out clause?
- How is dual agency addressed in your firm?