The intricacies of the agency relationship are difficult to explain, and sometimes it feels like Abbot and Costello’s Who’s on First skit. By the time I’m finished explaining Realtor® relationships, my clients’ heads are spinning like the exorcist, and they have no idea which way is up! When it comes to agency, the primary difficulty is that the definition is always changing, and agents struggle to keep abreast of the changes as well. If agents are unsure who they are working for, it’s impossible for the consumer to keep it all straight. This article presents some current thoughts on agency, so read on if you’re interested in shedding some light on exactly who is working for you.
The Agent/Broker Relationship
Before you can grasp the agency relationship, you first need to have a handle on the specific responsibilities of an agent. When you are discussing boise idaho real estate, the two most common terms you will hear are broker and agent. In order to receive an agent’s license, agents participate in a designated number of course hours, and then they must pass the real estate salesperson’s exam. Then, the agent is free to operate as a Realtor®, but only under the supervision of a broker. As such, an agent cannot be paid directly. In essence, the broker is the top of the food chain.
Individuals who have had experience as agents for a certain number of years may elect to become brokers. They must take a separate broker’s exam to become licensed as a broker, and then they may either work individually or under another broker. A broker is able to own, manage, or operate their own brokerage firm without another broker’s supervision, and any commission from a real estate transaction is paid to the broker. The agent’s cut depends on the agreement between the broker and the agent, which means that the agent answers to and is paid by his or her broker.
The Basics of Agency
In order to implement an agency relationship, a written agreement of some kind must be agreed-upon between the buyer/seller and the agent/broker. Depending on the nature of this relationship, the agent is given authority to represent his/her client in dealing with other agents. Essentially, the agent is working for you as your spokesperson or middle man. After signing an agency agreement, your Realtor® is legally obligated to keep your best interests in mind, protecting and promoting what is best for you. This fact separates an agent from most salespersons, who have a reputation for just being out for themselves. Not only are Realtors® in charge of the paperwork for a transaction, but they have specific responsibilities as well. There is a great deal at stake when you are dealing with such extensive assets, so agents are liable for a number of categories. This liability is why contracts are so extensive and involved, with a number of disclosures and agreements to sign.
The basic responsibilities and fiduciary obligations a Realtor® has toward you are the principal in a transaction are as follows:
Loyalty: At all times, the Realtor® must act in the best interest of you (the principal), and place your best interests above everyone else’s, including his own. This is what I call the Lassie factor. Obedience: Realtors® are also obligated to promptly obey all lawful instructions of the principal, lawful being the operative word there. (You can’t tell an agent to break into a home for you and expect that they will.) Disclosure: Realtors® must inform you of all known, relevant facts. Conversely, the principal has this same obligation to the Realtor and the other parties involved in the transaction. Confidentiality: As with many professional occupations, Realtors® are required to protect the principal’s secrets, unless keeping this confidence violates the property condition’s disclosure requirements. So, the agent can withhold your reason for moving, but must disclose that your home was once used as a nuclear test site.
Hopefully, your head has stopped spinning, and you have a better idea of what agency actually is now. The better you understand the agency relationship, the better able you are to determine the kind of agency relationship you choose to participate in. The most important thing to remember, though, is that agents are there to work for you, and ensure that your life is much easier throughout your real estate transaction.
Justin Renaud is a REALTOR working in the Rolla Missouri Real Estate market. He has been working with buyers and sellers full-time for the last three years. His website justinrenaud.com is a resource for buyers, sellers, and homeowners to find helpful advice as well as resources discussing the areas of Rolla, MO and St. James, MO.