There are following Agency Relationship when working with buyer or seller. Before signing any documentation Buyer need to understand Agency Relationship in order to decide agency relationship to work with an Brokerage/Agent.
Buyer Representation Agreement: A buyer representation agreement, creates an agency relationship between the buyer and the brokerage, and establishes buyer representation. It also explains services the brokerage will provide, establishes a fee arrangement for the REALTOR®'s services and specifies what obligations a buyer may have. Typically, buyers will be obliged to work exclusively with that brokerage for a period of time. Under Buyer Representation Agreement a buyer is treated as a Client and Agent duties are: (1) To Represent Client in Real Estate Transaction (2) To Negotiate for Client's best interest (3) Give best possible Advice to client (4) Honestly (5) Fairness (6) Integrity (7) Full Disclosure (8) Confidences a buyer shares with the buyer's agent must be kept confidential. Although confidential information about the buyer cannot be disclosed a seller working with a buyer's agent can expect to be treated fairly and honestly.
Customer service: A real estate brokerage may provide services to buyers and sellers without creating buyer or seller representation. This is called "customer service." Under this arrangement, the brokerage can provide many valuable services in a fair and honest manner. This relationship can be set out in a buyer or seller Customer Service Agreement. The agent duties under this agreement are: to give information, to Assist in Real Estate transaction.
Agency Relationship Difference and Brokerage/Agent Duties when dealing with Customers V/S Clients:
Client: Agent duty is to provide his best advice Customer: Provide Information
Client: Agent duty Negotiate for Customer: Do not Negotiate.
Client: Agent duly to Represent Customer: Assist
When dealing with Customer your brokerage/Agent duties still include:
- Ethical duty to deal fairly, honestly and with integrity
- Legal duty to exercise due care when answering questions and provide information
- Legal duty to avoid misrepresentation
Seller Representation: when a real estate brokerage represents a seller, it must do what is best for the seller of a property. A written contract, called a listing agreement, creates an agency relationship between the seller and the brokerage and establishes seller representation. It also explains services the brokerage will provide, establishes a fee arrangement for the REALTOR®'s services and specifies what obligations a seller may have. A seller's agent must tell the seller anything known about a buyer. For instance, if a seller's agent knows a buyer is willing to offer more for a property, that information must be shared with the seller. Confidences a seller shares with a seller's agent must be kept confidential from potential buyers and others. Although confidential information about the seller cannot be discussed, a buyer working with a seller's agent can expect fair and honest service from the seller's agent and disclosure of pertinent information about the property.
Who's working for you? It is important that you understand who the REALTOR® is working for. For example, both the seller and the buyer may have their own agent which means they each have a REALTOR® who is representing them. Or, some buyers choose to contact the seller's agent directly. Under this arrangement the REALTOR® is representing the seller, and must do what is best for the seller, but may provide many valuable customer services to the buyer. A REALTOR® working with a buyer may even be a "sub-agent" of the seller.
Under sub-agency, both the listing brokerage and the co-operating brokerage must do what is best for the seller even though the sub-agent may provide many valuable customer services to the buyer.
If the brokerage represents both the seller and the buyer, this is Multiple Representation.
Multiple Representations: Occasionally a real estate brokerage will represent both the buyer and the seller.
The buyer and seller must consent to this arrangement in writing. Under this multiple representation arrangement, the brokerage must do what is best for both the buyer and the seller. Since the brokerage's loyalty is divided between the buyer and the seller who have conflicting interests, it is absolutely essential that a multiple representation relationship be properly documented. Representation agreements specifically describe the rights and duties of everyone involved and any limitations to those rights and duties.