Who Does The Real Estate Agent Represent



Who Represents Whom in a Real Estate Transaction

If you are endeavoring to purchase or sell a house, you will probably need the assistance of a professional real estate agent. But it is not uncommon for buyers and sometimes sellers to work with a real estate agent without asking the crucial question: who does the real estate agent represent?

Sometimes the real estate agent only works for the seller, at times just for the buyer, and other times both clients.

Buyers and sellers can be misled into thinking that an agent is working exclusively for them when that is not the case. Quite often, this happens when a real estate agent practices dual agency. Dual agency occurs when a real estate agent “represents” both a buyer and seller in one real estate transaction.

The problem with the dual agency relationship is it is impossible to truly represent both a buyer and seller when they have conflicting goals. Additionally, when you become a dual agent, you’re not allowed to provide advice like you would in a traditional buyer’s agent or seller’s agent relationship. In other words, the very reason why a consumer hires an agent – to get the best advice possible.

Most states have disclosure laws where real estate agents must explain agency law to a prospective client. Even so, sometimes, either the real estate agent doesn’t explain agency well, or the consumer doesn’t understand it.

Even worse, many real estate agents don’t understand it either. Do you know how many real estate agents think they can give a consumer advice in a dual agency relationship? TONS! It is frightening how many agents don’t understand agency law in their own state. This is more commonplace than it should be.

Smart consumers secure exclusive interests of a respective buyer’s agent or seller’s agent, depending on what side of the fence they are on. They know that by doing so, their interests are protected throughout the transaction.

The best real estate agents understand that the goal isn’t to make a sale at all costs but to protect the best interests of the client they serve. For example, most homeowners would like to sell their property for the most money possible. On the flip side, most buyers want to make a purchase knowing they didn’t overpay.

Functions of Real Estate Agents

A real estate agent should have expertise in all aspects of buying or selling a home, no matter which side of the fence they sit on. Of course, this means passing a state-required test and getting licensed. While the end goal of a real estate agent is to help buyers purchase a home and help homeowners sell a home, not at the expense of violating their fiduciary responsibilities.

Consumers should also understand that the words Realtor, Real Estate agent, and broker all have different meanings! Read the detailed resource at Maximum Real Estate Exposure to know how they differ.

Below is a brief clarification of the kinds of real estate agents and their functions.

An Agent of The Buyer: Known as a Buyer’s Agent

The buyer’s agent works only with the buyer and guides them in every step with their best interests at heart, from finding a home to completing the transaction. It’s crucial to understand why you should have a buyer’s agent when purchasing a house. In particular, the buyer’s agent will do the following:

1. Assists in finding a property that matches the buyer’s search criteria.
2. Consults with the seller’s agent on all aspects of the transaction.
3. Directs buyers to professionals such as home inspectors, mortgage brokers, and attorneys.
4. Assists the buyer with all paperwork in purchasing a home.
5. Provides the buyer with advice and expertise from start to finish.

Real Estate Agent For The Seller: Known as a Seller’s Agent

The agent of the seller works only with and to the highest interest of the homeowner, advising them on everything from home staging, to proper pricing, and everything in between to completion.

The following are some of the primary roles of a seller’s real estate agent:

1. Guides you to prepare to sell your house
2. Lists your house in MLS
3. Provides online and offline marketing
4. Communicates with the seller throughout the transaction
5. Displays your home to buyers by providing photography and marketing expertise
6. Consults with the buyer’s agent before and during the sale

You can see an excellent summary of all of the things a real estate agent does for both buyers and sellers here. What’s written above only scratches the surface on what a buyer’s and seller’s agent does for their clients on a daily basis.

A Dual Real Estate Agent

As previously mentioned, he or she represents both the purchaser and the seller in a single transaction. This is lawfully allowed in some states but not in others with the assent of the buyer and the seller. Note that hiring a dual real estate agent can bring a conflict of interest since the real estate agent cannot advise the buyer or seller. Giving advice in dual agency is ILLEGAL. An agent doing so would be practicing illegal dual agency.

Designated Agency

Designated agency is when a real estate transaction is conducted in-house by the same real estate company with one agent serving the seller as a seller’s agent and another agent serving the buyer as a buyer’s agent. In this circumstance, the broker of record becomes a dual agent.

