Agency has been a buzz word in the real estate industry since the early 1990’s. The term “agency” is used in real estate to help determine what legal responsibilities your real estate professional owes to you and other parties in the transaction.
The Buyer’s Agent
The buyer’s representative (also known as a buyer’s agent) is hired by prospective buyers and works in the buyer’s best interest throughout the transaction. The buyer can pay the agent directly through a negotiated fee, or the buyer’s rep may be paid by the seller or through a commission split with the seller’s agent.
The Seller’s Agent
The seller’s representative (also known as a listing agent or seller’s agent) is hired by and represents the seller. All fiduciary duties are owed to the seller, meaning this person’s job is to get the best price and terms for the seller. The agency relationship usually is created by a signed listing contract.
The Subagent
A subagent owes the same fiduciary duties to the agent’s customer as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not the buyer’s agent, shows property to a buyer. The subagent works with the buyer to show the property but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer customer can expect to be treated honestly by the subagent.
Disclosed Dual Agent
A disclosed dual agent represents both the buyer and the seller in the same real estate transaction. In such relationships, dual agents owe limited fiduciary duties to both buyer and seller clients. Because of the potential for conflicts of interest in a dual-agency relationship, all parties must give their informed consent. Disclosed dual agency is legal in most states, but often requires written consent from all parties.
Designated Agent
Designated agents (also called appointed agents) are chosen by a managing broker to act as an exclusive agent of the seller or buyer. This allows the brokerage to avoid problems arising from dual-agency relationships for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. (Most agents who work in large firms will be designated agents. This makes it possible for both the selling agent and the buying agent to be from the same office. Designated agents owe the same duties to buyers and sellers and may not disclose confidential information to other agents in the company.)
Transaction Broker
A transaction broker (sometimes referred to as a facilitator) is permitted in states where non-agency relationships are allowed. These relationships vary considerably from state to state. Generally, the duties owed to the consumer in a non-agency relationship are less than the complete, traditional fiduciary duties of an agency relationship.
Source: National Association of Realtors
The Buyer’s Agency Agreement
Here are some exerpts from the St Louis Association of Realtors standard Buyer’s Exclusive Agency Contract.
Listed here are items for negotiation between you and the Buyer’s Agent.
- The first items to discuss are the term
- Describe the parameters: price range, number of bedrooms, number of baths, neighborhood, school district, etc.
- What is the compensation and who is paying: The agent may agree to accept the fee being offered by the seller. The agent could ask for a certain percentage of the sale. The agent can agree to a fixed dollar amount. The agent may want an additional fee due up front or at closing.
The Buyer Agent owes fiduciary duties to the Buyer under this agreement, including fidelity, honesty, dedication to purpose, acting in the Buyer’s best interests, etc
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