Do you know what “Agency Agreement” is?
As a buyer or a seller of a home and you are working with a real estate agent, you should have discussed agency agreement. What is that, you ask? It is a fancy term for an agreement that tells you who your agent works for, and what they will do for you. Your potential agent is required to discuss agency with you at their first substantial meeting with you. If your agent hasn’t mentioned how they will be representing you, you should be hearing warning bells, seeing red flags, etc., etc! You should be presented with a disclosure and you sign your name to it. This protects your best interests and insures that the agent will be acting for your interests and following NYS law.
The two main ways to be represented are by a Single Agent or a Dual Agent.
Let’s start with some definitions.
- Is a person who represents someone. This person is called their client.
- Must follow the client’s instructions and act in the client’s best interests, unless they violate law.
- Has Fiduciary Duties to their client.
“As a fiduciary, a real estate broker is held by law to owe specific duties to his/her principal (the person who they are representing), in addition to duties or obligations set forth in a listing agreement, buyer representation agreement, or other contract of employment. Subagents of the broker also owe the same fiduciary duties to the broker’s principal. These specific fiduciary duties include:
Obedience-agents must obey their clients within the law.
Loyalty-client’s interests are placed first.
Disclosure of Information-an agent must disclose defects and other pertinent information to his or her client.
Confidentiality-remains in effect for an indefinite period of time.
Accountability-agents are responsible for all monies exchanged in a transaction (earnest money)
Reasonable Care, Skill and Diligence-an agent must be knowledgeable and perform to and withhold the high standards set by the real estate profession.
A single agent represents one party: either a Buyer or a Seller, but not both. The agent has fiduciary duties to their client, and must deal honestly with all other parties. Let’s say you hire Keli DiRisio of Realty 3, LLC as your agent to help you purchase a home in Pittsford. I represent you and your interests ONLY. It doesn’t matter who the seller is. YOU are my concern. Same situation if you hire me to list and sell your home. I am only representing YOU, not whoever the buyer is. I only represent ONE party.
A dual agent either represents both the Buyer and Seller, or both the Buyer and Seller are represented by different agents from the same Brokerage. There’s two different scenarios here to work through. Either way, you can only be represented by a Dual Agent with explicit written permission from YOU.
In one example, I have a house listed to sell with Sally Seller. She has my fiduciary duty as my client. I get a phone call from Barry Wantstobuy. He does not have an agent but he drove by Sally’s house and saw my sign. I show him the house and he decides he loves it and must have it. He asks me to represent him and write an offer. It is my job to ask if he will accept Dual Agency. If he says yes, he is now represented by a Dual Agent. What this means is that I can’t tell Sally Seller that Barry would accept a higher purchase price, just as I can’t tell Barry what Sally is thinking as an acceptable offer. There is the possibility of conflicts with fiduciary duties, but if both parties are OK with the situation, there should be no problems.
In another example, Stan Seller hired me from Realty 3, LLC to sell her house. My broker has a client and he has a buyer, Betty Buynow and she submits an offer on Stan’s house. In a way, we are both Dual Agents, but I don’t know the confidentail information about Betty, and my broker knows nothing about Stan. The transaction continues as if it were any transaction between a buyer and seller.
Yet another example is the client that comes to a builder to build a new home. I respresent a builder, DiRisio Builders. Ned and Nicole Newbuild came to me to build a new home and they are not represented by an agent. I immediately present them with a Dual Agency Disclosure form, explaining to them that while I represent the builder as the Seller, I now represent them as the Buyer. The building process is slightly different than the buying/selling of an exisiting home, so there is not as much negotiating. But the clients must be made aware of the relationships.
It’s good to have questions and concerns and ask your agent to clarify anything you are confused about. Just remember: your agent is representing your best interests.