Who Represents You?

Many years ago a study was done, in which buyers were asked if they thought the real estate salesperson they were working with represented them. At the time, the only legal option most agents across the country had was to represent the seller, EVEN if they were working with the buyer, yet a substantial majority of the buyers surveyed said that they thought their agent was representing them.

Buyers and their agents now have many more options as to how they can work with each other, but a great deal of confusion still remains when it comes to recognizing whether or not you are being represented. How this is handled varies considerably from state to state, but there are some key things that you should know no matter where you are.

The first thing that every buyer (and seller) should know is that the listing agent on a property MUST represent the seller and look out for the seller's best interest while they are the listing agent. This means that the listing agent cannot help a buyer get the best possible deal on that property. Many buyers go to the listing agent deliberately, using the logic that the listing agent knows more about the property, but an agent representing the buyer can get that same information from the listing agent while simultaneously looking out for the buyer's best interest.

Buyers and sellers should also know that the salesperson must disclose the options each party has concerning representation, whether or not a party is being represented and who is being represented. MAKE SURE YOUR SALESPERSON DOES THIS! Don't let your salesperson "save you time" by skipping over this explanation. This is something a buyer or seller needs to know before they do anything with that salesperson. If a consumer says the wrong thing in front of a salesperson that is representing the other party, they may lose a key advantage in their negotiations. Not knowing who represents you could cost you thousands of dollars!

If the agent is considered to be representing the seller, they will be required to disclose any information about the buyer that affects negotiations. This means that everything an un-represented buyer says can and will be used against them! Once a buyer starts to feel comfortable around an agent, they will say all kinds of things that could hurt them in negotiations. If the buyer has to buy quickly, if they always try a low offer to see if the seller will take it or if the buyer could afford to pay a lot more would all be pieces of information that the agent would have to pass on to the seller.

Buyers should not be afraid to sign a disclosure form. In most states, the agent is required by law to have buyers sign this type of document. Not everything requiring a signature is a contract. The important thing for a buyer to do is to read and make sure they understand a document before they sign it. If a document does not say anything that obligates the buyer to work with an agent, and if the document says that it is a disclosure, then it's not a contract.

In addition to the disclosure of who is being represented, agents must also disclose to any buyer the condition of the property that they are purchasing. This is true even if the agent is considered to be representing the seller. The seller must disclose any hidden defect on the property. In many states this disclosure must be made in writing, or the sellers may be given the option of signing a disclaimer, which says that they are not going to put the information in writing.

Representation is a complicated issue which should not be taken lightly. All consumers should make sure they fully understand whether an agent is looking out for their best interest, or is legally obligated to look out for the other party. Anyone who does not understand should ask the agent to explain it to them again, so they are clear as to what they can do or say with the agent. Failure to fully understand can be very costly.

Important Terms You Should Know Concerning Representation

AGENCY - An agreement creating a relationship whereby one party (the agent) REPRESENTS another party (the client or principal). The agent is obligated to completely look out for the best interests of the client.

AGENT - In common usage this refers to the salesperson, however in reality, the agent is the broker that the salesperson works for. Both parties have the same level of responsibility to look out for the best interest of the client.

BROKER - Generally refers to the top licensee in a company in each state. In some states, more than one person in a company can be referred to as a "Broker", and the top licensee will be called the "Principal Broker" or the "Broker of Record". A company that operates in more than one state may have a separate broker in charge of the company in each state.

BUYER'S AGENT - A broker or salesperson who is obligated to look out for the buyer's best interest. Generally, this requires the buyer to sign a contract which will obligate the buyer to work with that agent (with a few exceptions in some states), but keep in mind, this is no different from what a seller is doing when they sign a listing contract, and will give the buyer the same advantage in negotiations that the seller has with their agent.

DUAL AGENT - An agent who is representing the buyer and seller at the same time, in the same transaction. In some states, only the principal broker in a company can be a dual agent, while in other states, the salesperson may also be acting in this capacity. A party acting as a dual agent may not help either side (the buyer or seller) with their negotiations. In situations where only the broker is considered a dual agent, the salesperson may still be allowed to fully represent their buyer or seller. A few states have outlawed dual agency altogether, and a buyer seeking representation might have to go to another company, but in most states, this is not necessary.

SELLER'S AGENT - A broker or salesperson who is obligated to look out for the buyer's best interest. Traditionally, all brokers and salespeople were considered to be looking out for the seller, even if they were working with the buyer. In many circumstances, an agent may still be working in this capacity, so a buyer must be careful what they do or say around the agent. Before a buyer reveals anything affecting negotiations, they should make sure the agent is representing them as a buyer's agent.

TRANSACTIONAL AGENT - Also called a Transaction Agent or Facilitator - Some states allow a situation where the agent will not be representing anyone. They would have to be fair and honest with everyone, but as far as negotiations go, everyone would be on their own.

Make sure you understand which of these options are available in your state and how they work in your state. Choices concerning agency and representation are dramatically different from state to state.