About Agency .....

Understanding the AGENCY Relationship with Your Realtor

Realtors work within a legal idea called agency. An agent is legally obligated to look after the best interests of the person he or she is working for. The Agent owes  the client competence, loyalty, fiduciary responsibility and many other obligations.

A Realtor may be your agent- if you have clearly established an agency relationship with that realtor. But often, you may assume such an obligation exists when it does not.

It is important that you understand when an agency relationship exists and when it does not- and to understand what it means.

Common Misconceptions:

1. Although people commonly refer to salespeople as agents, only the "company" is the "agent". The salesperson is simply representing the client for the "agent" (the company).

2. Although sales people commonly refer to purchasers as their clients, the purchasers are often customers. A purchaser/vendor becomes a client only when a buyer/seller contract is signed. Make sure you understand the difference between “customer” and “client”.
IN REAL ESTATE THERE ARE THREE DIFFERENT FORMS OF AGENCY RELATIONSHIP:

1. Vendor Agency
   
   A real estate "company" may be an agent of the vendor. In this case, a vendor can expect the REALTOR to represent his or her best interest. Vendors contract agents to sell their properties by signing a "listing" agreement. This is the agreement that establishes the formal agency relationship between the real estate company and the vendor. A vendors agent is expected to tell the vendor anything that might influence the vendor’s decisions (such as the decision to accept an offer to purchase). The REALTOR must also maintain the confidentiality of information discussed with the vendor. And the REALTOR must tell the vendor if the purchaser is willing to offer a higher price
   A purchaser (customer) can expect competent service, knowing the vendor’s agent is bound by ethics and law to be honest and thorough in representing the property for sale. Purchasers can expect help identifying how much they can afford to spend on a home; they will be shown properties for sale: and REALTORS will help purchasers complete the forms for an offer to purchase a home. Purchasers should know, however that information shared with a vendor’s agent- such as how much they ultimately are willing to pay for a particular property- must be shared by a Vendor’s agent with the vendor.
   
   2. Buyer Agency
   
   A real estate "company" may be an agent of the buyer (client). In this case, it is the buyer who can expect the REALTOR to represent his or her best interest. REALTORS will fully disclose to the buyers all pertinent facts about a given property that he or she may be aware of. A REALTOR working for a buyer will also keep information about the buyer confidential from the vendor.
   Buyer agency is established through a written contract between the purchaser and real estate company.

3. Dual Agency

Occasionally a real estate "company" will be the agent of both the vendor and purchaser. This is called "dual agency". Under this arrangement, a REALTOR is obligated to look after the interests of both the buyer and the vendor.
In a dual agency situation, a REALTOR owes full disclosure to both the buyer and the vendor. Any confidential information must be shared with both parties. If a Dual Agency situation exists the clients will be advised, and they must agree to the Dual Agency, then both parties agree that we may withhold certain information from one party as specifically instructed to i,e. although the company may represent the buyer, we will not disclose to the buyer what final price the vendor will accept nor will we tell the vendor what final price the buyer will pay. "Confidential" information will be withheld. However the Realtors will not mislead or misrepresent facts to either party. This limited agency only applies when buyers under "contract" with us want to purchase a property listed with our company.

Who pays?

The vendor’s agent earns a fee or commission from the vendor of a property. This fee is agreed upon in the listing agreement. A purchaser can expect service from a vendor’s agent (as previously described) but that service will be paid for by the vendor. The fee of a buyer’s agent is set out in the contract between the buyer and the company. Each client is responsible to pay their own agent, but usually both agents share the total commission offered by the Vendor.

In the agreement of purchase and sale, both clients agree that their respective agent will be paid from the proceeds of the sale at closing. Payment for a dual agent must be agreed upon in contract between the REALTOR, the vendor and the buyer.

When more than one REALTOR is involved

Often, a buyer will work with one REALTOR and a vendor will work with another REALTOR. It may appear that the REALTOR working with the buyer is working for that buyer and is in an agency relationship with the buyer. This is not necessarily the case.
Most homes are sold through a system of co-operation among REALTORS known as the Multiple Listing Service or MLS. Under this system, a listing broker representing a vendor offers to co-operate in the sale of the property with other Realtors. Unless the co-operating broker has established an agency relationship with the purchaser, the co-operating broker will act as a sub-agent of the original listing broker. Even though they are working closely with the purchaser they must still represent the interests of the Vendor.
However, vendors should assume that all co-operating brokers are buyer’s agents, and should withhold confidential information from them unless they have "declared" themselves to be a sub-agent of the vendor.