REALTORS® are governed by the legal concept of "agency". A Sales Represenetative is legally obligated to look after the best interests of the person he or she is working for. The Sales Representative must be loyal to that person.
A REALTOR® may be your Sales Representative- if you have clearly established an agency relationship with that REALTOR®. But often, you may assume such an obligation exists when it does not.
REALTORS® believe it is important that the people they work with understand when an agency relationship exists and when it does not - and to understand what it means.
In real estate, there are four different forms of agency relationship:
When a Real Estate Brokerage represents a Seller, it must do what is best for the Seller of a property.
A written contract, called a listing agreement, createss an agengy relationship between the seller and the brokerage and establishs seller representation. It also explains services the brokerage will provide, establishes a fee arrangement for the REALTORS® services and specifies what obligations a seller may have.
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 from potential buyers and others.
Although confidential information about the seller cannot be discussed, a buyer working with a seller's agent can expect fair and honest service from the seller's agent and disclosure of pertinent information about the property.
A Real Estate Brokerage representing a buyer must do what is best for the buyer.
A written contract, called a buyer representation agreement, creates an agency relationship between the buyer and the brokerage, and establishes buyer representation. It also explains services the brokerage will provide, establishes a fee arrangement for the REALTORS® services and specifies what obligations a buyer may have.
Typically, buyers will be obliged to work exclusively with that brokerage for a period of time.
Occasionally a Real Estate Brokerage will represent both the buyer and the seller. The buyer and seller must consent to this arrangement in writing. Under this multiple representation arrangement, the brokerage must do what is best for both the buyer and the seller.
Since the Brokerage's loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a multiple representation relationship be properly documented. Representation agreements specifically describe the rights and duties of everyone involved and any limitations to those rights and duties.
A Real Estate Brokerage may provide services to buyers and sellers without creating buyer or seller representation. This is called "Customer Service".
Under this arrangement, the brokerage can provide many valuable services in a fair and honest manner. This relationship can be set out in a buyer or seller customer service agreement.
Real Estate negotiations are often complex and a brokerage may be providing representation and/or customer service to more than one seller or buyer. The brokerage will disclose these relationships to each buyer and seller.
Who Pays? - Usually, the REALTOR® will be paid from the proceeds of the sale. The listing agreement states the REALTORS® fee.
When more than one REALTOR® is involved - Often, a purchaser will work with one REALTOR® and a vendor will work with another. It may appear that the REALTORS® working with the purchaser is working for that purchaser, in an agency relationship. That is not necessarily the case. The REALTOR® working with a purchaser may be a "sub-agent of the vendor. In this case, the REALTOR® is actually a vendor's agent. While a vendor's agent can provide many valuable services to a purchaser, he or she must do what is best for the vendor. If a written contract exists with a purchaser, a REALTOR® can be a purchaser's agent. Purchaser's and vendors will always be told - in writing - who a REALTOR® is working for.