Real Estate Agent:
Relationships in Real Estate
Many consumers turn to real estate agents to help them with the purchase or sale of property. You may even be thinking about taking this route yourself. If you are, a good starting point is to get smart about key terms that describe real estate professionals and their working relationships with buyers and sellers in a transaction. Knowing who's who and who works for whom helps you make informed choices and better navigate the entire process.
The real estate professional that you will most likely deal with face to face is a real estate agent. If this person is not also a real estate broker, he or she works for a broker. Both are licensed by the state where they work to handle real estate transactions, and they must complete continuing education to retain their licenses. Brokers, however, are agents who have passed an additional licensing exam. In order to sit for this exam, they must meet state requirements for years of active experience as a salesperson, as well as successfully complete considerable educational requirements above and beyond what is required of agents. Brokers, not agents, can own real estate companies. If they choose to work for another broker that owns the firm, they are called associate brokers.
Whether you are dealing with a broker or agent, you need to be aware that this person may or may not be a realtor. It is a common misconception that all real estate agents are realtors. That is not the case. The term realtor is reserved for those who are members of the National Association of realtors and local affiliate organizations. As members, these professionals agree to adhere to a Code of Ethics and Standards of Performance that hold them to a standard that is often higher than what may be mandated by law.
Just as it is important that you know the differences between agents, brokers, and realtors, it is also important to know the different working relationships buyers and sellers can have with agents. Two of the most common types of agents are described below.
Working for the seller is the listing agent.
As a seller, you have a written contract -- a listing agreement -- which legally obligates the agent to look out for your best interests. This includes negotiating the best possible price and terms for you. If you are a buyer and you contact the listing agent by calling after seeing their sign or an advertisement, be aware that the listing agent does not work for you. Yes, this agent can show you the home and should provide accurate information and honestly answer your questions; however, their loyalty is to the seller. They are also bound by their agreement to disclose information to the seller. If you are liberal in information sharing, you might unwittingly strengthen the seller's negotiating position.
And who looks out for buyers' best interests?
Unless you have a buyer's agent, you might be looking out for yourself. Even if you engage an agent to show you homes that are listed by someone else, that agent has a fiduciary responsibility to the seller in the absence of an agreement that states otherwise. An agent fully represents you as a buyer only upon entering a written agreement to do so. With that agreement, the buyer's agent represents you through the entire transaction. If you are a seller, be aware that prospects with a buyer's agent have a level of representation comparable to what you have with your listing agent. Reveal information to the buyer's agent, such as reasons for selling and potential concessions, and your negotiating position weakens when the buyer's agent discloses that information to their client.
No matter which party you are in a real estate transaction, having the right professional to assist you can save you money, time, headaches, and hassles. So, take the time to understand the basics of various types of agency relationships so that you know how your agent will be working for you. Find out if the agent you are considering specializes in one area or the other -- helping buyers or sellers only -- or if he or she works with both. Ask questions until you get satisfactory answers, and be sure to read and understand all agreements that relate to representation.
Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.