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Online Continuing Education

Article on Agency


Christopher O. Ashe
November 24, 2004 


When you decide to list your house for sale it is clear that the listing agent works for you. After all, you have signed a contract (listing agreement) with them and have agreed to pay them a fee for their services.  What about when you are a buyer? Who does the agent work for?  Does it really make a difference?  To answer the last question first; ďYes, it really does make a big difference.Ē  To answer the other questions we need to take a quick look at the Laws of Connecticut.  For a real estate agent to participate in a transaction the law says that they must be employed by one of the parties (buyer, seller, tenant or landlord).  This employment must be created by a written contract which states how  the agent will be paid and how much they get. The contract also has to have a definite beginning and ending date.  A real estate agent who participates in a transaction without a written employment agreement could be heavily fined and lose their license.  The laws of Connecticut also say that the first thing a real estate agent should do when you meet with them is discuss the various ways you can work together and let you decide which one you would like. That must take place before they show you any real estate or ask any personal questions about your finances or motivation. This may sound a bit complicated, but it really isnít.

There are two ways an agent can work with a buyer or tenant.  The first way is that the agent is employed by the seller or landlord.  When you call a real estate company about one of their listings they are already working for the seller. This means that it is their job (by law) to try to get the best price, terms and conditions for their client, the seller/landlord. The agent must put the interests of the seller/landlord first at all times.  They are the sellerís advocate in the transaction. The agent cannot tell you anything personal or confidential about the seller/landlord such as why they are selling or if they might take less than the asking price.  The agent canít advise you about negotiating strategy other than to recommend a full price offer.  The agent also has a duty to tell the seller/landlord anything they learn that would help the seller/landlord.  This means that you should not discuss your finances or motivation with this agent.  For instance, if you indicated that you might be able to pay more the agent would be required to pass that information on to their client.  This agent is required to be honest and truthful with you and to tell you about any problems with the property that they know about, but at all times they will put the seller/landlords interest ahead of yours.  Also this agent who works for the seller/landlord will only be able to show you their own firmís listings since these are the only seller/landlords that they work for.  They could not show you another firmís listings since they would not be employed by you or the seller/landlord and this could cost them their license.

The other way an agent can work with you is to work for you.  This means that you sign an agreement employing the agent to represent you in the transaction. You also agree that they can get paid out of the proceeds of the transaction or you agree to pay them yourself.  This agreement has to have a beginning and ending date, but it could be as short as one day or even a few hours.  So why would you sign an agreement with an agent you hardly know even if itís only for one day?  You would do it to get a much higher level of service and loyalty from the agent. Now the agent is your advocate in the transaction.  If you sign the agreement then the agent is working for you and must put your interests first.  It is their job to get you the best price, terms and conditions. They can tell you if they think the property is overpriced or that the seller might take less. They can advise you about negotiating strategy and help you craft an offer for less than full price.  Everything that you tell the agent is now confidential and it is confidential forever.  Even though your contract may expire at 5:30 today, the agent can never reveal the information you gave them about your finances, motivation or anything else that is confidential. Also, because this agent is employed by you, they can show you any properties that are for sale, even those that are for sale by owner.

It is very clear that if you are a serious buyer you are going to want the higher level of services that comes with having your own buyer agent.  After all why work with an agent who is not looking out for your best interests, when you can have one who will put you first?  So what is the downside, if there is one, to hiring a buyer agent?  One perceived drawback is what is called dual agency.  In CT, as in most states, agency runs to the company.  This means when you hire an agent from ABC Realty, you have really hired the company.  All of the agents in ABC Realty now work for you and owe you the same duties as the one person you are working with directly.  Dual agency occurs when you decide that you want to buy a property that is listed with ABC Realty. In this case the company represents both you and the seller. Obviously your agent canít work to get you the lowest price while working to get the seller the highest price.  In this situation the agent canít be an advocate for either party.  All of the confidential information that the agent knows about either party remains confidential. The agent becomes a negotiator trying to craft a win/win situation that will satisfy both parties.  Can this work?  It certainly can.  Out in the non-real estate world when there is a major dispute between labor and management or between two countries, the usual process is to employ the services of a mediator.  The mediator is not an advocate for either party, knows much of the confidential information of both parties and works to find a solution that everyone can live with.  In dual agency your agent becomes a mediator.  You do lose the advocacy, but you gain in that your agent may be better equipped to craft a win/win outcome when they represent both sides.

 Another potential drawback to hiring a buyer agent is that you are being asked to make this decision very early in the relationship when you may not know the agent very well.  There are several ways to solve this problem.  One is to hire the agent for a very short period of time such as one day.  This way if you donít like working with them you are free to try someone else.  You might sign several very short agreements with the same agent as a way of ďtest drivingĒ them before you sign for a longer term.  The other possibility is to hire someone you already know.  You probably already know someone who is a real estate agent. Perhaps it is someone you have worked with in the past or a person within your circle of friends and relations.  When you have decided to buy and are beginning to look at the house ads in the newspaper or on-line, contact the agent you know and ask them to become your buyer agent.  They will help you sort through all of the properties out there and make the arrangements for you to see the ones you want.  Getting them involved early in the process can save you a lot of time and frustration.

 As a home buyer/tenant you need to know your rights and make a decision early in the process about how you want to be represented.  You get to choose if you want an agent who works for you or works for the other side. Your choice will have a direct bearing on how easy of difficult the transaction will be for you.