It’s important for you to have suitable representation in your real estate transaction, no matter whether you’re the buyer or seller. An agency relationship is a kind of legal relationship between you and a real estate professional. Here’s an explanation of the various options available to help you decide the relationship that will protect you best.
An exclusive buyer’s agent is one who represents only a buyer. You could hire one when you’re planning to buy a home. This agent will act in your best interests and has a fiduciary duty towards you. You may decide to pay this agent by yourself, or negotiate with the seller or his agent to pay a share of the sales commission to your agent.
Similarly, you can hire a selling representative to list your home exclusively when you’re planning to sell it. This agent will have fiduciary duties towards you as a seller. Generally, you are required to pay the selling agent his commission after closing.
Selling agents normally offer to pay a part of the sales commission earned to the purchaser’s agent. Now if you’re the seller and your exclusive agent gets a buyer for you, he’s entitled to keep the entire commission amount.
There’s another option when you’re a buyer. You can choose to work with an agent who is not your agent but is the seller’s subagent. Typically, such a subagent will represent and act in line with the seller and his agent’s interest.
You can expect honest treatment from your agent who is playing the role of a subagent, but his loyalty lies with the seller and his agent. So he cannot put your interests before those of the seller. Some states do not permit agents to play the role of subagents.
Take care that you don’t divulge anything you don’t want a seller to know to a subagent, for example, your willingness to up your offer.
Disclosed dual agency
Some states allow companies and agents to represent both the buyer and seller provided the relationship is open. This is known as disclosed dual agency. Since dual agents work for both entities, they cannot be loyal to only one. Dual agents do not owe all the typical fiduciary duties to their clients. Their fiduciary duties towards each party are limited.
When does one agree on dual agency? If you’re interested in buying a property listed by a real estate brokerage firm in which your agent works, the firm would represent you and your seller at the same time and both parties need to agree on this.
Since the potential for conflicting interests with dual agency is high, both parties must give informed consent.
Designated agency is a kind of disclosed dual agency which allows two separate agents from a single company to represent both seller and buyer in a single transaction. For avoiding potential conflicts, some managers designate agents from their company to represent sellers only or buyers only. In case of a designated agency, this is not required. A designated agent gives you complete representation and looks after your best interests.
Non agency relationship
Some states allow you to proceed with a transaction without any agent as a representative. This is called non agency which involves working with a transaction facilitator or broker. In case of non agency representation, the professional you’re working with has fewer duties towards you as compared to a regular agency relationship. You need to clarify the exact duties with him.
Whether you are buying or selling, be sure to consider the advantages of knowing the true value of your home. You can obtain a free home valuation report from Neighborhood IQ to find out how much a property is worth before you buy or sell. Also, the Home Loan Advisor can analyze your property, current market conditions, local market comps, and other variables in our proprietary algorithm, and match you with potential lenders.