Estate and mortgageAgent Disclosures
Most states require real estate agents to disclose up-front who he or she is representing in a transaction. If they don"t, the consumer needs to ask.
If you aren"t sure, don"t be afraid to ask
I received an email a few weeks ago from the National Association of Exclusive Buyers Agents that presented the five questions that the group has determined real estate agents don"t want to hear.
The question I expected to see at the top was,"Isn"t the commission negotiable?" I know if I were a real estate agent, I would put my hands over my ears like the homeowners in those TV commercials about mold, and start singing loudly to block out the message.
The typical commission is six percent, although some brokerages can get away with seven. A few years back, a seven percent broker was beginning to make noises about coming to our neighborhood, so I called a 6 percent broker to ask him what he thought.
"I can"t discuss commissions," he told me in all seriousness. "It"s a violation of federal racketeering laws."
He was serious. When I called the National Association of Realtors for confirmation, I was told, again in all seriousness, that the law applied only when brokers conspired to make changes to the going rate.
What the buyers" agents" group is talking about is not commissions – many charge a set fee rather than a percentage that still emanates from the seller – but rather agent representation.
In many states, who the agent is representing in the transaction must be disclosed to the buyer before anything can begin. I wrote so much about it when the state I live in adopted the agency rules that I found myself reminding my agent to do so when she walked through our front door.
"Give me a break," she said, "waving the disclosure form in my face. It"s not your law, it is mine."
This is how most of the state laws work. The disclosure document that agents provide to consumers defines agency, which is the business relationship between the consumer and the agent.
It also lists the duties of each kind of agency, and details the kinds of things that are negotiable, such as contract duration and fees.
Some forms of agency are traditional - buyer"s agent, who represents the buyer exclusively; seller"s agent, who works for the seller only; and "dual agency," in which the same agent represents both.
When a dual-agency relationship arises because the seller"s agent and buyer"s agent are employed by the same broker, the law usually authorizes the use of designated agents. A designated agent is a salesperson selected by the broker, with the principal"s buyer or seller consent, to act exclusively on behalf of that principal.
There often is a need to examine the concept of dual agency in many real estate offices, since the agent cannot take any action that is inconsistent or adverse to the other party, whether buyer or seller.
Designated agency has been created by most state laws to solve problems created by the limits of dual agency, which effectively turns a real estate agent into a conduit or a messenger for the client, without actually providing any service to the client.
A designated agency was a good policy for moderate-to-large-size agencies. Consumers typically want the knowledge and expertise real estate agents can provide, not just someone who carries messages from one party to the other.
Although some consumer groups oppose laws that establish designated agency, here"s how it works:
A buyer comes to a real estate agent looking for a house. The agent has a perfect house for the buyer, but is already the listing agent for the house, and is representing the seller.
The agent informs the buyer of this, then suggests that if the buyer wanted someone else in the office to represent him or her, one could be designated to do so.
With the written consent of the client, the broker then designates a buyer agent within the office. Each agent is loyal to the client he or she represents, whether the buyer or the seller. The broker is responsible to both clients because he is supervising the agents and in charge of the business, but basically stays out of it.
Some state laws establish the category of "transaction licensee," which is defined as a broker or salesperson who provides communication, document-preparation services, or other real estate services without being an agent or advocate of the consumer.
A homeowner who decides not to use a licensed real estate agent could use the services of a transaction licensee to handle the paperwork involved in the sale. However, the homeowner, not the transaction licensee, would have to find a buyer, since that would be the mandated duty of a buyer"s agent.