Types of Agency Relationships
Having decided to buy or sell a home, you are now faced with deciding what type of agent you will engage. There are several contractual agreements from which to choose, and understanding each of them is important before making that commitment. It is important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transactions. Ask your salesperson to explain what type of agency relationship you have with him or her, and with the brokerage company.
Seller’s agent. Also known as a listing agent, a seller’s agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is evidenced by a listing contract. Once a property is listed, the seller’s agent either can attempt to sell it or, in addition, may be permitted by the seller to cooperate with another licensee who will attempt to find a suitable buyer for the property. A seller’s agent negotiates the best possible price and terms for the seller. The agent represents the seller’s best interests throughout the transaction.
Buyer’s agent. A real estate licensee is hired by a prospective buyer as an agent to find an acceptable property for purchase and to negotiate the best possible price and terms for the buyer. The agent represents the buyer’s best interests throughout the transaction. The buyer can pay the agent directly through a negotiated fee, or the buyer’s agent may be paid by the seller or receive a commission split with the listing agent.
Disclosed dual agent. Dual agency is a relationship in which the brokerage represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to the clients; instead, dual agents owe limited fiduciary duties. The fiduciary duty of loyalty to the client is limited. This focuses on confidentiality and the negotiation process. Because of the potential for conflicts of interest in a dual agency relationship, it is vital that all parties to the dual agency relationship give their informed consent in writing.
It is important that you discuss the type relationship you and your agent will enter, and that you fully understand the responsibilities and working relationship that will result. Your REALTOR® will explain all options to your full satisfaction.
Real estate commissions
Commissions are negotiable between the seller and the listing broker. When completing the listing agreement, the seller and the listing REALTOR® will agree on the amount of the real estate commission. The listing contract also specifies when the commission is earned; it is important that you understand this.
Portions of this article reprinted from REALTOR® Magazine Online by permission of the National Association of REALTORS®. Copyright 2008. All rights reserved.