Descriptions of Agency: The Buyer Agency Agreement
There are agents, and then there are agents. Yes, it sounds confusing; that’s because the term “agent” is often used in a casual manner, referring to any real estate practitioner.
But agent also refers to someone with whom you’ve established a formal agency relationship; someone who represents your best interests in a real estate transaction and who owes you fiduciary responsibilities.
Agency relationships are usually established in writing with buyer agency agreements, and require:
THE BIRTH OF BUYER AGENCY
For many years, real estate was practiced in such a manner that agency relationships were only extended to sellers. Any real estate agent who brought a buyer to the table was actually working as a sub-agent to the seller.
This all began changing in the 1980's, when buyer agency started gaining momentum in residential transactions. Today, agency laws still vary from area to area. But even if you live in a area that recognizes buyer agency, you can’t assume that you will automatically receive fiduciary responsibilities from the agent you’re working with as a potential home buyer.
* This chart is for general illustration purposes only. Agency laws vary by place; and specific terms of individual agency contracts will vary from one agent to another.
YOU MAY NOT KNOW IF YOU'RE A CUSTOMER OR A CLIENT
Depending on the laws in your area, you may find yourself working with someone who is actually negotiating for the seller, not you the buyer. The best way to be certain your interests are being considered and protected is to sign a buyer agency agreement with a trained buyer’s rep, which clearly establishes client-level services and spells out what services you can depend upon.
WHAT ABOUT DUAL AGENCY?
In some cases, it will become necessary for your real estate professional to deviate from the single agency model. For example, a buyer-client may become interested in a house that also happens to be offered for sale by a seller-client of the buyer’s rep, or by the same brokerage firm. How can a buyer’s rep, in this instance, maintain complete loyalty to their buyer if he or she also owes complete loyalty to the seller?
Obviously, they can’t. But, depending on the real estate license laws in your place, and your status with the brokerage firm, the manner in which this situation is handled will vary. To get concrete answers, you should read and discuss the brokerage services disclosure statement, which should reflect your area’s agency law. If your agent hasn’t supplied a disclosure statement, you should ask for it. It spells out the different categories of agency services they provide and how they address dual agency.
OTHER TYPES OF RELATIONSHIPS
Some areas also allow different types of relationships beyond agency relationships. For example, a transaction broker assumes responsibility to facilitate the transaction, rather than represent one side over the other. Further obligations may also be set forth in a written contract with a client.
Even though the laws concerning agency can vary from one place to another, one thing that is constant is the obligation for all Real Estate Professionals to comply with our local Code of Ethics.
ISSUES TO DISCUSS WITH A BUYER'S REPRESENTATIVE
Real estate agency relationships, like all business relationships, can be formed in a number of ways. In order to help talk through your options, here are several questions to ask your buyer’s rep: