Buyer and seller beware: Your agent may not represent your best interests

By MATT CARTER and ANDREA V. BRAMBILA Homebuyers sometimes gripe that their real estate agent seems more interested in closing a sale and collecting a commission check than in helping them find the right home at the right price. Sellers, too, may feel pressured by their broker to make price reductions or accept an offer that’s less than what they’d hoped to receive for their home. What buyers and sellers alike may not realize is that, in many cases, real estate brokers and agents actually have no legal obligation to look after their best interests. Laws in 25 states now allow brokers to provide services to buyers and sellers as “transaction brokers” or “facilitators,” without traditional fiduciary duties of loyalty and obedience.

All 50 states also provide avenues for brokers to “double end” a deal, working with both the buyer and seller in the same transaction and avoiding the need to split commission income with a cooperating broker. In such instances, neither the buyer nor seller is fully represented, critics say. Because they rely on referrals and repeat customers for much of their business, scrupulous real estate brokers and agents strive to provide a high level of service, whether they are representing clients individually in “single agency” relationships or double-ending deals.

See related report: Beyond Dual Agency But consumers shouldn’t assume that their broker or agent is obligated to represent their interests, and their interests alone, until they have seen a written disclosure describing the agency relationship under which services are being provided to them.

Homebuyers and sellers looking to negotiate the best commission rate, obtain the highest level of service, and protect their legal rights in the event of a dispute can start off on the right foot by making sure they understand the form of representation their broker or agent is providing. Agency relationships Agency relationships are created when one person agrees to act on another’s behalf, or represent them in dealings with a third party. Once an agency relationship is established, agents owe their clients “fiduciary duties” of loyalty and obedience.

They are typically required to place their clients’ interests ahead of their own, providing services with honesty and good faith while avoiding conflicts of interest or “self-dealing.” But the rules governing agency relationships between consumers, real estate brokers and their agents vary from state to state, and all have been rewritten in the last 25 years. Depending on the laws of the state they are licensed in, brokers can provide services in one of six relationships:

Single agency: A broker or agent represents the interests of the buyer or seller alone in a transaction — either as the listing agent or as a “buyer’s agent.” Consumer advocates and agents who work exclusively with buyers say single agency is the best form of representation.

Designated agency: One broker designates two of their agents to represent the buyer and seller separately. When states require that brokers implement safeguards to protect clients’ confidential information, designated agency is the next best alternative to single agency, academics and consumer advocates say.

Disclosed dual agency: A lone agent provides services to both the buyer and the seller in a limited agency relationship, without an obligation to represent the best interests of either. In states with no provisions for designated agency, when two agents affiliated with the same broker represent both sides of a transaction, the broker may be considered a dual agent. Although controversial even among real estate brokers and agents, disclosed dual agency does present opportunities for experienced sellers to negotiate discounted or “variable rate” commissions in advance.

Transaction brokerage: One agent or two agents at the same brokerage may provide services to the buyer, the seller, or both, in a non-agency relationship, owing no fiduciary duties of loyalty and obedience. In addition to having the same disadvantage as dual agency — neither the buyer nor seller can expect an agent to represent their interests during negotiations — consumers served by transaction brokers have little leeway to file claims for professional negligence.

Provision of “ministerial” services to unrepresented “customers”: A listing broker may avoid splitting a commission with a cooperating broker by providing limited services to an unrepresented buyer. Every state in the union provides avenues for brokers and agents to “double dip.” Of the eight states that ban dual agency outright, four allow designated agency (Alaska, Colorado, Maryland and Texas), three allow transaction brokerage (Florida, Kansas and Oklahoma), and three allow both (Alaska, Colorado and Texas). Subagency: The listing broker represents the seller in an agency relationship. “Selling agents” who work with buyers are “subagents” of the listing broker. All of the agents involved in a tran

Source: Buyer and seller beware: Your agent may not represent your best interests

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The 3 Types of Buyer-Broker Contracts – Real Estate News and Advice – realtor.com

The 3 Types of Buyer-Broker Contracts By Craig Donofrio 3:24 pm ET April 7, 2015 Kirby Hamilton a home comes with a lot of responsibilities: You need to figure out the right community, the right size of house, the location, and especially the price. You have to negotiate with sellers and real estate agents. To cut down on the time it takes to do this, you might want to hire a real estate broker, otherwise known as a buyer’s broker, to represent you and help you find a home. The broker usually has an agent to help him or her with this task.

If you want to get a buyer’s broker, you’ll want to know about the three most common buyer-broker contracts and what they entail.

The basics  To avoid problems, the buyer and broker enter into a contract defining the legal relationship. This contract explains the duties and responsibilities of the parties and sets out exactly what services the broker will provide. There are several types of buyer’s broker real estate agreements representing the nature of the relationship between the buyer and the broker. These contracts can generally be provided by the broker in preprinted “fill-in-the-blank” forms adapted to the laws of the particular state.

Nonexclusive not-for-compensation contracts Please, Mr. PostmanSend me news, tips, and promos from realtor.com® and Move. Sign UpThis type of contract describes the broker’s duties and obligations to the home buyer, generally to be performed by the broker’s agent. It also outlines the relationship between the agent and the broker and the buyer’s responsibilities.This contract specifies there is no compensation to be paid to the broker. Other common components include that the buyer can retain more than one brokerage and either party can revoke the contract at any time.

Nonexclusive right-to-represent contracts  This arrangement defines the broker’s responsibilities to the buyer, the relationship between the broker and the agent, and the buyer’s obligations. It provides for compensation to be paid to the broker if the broker proposes the house the buyer decides to buy or otherwise represents the buyer.If another party pays a commission to the broker, this obligation is removed. Additionally, the buyer is typically able to buy a home through another broker as long as that home was not proposed by the previous broker. Usually these agreements may not be revoked except for specified reasons.

Exclusive right-to-represent contracts  This is the most common contract between home buyers and brokers. This agreement outlines the obligations of the broker, the broker-agent relationship, and the responsibilities of the buyer. What distinguishes this contract is the buyer may not retain more than one broker to assist him or her. It sets forth the commission amount to be paid to the broker, which is owed even if the buyer finds the house herself or another broker does so. But if another party pays the broker the commission, the buyer doesn’t have to.In comparison to nonexclusive contracts, which are usually for one or two months, exclusive agreements might run from several months to a year and generally cannot be revoked except for specified reasons.

Making the choice  The key elements of the agreement are broker exclusivity, contract duration, compensation, and the description of the type of home the buyer is seeking. There is no “correct” answer for every buyer, so you should compare options. Speak with friends, family members, and professionals who are familiar with the process, and consult different brokers to see what they offer and whom you feel most comfortable working with.

Source: The 3 Types of Buyer-Broker Contracts – Real Estate News and Advice – realtor.com

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