Buying And Selling a House: The Role of the Real Estate Agent
September 15, 2015
Most of us, at least once in our lifetime, will buy and/or sell a house. The process can be stressful and overwhelming and there are many legal issues to be considered. A real estate agent can help to navigate the process, so it is important to understand the real estate agent’s role.
In the past, real estate agents were always considered the agent of the seller. Thus, even if you as a buyer went to a real estate agent to help you find a house, that agent was considered to be working for the seller while helping you. This is because the agent’s fee was paid from the seller’s proceeds when the house sold. The seller might sign with only one agency and agree upon a fee with that agency, but if another agent from a different agency produced the buyer, the fee was split between the seller’s agent and the agent finding the buyer. Since the agent knew that it was going to be paid a fee by the seller if it produced a buyer, the agent’s loyalty was owed to the seller, even though the agent might not be under contract with the seller.
The agency relationship is a legal relationship. The seller’s agent has a duty to work only for the seller’s benefit. Because of that duty of loyalty, the seller can tell his or her agent what is the lowest price they are willing to accept, that the next door neighbor plays the drums and practices at night, and that a ghost walks the hallways every Halloween, without fear that that information will be relayed to the buyer. If you as the buyer seek help in buying a house from a real estate agent you may want to disclose to that agent how much you are willing to pay for the house, even though your initial offer will be much less. You might also disclose that you must find a house because yours has been sold and you will be homeless in 60 days. If that agent is not under contract with you, however, and is legally considered to owe a duty to seller, the agent may disclose this information to the seller (many agents do not, but the possibility exists if the agent is not a buyer’s agent).
Some real estate agents have become uncomfortable when the buyer discloses this type of confidential information when the agent owes no duty of loyalty to the buyer. This has led to a new agency relationship – the buyer’s agent. If your agent is a buyer’s agent, the agent agrees to work solely on behalf of the buyer. Instead of receiving a fee from the seller at closing, the buyer would agree to pay the agent a fee if the agent locates a house that is acceptable to the buyer, meeting all the terms that the buyer has specified. Note that this fee might be due even if the buyer doesn’t buy the house so long as the house located by the agent meets the specifications the buyer set. A buyer’s agents must have a signed contract with the buyer specifying the fee to be paid and the terms under which that fee will be paid. If you, as a buyer, do not have a signed contract with a real estate agent, you need to realize that the agent’s ultimate loyalty belongs to the seller.
There is no requirement in buying or selling a house, however, that you contract with any real estate agent. Whether you do as a seller will depend on a number of factors, including your comfort in meeting and negotiating with potential buyers and the amount of time you have to devote to the process of selling a house, including advertising, holding open houses, and meeting prospective purchasers. Many sellers prefer to remain in the background, making decisions but not meeting the buyer until after the deal has been signed. Whether you as a buyer hire an agent will depend again in part upon the amount of time you have to devote to the buying process, including reviewing want ads and weekly booklets of houses for sale, and your comfort in negotiating on your own for the purchase.
If you decide to hire a real estate agent, you will need to be sure to thoroughly review and understand the contract that you will be asked to sign.
Author: Bernadette L. Puzzuole
Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm’s attorneys.
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