Agency 101 (The Condensed Version)
When it comes time for you to purchase or sell a home in the future, the concepts that dictate real estate practices can, at times, become quite confusing. It’s been said that the real estate career is the only one in which practitioners only get paid when they are successful!
When you first sit down with a REALTOR® to discuss purchasing or selling, they will ask you to sign a Consumer’s Guide to Agency. This is NOT a contract. You are simply signing a receipt that they gave you this information. This document is required by law to present to the client at the first opportunity (except during open houses) and explains how the company is structured when representing clients; either as a “split” agency company where only your agent and the broker/manager has access to your private information, or a “dual” agency company where ALL agents of the company represent you.
When you list your property for sale, you will enter into a listing agreement with your chosen real estate company stating the price of the home, a beginning and end date of the contract, total commission, and what part of that total commission you are offering as a “buyer’s agency” commission. The rules of the Multiple Listing Service (MLS) dictates that all MLS-advertised properties must offer “co-broker compensation”. Once your listing appears on the MLS, the information of your house will include what the buyer’s agency commission will be, most generally a percentage of the sales price, or at times a fixed or minimum amount of money. In this way, the buyer’s representative can see what the compensation will be if they represent the buyer on that property.
When you are the buyer, your agent may ask you to sign a Buyer’s Agency Agreement, which is a contract in which you promise the company representing you a set price/percentage of the purchase transaction or perhaps whatever is offered on the MLS as buyer’s agency compensation. In many cases, there is no formal Buyer’s Agency Agreement, but the premise is basically still followed. The buyer’s agent company is given whatever compensation is showing on the MLS.
At times, an agent may represent both parties. This is called a “dual agency”. The agent has a fiduciary responsibility to represent both parties legally and fairly and they cannot divulge sensitive information that may put one side at an advantage over the other. With that in mind and in my personal business, I never ask the seller’s bottom line just in case I find myself in the future representing both sides. The thought of a buyer writing a contract with that exact same price comes to mind and the seller perhaps thinking I told them! I don’t even want to know!
In all cases, when a purchase agreement is entered into, an Agency Disclosure will be presented to all parties where they must acknowledge who is representing whom. The listing contract and MLS dictates the percentage or amount each company will receive.
So in what scenarios would we not get paid (be successful)? If your agent shows you a property, he or she should be the one actually writing up the purchase agreement. For example: You tour a property with Agent A, but decide to purchase the property through brother-in-law Agent B, he and/or his company will most likely not be entitled to the commission offered, as he was not the “procuring cause” of the sale. And if you see a property with your agent and want to see it again, always make that appointment through your agent and not the list agent, as the same “procuring cause” issue will apply. When representing sellers, if the contract expires and you switch to another company, your first agent’s company will not get paid when a sale ultimately happens. There are, at times, “procuring cause” issues under this scenario, but are rare.
It is important for you to do your research and pick the agent/company you feel most comfortable with, as he/she will be with you every step of the way. Spring is one it’s way and so is the ultimate home selling/buying season! The more knowledge you have about the process, the easier it will be for everyone!
As Appearing in the Canton Repository 2-19-16