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:
- full disclosure
- reasonable care and skill
- full accounting
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 homebuyer.
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 CUSTOMER (no agency relationship), an agent will:|
|If you are a CLIENT (agency relationship), your agent will:|
|Maintain loyalty to the seller’s need|
|Pay full attention to your needs|
|Tell the seller all that they know about you|
|Tell you all that they know about the seller|
|Keep information about the seller confidential|
|Keep information about you confidential|
|Focus on the seller-client’s property|
|Focus on choices that satisfy your needs|
|Provide just the material facts|
|Provide material facts as well as professional advice|
|Only provide price information that supports the seller’s listing price|
|Provide price counseling based on comparable properties and their professional insights|
|Protect the seller|
|Protect and guide you|
|Negotiate on behalf of the seller|
|Negotiate on your behalf|
|Attempt to solve problems to the seller’s advantage and satisfaction|
|Attempt to solve problems to your advantage and satisfaction|
* This chart is for general illustration purposes only.
You may not know if you’re a customer or a client.
Don't 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 rep, which clearly establishes client-level services and spells out what services you can depend upon.
What about dual agency?
Dual Agency has been replaced by Transaction Brokerage.
In some cases, it will become necessary for your real estate professional to deviate from the Sole 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. By representing both you and the other party in the transaction, the brokerage's ability to fulfill agency duties to you (and the other client) are limited, particularly the duties of undivided loyalty, confidentiality and full disclosure.
Under these circumstances, a different relationship called transaction brokerage can be formed. The relationship applies whether one REALTOR® represents both parties or two different REALTORS® in the same brokerage each represent a client in the transaction.
Transaction brokerage is ONLY permitted with the fully informed and voluntary consent of both the buyer and the seller. This consent allows the borkerage to act as a Transaction Facilitator to help you and the other party reach a mutually acceptable agreement.
The transaction Facilitator will treat the interests of both the buyer and the seller in an even-handed, objective and impartial manner and will ensure that any advice or information given to one party is discolsed to the other.
However, the Transaction Facilitator cannot disclose any information received in confidence, and in particular cannot disclose:
• that the buyer may be prepared to offer a higher price or agree to terms other than those contained in the offer to purchase;
• that the seller may be prepared to accept a lower price or agree to terms other than those contained in the Seller Brokerage Agreement;
• the motivation of the buyer or the seller wishing to purchase or sell the property; and
• personal information relating to the buyer or the seller.
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?