What is real estate agency? It's a question anyone delving into real estate should ask, because sooner or later we all deal with real estate agents, and agency—simply, which side they represent—comes into play at the moment of meeting.
In fact, at the first ‘substantiative dialog’ between you and an agent, the agent is supposed to declare who they represent in a manner in which no doubt exists. We are required to give consumers a copy of The Information About Brokerage Services, which defines agency, but, ideally, also verbally declare our affiliations.
This process has changed a lot over the last 20 years. Before buyer’s agency came into being—also called buyer representation—technically even the agent helping you to buy a property worked for the seller.
Call it a glitch in the law or just an oversight, this was corrected with the creation of specific buyer’s agency. This provides a buyer with the same level of agency, information and protection, as possessed by the seller. (This also applies to leasing, though that’s a slightly different application.)
The quick note on agency is this: when a seller signs a listing agreement with a real estate agent (REA), that agreement binds the fiduciary responsibility of the seller to the agent, and the agent must represent that seller within specific guidelines. That agent must deal with all parties honestly and fairly, but their sole fiduciary duty goes to the person they have the signed agreement with, the seller.
So, when someone calls from a yard sign or newspaper ad, they are calling someone whose sole fiduciary duty goes not to the caller, but the person they have the signed agreement with, something not always understood by the caller. In fact, many people don’t understand how this works, so they may believe they are calling someone who is neutral or who is there to not just answer their questions, but to help them buy that property.
And yet, if the seller’s agent has specific duty to the seller, and the only responsibility to the caller is to deal with them fairly and honestly, but not represent their interests at all, why wouldn’t the caller start with their own agent? In a word: ignorance.
Ignorance is not a bad word, it’s just the simple state of not knowing something. Since real estate can be a labyrinth of contracts and legalities, and even agents have a hard time figuring things out sometimes, it actually seems reasonable the person with no training would feel confused, too.
Agency is the simple state of an agent representing one side of the transaction. If a seller has a written agreement with an agent to represent their interests, it only makes sense a buyer would have their own agreement in place to protect themselves.
Many, however, do not, and, indeed, refuse to sign a buyer’s representation agreement, thinking it somehow eliminates their rights and choices rather than puts someone firmly—contractually—on their side.
This notion is slowly being dispelled, but it does linger because so many people won’t read as far as you just have. So, let’s look at the other side of calling off the sign and trying to work with the seller’s agent.
One of the primary reasons buyer’s agency was created was due to something called ‘dual agency’, in which a single agent ‘represented’ both sides. I put these things in quotes for a reason, and I call it the Firesign Mandate.
The Firesign Mandate is a simple, grammar slaughtering, question: How can you be two things at once, without being nothing for nobody? The answer is: you can’t.
By the way the laws are written, an agent can only truly represent one side. Dual agency, then, is not representing two sides, just collecting both sides of the commission.
In fact, in many if not most of these situations, the only thing represented is the agent’s financial gain, because the law does not allow an agent in these situations (called ‘intermediary’) to give advice to either party, so neither side has representation.
The laws and rules governing agency sought to do away with that, and many (particularly more experienced) agents still do this type of transaction, and it is legal. But, it might not be in your best interest.
And that, quite frankly, is what agency is supposed to be all about: your best interest. You should proceed accordingly by first recognizing your best interests include having someone on your side.