Buyer's Agents and Seller's Agents Have Two Very Different Jobs
Know The Players
To understand agency, it helps to first know the names of the players. A "broker" is a person who has passed a special exam to earn the designation and is licensed by the state. Typically a principal broker forms a real estate company and recruits real estate licensees (salesperson and associates brokers) to the company as associates (often called "agents"). Agency agreements are legally made between the client and the company, personified by the principal broker. The associates, or agents, represent the principal broker by working personally with the firm's clients and get some or all of the resulting brokerage commission.
Agent And Principal
Legally speaking, an agent is the person who represents and acts on behalf of another person, called the principal. The agent owes certain duties to the principal. These duties generally include care, confidentiality, full disclosure and accurate accounting, although some specifics may vary from state to state.
Seller's Agent
A real estate agent who is employed by and represents only the seller in a transaction is a "seller's agent." This agent is also known as a "listing agent," because the agent lists the home for sale and generally markets it through a Multiple Listing Service. The listing agreement serves as a contract between the seller and the agent, and spells out how the seller's agent will be paid. Responsibilities of a seller's agent include getting the highest purchase price and best terms possible for the seller.
A seller's agents can offer buyers a variety of services, including a diligent search to find the right home, an explanation of available financing, calculation of monthly payments and estimated settlement costs, etc. The seller's agent is expected to act honestly and in good faith and may also be required by state law to disclose to the buyer certain kinds of information about the property.
However, a seller's agent cannot divulge confidential information to the buyer that is not in the best interest of the seller, such as what price the seller will accept, or offer an opinion of the home's value.
In the many instance, a seller's agent produces a buyer for the home. Although the seller's agent is often first contacted by a potential buyer and works hard to help the buyer find the right home to purchase, the seller's agent represents the seller throughout the transaction and is responsible for getting the best terms possible for the seller.
Buyer's Agent
A real estate agent who is employed by and represents only the buyer is a "buyer's agent." The agreement between the buyer and the buyer's agent serves as a contract between them and typically spells out the agent's duties and how the agent will be paid. The buyer's agent may be paid by the seller through a commission by the buyer or by some other mutually agreed-upon formula. Some buyer's agent may also (or instead) charge the buyer a retainer or hourly fee for services. In addition to helping the buyer with the home-finding process, the responsibilities of a buyer's agent - unlike those of the seller's agent - include representing the buyer's interest throughout, and working to negotiate the best price and terms for the buyer.
In-Company Situation
An "in-company situation" occurs when the potential buyer is working with an associate from the same real estate company that listed the home for sale. The solution to this situation goes by different names in different parts of the country - for instance, "designated representative," "transaction broker," "facilitator" or "disclosed dual agent."
State statutes and common law determine how an "in-company situation" is handled. Your real estate professional can explain the alternatives to you. Keep in mind, however, a broker and associates must maintain the confidentiality of their clients. For instance, without permission the cannot reveal to a buyer what lower price their seller would accept nor to a seller how much more their buyer is willing to pay.
In an "in-company situation," as in other agency relationships, the basic goals haven't changed: the seller wants to sell, the buyer wants to buy, and the agents want to help close the transaction.
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COMMONLY-ASKED QUESTIONS
Straight Answers For Sellers
I'm selling my home. Should I agree to let buyer's agents show my home?
Although only you can decide whether you want to permit buyer's agents to show your home, remember the greater exposure your home gets to qualified buyers, the more likely you are to sell it quickly and at the highest possible price. The majority of sellers and seller's agents let any agent help sell the home. Sellers typically don't care who brings a buyer or how the broker splits the commission as long as the home sells.
If a buyer is using a buyer's agent, do I have a pay the buyer's agent a commission?
Practices vary by area. Check with your agent to learn about your choices. As the seller, generally you can indicate on the listing agreement whether the seller's agent must split the commission you pay with the buyer's agent. Most sellers choose to work with a broker who splits the commission with a buyer's agent even though that agent does not represent the seller's interests. This, of course, maximizes the number of potential buyers for your home. Because the listing broker already is prepared to share the commission with a seller's agent who produces a buyer, most sellers don't mind when their broker instead shares the commission with a buyer's agent.
Can the seller's agent represent me in the sale of my home and then continue to represent me as a buyer's agent when I purchase my next home?
If the seller's agent also works as a buyer's agent, the agent can go on to represent you as a buyer's agent - under a separate agreement - as you purchase another home provided both you and the agent agree to the representation.
