Understanding Agency In Real Estate
What is Agency in Real Estate? Agency refers to the legal responsibilities your real estate agent has to all parties. Under the law agents are an extension of the company (or brokerage) that they work for. This can create some confusing agency situations since the agents often work independently of each other within the brokerage. Your agent should explain what type of Agency they have with you on your first meeting. Here is a brief explanation of how they work.
A Seller’s Agent (often called a Listing Agent) represents the seller’s interests. All agents are assumed to be working for the seller in the state of New York. All agents from the brokerage are considered Sellers Agents (in respects to that property). Even when working with a buyer. If you are a buyer working with a Sellers Agent make sure not to disclose information that might hurt your negotiation power. Some examples include letting them know your top price or if you have to move by a specific date.
A Broker’s Agent also represents the seller, however, they work for a different company (or brokerage). The agent will still treat the buyer honestly. But the buyer should not disclose information that might hurt your negotiation power.
When a buyer signs a Buyer Broker Agreement with an agent then the agent legally works for them instead of the Seller. The buyer becomes responsible for paying the agent’s commission. However the Buyer Broker Agreement states that the agent may be paid by a commission split with the listing broker. This means that the agent’s commission will be covered for almost every property the buyer will see. They will be responsible for the commission only for properties that are For Sale By Owner (FSBO). In these cases the Seller has not already agreed to pay.
Dual agency is a relationship in which the Real Estate firm (and agent) represents both the buyer and the seller in the same real estate transaction (through both Sellers & Buyers Agency). Because of the potential for conflicts of interest, Dual Agents owe limited legal duties and it’s vital that all parties give their informed consent in writing.
Dual Agency With Designated Agents
This is a practice that allows the Real Estate brokerage to designate which Realtors in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dual-agency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.