Representation in Real Estate, does it matter?
Who represents you when buying a home? Is it the agent from the open house? The buyer’s agent who is showing you properties? The dual agent who says they work for the seller but will also work for you?
If you are not sure who represents you, you’re not alone.
In fact a Consumer Federation of America report titled, Why Required Real Estate Agent Disclosures about Representation Fail and How They Can Be Improved says,
“There is evidence that most consumers do not understand how real estate agents work with and represent consumers.
In an October 2018 national survey commissioned by the Consumer Federation of America, two-thirds of respondents mistakenly said that real estate agents are “always” or “almost always” required to represent the interests of the home buyer or seller with whom they are working.
No state has this requirement
And when respondents in this survey were asked if they understood the differences between a single agent, a designated agent, a dual agent, a subagent, and a transactional agent, 55 percent said that they did not.”
This article focuses on buyer real estate representation in Washington D.C., Maryland and Virginia, the areas served by HomeBuyer Brokerage.
It is the position of HomeBuyer Brokerage that dual and designated agency should be avoided at all costs. We at HomeBuyer Brokerage do not condone dual or designated agency nor do we practice it.
As an exclusive buyer brokerage, we do not list properties for sale. We have no in-house bonuses for agents who sell one of our listings, we don't have any. We are committed to single agency representation. We know the conflicts of interest that arise in real estate and we avoid them.
Real Estate Representation in Washington D.C.
Washington D.C. has dual, designated, transactional & single agency representation. What does this mean?
Dual agency in the District is when a licensee has a brokerage relationship with both the seller and buyer
When parties agree to dual representation, the ability of the licensee and the brokerage to represent either party IN full is limited. A buyer or seller agreeing to dual agency representation would sign a dual agency agreement
A transactional agent does not owe a fiduciary duty to either the seller or the buyer. A transactional agent handles the paperwork for both sides but offers no advice, guidance or loyalty to either party.
A designated agent is a type of dual agency in which both buyer and seller are represented by the same brokerage. An agent is assigned by a real estate broker to both the seller and buyer in a transaction. In this scenario, the seller has signed an agreement with a brokerage with the expectation of obtaining the highest offer with the best terms. A buyer working with a ‘buyer’s agent with that brokerage makes an offer on the brokerage’s listings. This type of agency does not provide either party to the transaction the full representation a standard agency agreement would.
Real Estate Representation in Virginia
Virginia is a dual agency, “Buyer Beware” or Caveat Emptor state. What does this mean?
In Dual Agency, one agent, with both parties’ written consent, can represent both the buyer and the seller in a transaction.
A dual agent is limited by law from representing either buyer or seller fully or exclusively. In effect, the agent becomes the transaction coordinator and represents no one.
According to the Code of Virginia § 54.1-2139, a dual agent
cannot advise either party as to the terms to offer or accept in any offer or counteroffer;
cannot advise the buyer client as to the suitability of the property, its condition (other than to make any seller disclosures as required by law) and cannot advise either party as to what repairs of the property to make or request;
cannot advise either party in any dispute that arises relating to the transaction; may be acting without knowledge of the client's needs, client's knowledge of the market, or client's capabilities in dealing with the intricacies of real estate transactions.
This takes on more importance when a buyer understands that Virginia is a Caveat Emptor state, meaning “buyer beware”
In Virginia, sellers are not required to provide any information.
The seller disclosure is one paragraph stating that a full statement of required disclosures can be found on the Real Estate Board’s webpage. A quick trip there provides a detailed list of 17 items that all begin with “The owner(s) makes no representations with respect to…”
Designated Agency, which requires the written consent of both parties, occurs when a buyer and seller in one transaction are represented by different sales associates affiliated with the same broker.
The broker is considered a dual agent overseeing the entire transaction as broker for the two agents.
Each party has individual representation in these in-house transactions.
This situation occurs most often when an agent from one office brings a buyer to a house listed by another agent under the same broker.
It can also occur when an unrepresented buyer wants to make an offer but doesn’t want to consent to dual agency with the listing agent.
This type of agency does not provide either party to the transaction the full representation a standard agency agreement would.
An agent with ABC Realty represents a buyer who purchases a property from DEF Realty. If the buyer purchases a home listed by ABC Realty, they would be required to sign a dual agency agreement.
An exclusive buyer’s agent represents a buyer who purchases a property from any real estate listing brokerage. Exclusive buyer brokerages do not list properties, do not work for sellers and have no dual agency agreements.
Real Estate Representation in Maryland
Maryland allows designated agency in real estate transactions. What does this mean?
Designated agency is when the seller's agent and the buyer's agent are affiliated with the same broker. In order for this type of relationship to legally occur, both the buyer and seller must agree to this in writing. Agents practicing this type of dual agency are still required to keep all bargaining details and client motivations confidential.
Here’s our take on designated agency
The listing brokerage has a signed agreement with a seller. They’ve agreed to protect the seller's best interest in a transaction. How can the listing brokerage offer the same terms to a buyer?
The Maryland real estate commission lawyers say designated agency representation is legal.
Consider this, two lawyers from the same firm would never represent opposing clients in a lawsuit. In fact, it’s likely they would be disbarred. But this type of representation in real estate happens every day in states all over the country.
Some things to note about Maryland real estate representation
In Maryland, an agent is legally obligated to disclose who they represent upon first substantial contact.
For example, if a prospective buyer attends an open house, the listing agent at that open house must have a document in plain view indicating that the agent represents the interests of the seller.
If a prospective buyer were to ask questions about the property to the listing agent, any and all information provided by the listing agent will be done so with the seller's interests in mind.
For a buyer to enter into an agency agreement with an agent, the buyer and agent must sign a buyer agency agreement.
Among other things, this legally binding contract includes the responsibilities of both parties, details on broker compensation, information on how to terminate said agreement, and other additional inclusions.
Once signed, the buyer's agent or in our case the exclusive buyer's agent, is now working solely for the buyer and represents the buyers interest in all real estate dealings.