Designated agency differs from dual agency in the fact that each party has a real estate agent who is representing their best interests. Designated agency relieves the conflict of interest that is inherent with dual agency. Both buyer and seller have an agent they can lean on for advice.

Cooperating Real Estate Agents or Sub-Agents

Cooperating real estate agents or sub-agents is just another name for an agent who is working for a buyer.

They are real estate agents who, in concurrence with the listing agent organization, go into a “sub-agency” relationship in which they show the house to the buyers on behalf of the listing agent of the seller. Another term that is often used is what’s called a “co-broke.”

The company working for the seller almost always pays the real estate commission.

Real Estate Broker

A real estate broker is typically the owner of a real estate firm, but not always. They generally oversee the day to day operation of the business to make sure everything goes smoothly. A real estate broker also is responsible for the agents they employ. One vital role that a real estate broker takes on is holding a buyer’s earnest money funds in escrow until a transaction is completed.

The earnest money deposit is duly accounted for at the time of closing.

Transaction Coordinator

A transaction coordinator is another name for someone who works for a real estate agent doing tasks for them. It is possible that a transaction coordinator could be a licensed agent or not.

They typically help a real estate agent or intermediary in taking care of the administrative components of a real estate transaction, including the collection of all documents, the opening of the escrow account, the verification of the signature, and the completion of the time management information provided.

The Right Real Estate Agent

Different types of real estate agents may be required for various transactions. For those who buy or sell a property, it is imperative to find the right agent for every situation. Some agents work exceptionally well with buyers, while others are better suited to work with sellers. It is essential for consumers to distinguish this difference.

For those new to the business who become real estate agents, it is crucial to determine the career path you want to go through. You know exactly what steps you need to take to achieve your goals.

Final Thoughts on Agency

Whether you are buying or selling a home, it is essential to understand how agency law works in your state. The real estate agents you meet with should be explaining exactly how it works. You should always know if the real estate agent you hired plans on representing your throughout the entire transaction. It would be highly advisable to avoid agents who practice dual agency as it is not in your best interests.

Other Valuable Realty Biz News Real Estate Articles

FAQ Buying a House – do you know some of the most frequently asked questions when buying a home? If you are going to be purchasing a house for the first time, you should! Take a look at what gets asked quite a bit.

How to go from renting to owning – are you considering purchasing your first house? Have you been renting for a while? See what you need to know about going from a renter to a new homeowner.

How you can lose your earnest money – when buying a home, you will be required to put up what’s called an earnest money deposit. It is quite possible you could lose these funds if you are not careful. See what you need to know to avoid losing earnest money.

Use these additional resources to make the best possible decisions when you will be buying a home.

Bill Gassett About Bill Gassett

Bill Gassett is a thirty-two year veteran to the real estate industry. He enjoys writing helpful articles for buyers, sellers and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame and here at Realty Biz News. He was the #1 RE/MAX agent in Massachusetts for 2018.

Comments

  1. Adrienne Hollis says

    Bill it is funny how some of the buyer’s agent only companies like to position themselves as being the best option. As a buyer you should seek out the best agent regardless of where they work or what brand they are under.

    Look for someone who has tremendous buyer agent skills. Someone who doesn’t take their fiduciary responsibility lightly. Like you said a true buyer’s agent could care less if they sell one of their companies listings – it is all about finding their client the best house period. For anyone to say otherwise is just plain STUPID!

    Can anyone name a “Buyer’s Only” firm that sticks out in their mind? I am hearing crickets.

    • Exactly – it is crystal clear that is what a few of these commenters are trying to puff up their own chests when it is unwarranted. If you are a buyer’s agent you work for your buyer – end of story. Do to anything else would be being unethical.

  2. This is a good summary on agency, as good as any I’ve read. I do think you should mention negotiation on both buyer and seller agency list. It’s much more than “consulting”, and is the part most missing from dual agency. Granted dual agents negotiate with both sides, but they do it it more from a neutral position and inherently favor the seller in the transaction. I don’t know anyone who does designated agency. Just too difficult and expensive to separate the business.

