An AGENT is actually the Brokerage or company that appears on the Contract.
Not the individual salesperson.
This form of Agency is fast becoming the norm in virtually all of the real estate transactions in our North American Society because of the rise in popularity of consumerism and simply a more savvy public. Time was, when both listing and selling real estate Agents primarily represented the interests of the owners of property because the Listing contract was the only binding document and it was signed by the Seller! Buyers had no representation whatsoever!!!
Can you believe that pretty much all of the real estate Buyers of real estate were depending on the personal integrity of the individual Salesperson they were dealing with at the time?
There has always been a duty of care in dealing with customers that is fundamental in the industry, but the legal duty had always been to the seller. The challenge always was to determine who exactly was a customer and who was a client.
It is a comment on the prevailing professionalism of the industry through that time to say that for decades real estate traded hands efficiently and profitably for both buyers and sellers under the system where it was understood that whoever paid the commission was the principal to whom the Agent(s) owed their loyalty and fiduciary duty.
The only obligation any particular Agent had to a any buyer was called a "duty of care'. Legally there was nothing in the Law that tied the Agents to any formal legal responsibility.
Today, all of the real estate Association's "Code of Ethics" clearly state that not only is any member of the public dealing in Real Estate entitled to a choice of representation but in all cases the Agency's who are involved in the transaction must disclose whom they are working for and have written acknowledgement by all of the parties prior to presentation of any offers.
THIS IS A BIG DEAL!
The agent is considered in law to represent the principal and to bring the principal into legal relationships with other parties. The needs of individuals are so complex that, to a large extent, such needs are fulfilled not by their own efforts but by the efforts of others on their behalf. If someone acts on behalf of another, he/she is considered in law to be an extension of that person. The law governing relations between these individuals and other persons is referred to as the law of agency.
Agents owe principals (e.g., clients) their primary allegiance, including such duties as good faith and full disclosure, competence, obedience, and accounting. Classifications and terminology regarding these duties, generally fall under the term fiduciary responsibilities and vary somewhat in printed materials. Fiduciary duties are best explained as follows:
Disclosure The agent must disclose to his/her principal any information relevant to the transaction in which the agent has been engaged to assist. This includes any facts affecting the value or desirability of the property and all known relevant and material information.
Competence The agent must exercise a degree of competence when representing his/her principal such as would be expected from an average person in that occupation or profession. In all agency relationships, the law sees the agent as an extension of the principal. Thus, the principal is liable for the agent’s actions. Therefore, the agent will be under a duty to use superior skill and knowledge while pursuing the principal’s affairs. An agent who claims to be a specialist must exercise competence in that specialty.
Obedience An agent is obligated to obey the principal’s lawful and reasonable instructions, even if the agent doesn’t agree with them.
Accountability An agent is obligated to account for all monies or property entrusted to his/her care that belongs to the principal, i.e., safeguard any money or documents relative to the principal’s transactions or affairs.
Confidentiality An agent must not use information acquired as the principal’s agent for any purpose that is likely to cause the principal harm or to interfere with the principal’s business, now or in the future. The duty of confidentiality should not be confused with a real estate professional’s responsibility to disclose known material facts about the property to non-principals. The obligation to disclose such facts, including defects, is based on the professional’s duty to treat all persons fairly and honestly.
Loyalty The most important duty an agent has toward the principal is loyalty. The agent must place the interests of the principal above all else except the law in carrying out his/her functions as an agent.
Agents owe third parties (e.g., customers) the ethical duty to be honest, the legal duty not to misrepresent, and the responsibility to exercise due care when answering inquiries or giving information. In real estate, the agency relationship can be established between the agent and either the buyer or the seller. The relationship can arise out of an agreement either expressed or implied, or written or oral. Agency relationships should be in writing and real estate brokerages should ensure that all activities fall within the limits of that authority. Agency will be implied when agents treat customers as principals (clients), even though no written agreement/contract exists.
Ask yourself if your last Agent measured up to these standards.
Def: Customer - Someone who pays for goods or services
Actually, the term "customer" really shouldn't apply as it does in the world of real estate but the industry regulators haven't figured that part out yet. In the initial stages of any Agency, there is no passing of money for any service, yet we still have to refer to any "consumer" who request some real estate information as a "customer".
So for the purposes of keeping the appropriate real estate organizations happy, whenever you see "customer" you may also find it easier just to see them as a "consumer".
The real estate rules say, when initially dealing with a Realtor, a persons status will always default to that of a "Customer" unless another form of Agency is established in writing to the contrary. As a “customer only" status, there is no obligation on the part of the Realtor to do anything but provide a customer service which is basic fairness and truthfulness.
