I know, you’re not even shocked. Everyone has a story of a crappy real estate agent who tried to cheat someone out of something (or who actually did). So there’s really no shame in asking if you can really trust a real estate agent.
What is a Real Estate Agent?
Salesperson
Yep. Real Estate Agents are sales people. I get paid to sell houses. And if any real estate agent ever tells you they don’t work in real estate to make money I’d run. I am a real estate agent, in large part, to provide for my family. (I talk all about the salesperson aspect of the real estate agent in this post here.)
Agent
It’s funny, but the “agent” part of Real Estate Agent never really gets any play time. But its vitally important to understand what the agent part of real estate agent means to you as you look to buy or sell a house!
Understanding Agency
Understanding Agency is so important that the State of Idaho (who licenses me) requires me to present you (the potential home buyer or seller) with a brochure that explains the agency relationship. And what I think is more telling: it’s the only such material the state produces!
The idea of agency simply means that you (the principle) have hired me–or more precisely my Brokerage (the agent) to work on your behalf, and in your best interest, to negotiate a purchase and sale agreement on a property of your choosing. In other words I need to put your best interests ahead of mine, which includes my sales commission, because I have a fiduciary duty to do so.
Agent vs Non-agent
Now, in the state of Pennsylvania and NJ, I can actually function as a non-agent on your behalf. In other words, we don’t have a written agreement between us, but I still execute the duties you’d expect a real estate agent to do–things like write up an accurate offer, and show you houses based on your criteria, and disclose any adverse material facts about a property.
But, I’m NOT required to promote your best interest above others or bound to maintain confidentiality of your bargaining information!!
That’s why YOU should be asking me to sign on the dotted line!
Truthfully, I don’t push my buyers to sign a Buyer’s Representation Agreement. But I have asked some to, and some have asked me to.
But I won’t do business without a seller signing a Seller’s Representation Agreement aka Exclusive Listing Agreement. And I’ve never been asked to either.
But what you need to know is, a representation agreement protects both you and me. And it gives you the ability to put your full trust and faith into me as your agent.
Single Agency vs Dual Agency
To complicate things a bit (and make this post crazy long) there’s even more you need to know. In Idaho (and in many states) you have different “versions” of Agency.
Single Agency is when I (or more specifically, my brokerage) represents you, and you alone, in a real estate transaction.
Dual Agency is when I (or more specifically, my brokerage) represents you AND the seller in a real estate transaction.
“But Mike, Dual Agency doesn’t sound like agency at all! In fact, it sounds bad for me.” Well, you’re probably right in thinking that.
So why have Dual Agency at all?
I work at Coldwell Banker Preferred. When you hire me, you hire the brokerage. Coldwell Banker Preferred is a great company and I’m proud to work for them. And since a lot of great agents work at Coldwell Banker Preferred it might not be a surprise that we do more business in the Delaware Valley than anyone else.
That’s a long winded way of saying the brokerage represents a lot of buyers and a lot of sellers.
WITH Assigned Agents vs WITHOUT Assigned Agents
Dual Agency is hotly debated in real estate circles because it presents an obvious conflict of interest in the agency relationship.
What does every seller want when selling their house? The most money possible for their home. Right? What does every buyer want? They want to buy at the lowest possible price. Right? If I represent both of you, who’s interest do I put first? The answer is nobody’s. And that’s probably not what you think I’m getting paid for, right? (These are all rhetorical questions in case you’ve missed that!)
In PA and NJ, Dual Agency is actually broken into two categories: Transactional and Limited Dual Agency with Assigned Agents.
An example of Limited Transactional would be you selling your house to your buddy and you ask me to basically do all the paperwork. At Coldwell Banker Preferred, we don’t work as Transactional agents. There are many legal aspects of a real estate transaction and without an Agency Agreement, I can’t give you the guidance and advice you’ll need to successfully navigate a real estate transaction.
Now, Limited Dual Agency with Assigned Agents simply means that the designated broker steps in and “assigns” the two agents to represent their clients best interest (as you would in single agency) and they remain a 3 party making sure we do exactly that.
It’s still not ideal, but it’s many times better than having Limited Dual Agency without Assigned Agents.
OKAY! If you’ve read this far, gold star for you!! Of course if you have any questions just let me know!
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