In the context of working with a realtor to buy or sell a home, “agency” refers to the legal relationship and responsibilities between the realtor (real estate agent) and their client (buyer or seller). Understanding agency is crucial because it defines the level of representation, loyalty, and fiduciary duties the realtor owes to their client. Here are the common types of agency relationships in real estate:
- Seller’s Agent (Listing Agent):
- When a homeowner decides to sell their property, they typically hire a seller’s agent, also known as the listing agent.
- The seller’s agent’s primary duty is to represent and promote the best interests of the seller.
- They help the seller determine an appropriate listing price, market the property, negotiate offers, and guide the seller through the selling process.
- The seller’s agent owes the seller fiduciary duties, such as loyalty, confidentiality, and full disclosure.
- Buyer’s Agent:
- A buyer’s agent is hired by a prospective homebuyer to represent their interests during the homebuying process.
- The buyer’s agent assists the buyer in finding suitable properties, evaluating their value, negotiating offers, and facilitating the purchase.
- Their primary duty is to advocate for the buyer’s best interests, including helping the buyer secure a favorable deal.
- The buyer’s agent owes fiduciary duties to the buyer, such as loyalty, confidentiality, and full disclosure.
- Dual Agency:
- Dual agency occurs when a real estate brokerage represents both the buyer and the seller in the same real estate transaction.
- In a dual agency scenario, the real estate agent must be neutral and cannot provide full advocacy to either party.
- The agent’s primary duty is to facilitate the transaction, and they must maintain confidentiality for both parties.
- Dual agency is subject to specific laws and regulations, and it may be restricted or prohibited in some states due to potential conflicts of interest.
- Transaction Broker (Facilitator):
- In some states, real estate agents may act as transaction brokers or facilitators, working to facilitate the transaction without representing either party’s best interests.
- Transaction brokers assist with paperwork, ensure legal compliance, and help both parties navigate the transaction process.
- They do not owe fiduciary duties to either the buyer or the seller but must act in an honest and fair manner.
It’s crucial for buyers and sellers to understand the type of agency relationship they have with their realtor and the associated responsibilities. Additionally, agency relationships should be documented in a written agreement, such as a listing agreement for sellers or a buyer’s agency agreement for buyers. These agreements outline the scope of the realtor’s services, compensation, and other relevant terms.
Before entering into an agency relationship, individuals should discuss their expectations with the realtor, clarify the type of representation they desire, and ensure they are comfortable with the arrangement. This transparency helps create a smoother and more transparent real estate transaction process.
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