By Margy Grant, Esq.
In a tight market it is essential to remember your responsibility if you are acting as an agent for a buyer or seller. You are not just passing paperwork between you and another broker; you are the advocate of the buyer or the seller. It is important to remember the level of service you have agreed to provide and that should remain at the forefront of your mind. As you enter into a relationship consider the sequence of your services:
•Disclosure - What does your relationship create?
•Contract – What further defines your relationship?
• Services – How do you become engaged?
This is your first entrance into your relationship with a consumer. Your role must be disclosed, via the state mandatory consumer disclosure form, at the first personal meeting to discuss a specific property (even as a listing agent.)
Once you disclose that you are an agent you become your client’s fiduciary, unless you are acting as a facilitator. Unless you are a facilitator, you now owe the client obedience, loyalty, full disclosure, confidentiality, accountability for all funds you receive, and reasonable care. Many REALTORS® assume you do not become an agent unless you have a contract -- this is not correct. Once you disclose that you are an agent you cannot reduce the level of services you have promised.
Some facts of disclosure and client level services to remember:
1. Once you disclose you are a buyer agent you cannot “switch back” to a seller agent for an in-house listing, even if you do not have a contract. You are required to now obtain consent for dual agency.
2. As a buyer agent without a contract, your duties are very vague. Make sure that your client understands the services you are willing to provide and what their responsibilities are on their own behalf. Ensure that the buyer understands the services you will not provide. This cuts down on confusion at important times in the transaction.
3. Communication is essential with all clients, even without a contract to protect your fee. If you work with a buyer and then lose touch with them you are risking your fee if they decide to purchase a property they have seen with you.
4. If your seller client is unhappy they do not have a unilateral right to cancel, however you should attempt to resolve the problem. Trying to sell an unhappy seller’s home is challenging.
There is no legal requirement to have a buyer agency agreement with a buyer, however they are highly recommended. Listing agreements are standard and point out that they not only provide exclusivity and protection to you, they also educate your client on their responsibility in the transaction as well as how you get paid. Some of the main points of a buyer agency contract are as follows:
1. Exclusivity. This puts your buyer on notice that you are the only brokerage firm who represents them.
2. Purpose. This can limit the geographic area if needed.
3. Duration. The contract can be effective for as little as 24 hours or long term.
4. Services. This is essential as it states what services you will provide and which ones you won’t.
5. Compensation. This can either create an obligation for them to pay you regardless of how they find a house, or stipulate that you will only be paid by the listing broker. This is solely your company’s choice and can always be negotiated. Individual business models determine how agents are paid for their services.
6. In-House Sales. This informs the buyer of the possibility for dual or designated agency. It is recommended that you obtain consent up front, however you are required to disclose the potential.
Communication is the key to providing quality services to consumers. Know the limits on your representation regarding in-house sales and the advocacy your client is looking for during the transaction. Dates, deadlines, and requirements should be followed closely and the client or customer should be kept informed. These guidelines not only contribute to successful transactions, but greatly reduce liability. The more the consumer understands about your role in the transaction, the better off everyone will be.
Flow chart of Relationships, Their Origins, and the Direction of Disclosures