Whether you are a potential seller, investor, purchaser, landlord or tenant of any type of residential or commercial properties, make sure whomever you are going to work with, that your Broker or salesperson establishes who and how they will be representing you in the transaction. If you are a seller or landlord working with a listing agent, your Broker or sales agent can be either be a seller’s agent or a dual agent; meaning if they are strictly representing you, the seller or landlord, they have the following fiduciary duties without limitation: (to remember it, you can give it a code, call it ccload)
1.) reasonable Care
3.) undivided Loyalty
5.) duty to Account
6.) full Disclosure
If they are a dual agent, they will be representing both the seller and the buyers, but without exclusitiviy for either. However, most Brokers and agents usually sign the disclosure as a sellers or a Broker’s agent, for reasons that cannot always be explained or understood, especially if they are taking an exclusive “in house” or some call a “pocket listing” where only their office is privy to showing it. But today as per the National Association of Realtors new code and ruling, Brokerages can no longer take exclusive listings and advertise them anywhere unless it is just to the brokerage’s database of only current and future clients.
Buyer’s agents have the absolute legal right to show the property, as per the D.O.S. (Dept. of State who licenses all of us) but, are not always paid by the listing agent, but sometimes must collect their commission from their buyer, unless there is an written agreement with the listing agent. In this still very strong, hot and historic low inventory market, many offices take exclusives for their current data base of clients (without any legal advertisements) a period of time, forcing many agents to try to get paid by their buyers, which in the majority of these type of sales, is difficult to do, because it substantially raises the total cost of purchasing, especially with the increased interest rates that have occurred for the buyer; making it extremely difficult for a buyer’s agent to consummate a deal. If it doesn’t sell exclusively with the listing office, within a reasonable time, then they make it a public listing, available to be shown by all brokers and agents outside the designated listing office, then enabling outside agencies to get paid by the seller and not the purchaser. If you are a buyer, do you want to pay more, of course not! So they go and work with the listing agents, because they think they are getting a better deal, which is not usually the case, (the selling agent and listing agent from the same office receives the full fee) since the listing agent is supposed to be loyal to the owner/seller.
Ah, Ah, this is where the conflict begins if the listing broker isn’t a dual agent from the get go, while signing their listing agreement and thoroughly explaining it to their client seller and buyer with written consent. As the listing agent develops relationships with their buyers, then at that point, are the seller’s interests foremost in the mind of their listing agent? I would profess with some exceptions, absolutely not! But I have thought about this for a long time and wondered, who is representing the seller or the purchaser, and who is really paying our fee? Of course, it comes from the buyers proceeds at the closing. So why shouldn’t the listing agent pay a buyer agent/broker as long as the seller is happy with the offer. Many times the listing agent doesn’t put in any commission in the listing for a buyer’s agent or cuts the commission (which is their right to do, but is the seller made aware of this while making up their listing agreement?) by not providing the same percentage as their office is receiving (eg. 50% of the total fee). The more traffic a seller receives by including a commission for buyer agents, the greater the exposure there will be to your property.
As a Broker agent (all agents outside of the listing office) they still fully represent without limitation, the seller, but they, as well as their customers, cannot sue the seller for vicarious liability and their recourse is only through the listing agent. The law of agency is somewhat complicated and I have been told by sellers, investors, purchasers, landlords, tenants, brokers and sales agents, that they do not really fully understand it. They may be signing a piece of paper that they don’t necessarily know why or what for? But they do it, because they are accustomed to doing so. However, if you are a buyer, investor or tenant, it is not a contract that binds you to purchase, invest, rent or lease anything, just an understanding as to who your agent is representing; and it has nothing to do with our commission. As a listing agent, you are still a seller’s agent, representing the seller (or you can be a dual agent, with the agreement of the seller and purchaser, again, representing both seller and buyer. Undivided loyalty to both parties is diminished in this situation, but disclosure to both parties, is still a requirement. However, outside of the listing agents office, the listing agent can provide a choice to those agents to be either a seller’s agent, broker’s agent or buyer’s agent, but just only one type of representation is allowed. This depends on what the listing agent chooses to provide, that is noted on the MLS (Multiple listing Service) listing.
I think eventually, the process of agency law will or should be much more simplified, so sellers, purchasers, landlords and tenants will have a better understanding and concept as to who is representing them and in what form. Florida and Colorado were two of the first states that offered transaction agency, where you represented the transaction, but not the seller or buyer, which in many instances would eliminate lawsuits, because of mistakes in representation and disclosure. Caveat Emptor (buyer beware) (or seller beware) should be something that the attorneys who are representing their clients’ interests should be as involved as possible, as they usually are required to be. They play a pivotal role and in a sense are already involved, to make sure everything they are selling, investing, buying, renting or leasing is in the contract of sale or the lease. The attorney’s review everything, as they always do, so I ask, why are we so involved in agency agreements? It appears to me that there is a bit of redundancy in our New York State real estate agency rules and regulations. I think there should have been more focus and oversight, as there now is with the Dodd-Frank regulations, on the money lending aspect of the transaction 14+ years ago, where documents were enhanced to push the loan through and no doc loans were the rage! Lastly, no matter how an agent represents the seller, investor, purchaser, or tenant, coming to an agreement amongst all the participants, is the most critical and crucial factor completing a transaction. Providing honest, credible, reliable and knowledgeable service will always minimize the potential of disagreements, misunderstandings and possible lawsuits. If you cannot receive an answer from your agent about this subject, find someone that can or ask your attorney’s advice, because agency law is a legal subject, that because of its complexity, many times goes beyond the scope of many in Real Estate. The bottom line, know what and why you are signing and know who is representing you whether you are a potential seller, investor, purchaser, landlord or tenant.
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Phil Raices is the owner/Broker of Turn Key Real Estate at 7 Bond St. in Great Neck. He has
earned designations as a G.R.I. (Graduate Realtor Institute) and C.I.P.S. (Certified
International Property Specialist) He can be reached by email: [email protected] or by cell (516) 647-4289 to answer any of your questions or article suggestions.
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