Why is agency important?
Why is it important to know what kind of an agent you are using to buy your home? In a recent analysis the Consumer Federation of America (CFA) concluded that:
“According to a comprehensive study of consumer knowledge and opinion about real estate services, most Americans view real estate agents, brokers, and services favorably, but understand these services poorly…”
“Only 36% of all respondents said they know “a lot” or “a fair amount” about “real estate agents and brokers and their consumer services. And in fact, only a minority knew that the local multiple listing service is the most complete source of information about homes for sale (34%), that one’s broker may not represent one’s financial interests (26%)…”
“Home sellers and buyers who think they understand a complicated industry, yet in fact do not, are at a disadvantage in obtaining effective representation…”
So it is evident that consumers are in need of information to make an educated decision when employing a real estate agent to purchase a home. So I will try to clarify the most misunderstood issue, the one of agency.
What’s an Agent?
The common law concept is that an Agent is a person authorized by another (the Principal) to act in his/her interest only. This obligation to the Principal is called Fiduciary Duty. It is the highest standard of care in law. These duties include loyalty, disclosure, confidentiality, obedience, reasonable care and diligence and accountability.
Since all listings are the property of the broker, in traditional real estate companies all agents working for that broker owe Fiduciary Duty to all sellers listed by their broker. So the LISTING AGENT represents the seller only. Would you let him know what you are willing to pay? How much can you afford? Would you let him know that it’s urgent that you find a home? Since this information could be used to the seller’s negotiating advantage, I am sure your answer would be no.
An Agent can help the seller AND the buyer in a transaction, but most brokers require the consent of the parties to a “Limited Dual Agency.” This means the Agent is acting as a DUAL AGENT. In this case there is no Fiduciary Duty to either party, only the promise to be fair to both.
A buyer can retain the services of an Agent to purchase a home: a BUYER AGENT. However, when this Agent works for a traditional company with many listings, as I said above, he or she already owes Fiduciary Duty to the sellers listed by the broker. Their duty of diligence requires the promoting of their company’s listings. This Agent cannot offer you buyer representation unless the listing is from another broker.
Then there is the Agent that works for a broker that never takes listings: an EXCLUSIVE BUYER AGENT. This is the very best choice since they can make a blanket offer of representation. For more information on the issue of agency visit the The National Association of Exclusive Buyer Agents (NAEBA).
Toll Free: 1-800-FORBUYERS
Local: (480) 345-6000