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Agency
Disclosure & Representation
While not the most
exciting reading in the world, this information is important
and is worth your consideration if you wish to be an
conformed consumer. Since buying and/or selling a home
involves, for most people, their most valuable asset, isn't
it worth a few moments of your time?
The first time you meet with a real agent
in person, Massachusetts Law says that the agent must
explain the matter of “Agency” and you will be presented with a form
titled “Mandatory Licensee-Consumer
Relationship Disclosure”. While “Mandatory Agency Disclosure”
is not new in Massachusetts, effective July 1, 2005, a new disclosure
form was designed to provide the same kinds of disclosure previously
given to consumers while adding new choices and also new disclosures
regarding a real estate company’s internal agency policy.
This form is NOT A CONTRACT. The form is being provided
to help you understand the role of the real estate agent and their
affiliated firm in your real estate transaction. It is also intended to
help you understand the role of others agents who may be involved in
your transaction.
Why is this important to you?
Whether you are listing, buying or leasing property, a real estate agent
can provide you with expertise and assistance. As an informed consumer,
it is important for you, whether a buyer or a seller, to understand the
difference. The difference lies in the
level of services. Do not
assume that a real estate agent works solely for you unless you have an
agreement for that relationship.
To
preview the Agency Disclosure form,
click here if you have Adobe Acrobat Reader
The 1st
part of the form contains general information for the consumer about the
kinds of relationships available to them, namely
Seller’s Agents,
Buyer’s Agents and
Facilitators and also the
possibility of Dual Agents
and/or Designated Agents and
what that means to a consumer.
The 2nd part of the form discloses
what kind of agency relationship the
agent’s firm offers. As of July 1st, 2005,
brokerages have options as well. There are two options:
1)
If a
brokerage office adopts a traditional agency policy (not
designated agency) it means, although you may be working
with one agent to list your home or help you purchase a home, ALL the
agents within the firm represent you, the consumer.
EXAMPLE: If
you opt for buyer representation and are interested in a property listed
by the same firm (even if listed with a different agent in the firm) a
Dual Agency situation exists (reference Disclosed Dual Agent below).
2)
If a
brokerage office adopts a designated
agency policy, one salesperson/broker within the firm is
appointed to represent the seller and another salesperson/broker within
the same firm is appointed to represent the buyer without wither
salesperson being consider a dual agent (reference Designated Agents and
Disclosed Dual Agents below)
EXAMPLE: If
you opt for buyer representation and are interested in a property listed
by the same firm, your buyer agent can represent you and the listing
agent can represent the seller (no Dual Agency exists – this is
Designated Agency).
Dual or
Designated agency will be effected by what kind of agency relationship
your firm offers (determined by office policy). More on this further
later in this report. Both have advantages and disadvantages that can be
explained more fully by the agent you opt to work with.
Realty
Executives of Cape Cod with whom Darryl & I are affiliated is a
Designated Agency firm. We personally prefer this office model as we
feel it allows us to offer a higher level of service to our clients
(both buyers and sellers) – Shirley Enders, Realtor, GRI, ABR
SELLER'S AGENT:
A seller can engage
the services of a real estate agent to sell his property (called the
listing agent) and the real estate agent is then the agent for the
seller who becomes the agent’s client. This means that the real estate
agent represents the seller. The agent must
put the seller’s interests first
and negotiate for the best price and terms for their client, the seller.
The
seller may authorize sub-agents
to represent him/her in marketing its property to buyers.
Basically, this means
the listing broker would solicit other brokers and agents to also work
toward the seller’s goal of trying to sell the property (an agent of an
agent and of the seller). In this scenario, the subagent works FOR the
seller and WITH the buyer. The seller is a “client” and the buyer
is a “customer”. The subagent (together with the listing agent)
would also represent the seller’s interests and has all of
the same duties as the listing agent, including loyalty and
confidentiality and the obligation to disclosure all material facts to
the seller. However, the seller should be aware that wrongful action by
the real estate agent or sub-agents may subject the seller to legal
liability for those wrongful actions. Effective July 1, 2005, in order
to practice sub-agency in Massachusetts the brokerage firm must obtain
written permission from the client before offering compensation to
subagents. This written permission must include a disclosure of the
risks of “vicarious liability”. Vicarious liability is the potential for
a seller to be held liable for misrepresentation or an act or omission
of the subagent and that the seller authorizes the broker or salesperson
to offer sub-agency in the signing of the notice.
BUYER'S AGENT:
A buyer
can engage the services of a real estate agent to purchase property and
the real estate agent is then the agent for the buyer who becomes the
agent’s client. This means that the real estate agent represents the
buyer. A buyer’s agent advocates and negotiates in behalf of the
buyer. A buyer’s agent also has an obligation to disclose to the buyer
all material information obtained from the seller or from any other
source. In this scenario, the agent works FOR the buyer and the buyer is
a “client”. The buyer may also authorize the buyer’s agents to
have sub-agents to represent him/her in purchasing property. Because of
the possibility of vicarious liability, in those rare instances where a
buyer’s agent desires to offer subagency to other licensees, written
consent from the buyer must be obtained.
FACILITATOR
(non-agent):
When a
real estate agents work as a facilitator that agent
assists the seller and buyer in reaching an agreement but does not
represent either the seller or buyer in the transaction.
