Real Estate Agents

Real Estate Agents:

Subagents. Some experts recommend using subagents, if only for the flexibility they afford. Since subagents don't work under contract, the buyer is free to work with a number of agents while property hunting. The subagent also has a leg-up in a hot real estate market thanks to a non-adversarial relationship with the seller's agent. After all, both are legally obligated to the selling party, and the selling party will ultimately decide which buyer prevails in a real-estate bidding war.

Non-Exclusive Buyer Agents subscribe to the practice that the agent represents either the buyer or the seller, but never both in the same transaction. Because these "buyer" agents work in offices where listing agents represent sellers, find out how the agent will handle a conflict of interest. Will they then become dual agents?

Seller's Agents. More straightforward is the selling, or listing, agent. Employed by a real estate firm, this agent works with the seller to establish an appropriate sale price for the home then markets that property, usually through a multiple listing service.

In any real estate office, each agent works hard to sell their company's listed properties and each is paid only if the home is sold, taking their commission on a percentage of the final sale. If the selling agent fails to produce a buyer for their client within the negotiated time frame, the seller may pull the property listing and contract with another real estate company.

When a seller engages the services of a listing broker or agent, that seller becomes the agent's client. This means the broker, and his or her subagents represent the seller. They owe the seller undivided loyalty, utmost care, disclosure, obedience to lawful instruction, confidentiality and accountability. They must put the seller's interest first and negotiate for the best price and terms for their client, the seller. (The seller may also authorize subagents to represent him or her in marketing the property to buyers).

Any personal and financial information given by a potential buyer to a seller's agent must by law be told to the seller. Buyer beware!

Dual Agents. Today most offices offer buyer and seller agency and, where it is still used, sub agency, so it is not unusual for a buyer client of one agent to buy a home listed by another agent in the same office. This is called "dual agency" because the office or agency is representing both sides of the transaction. This dual allegiance should be fully transparent and disclosed to both buyer and seller, but is neither unethical nor illegal.

And, it is, of course, common for a single agent, (let's say Walter, an agent with Salem Real Estate) to list a home (Ray Walker's) and thus represent Ray as a seller agent; assist Judy and Carl Jackson in locating a home (acting as a subagent to the seller of every home he shows them) and contract to represent Sheila Hughes as a buyer agent throughout her home buying experience. Three separate buyers, three separate transactions, so Walter can certainly perform all three roles independently of each other.

Sometimes transactions don't always stay separate. If Carl and Judy Jackson decide to make an offer on Ray Walker's house, Walter as agent for both of them, has a very clear course of action. He is Ray's agent but the Jackson's are merely customers, not clients. His fiduciary obligation is to Ray and his seller's best interests should drive everything that Walter does in trying to put together the deal.

But what happens if Sheila Hughes falls in love with Ray Walker's house and wants to buy it? Can Walter represent Sheila as a buyer agent and represent Ray as a seller agent, in other words, act as a dual agent?

Certainly Walter is ethically, and probably legally, required to divulge to both of his clients the existing relationships. Sheila is likely aware of Walter's relationship as listing (seller's agent); his name is on the listing sheet and probably on a great big sign in front of the house.

Ray, however, has no way of knowing that Sheila is a represented buyer. Once the dual agency is disclosed and with the consent of buyer and seller, Walter clearly must cease advocating for either of his clients and become a facilitator. Even better, if the size and structure of the office permits it, Walter should step aside and let his manager and/or another agent in the office represent at least one of his two clients, at least during the negotiation process.

A broker or agent can work for both the buyer and the seller on the same property provided such broker obtains the informed consent of both parties. The agent is then considered a disclosed dual agent (also known as subagent). This broker owes the seller and the buyer a duty to deal with them fairly and honestly. In this type of agency relationship the agent does not represent either the seller or buyer exclusively and they cannot expect the agent's undivided loyalty.

Undisclosed dual agency is illegal. Disclosed dual agency is legal only if there is full disclosure of potential conflicts of interest and the implications of service to both the buyer and seller.

Designated/Dual agency is when one real estate agent in a company is appointed (designated) to represent the buyer and another agent within the same company is appointed (designated) to represent the seller. This means the same real estate office may now represent both the buyer and seller of the same property!! There is cause to question whether a real estate brokerage may ethically seek both a higher price and a lower price for the same home at the same time!

This is good for that real estate company because they get both sides of the real estate professional fee.

Every client must understand all the implications of the conflicts of interest inherent in Designated/Dual Agency. Such as:

· Other agents within the very same office may berepresenting the seller of the property you are interested in.

· Leakage of confidential information, negotiation strategies, overheard telephone conversations, staff meetings, common fax machines and computers.

· Office policy may pay the buyer agent more for promoting in-house listings.

· Who has access to agents' voice mail?

· How many agents in the company will be representing. Buyers for the same house you are negotiating on?

· Who has access to office files, etc?

When an agent discloses to you that their brokerage/company is a designated agency, you the consumer must understand that your relationship is limited, the rest of the brokerage or company does not represent or protect you.

Discount Brokers. If you've gained sufficient buying knowledge, say from a previous purchase, or if you simply don't want to pay the full commission, hiring a discount broker is yet another option. Discount brokerage doesn't necessarily remove the conflict of interest possible in dual agency, unless the discount broker is also exclusively a buyer's agent.

Discount brokers charge a reduced commission as small as one percent or offer a menu of services in a "pay-as-you-go" arrangement where you pay only for those services you use. Some offer a combination reduced commission and menu of services while still others work by the hour. While some franchise operations offer discounts and agents are often free to charge less as they see fit, most discount brokers are independents or discount chain operations.

The disadvantage is that you may have to pay for the hours or services you use whether or not you buy a house. Also, discount brokers often don't provide the one-stop set of supplementary services generally available from more traditional brokers. Additional services often include referrals to proven lenders, insurance agents, home inspectors and the like, who help speed up the home buying process.

Real Estate Websites. The new "virtual" brokers on the Internet are often discount brokers offering reduced commissions, but the affiliate and partnering approach on the Web often allows them to offer many of the secondary services you get from a traditional broker. Virtual brokers may or may not have brick and mortar facilities from which to hold your hand, should the need arise, but they are able to cut costs because of the automation and smaller overhead. The so-called "click and mortar" brokers typically offer their own listings and come with a dual agency potential, but they typically also align themselves with a larger online MLS (Multiple Listing Service) or listing site.

Non-Agency. Yet another type of agency is usually referred to as non-agency or no agency. Perhaps facilitation would be a better word. The agent who is working with the buyer identifies properties, arranges for showing and shows properties, informs the buyer about the process, assists in the mechanical preparation of offers and counter-offers (without suggesting strategies or negotiating on behalf of the buyer) and facilitates inspections and other transaction requirements such as obtaining insurance, identifying utility companies and so forth.

Non-agency might also be an option on the seller's side, where the agent would agree to write and place ads, enter the property into multiple listing, promote it to other agents, set up and monitor showings, present offers (with-out negotiating or advising on the handling of same) and do the legwork leading to the closing such as scheduling inspections, obtaining a copy of the deed, and so forth. Where this option currently exists, (it is not legal in all states) it is usually provided by companies that advertise themselves as tools for FSBOs (for sale by owner) rather than as traditional real estate agents.