How and when will I find out who an agent is working for?
Most states require real estate agents to disclose to buyers and sellers their agency relationship. The National Association of REALTORS supports disclosure laws requiring real estate agents "to provide timely, meaningful, written disclosure to consumers of all possible agency relationships available under state law and most significant implications of choosing one type over another."
This "disclosure" should take place early, certainly before either a seller signs a listing agreement, a buyer is shown any properties, or the real estate agent is told any confidential information. The consumer usually signs a form acknowledging the agency disclosure.
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Straight Answers For Buyers
How can a seller's agent help me buy a home and what can't they do?
A seller's agent can provide you, the buyer, with many important services. Here are a few: help you determine what price home you can afford and explain how different loans can stretch your buying power; search all homes in the Multiple Listings Service and show you those that you select as best meeting your needs; provide general information about homes, recent area sales if asked, neighborhoods, and local lending institutions; prepare your sales contract and present it to the sellers; walk you through the home buying process and keep in contact with lenders, inspectors, and sellers through settlement.
Since the seller's agent is required to share with the seller information you provide, you may want to keep certain financial and other confidential matters to yourself. Common sense should be your guide. For instance, you may no want to say you're willing to pay more than the price you're offering, or that you'd agree to pay more points or closing costs, or that you're especially motivated to buy.
Remember, the seller's agent can't offer an opinion of the property's condition, the value of improvements, any urgency the seller may be under to sell, and if the seller will accept a price below the asking price. The seller's agent assisting you also must respond to such questions as "What do you think I should offer?" and "What do you think the home is worth?" with the answer, "I can only quote the listed price." When it comes to price and terms, at the negotiating table, you must be your own representative. The seller's agent will present your offer and bring back to you the signed contract, a rejection, or a counteroffer. You are free to respond as you see fit.
Should I be represented by a buyer's agent?
There is no simple answer. Some buyers want the help of an agent in whom they can confide. A buyer's agent can discuss relative advantages and disadvantages of a particular home, advise on how much to offer, evaluate improvements, and actively participate in negotiating favorable price and terms for the buyer.
Other buyers who are comfortable negotiating for the themselves feel a seller's agent will give them all the assistance they need to find a home and close the transaction smoothly and successfully.
I know the seller's agent is paid by the seller, but who pays the buyer's agent?
Compensation arrangements for buyer's agents vary. Surveys have shown buyer's agents generally receive a share of the commission paid from the sale proceeds. Many listing agreements between seller and seller's agent note whether the commission will be split between the seller's agent and the buyer's agent or must be negotiated.
There are, however, other ways buyer's agents may be paid. Some buyer's agents collect a retainer fee from the buyer at the beginning, some charge by the hour, and some charge a flat fee or a contribution. Often these fees are applied against any subsequent commission received by the buyer's agent. Your agreement with the buyer's agent should specify the details of compensation.
If the buyer's agent I use will split a commission based on the sales price, doesn't the buyer's agent have a conflict of interest when it comes to negotiating the lowest price for me?
While theoretically this could be true, in practice buyer's agents would benefit only slightly by failing to help you negotiate the best price. For instance, the every $1,000 paid above the bottom price a seller would have accepted, the buyer's agent only receives a few dollars extra in commission. Most buyer's agents prefer to negotiate the lowest referral business from satisfied buyers.
Some buyers and buyer's agents agree on a payment formula not tied to the sales price, such as a commission based on original asking price or a flat fee.
Can a buyer's agent show me all the homes for sale in the area?
In areas with Multiple Listing Service, a buyer's agent generally can show buyers almost all available homes, including homes not in the Multiple Listing Service and homes for sale by owner. The listing agreement made between sellers and seller's agent often specifies whether buyer's agents may show the home. Most sellers want their home made available to the largest possible audience of potential buyers. It is rare, but possible, that a seller may refuse to work with a buyer's agent.
A special in-company situation occurs when you want to see a home that your buyer's agent has listed for sale as a seller's agent, or one that is listed by another agent at the company of your buyer's agent. State laws, individual company policies and local practices vary. Ask the agent whether and in what ways the company or agent might then modify the agency agreement with you in you wish to purchase a company listing.
Can a seller's agent show me all available homes?
In most states, the agent can show you any home available through the Multiple Listing Service. That includes homes listed personally by the agent, homes listed by agents in other companies.
In areas without a Multiple Listing Service or where each real estate company shows only its own listings, both buyer's agents and seller's agents may be restricted to showing their own company listings.
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