September is one of the last months of the typically busier summer real estate season. As cooler weather approaches that normally means that the housing market will also cool down before ramping up again next spring. Many people will spend the last several weeks of warmer weather shopping for a new home. But before enlisting the services of a real estate broker or agent to help you buy or sell your home, it is important for you to first understand that not all Realtors have the same legal roles and responsibilities. How they operate – and what your relationship to them will be – all depends upon what particular laws and regulations they must follow.
Here is an overview of some of the main categories of real estate relationships, to help you gain a more insightful perspective regarding whether or not your agent or broker represents the buyer, the seller, or both.
Consumers typically think of agency as meaning a business or other kind of group. We do business with insurance agencies, real estate agencies, and sometimes need the support and assistance of a law enforcement agency, an advertising agency, or a talent agency. But when it comes to matters of real estate law, agency refers to legal representation.
The person who serves as your legal representative is your agent, and how they must act according to the law is determined by the nature of that legal agency or relationship. To whom do they owe fiduciary allegiance, or in other words on whose behalf and in whose best interest are they acting as they execute their professional responsibilities?
In the real estate business there are various kinds of relationships. Sometimes the broker or agent acts primarily on behalf of the seller. Other brokers and agents work primarily for the buyer. Then there are those who are responsible for trying to represent both the buyer and the seller equally.
Dual agency is the term for a real estate broker who represents both the buyer and the seller during the same sales transaction. A common way reason for dual agency is when a real estate broker has one agent who lists a property for a seller and another agent who finds the buyer.
In that case, the broker is in the awkward position of trying to serve the best interests of both the buyer and the seller – who have opposing interests in the transaction. Since this could cause conflict of interest, a broker in this situation will usually have the buyer and sell sign documents verifying that they have given up their rights to full, exclusive representation.
The bottom line? If you work with a dual agent don’t tell them anything that you don’t want the other party to the transaction to know. The agent or broken has allegiance to both the buyer and seller so if, for instance, you are willing to accept a lower price as a seller or pay less as a buyer they have a responsibility to share that information with the other party.
Exclusive Buyer Agency
But buyers can hire their own exclusive agents to guarantee that only their best interests are served. Look for a Realtor who is an official Exclusive Buyer’s Agent. They are specially trained and by law are not permitted to list any property for a seller. Instead their loyalty and fiduciary duty is only to the buyer. So if you are shopping for a home, one of these agents may be your best bet.
Likewise, Seller’s Agents work as the exclusive representatives of home sellers. They will certainly assist the buyer in a professional manner. But their legal loyalty and fiduciary duty is first and foremost to the seller. So if you are selling your home you may want to enlist the help of an Exclusive Seller’s Agent.
Of course lots of time transactions involve Realtors who work for broker firms that are in competition with each other. For instance brokerage firm A may have an agent who has listed a home for sale. But someone from brokerage firm B comes along with a qualified buyer. In this situation the agent bringing the buyer is considered a “co-op” agent. That agent acts as a facilitator for the listing agent, kind of like a “sub agent” and receives part of the selling agent’s commission as compensation.
If you are a buyer working with a co-op agent, keep in mind that whatever you tell the co-op agent may be related back to the listing agent and the seller. If you want to avoid a co-op agent situation then, as explained before, you can work with an Exclusive Buyer’s Agent. They always represent the buyer and only the buyer.