Consumer Guide: Understanding Agency and Non-Agency Relationships (Based on NAR Guidelines)

What Does it Mean for a Real Estate Professional to Be My "Agent"?

When a real estate professional acts as your "agent," it means they've been hired to represent your best interests in the transaction. Think of them as your advocate, guiding you through the complexities of buying or selling a home. They have specific legal and ethical responsibilities to you, known as fiduciary duties, which include loyalty, confidentiality, disclosure, obedience, reasonable care, and accounting. There are different types of agents:

• Seller's Agent: They work exclusively for the seller, aiming to get the best possible price and terms for their client. This relationship is usually formalized through a listing agreement.
• Buyer's Agent: They work exclusively for the buyer, helping them find the right home and negotiate the best possible deal. Many buyer's agents, especially after recent changes related to real estate commissions, now require buyers to sign a buyer agency agreement before touring homes. This agreement clarifies the terms of their working relationship.
• Dual Agent: They represent both seller and buyer in the same real estate transaction (requires full disclosure and informed consent from both parties). It's a tricky situation because the agent has a fiduciary duty to both parties, which can create a potential conflict of interest.

The purpose these agreements for clearer expectations and a better understanding of the relationship between consumers and their agents. This helps to:

• Improve Communication: Consumers and agents have a clear understanding of their duties and responsibilities. No more misunderstandings about what the agent will do and what the client expects.
• Increase Professionalism: Formal agreements create a more professional and business-like environment, fostering mutual respect and provide protection for everyone involved.
• Build Trust: Transparency is key to building trust. These agreements help to clarify how agents are compensated and what level of service clients can expect, fostering a stronger foundation for the relationship.

Please note: These agreements change periodically to align with the ever-changing guidelines in the industry.

Understanding Your Options: The Different Buyer Agreements

Now, you might hear your Realtor® mention few different types of agreements, and it's essential to understand what each one means and how they may affect your purchasing process. Let's take a look:

This agreement is more specific. It's designed for buyers who are interested in one particular property. It allows you to work with an agent for that specific property only. This is often used by investors or buyers who have their eye on a very specific listing.

What does this agreement involve?

• Property: It clearly states the specific property address the agreement covers.
• Length of Agreement: It specifies how long the agreement is valid for that property.
• Broker Fee: This agreement clearly explains the real estate professional's fee for representing you before you tour any properties. This fee is typically due at closing. While traditionally, sellers often covered the buyer's agent's commission, that's not always the case anymore. If the seller isn't offering a buyer's agent commission, your agent will work with you to negotiate for the seller to cover this fee as part of your offer.
   

2. Buyer Agency Agreement (Your Dedicated Partner)

This is the most comprehensive agreement, and it basically says, "I'm hiring this agent to be my dedicated representative throughout the entire home-buying process." It's like having a trusted advisor by your side every step of the way. This is often the best choice for:

• First-time homebuyers (who can really benefit from expert guidance)
• Buyers who have be referred an agent by someone the truly trust
• Anyone who wants a dedicated agent working exclusively for them 
• Buyers who are also selling a home (for a seamless experience)

What does this agreement involve?

• Commitment: Your agent pledges to find properties that match your needs, negotiate on your behalf, educate you about the process, be available when you need them, show you all the homes you're interested in, and provide expert advice.
• Exclusivity: You agree to work exclusively with this agent for a specific period. This solidifies the client-agent relationship.  
• Confidentiality: Your agent is legally and ethically bound to keep your information private. They can't share your financial details or negotiating strategies with anyone else.  
• Compensation: This agreement clarifies how your agent gets paid. While traditionally, the seller covers the buyer's agent's commission, that's not always the case anymore. It's important to discuss this upfront. Sometimes, the buyer might pay the commission, or it might be negotiated as part of the offer with the seller.  

Sample of Exclusive Buyers Agency Agreement

3. Non-Exclusive Buyer Agency Agreement (Flexibility)

This agreement offers a more flexible approach. It outlines the terms of representation while allowing you to work with multiple agents if you choose. It also doesn't obligate the agent to show you every single property on your list. This can be a good fit if you're still exploring your options and want to maintain professional relationships with several agents.  Essentially, it's a way for both buyers and Realtors® to dip their toes in the water before diving into a fully committed relationship. This is particularly useful when a buyer is interested in seeing a specific property but isn't quite ready to commit to one Realtor® exclusively just yet.

What does this agreement involve?

• Properties: This agreement applies to multiple properties you tour with the agent. The understanding is that if you make an offer on a property you viewed with this Realtor®, they will represent you throughout the transaction.
• Length of Agreement: It specifies the limited timeframe the agreement is valid for.  
• Broker Fee: It clarifies the Realtors® fee and how it's earned. If you enter into a purchase agreement for any property that your Realtor® (or anyone from their brokerage) showed you, introduced you to, or even discussed with you, they've earned their commission. This is true even if you later find the property on your own or work with a different agent. It's because their initial work laid the groundwork for your purchase.

  Now, what happens if you sign a purchase agreement but then default on the contract (meaning you break the agreement)? In that case, you'll still be responsible for paying your agent's fee. It's also really important to know that contacting the listing broker or seller directly without your agent's involvement could jeopardize your agent's ability to receive their commission from the listing broker. This could then mean that you become responsible for paying their fee directly. So, it's always best to keep your agent in the loop throughout the entire process.

Sample of Non-Exclusive Buyers Agency Agreement 

What Should You Do as a Consumer?

Ready to dive into the selling or buying process? Here's how to get prepared:

• Ask Questions: Don't hesitate to ask your Realtor® about anything you're unsure of. Before signing any documents, make absolutely certain you understand every term, clause, and implication. It's better to be safe than sorry!
• Be Upfront:  Transparency is key! If you're still just exploring your options or working with or interviewing other agents, be honest about it. Open communication with your agent will allow them to best guide you and manage expectations.
• Embrace the Process: Remember, these policies and agreements are ultimately designed to protect your interests and provide a smoother, more transparent experience. With the support of a dedicated Realtor®, you'll be well-equipped throughout the process.