Every real estate purchase transaction has a seller and a buyer. The confusion arises when real estate agents are added to the picture. The real estate agent that represents the seller’s interests is called the “listing agent;” he or she enters into a listing agreement with the seller to sell the house. The listing agreement is a binding contract between the seller and the listing broker. Among other terms, it obligates the seller to pay a commission when the home sells.
It also creates a legally recognized “fiduciary” duty obligating the listing agent to act in the seller’s best interest and to maintain seller’s confidential information, even if those actions are contrary to the agent’s self-interest.
It is vital that the buyer understand that the listing agent does not work for the buyer and does not owe a duty of confidentiality to the buyer. Anything a buyer reveals to the listing agent may be disclosed to the seller.
Often, the buyer will work with his or her own real estate agent. This can occur in two ways: through a written buyer-broker agreement, in which the buyer agrees to work exclusively with that one real estate broker, called a buyer’s agent. But the more typical arrangement is when a buyer works with a subagent of the seller, called the cooperating agent or selling agent.
This often arises when a buyer meets an agent at an open house or socially and starts to work with that person without entering into a written buyer-broker agreement. In either case, these agents have a duty to treat the buyer and seller fairly and honestly, but only a buyer’s agent has a fiduciary duty solely to the buyer. What’s the difference? For example, the cooperating or selling agent must answer all questions about a home honestly and fully, but those agents do not have a legal duty to let the buyer know there is a nearly identical house for sale nearby with a 20 percent lower asking price.
A true buyer’s agent, having knowledge of that cheaper home, has a legal duty to inform the buyer. Of course, in such a case, the buyer’s broker’s commission would also be reduced by 20 percent.
Buyers, beware: No matter now nice and helpful your cooperating or selling agent is, he owes his duty of loyalty solely to the seller, not to you. So before you tell him that your first offer is just a low-ball and that you would be willing to pay more, understand that your cooperating or selling agent is duty-bound to disclose that strategic information to the seller.