Understanding Agency Relationships

by admin on February 14, 2009

You have been driving around, looking at homes, calling every agent you see a sign for, finally write an offer on a house and you get to the agency disclosure and find out that the agent you have been friendly with for the past week – the one that knows every intimate detail of your financing, and the one that KNOWS you are willing to pay top-dollar for that new house – is not your agent!

The above scenario happens a LOT in our industry and while agency laws vary from state to state, the major gist of all of them is that the agent with the listing represents the seller first and foremost. Sure, you may run into a dual agency or implied agency relationship with a Realtor® that you deal with, but it is important to get the details of your representation up front as it could save you thousands of dollars and a lot of headaches.

There are many types of agency relationships but we are going to focus only on the ones that are relevant to Mississippi since that is the target audience for this post. There are Ultimately 4 different ways you can be represented in a real estate transaction in Mississippi, as a Seller’s Agent, Buyer’s Agent, in a Dual Agency, or as a Customer.

Seller’s Agent:
A seller’s agent represents the best interest of the seller only and it is his duty to procure the best price and terms for the seller. A seller’s agent owes the seller, and only the seller, the fiduciary responsibilities of loyalty, confidentiality, obedience, disclosure, full accounting and duty to use skill, care and diligence. To the buyer in a transaction, the seller’s agent must exercise a duty of honesty and fair dealing as well as disclosure of all known facts to the buyer or buyer’s agent which materially affect the value of a property which are not known to, or readily observable by the parties in the transaction.

Buyer’s Agent:
A buyer’s agent represents the best interest and terms of the buyer only. The duties of a buyer’s agent are the same fiduciary responsibilities of loyalty, confidentiality, obedience, disclosure, full accounting, and the duty to use skill, care and diligence. The buyer’s agent still owes the seller a duty of fair dealing.

Dual Agent:
Dual agency relationships must be fully disclosed to all parties in the transaction. While all agency relationships should be fully disclosed, dual agency is kind of like an attorney representing the husband and wife in a divorce case. Each party has differing wants, but the dual agent walks a fine line between the two.
A dual agent should never represent the interest of one party to the extent it would create a detriment to the other.

A customer in a real estate transaction basically has no representation and the agent can only ask you what you want in the terms without giving advice. The duties of fair dealing must still be there but ultimately their duties and responsibilities lie elsewhere. A customer is basically “representing himself”.

Implied Agency and Agency Disclosure:
Disclosure of agency relationship should be made at the “first substantive meeting”, basically meaning as soon as anything relative to pricing, financing, or ability to purchase is discussed. Typically, a working with a real estate broker form is presented the first time you meet. Many agents do not do this out of fear of presenting paperwork to someone the first time they meet. If your agent does not provide this to you – ASK FOR IT. It is your right to get this form and knowledge of how you will be represented in any potential purchase.

Implied agency is a way of creating an agency relationship without actually meaning to. If a real estate agent asks you personal questions about your financing or ability to purchase, and you give them the information, they may have created an implied agency. There are many other ways of creating an implied agency. A general rule of thumb – if it quacks like a duck and walks like a duck – it must be?…. Yep, an Agency Relationship!

What all this means to you!!
Some basic scenarios here for each agency relationship.

If you are looking to a buy a house and you contacted the listing agent directly. They most likely will want you to be a customer. At this point, any information you give them may be used against you. If you told them you LOVED the house and are willing to pay top dollar, they will tell the seller that and any offer less than the asking price would be a moot point and very likely to be countered.

If you are looking to buy the same house, but you have someone like ME representing you, I would make sure that you knew to be careful about saying anything to the seller or seller’s agent that may hurt your negotiating position. This means that the low offer you originally sent is much more likely of getting accepted. I am great at negotiating contracts and have saved my clients hundreds of thousands of dollars cumulatively.

Closing costs are another aspect that many agents miss in a transaction or intentionally try to push to the buyer. As your buyer’s agent – we would attempt to negotiate those closing costs for you saving you as much money at closing as possible so more of your money goes towards the house and not the fees!

Using the same transaction, a dual agent, the agent technically is not supposed to say anything to either party about the other. In a perfect world, a true dual agent is about as good as having the buyer and seller in the same room, letting them hash out the details and then just fill in the contract. This is not a perfect world though and most agents will typically play “Mr. Nice guy” on both sides just so he can get the deal done and collect his fee. Now this is not always bad, as the outcome may be the same as putting buyer and seller in the same room, but ultimately, the agent is representing only one person’s interest in this scenario – his own.

As a customer in the same transaction:
A buyer customer will pay the highest price for the house with the least favorable terms.
A seller customer will get the least for their house with the least favorable terms.

My Practices:
Typically, I try to be as fair as possible to all parties in a transaction. I do not like dealing with dual agency situations because I realize that is very difficult for me to do my job as effectively as possible in this case. I have occasionally created an implied agency relationship and had to do a dual agency. This typically happens when I start working with a buyer and then I get a listing that meets their needs.

Typically I will work as a buyer’s agent for my buyers and a seller’s agent for my sellers. I obviously have to be fair and honest in my dealings but I am also VERY proficient at negotiating contracts and getting the best price and terms for my clients.

If you are looking for an agent to represent you, as a buyer or seller, please contact me. Even as a buyer’s agent, I typically (over 99% of the time) get my commission paid by the seller of the property.

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