Agency and What it Means

Realtors are governed by the legal concept of “agency.” An agent is legally obligated to look after the best interests of his client. The agent must be loyal to that client.

A Realtor can be your agent if you have clearly established an agency relationship with that Realtor. This relationship is established in a written contract.

Seller’s Agent: When a real estate company is a “Seller’s agent,” it must do what is best for the Seller of a property. This relationship is established by a written contract called a listing.

A Seller’s agent must tell the Seller anything known about a Buyer. For instance, if a Seller’s agent knows a Buyer is willing to offer more for a property, that information must be shared with the Seller. Confidences a Seller shares with a Seller’s agent must be kept confidential.

A Buyer can expect fair service and disclosure of pertinent information about a property. Nothing will be misrepresented about a property. All questions will be answered honestly.

Buyer’s Agent: A real estate company acting as a “Buyer’s agent” must do what is best for the Buyer.

A written contract establishes Buyer agency. It also explains services the REALTOR will provide, spells out who will pay and specifies what obligations a Buyer may have. Typically, Buyers will be obliged to work exclusively with that REALTOR for a period of time.

A REALTOR working for a Buyer will keep information about the Buyer confidential from the Seller.

Dual Agent: Occasionally a real estate company will be the Agent of both the Buyer and Seller. The Buyer and Seller must consent to this arrangement in their listing and Buyer Agency Agreements. Under this “dual agency” arrangement, the company must do what is best for both the Buyer and the Seller. Since the company’s loyalty is divided between the Buyer and the Seller who have conflicting interest, it is absolutely essential that a dual agency relationship be established in a written agency agreement. This agreement specifically describes the rights and duties of everyone involved and any limitations to those rights and duties.

Who pays commission? Usually, the REALTOR will be paid from the proceeds of the sale, provided the Buyer has worked exclusively with the agent and has not gone directly to a Seller. The Buyer must work exclusively with the Buyer agent; for example, the Buyer would inform the agent of interest in a new construction home or exclusive listing and have the Buyer agent approach the Seller for information and to arrange commission payment to satisfy the Buyer contract. Should the fee not be negotiated satisfactorily, the Buyer would have to pay. Normally, the listing agreement states the REALTOR’S fee.