Realtor Agency and Why It Matters To You
Whether you are buying or selling your first home, most consumers utilize the expertise of a real estate professional. When you work with a Realtor, how they represent you is called agency. This is important because it determines who the agent works for and where their fiduciary duty lies.
There are three different categories of agency; buyers, sellers and dual agency. Some real estate professionals serve in any of the roles depending on the transaction, while others specialize as either a buyer’s agent or a seller’s agent.
What Does Agency Offer
- When written it will provide a legal obligation for the real estate agent to uphold the integrity of the clients’ interests.
- Negotiate and protect the clients’ position through negotiation of terms and the contract.
- Offer undivided loyalty toward the client and their interests.
- Keep confidences of the client. Though any material facts should be disclosed. Agents must maintain integrity and honesty in all cases for all parties.
- Maintain strict adherence to the Code of Ethics.
Buyer’s Agent. When you hire a buyer’s agent, the agent works for you and will give advice and negotiate with your best interest in mind. The real estate agent will have a fiduciary duty to the buyer as long as the agreement is in writing. They assist with evaluating the property, preparing the offer and negotiating the terms of the contract.
If you are buying a property listed by another agent then the buyer’s agent fee is generally paid by the seller at closing. If you are buying a home that is listed as “For Sale By Owner,” then you may need to make arrangements to pay the real estate agent’s fee directly.
Seller’s Agent is also known as the listing agent. The seller’s agent is hired by the seller and works for the seller. This is where their fiduciary interest lies. The agent will help the seller prepare the home for sale, determine the best listing price and negotiate terms of the contract. When the listing contract is signed the duties and responsibilities of the real estate agent are established.
Dual Agent works for both the buyer and the seller. This case arises if the brokerage firm represents both the buyer and seller. For dual agency to occur both buyer and seller must agree in writing. When this occurs the firm and agents have limited fiduciary duties. Even if there are two different agents involved in the transaction, if both work for the same firm then dual agency exists.
Due to potential conflicts of interests, neither agent will offer the full fiduciary duties listed above. This might impact the buyer’s agent’s ability to negotiate the best terms and keep confidences. Consider if it is in your best interest to have a dual agency transaction or if you would prefer a different agent to represent you during the negotiations and contract.
The rules of agency vary from state to state, therefore asking about who represents you will protect your interest. Most states require agency agreements to be in writing. Generally for buyers the contract is for one day, allowing you to work with different agents until you find one you trust with finding your home. Seller agent contracts are generally for a longer period of time, such as 3 months or more. This gives them the opportunity to advertise and market the home.
Most real estate professionals work on commission and only get paid if they successfully find you a home or sell the home they have listed. If the home is listed by another agent, the seller will generally pay the commission for both agents. This means all buyers should work with a real estate agent as the fees are covered in the transaction and failing to do so will generally result in dual agency.