When working with a realtor, it is important to understand who the realtor works for, that is, to whom the realtor is legally obligated. In real estate, there are different possible forms of agency relationship.
1) Sellers Agent
When a real estate company is a seller's agent, it must do what is best for the seller of the property. A written contract is called a listing agreement and establishes seller agency. It also explains services the company will provide, establishes a fee arrangement for the realtor's services and specifies what obligations the seller may have. A seller's agent must tell everything known about the buyer. For instance, if a seller's agent knows a buyer is willing to offer more for the property, that information must be shared with the seller.
Confidences a seller shares with a seller's agent must be kept confidential from potential buyers and others. Although confidential information about the seller cannot be discussed, a buyer working with a seller's agent can expect fair and honest service from the seller's agent and disclosure of pertinent information about the property.
2) Buyer's Agent
A real estate company acting as a buyer's agent must do what is best for the buyer. A written contract, called a buyer agency agreement, establishes buyer agency. It also explains the services the company will provide, establishes a fee agreement. In our area this is almost always a specified percentage of the commission of the property purchased and it is paid by the seller, as set out in the MLS agreement. The contract also specifies the obligation a buyer may have. Typically the buyer will be obliged to work exclusively with that company for the period of time specified in the contract. Confidences a buyer shares with the buyer's agent must be kept confidential. Alalthough confidential information about the buyer cannot be disclosed, a seller working with a buyer's agent can be expected to be treated fairly and honestly.
3) Dual Agency
Occasionally a real estate company will be the agent of both the buyer and the seller. The buyer and seller must consent to this arrangement in their listing and buyer agency agreements. Under this "dual agency" arrangement, the company must do what is best for both the buyer and the seller. Since the company's loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a dual agency relationship be established in a written agency agreement. This agreement specifically describes the rights and duties of everyone involved and any limitations to those rights and duties.
