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Real Estate Agents | What Are Their Obligations

Real Estate Agents | What Are Their Obligations

About Real Estate Agency

One of the most common misconceptions that is shared by a large number of home buyers is that when working with a Real Estate Agent, he or she will “automatically” represent you as a buyer. As we will discuss, unless this is specifically disclosed in writing, in all probability the Agent will be representing theseller.

The traditional relationship (probably going back to when the first thatched hut was sold by someone other than its owner) has been that a Real Estate Agent’s primary loyalty was to the seller of the property. This relationship was in effect whether the Agent was the listing agent or working with a buyer. This situation caused many home buyers to be confused: they assumed that the Agent that had been driving them around showing them houses for the last 3 weeks was representing them. In reality, real-estate-agentsthe Agent was representing the owners of the houses they saw, and was bound to reveal to those owners any information he or she knew about the buyers.

Buyer Agency, which is almost universally available now, changed all that. The buyer now often has a choice in representation: the Agent with whom they were working could continue to represent the seller in the transaction, or the Agent could represent them as buyers. The buyer is now able to compete on a more level playing field.

Although there are state to state variations (please verify the situation in your particular locality), the following is a basic summary of the types of agency, and who the Agent represents.

SELLER AGENCY

The “default” situation. Unless disclosed to the contrary, all Agents involved in a Real Estate transaction (and their Brokers–with whom a listing agreement is actually with) represent, and owe their allegiance, to the seller. If you contact an Agent who has a property listed, that Agent will always represent the seller.

BUYER AGENCY

When an Agent represents the buyer, that Agent “rejects” the implicit seller agency and thus owes loyalty to the buyer. For more information on this subject, see the section devoted to Buyer Agency.

DUAL AGENCY

This occurs when 2 Agents–or the same Agent–working for the same Broker each represent a buyer and a seller in a transaction. This situation must be disclosed to both the buyer and the seller. Privileged information (e.g. the price that a buyer will pay or a seller will sell at) cannot be disclosed to the other party without the express permission of that party.

What it means to you
If you leave the agency question “as-is”, your Agent will automatically represent the seller in the transaction (although it is very likely that they will suggest Buyer Agency.) If the Agent does not represent the seller, in most areas you can opt for Buyer Agency. If the house in which you are interested is listed by the same Broker as your Agent, then you have an automatic Dual Agency situation. To sum it up, if you want full representation and it is available, insist on Buyer Agency. 

All About Buyer Agency
Why a special section on Buyer Agency?
Many visitors to this Web Site, in their search for a home, pass by some of the most important information in it–the discussion on agency. They, like many home buyers before them, believe that the Agent with whom they are working–sometimes on a daily basis–represents them and their interests. Without certain disclosures, this definitely is not the case.

The Agent, unless specifically disclosed otherwise, represents the seller in any transaction for the sale of a home. It is that Agent’s fiduciary duty (where their loyalty lies) to protect the seller’s position at all times.

Buyer’s Agency, however, may be an option available to you. Simply put, it allows the Agent with whom you are working to be your representative and to put your interests above all others.

Example 1: You see a house advertised in the newspaper, a home magazine, or the Internet. You contact the Listing Agent (this is who will be advertising the home) and make an appointment to see the house. The Agent is friendly, informative, and tells you what you believe to be everything about the house. The Agent represents the seller, not you.

Example 2: You are working with an Agent, who shows you 25 different homes over 3 weekends. The Agent buys you lunch twice, knows all 4 of your children by name as well as all of your personal likes and dislikes, but does not offer Buyer Agency. You feel comfortable with the Agent, revealing important personal information. Without Buyer Agency, “your” Agent represents, and owes loyalty to, each and every one of those 25 sellers–not you. Any information you reveal to the Agent must be relayed to the sellers.

“Okay,” many buyers say, “so the Agent represents the seller and not me. Is that a big deal?” Maybe not, but it is important to understand that if the Agent represents the seller, they cannot reveal certain things to you, as the buyer:

  • The reason for selling (unless the seller specifically authorizes it)
  • Any concessions, in price or otherwise, that the seller may be willing to give up.
  • Any conversations that the seller and the Agent may have had.
  • Any information that could be detrimental to the seller, or give you, the buyer, an advantage. This would include a CMA (Comparable Market Analysis) that could put the seller at a disadvantage.

Buyer Agency turns the tables. If a Buyer’s Agency agreement is struck between you and the Agent, it isyou, rather than the seller,who has the representation from the Agent with whom you are working. If you are represented by a Buyer’s Agent, some of the potential benefits include:

  • The Agent can develop a CMA (Comparable Market Analysis), revealing at what price similar properties in the area have been listed for and sold for.
  • The Agent can reveal to you any information about the seller that the Agent has been able to ascertain. This may include reasons for selling, potential concessions, or other information that may be to your advantage.
  • Information about property value trends that may influence your decision about a certain area can be relayed to you.

Summary. Is it necessary to have a Buyer’s Agent? No. Thousands of home buyer’s have been well served dealing with the seller’s Agent. (For years, it was the only way it was done). The important thing is to understand your options, so that you don’t unintentionally accept less representation than you want.

How much will a buyer’s agent cost me?
If you are looking at property that is listed on either Georgia MLS or FMLS, the seller has already agreed to pay the agents commission for you. The only time that you would ever have to pay your buyer’s agent, would be if a property is not listed and the seller will not agree to pay commission.  If this service is essentially free to you, why in the world would you choose to not be represented?