Essentially a facilitator earns a fee for services as a “finder” and
works as a middleman or non-agent to assist the buyer and seller to find
one another and reach agreement for purchase and sale of property The
facilitator and the broker with whom the facilitator is affiliated owe
the seller and buyer a duty to present each property honestly and
accurately by disclosing known material defects about the property and
owe a duty to account for funds. In this scenario, either or both the
seller and buyer are “customers” – not “clients”. They are
working WITH the buyer or seller versus FOR the buyer or seller. Unless
otherwise agreed, the facilitator has no duty to keep information
received from a seller or buyer confidential. Should the seller and
buyer expressly agree, a facilitator relationship can be changed to
become an exclusive agency relationship with either the seller or the
buyer.
ATTENTION BUYERS! Although a buyer has a real estate agent helping
them in their endeavor to purchase real estate, it does not
automatically mean that the real estate agent represents the buyer’s
interests or that the buyer is a “client” of the agent. That would be
the case if an agent is a listing agent for a seller, a sub-agent of the
seller or when being assisted by a Facilitator or non-agent.
EXAMPLES: 1) A Buyer who is not represented by a buyer agent is dealing
with a listing agent directly about a home for sale (the listing agent
represents the seller). In this scenario the listing agent must endeavor
to negotiate the best price and terms for the Seller – not the buyer..
2) When a buyer not represented by a buyer agent attends open houses and
subsequently has the hosting agent or listing agent assist them to
formulate an offer (in most instances, the agent represents the seller).
If a buyer desires no representation, a seller’s agent or non-agent can
help them put their offer in writing but cannot “advise”.
Buyer representation is by pre-arrangement.
If a buyer is attending Open Houses without their buyer agent present or
making general inquiries about a property directly with a listing agent,
the buyer should simply disclose to the agent they have a buyer
representative and give them the name of that agent who will be “in
touch” if there is interest. If buyer who is being represented by a
buyer agent has an interest in the property, it is in his/her best
interests to contact their buyer agent immediately through whom they
would make the offer as their agent can provide a higher level of
service – help them negotiate best price and terms, point out reasons
not to buy and more.
As an
Accredited Buyer Representative and one who has been practicing buyer
representation before it became popular in Massachusetts, I would
strongly encourage buyers to educate themselves on the benefits of buyer
representation. With no additional cost to the transaction, why would
anyone settle for less? – Shirley Enders, Realtor, GRI, ABR
To
view the Benefits of Buyer Representation,
click here if you have Adobe Acrobat Reader
DESIGNATED
SELLER’S & BUYER’S AGENT:
An agent can be designated by another real estate agent (the
appointing or designating agent) to represent either the buyer or
seller, provided the buyer or seller expressly agrees to such
designation in writing. This can only occur in offices that select
that office policy or method of operating their business (option #2 on
the Agency Disclosure form). The real estate agent once so
designated is then the agent for either the buyer or seller who becomes
their “client”. The agent must put their client’s
interests first and negotiate the best price and terms for their
individual clients. In situations where the appointing agent designates
another agent to represent the seller and an agent to represent the
buyer then the appointing agent becomes a dual agent. Consequently, a
dual agent remains neutral and does not represent either the buyer or
seller solely – only your designated agent represents your interests.
Consent and Notice of Designated is required
in writing.
DISCLOSURE
DUAL AGENCY:
In this type
of relationship, one agent may represent both parties in a real estate
transaction, but only if both parties consent in writing (1st
with written consent of the buyer and seller at time of
establishing a relationship and subsequently with “Notice” prior to
execution of an offer to purchase of a specific property). This is
perfectly legal and ethical as long as both parties are agreeable. For
example, the dual agent cannot advocate or negotiate on behalf of either
the buyer or seller, or disclosure confidential information of either
party to benefit the other party in the transaction although known
material facts about a property must always be disclosed. In this
situation, the agent must fulfill their duties to both the buyer and
seller in an unbiased manner.
Disclosed
dual agency can occur in either a non-designated agency firm or a
designated agency firm. But the conditions are very different.
1.
TRADITIONAL or NOT DESIGNED AGENCY: If an agent within the office has
entered into an agreement to represent a buyer’s interests and the buyer
is interested in purchasing a home listed with the same brokerage
company (who also represents the interests of the seller), a dual agency
situation exists.
2.
DESIGNATED AGENCY: If an agent within the office has entered into an
agreement to represent the buyer’s interests and the buyer is interested
in purchasing a property listed with another designated agent within the
same firm, each agent can exclusively represent the interests of their
individual client. Dual agency would exist only if the buyer and seller
are represented by the SAME AGENT for the same property.
In either a Traditional or
Designated Agency firm, Disclosed Dual Agency is perfectly legal and
ethical as long as both parties are agreeable. Consent and Notice of
Disclosed Dual Agency is required in writing.
Hopefully
this information will enlighten real estate consumers as to their
options. While it might sound confusing, the options provided by
Massachusetts Law are for consumer
protection and because savvy buyers and sellers
ultimately demanded opportunity for both higher level of services from
real estate agents/brokers and more options in their real estate
dealings.
Questions
on "Agency"? Email: shirley@AtHomeCapeCod.com
Shirley & Darryl Enders
ENDERS
ASSOCIATES
4 Merchants Square, Suite 7
P.O. Box 1780
Sandwich, MA 02563
508-888-8999 x144 (Shirley)
508-888-8999 x145 (Darryl)
800-878-3722 (toll free)
or
1330 Phinney's Lane
Hyannis, MA 02601
508-362-1300 x731 (Shirley)
508-362-1300 x735 (Darryl)
800-244-1592 (toll free)
Email:
Shirley@AtHomeCapeCod.com
Email:
Darryl@AtHomeCapeCod.com
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Enders
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