NOTE: The integrity of a principal will be protected at all costs and there should only be ONE Prtincipal in any transaction.
Realtors, to the best of their ability, are educated and trained to provide a complete service to the consumer with regards to the buying and selling of real estate. To dissect any part of the service being offered by a Realtor is like telling a mechanic you want the car fixed but not to touch it.
This curtailing of services, prevents the Realtor in giving any opinion or comment on any particular property value, listed or otherwise and such as explaining the current market conditions or even provide facts about a property.
The Realtor should not ask about any information of the Customer such as their down payment or how much they are looking to spend on a piece of property because any information would imply a confidence imposed on the Realtor and an Agency is immediately established whether you like it or not.
If the Customer asks a Realtor to make appointments to view properties, the Realtor may do so if they choose. If the customer refuses to accept the Realtor as their Agent then the Realtor may only act as a Sub Agent of the Seller. This alone is a nightmare.
Without declaring the desired Agency, the Customer is really on their own and are totally unrepresented which disallows them from learning any more than superficial information about most of the things they should know if they were considering the purchase of the property.
The Realtor’s Code of Ethics requires that the relationship between a person and a Realtor must be determined at an early point in the association in order for the Realtor to act appropriately and accordingly. The reality is, most consumers are reluctant to sign any form which obligates them to any Brokerage.
This point of arrangement was instituted nation wide because the courts felt that after hearing some extenuating cases of failed transactions that the public at large believed the Agent was initially working for them when in fact the Agent was not.
AGENCY AGREEMENT IN WRITING (Listing / Buying)
Since the Types of Agency may vary under the circumstances, you as a consumer must be informed as to the responsibilities of each and must the Agent explain all the differences to you. The status that is finally determined in the Type of Agency you are to have with the Agent must be set out in writing to be legal..
Real estate boards, associations and regulating authorities have prepared the industry with prescribed forms for this Agency declaration and it would behoove any person thinking of buying or selling to commit to such an Agency agreement.
A competent Realtor should be fully conversant in all forms of Agency and be prepared to explain the similarities and differences.
A Realtor has an duty and obligation, to advise any prospective customer that there are various optional representations of agency that a Realtor may offer.
The Realtor is obliged to explain the different relationships that are available competently so that the person understands their choices when dealing with a Realtor.
Failing to do this one simple task may result in an undisclosed Agency, misrepresentation by the Realtor but the public must also choose to choose.The following are the six different Types of Agency that a Realtor may find themselves demonstrating in dealing with the public. If your Agent can't explain each of these to you that is completely understandable... change Agents now.
By signing a Listing Agreement, a seller commits exclusively to the Agent, for the purposes of representing their interests in the promotion, marketing and ultimate sale of their property.
By signing a Buyer’s Agency Agreement, a buyer commits exclusively to the Realtor of their choice, for the purposes of ultimately representing their interests as their Agent in the purchase of any property within the specific terms.
For a buyer to go from Realtor to Realtor signing more than one Buyer’s Agency Agreement, may obligate the buyer depending on the specific geographic area, the specific time period and specific price range as stated on each separate agreement.
By signing more than one Buyer's Agreement, a buyer may be obligated to pay some difference in commission on an unrelated transaction. It is also unfair to all the Realtors who have undertaken the Agency seriously and in good faith to discover that they have been unscrupulously used.
It is always prudent to interview and choose a competent Realtor at the beginning of your quest and this will pay large dividends down the road.
There is no doubt that if one can sell their principle residence without paying a commission the extra savings would feel better in their pocket.
Both Seller and Buyer feel they are saving something. But are they?
There are circumstances when selling privately is a definite advantage and then there are times when it is not.
In a hot market everyone gets caught up in the frenzy of escalating prices but the only way to know what your property will go for is to expose it properly to the market place. That means listing it for sale on the local MLS (Multiple Listing Service) with an experienced Realtor.
Not only are all the eligible Buyers informed about the availability of the property but through the services of their own Agent they can be guided through the organized process in which there is protection for all consumers.
When the market is down and listings take months to even get viewings never mind offers, selling privately is almost never a consideration. No matter what you are think your property is worth, there is almost no one who will agree with you.
In either type of market, You may be tempted to just get a free evaluation from the local Realtor and then sell the place to your relative or friend for around that price. If you want to maximize the equity, this may not be the best way to do so.
From a Buyer’s perspective, a hypothetical price is more apt to be an unrealistic one in relation to the prevailing conditions.
The services provided by the local Realtor are like any other service in any other business and is only as valuable as the recipient believes it to be. There are some things that are best left to those who do it every day.
For more in-depth discussion on selling privately please go to FSBO101.