So who is the REALTOR® Working for anyway?
Let’s talk Agency – it may not be the most exciting topic but if you are buying or selling Real Estate it is critical that you understand it. Normally when you think of Agency you may think of Insurance Agency or maybe Detective Agency or even Modeling Agency and these are great clues to what Agency means in Real Estate.
Agency is the Buyer or Seller’s Representation. In Real Estate, representation roots from the office known as the “Brokerage”. Although a Seller may have hired a Real Estate Agent to list their property the contract is actually with the Real Estate Office and not with the individual REALTOR® also known as a Representative. In fact if the REALTOR® changed their office it is possible that the contract would stay with the original listing Brokerage.
Now to add one more layer in Agency it is important to realize that because contracts are held with the Brokerage that means that every REALTOR® in that office is representing that Seller, known as the Principal. It is the office that is representing the Seller.
So why is this important for you to know this? This is a key component to understanding Dual Agency when the Buyer and Seller have the same representation.
You need to ask yourself before you plan to Sell or Buy a property. Do you want enter into a Dual Agency relationship or do you want your own representation in negotiations.
These are the guidelines and restrictions to the agency relationship
Expectations of a Regular Agency relationship – having your own representation
1) Undivided loyalty, protecting your negotiating position at all times.
2) Obey lawful instructions
3) Obligation to keep confidence
4) Exercise reasonable care and skill in duties
5) Account for money and property
Limited Dual Agency – when the Buyer and Seller are represented through the same office there are some changes to make sure each party is dealt with fairly and does not have an unfair advantage over another.
1) To deal with you impartially.
2) Duty of disclosure except:
a) The price you or they are willing to pay/accept or other terms you would be willing to agree to that are not already outlaid in the offer to purchase or in the listing.
b) The motivation of either party unless authorization has been given to reveal this.
c) Personal Information about either party unless permission has been given in writing.
3) The Brokerage will disclose the known defects about the physical condition of the property.
You must consent to Limited Dual Agency in writing.
- When the Buyer and Seller are represented by the same REALTOR®
- When the Buyer and Seller are represented by two different REALTORS® that work in the same office.
- When two or more Buyers are represented by the same REALTOR® and bidding on the same property.
- It can be a benefit when dealing with a complicated property, sometimes that REALTOR® has done significant research and investigating already and is in the best position to inform both parties of the circumstances and bring two parties together.
- It could be a benefit if either the Buyer or Seller has a unique relationship with the REALTOR® one that would benefit both parties.
So what would happen if you did everything right, you have a long time relationship with a REALTOR® you trust and like working with? You see the perfect property and it happens to be their listing? What happens now?
Well hopefully you have discussed what might happen if this circumstance did come up well in advance but if you did not then it is time to talk about it. There are several options.
1) You could continue to work with your REALTOR® providing the Seller is agreeable to limited Dual Agency. Hopefully you have done your homework and kept informed of property values by studying sales and viewing properties for comparison. Your REALTOR® can still give you a list of comparable properties but they cannot suggest a price that the Seller may be willing to accept.
2) Your REALTOR® can refer you to another agent to represent you. If they do this they will benefit by earning a referral fee (a percentage of the commission). You will have to understand that your REALTOR® will not be representing you or helping you during the transaction.
3) You are welcome to find your own representation for the transaction.