  3. Good article. I do disagree with this point: “Designated agency relieves the conflict of interest that is inherent with dual agency. Both buyer and seller have an agent they can lean on for advice.”
    Those ‘designated’ agents are both working for someone who is a dual agent. That dual agent has some authority over them and is the person they must go to for advice. So, designated agency often does not relieve the conflict.
    The one term you did not explain was “Exclusive Buyers Agent”. They are the solution to avoiding the conflict. The work for companies that never represent sellers – thus the agency conflict doesn’t exist. HUD recommends that buyers consider using an exclusive buyers agent.

    • Paul I am sorry but that is nonsense. The argument that a designated agent isn’t a better situation is what you always hear from the exclusive buyer’s agent crowd. The fact of the matter is brokers don’t get involved in negotiations and even if they did you would want them to be a neutral party which is exactly what they are in this situation.

      • That is an unfortunately inaccurate response. It actually worse than I had indicated – but ok.
        It is the company that represents the consumer – not the individual agents ‘designated’ or not.
        It is in that company best interest to see that the transaction is completed so that ‘the company’ collects the commission from both sides. An exclusive buyers office doesn’t care at all which house a consumer buys and so they are much more likely to advise a buyer to move on. In fact, making sure buyers have a ‘plan b’ house in mind helps them to avoid much of the stress of a purchase transaction.
        Back to the original point — some agents – especially inexperienced agents – do go to their broker for advice. So, if the advice the agents wants concerns how best to position their buyer for a successful transaction – where does that leave them. On their own. All else being equal it is virtually always beneficial for a home buyer to use an exclusive buyers agent. There aren’t that many so the defensiveness of agents that work and profit by working both sides is odd.
        HUD recognizes the benefit of Exclusive Buyers Agents and recommend that consumers consider using one.

        • You comment is 100 percent false and totally misleading to anyone reading it. A company as you say does not get involved EVER in negotiations between a buyer and a seller. A buyer’s agent works for their client period and could care less whether the home they are selling is listed with their company or not. For you to insinuate otherwise is totally ingenious.

          What is completely evident here is that you work for a buyer’s only company and are trying overly puff up that concept. I have no problem with that but please don’t fabricate the BS you are spreading that agents who work for a company with designated agency are doing everything at all costs to make a sale whether it benefits their client or not. Total garbage!

          Sorry Paul but you get the Pinnochio award for that – 4 stars in fact.

          • Bill, when Ohio Realtors abrogated in the Ohio Legislature the Common Law of Agency in 1996 I testified against the concept of “Designated Agency” even though I knew it would pass due to PAC money. I contacted the Ohio State Bar Association and they, using their words, “had an internal civil war going on”. Smaller law firms and solo practitioners thought it was an absolute impossibility but large law firms wanted it to go forward. Why? Because large firms represent many clients on retainer and associated fees. Should one of their clients initiate a suit against another client they must step away and recuse themselves. In essence they wanted to lay the groundwork for “designated lawyering” decades in the future because of the lost revenues involved!

            In 1991 the President of NAR, Harley Rouda, stated in the Realtor magazine that, “Just as God made little green apples agents with the same brokerage will talk between themselves even in different offices” and therefore ‘buyer agency’ was impossible” when working both sides of the pie.

            For sellers there is an “Exclusive Right To Sell Listing Agreement” which is about compensation and agency is handled in a second document/disclosure. But on the buyer’s side, they call it an “Exclusive Buyer Agency Agreement” which it is NOT, and it only deals with compensation and not agency – which is also handled in a second document/disclosure. So why does NAR promulgate treating and confusing buyer consumers differently than seller consumers?

            You would not accept designated lawyering or designated coaching in sporting events, so why accept it in the biggest financial transaction of your life?

            The Realtor answer is “double-dipping commission dollars”.

          • Of course, you did Andrew because by doing so it was a benefit to exclusive buyer’s agency companies. Say what you will, but the fact remains that an agent does not make more money whether they sell their own companies listing or another companies listing. There is no double-dipping as you say as there are two different agents.

            You get the exact same representation as a buyer. I could care less whether a buyer purchases one of my company listings or someone else’s. You can try to fool the public with your long-winded comment but it isn’t going to work.