Whether you’re looking to buy or sell your apartment, there’s a lot that goes into the process and you’ll probably want to work with an agent who can assist you with the arduous process. However, before embarking on the journey of finding an agent to assist you, you’ll want to make sure that you fully understand how to get the best representation when buying or selling.
The action of authorizing a party to act on your behalf is an agency relationship. In real estate, the buyer or seller who authorizes an agent to buy or sell on their behalf becomes the “principal” and the real estate agent becomes the “agent” and will interact on behalf of the “principal” with other “third parties”. In such a relationship, the agent becomes the principal’s fiduciary, someone who acts on behalf of another person or persons. The fiduciary relationship is the highest legal duty of one party to another and bounds the fiduciary to act ethically the principal’s best interest. The fiduciary duties of a real estate agent are as follows:
- Confidentiality: The principal’s personal information must be kept private unless the principal authorizes or releases the agent from this duty. Material facts and defect of a property do NOT have to be kept confidential.
- Disclosure: The agent must disclose all information that might affect the decisions that a principal makes.
- Accounting: The agent has to safeguard money or property held on behalf of the principal and must report to the principal promptly whenever money or property is received or paid out.
- Undivided Loyalty: The agent must not act in any manner which would advance any interests adverse to the principal or conduct business to benefit anyone outside of the principal.
- Obedience: The agent is required to follow, act, and abide all lawful instructions from the principal.
- Reasonable Care and Diligence: The agent must protect the principal from foreseeable risk of harm.
There are three different types of agency relationships:
- Seller Agency: The principal is the seller and the agent represents the seller. In this particular type of agency relationship, the agent owes his/her fiduciary duties to the seller. The agent can be known as the seller’s agent or listing agent. The seller’s agent does anything they can to help smoothen the process of selling a home, including:
- Pricing the home correctly. The best listing price isn’t necessarily the highest one and the worst thing a seller’s agent can do is inaccurately price the listing. Priced too low and the listing will sell undervalued; Priced too high and the listing might not sell for months and develop a bad reputation.
- Advertising your listing through more mediums than just the Multiple Listing Service (MLS). In this day and age, the agent should be using social media and his/her own website to draw traffic to market to. The marketing material the agent creates should also be top notch with great photos to draw attention.
- Qualifying buyers who are pre-approved and not just pre-qualified will help the seller save time from buyers who can’t get approved for a mortgage.
- The agent should be on top of providing feedback from potential buyers and should be prompt in responses via phone call or email.
- Negotiate the best terms based on what makes the most sense for the seller.
- Buyer Agency: The principal is the buyer and the agent represents the buyer. In this particular type of agency relationship, the agent owes his/her fiduciary duties to the buyer. The agent is known as the buyer’s agent. The buyer’s agent does anything they can to help the buyer in the process of purchasing a home, including:
- Identify and show homes that fit the buyer’s criteria.
- Research and gather information about potential homes and local communities for the buyer. This process should also allow the agent to provide the buyer with pricing information based on market research.
- Write and submit all offers to purchase homes for the buyer.
- The buyer’s agent is in charge of negotiating all offers to purchase homes for the buyer.
- Dual Agency: Where the agent represents both the seller and the buyer. Dual agency is currently legal and allowed in New York. However, the agent or broker is required by law to fulfill several disclosure requirements before being allowed to act as a dual agent. We’ll delve deeper into the topic of dual agency next week!
As you can see, there are a lot of reasons why working with a good agent representative can save you time and energy in the long run. However, every state has their own particular agency laws, so you can get a better understanding of what they are in your state by speaking to your local real estate. Once you have done the research, it is incredibly important for you to talk to your agent early in the working relationship about his/her agency status. This will allow you to determine whether or not you will be getting the representation you need.