Understanding Real Estate Representation
Whether you’re buying or selling, it’s important to choose representation that meets your needs in the transaction.
1. Buyer’s agency
When you’re buying a home, you can hire an agent who represents only you, called an exclusive buyer’s representative or agent. A buyer’s agent works in your best interest and owes you a fiduciary duty. Real estate fees owed to the agent can be paid by you, or it can be paid by the seller, or a combination of both.
If you’re selling your home and hiring an agent to list it exclusively, you’ve hired a selling representative–an agent who owes fiduciary duties to you. Typically, you pay a selling agent a commission at closing. Selling agents usually offer or agree to pay a portion of their sales commission to the buyer’s agent in order to entice the agents representing buyers to bring them to the listing. If your seller’s agent brings in a buyer, your agent keeps the entire commission.
When you purchase a home, the agent you can opt to work with may not be your agent at all, but instead may be a subagent of the seller. In general, a subagent represents and acts in the best interest of the sellers and sellers’ agent.
If your agent is acting as a subagent, you can expect to be treated honestly, but the subagent owes loyalty to the sellers and their agent and can’t put your interests above those of the sellers. In a few states, agents aren’t permitted to act as subagents. Never tell a subagent anything you don’t want the sellers to know. Maybe you offered $150,000 for a home but are willing to go up to $160,000. That’s the type of information subagents would be required to pass on to their clients, the sellers. This practice is allowed in Arkansas, but rarely seen. Be sure to check with the agent.
3. Disclosed dual agency
In many states, agents and companies can represent both parties in a home sale as long as that relationship is fully disclosed. Arkansas does allow disclosed dual agency. In Arkansas, with dual agency, the agent is not allowed to communicate personal information about one party to the other since it could provide an unfair advantage for one client over the other. Because dual agents represent both parties, they can’t be protective of and loyal to only you, but must be fair and impartial to both parties involved. Possible dual agency situation is when a house that’s listed for sale by the same real estate brokerage where your buyer’s agent works. In that case, the real estate brokerage would be representing both you and the seller and you’d both have to agree to that. As a seller, allowing dual agency allows buyers from your listing agency and other agencies to purchase your home. Allowing dual agency as a buyer allows you the option to purchase any home on the market, listed with your agency or any other. Because there’s a potential for conflicts of interest with dual agency, all parties must give their informed consent. In many states, that consent must be in writing.
4. Nonagency relationship
In some states, you can choose not to be represented by an agent. That’s referred to as nonagency or working with a transaction broker or facilitator. In general, in nonagency representation, the real estate professional you work with owes you fewer duties than a traditional agency relationship. And those duties vary from state to state. Ask the person you’re working with to explain what he or she will and won’t do for you.