Ever wonder why they call us Real Estate Agents? Lots of people do. This article is about agency and real estate and how it pertains to you, the buyer or seller of a home. Many people go through the entire process never really understand how their agent represents them or what duties they have. This is important stuff so let’s get crackin’…
Agency in Real Estate… Who do Agents Represent?
Arkansas law requires real estate agents to clearly disclose to all parties in a real estate transaction which party(s) he or she is representing. Real estate agents typically represent Sellers but can also represent Buyers as well as both Buyers and Sellers in the same transaction (disclosed dual agency).
An agency relationship in real estate creates a fiduciary and ethical duty for the agent to act on your behalf and in your best interest. A fiduciary duty is legal requirement of loyalty and care.
A Sellers’ Agent represents the Seller to protect and promote the interests of the Seller. Any information given to the Sellers’ Agent by another party must legally be given to the seller to further promote their interests. This means that if a buyer does not have representation (as in when you call a yard sign and talk to the listing agent) any information you share can and may be used against you in the transaction. Needs, motivations, financial information, an negotiating strategies are just a few of the issues that can be shared with a seller after a conversation with an unrepresented buyer.
Smart Buyers hire real estate agents for two reasons.
1. Someone is paying a commission on the buyer’s side either way… you might as well get representation for it.
2. People have neither the time nor understand of how to go through the complex search, negotiation, and closing process of home buying.
A Buyer’s Agent does the same thing as a Seller’s Agent… but for the Buyer. Try to keep up with me now. The same thing holds true in this situation. If a seller is unrepresented in a transaction (as in a property for sale by owner), the Buyer’s Agent has a duty to tell their client any pertinent information the Seller discloses about price, negotiating strategy, terms, concessions, and the Seller’s financial situation.
Are you getting the idea that it is good to be represented on either side of the transaction?
Dual Agency in Arkansas
I say in Arkansas because not a whole lot of states still offer Dual Agency. It isn’t something to be scared of though. In fact, it can make a transaction go remarkably smoothly. You are cutting out part of the process. Dual Agency actually happens any time the same firm represents the Buyer and Seller in a transaction. It doesn’t even have to be the same Agent in the firm. Both Seller and Buyer much give their written consent to be in a Dual Agency situation.
In Dual Agency the Agent becomes a ‘facilitator’ of the transaction. They still cannot disclose confidential information from one party to another but take steps to make the transaction flow smoothly and mediate any conflicts or concerns during the closing process. Realize that a Dual Agent generally gets both sides of the commission, resulting in a much higher income for the work done. This is why Agents in Arkansas like Dual Agency and will work hard to make a transaction where it exists work for all parties involved.
If you are not comfortable with Dual Agency you have a right to separate representation from the other party to the transaction.
Why You Sign on the Dotted Line
Agency is meant to help you and protect your interests as the Seller or Buyer. I talk with some many Buyers who “don’t want to be tied to one Realtor” and Agents who “can’t give the buyer a good enough reason to commit.”
Here’s what I have to say to that…
Buyers – What are you talking about? When you sign an Agency Agreement with a Realtor they are now your employee. They work for YOU. If you just go around asking Realtors to find you a house they:
1. Aren’t going to take you seriously
2. Will do a half-A**ed job
Why? Because they have no guarantee that they’ll get paid if they do find you a house.
Realtors – If you don’t have a good reason to get a Buyer or Seller into an Agency Relationship with you then you don’t understand Agency in Real Estate. Explain to the Buyer:
1. I will work harder for you knowing that we have a committed Agency Relationship in place.
2. I am legally bound to look after your interests and needs in regards to purchasing a home.
3. You can dissolve our Agency relationship at any time if you feel I am not the Agent for you.
If one through three aren’t reasons enough I would wonder who the heck you are trying to represent. Seriously people. This is why the general public doesn’t take Real Estate seriously as a profession. You have to be professional. Part of that is making sure you are in an Agency Agreement with the party you represent.
If you need to know more about Agency, have a story or opinion to share, just leave a comment below or contact me. Thanks for reading.