Real Estate Agency Explained
I have had several clients ask about “Agency” laws and how they work for the buyer or seller. When a buyer has the “first substantial contact” with a Realtor® , the NC Real Estate Commission expects an agent to present and explain a brochure called “Working With Real Estate Agents.” This brochure explains who the agent actually represents in a given transaction. In other words, the buyer should know that the agent represents the buyer, the seller, or is acting as a dual agent representing both the buyer and the seller. Below is a list of terms and their definitions with regard to agency representation.
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 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 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.
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.
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 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.
As you can see, there are multiple ways an agent can work with parties in a transaction. Just make sure that your agent discloses to you how they will be working, and that you understand the “Working With Real Estate Agents” brochure. Please contact us if you have any questions regarding agency.