Learn if real estate agent represents your interests, seller's interests or both
Shopping around for a house often begins casually. On a Sunday, you decide to visit a number of properties that are on the market. You have not engaged a real estate agent to assist you. When you enter the various houses, you are greeted by a real estate agent who is "housesitting." She or he welcomes you, asks you to sign in and invites you to look around. Before you know it, the shopping process can become not-so casual -- and you should get answers to some basic questions.
Who does that agent represent? What obligations -- if any -- does she have to you and to the seller?
Let's look at some basic terms:
-- Seller's agent: The property owner has listed his house with a real estate brokerage, and the agent working for that company has a duty of loyalty to the seller. That does not mean that this agent cannot answer your questions. In fact, agents are legally obligated by law to treat all parties to a real estate transaction honestly and fairly, and they must answer all questions truthfully. However, if you provide any personal or financial information to the seller agent, be warned that this information will be shared with the seller.
-- Buyer's agent: With this arrangement, there is a written agreement between you and a real estate agent that makes it clear that the agent is working exclusively for you. Unless you authorize disclosure to the seller, your buyer's agent must keep any information you give her confidential.
-- Dual agents: This arrangement may also be called "dual representation." Both buyer and seller are represented by the same agent. Both parties must sign a form, prepared under the auspices of the local real estate commission. The form requires informed consent. For example, in the District of Columbia, sellers and buyers are put on notice that "when the parties agree to dual representation, the ability of the licensee [the agent] and the brokerage firm to represent either party fully and exclusively is limited." Maryland law does not allow such dual representation.
-- Designated representation: Often confused with dual representation, this is a variation on the dual agency concept. Here, the real estate firm assigns one agent to assist the buyer and another to assist the seller. According to the Maryland Real Estate Commission, the real estate company [or broker] is called a dual agent, and dual agents do not act exclusively in the interests of either the seller or buyer, and therefore cannot give undivided loyalty to either party. There may be a conflict of interest because the interests of the seller and buyer may be different or adverse.
Why? Let's assume you are prepared to pay up to $450,000 for a two-bedroom condominium. You find one that you like and offer $410,000. You tell your designated agent that you really are prepared to go up to the higher amount, but you want to negotiate. Since that agent does not have a duty of loyalty to you, there is always the possibility that this information -- which you thought was confidential -- will be given to the seller.
The laws in all three Washington-area jurisdictions require that agents give buyer and seller a disclosure form, which must be signed before any meaningful discussion (or action) is taken regarding the property. So when you enter the house on Sunday, the housesitting agent does not have to provide you with any disclosures. However, once you start having a substantive discussion, you must be advised whom the agent is representing and sign the written disclosure form. According to District law, which tracks the laws in Maryland and Virginia, the "disclosure shall be made in writing at the earliest practical time, but in no event later than the time when specific real estate assistance is first provided."
It's confusing. Sellers want the best possible price, and buyers want a bargain. And real estate agents are the intermediaries, who attempt to get the parties to a happy meeting place and ultimately a real estate contract.
What should you, as a buyer, do to protect yourself? Should you agree to dual representation? Should you hire a buyer's broker? Or should you seek guidance from your legal and financial advisors instead of an agent or broker?