Do You Know Who Your Realtor® Works For?
Might seem like a silly question but, in the state of North Carolina, we have several Agency Relationships! There is a Seller’s Agent, A Buyer’s Agent, a Dual Agent and a Designated Agent. Do you know the difference?
When one person (seller or buyer) authorizes another person (agent) to work on their behalf the two are therefore bound together. This is the crux of “Common Law of Agency” and sets forth the fiduciary duties that an agent owes his principal (seller or buyer). The following 5 duties are what is owed to a Principal by their Agent:
- Loyalty and Obedience – (follow your lawful instructions and promote your best interests)
- Accounting – (account for all monies they handle for you)
- Disclosure of Information – (provide you with all material facts which may influence your decision)
- Skill, Care, and Diligence
While these fiduciary duties are a common thread among all types of agency (Seller, Buyer, Dual and Designated) there are some differences between the agency relationships.
The two agency relationships that may seem the most self-explanatory are Buyer Agency and Seller Agency.
Buyer Agency: A principal, in this case a buyer, contracts with an agent to be an advocate for them, and only them, for a real estate transaction. The agent owes to the principal all of the above 5 fiduciary duties.
Seller Agency: A principal, in this case a seller, contracts with an agent to be and advocate for them, and only them, for a real estate trasaction.
What is most important to note – Until Agency is established between a Principal (seller or buyer) and an Agent ALL AGENTS WORK FOR THE SELLER! There are no exceptions! What this means is that anything you, as a buyer, may say to an agent is NOT privileged and confidential UNTIL you agree upon Agency Relationship!
Example: A buyer drives by a property for sale and calls the number of the agent on the sign. At this point, they are just looking. While on the phone the buyer decides that they may be interested in seeing the property and may offhandedly and innocently offer information such as place of employment (home is close to where they work), mention that they qualify for a much higher amount (the agent gives the price of the home and the buyer says no problem we’ve talked to a lender and we qualify for much more than that), etc…… All of this information can be used against you in the negotiation process should you choose to make an offer on the property. Why? The agent that answered the phone is working for the seller. Regardless of how friendly they may seem, the information they give or the information they try and get – they work for the seller! It is critical for all buyers NOT to divulge ANY information of a confidential nature or one that may hamper their negotiating leverage until they have contracted with a BUYERS AGENT!
So, what about Dual Agency and Designated Agency? We’ll explore that more in a follow-up post – great information and need to know guidelines!