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Do You Know Whose Side Your Real Estate Agent Is On?

Do You Know Whose Side Your Real Estate Agent Is On?

A survey by the National Association Realtors indicates that many homebuyers don’t know who the real estate agent they are working with actually represents. In some cases, the agents may actually be working against the buyer’s best interest.

Laws in most states require agents to disclose, usually at the first meeting, their fiduciary relationship. But often agents fail to disclose this and buyers don’t know the agent’s efforts are on behalf of the seller, or has no duty to either buyer or seller.

The NAR’s survey revealed that perhaps a third of all buyers were not told whom the agent represented. The group’s biennial Legal Scan confirmed that this problem was among the most pressing legal issues faced by its national membership. A significant majority of Legal Scan respondents put agency as among their top three concerns, and 32 percent thought that agents needed more training on the subject.

Over the years there have been many legal efforts to define exactly who represents whom in real estate transactions, but these efforts have apparently not sunk in with many realty agents. Legal Scan comments reveal that many agents either don’t take disclosure rules seriously or are afraid they might lose a client if they do. A realty instructor said that it’s “true that most agents are not educated (about) and (are) afraid” to disclose who they are working for — buyer, seller, both, or themselves.

Legal Scan found that many agents, and even the brokers they work for, don’t understand the concept of dual agency, where the agent represents both sides and strives to serve both interests. Respondents said agents have difficulty explaining the concept to clients and many don’t even bother.

A Legal Scan respondent said, “Agents put their own interests ahead of clients’ and do not seem to care how they get a contract closed. They’ll do what it takes.”

Another broker laid it out that unless agents are audited, “nobody will ever know” they failed their fiduciary duties. If they are cited, they plead ignorance, pay a small fine, and go back to business as usual, he said.

Although exact definitions can vary from state to state, here are some basic concepts of agency you may want to ask about if you engage a real estate agent.

Exclusive seller agency.  The agent only represents sellers and may receive partial commission just for listing houses or pushing advertising.

Exclusive buyer agency. The agent works only for the buyer and should be trained in representing buyers, including any bargaining or detective work needed to protect client interests.

Seller and buyer agency. This is the most popular form of agency where the agent works with both parties, even on the same transaction. This is where clarity is most needed. Often dual agents have limited training in representing buyers, but are happy to work as a buyer’s representative if the buyer so wishes. However, you can expect them to start with their own listings or their firm’s listings (where their commissions and bonuses are best) before looking at other listings.

Single agency. These agents work with both buyers and sellers, but not on the same transaction. So they, in effect, function either as an exclusive buying agent or an exclusive selling agent for a particular piece of property.

Transaction broker. This person owes no fiduciary duty to either party, but is simply a facilitator working with both sides to complete the transaction.