Agency 101 Presented by Davidson Pless, ABR, GRI, e-PRO

A form required in all Broker assisted real estate transactions conducted in North Carolina is the acknowledgment page from the North Carolina Real Estate Commission's publication titled "Working With Real Estate Agents". The purpose for this publication is to inform prospective buyers and sellers of the different roles a real estate agent can play in a transaction.  The agent retains the acknowledgment page to document that they fulfilled their obligations of: (1) providing the prospective buyer or seller a copy of the publication, (2) providing timely disclosure of their agency relationship, or role, in the transaction, and (3) reviewing the publication with them.

This is first of a multi-part series that will take an in depth look at this publication.  In this introductory installment we are going to review the fundamentals of agency relationships.

The Firm.  Whether you are a Buyer or a Seller, when seeking the assistance of a real estate agent it is important to understand the individual real estate agent you work with (i.e. Pat Smith) is associated with a firm (i.e. Best Realty). The firm consists of at least one licensed and specially trained broker known as the Broker-In-Charge, plus the firm's other affiliated agents and employees.  When a buyer or seller client  enters an agency relationship agreement with Pat Smith, the buyer or seller is appointing the firm , Best Realty, to represent them.  Pat Smith becomes their agent through sub-agency, as do all of the firms affiliated agents.  In practice, a buyer or seller client may work exclusively with just one of the firm's sub-agents.

 A Seller's Agent is a firm that has been appointed by a property's owner to assist them with securing the highest price and most favorable terms for the sale of their property. The seller is a client of the firm.  The seller's property is known as a listing. A buyer that purchases this seller's property may be represented by a Buyer's Agent, or not represented at all.  The seller client is fully represented at all times from the beginning to the end of the agency agreement period, or until the property is sold, whichever occurs first.

 A Buyer's Agent is a firm that has been appointed by a purchaser to assist them with securing the lowest price and most favorable terms for their purchase.  The buyer is a client of the firm.  An owner that sells this buyer a property may be represented by a Seller's Agent, or not represented at all.  The buyer client is fully represented at all times from the beginning to the end of the agency agreement period, or until the buyer has completed the purchase, whichever occurs first.

A Dual Agent, or dual agency occurs when both parties in the transaction are clients of the same firm.  The seller may have become a client of the firm for the purpose of the firm representing them as a Seller's Agent.  The buyer may have become a client of the firm for the purpose of the firm representing them as a Buyer's Agent.  Although the buyers and sellers remain competing parties in the transaction, the firm must divide its loyalties and therefore can not fully represent either the seller or buyer client.

Unrepresented Parties.  An unrepresented buyer is a party that purchases a property without the representation of a Buyer's Agent or a Dual Agent.  An unrepresented seller is a party that sells property without the representation of a Seller's Agent or a Dual Agent.  It is not uncommon for unrepresented buyers or sellers to work with real estate agents in a sales transaction.  An unrepresented party may receive certain assistance from a real estate agent, such as a Seller's Agent referring an unrepresented buyer to a lender that offers favorable financing.  Since favorable financing may enable the buyer to better perform, it is in the seller's, or client's best interest for their agent to assist the buyer this way.  Regardless of the amount and type of assistance, if any,  an agent provides an unrepresented party, the assistance must be in their client's best interest.  In all dealings with unrepresented parties the agent must be fair with them, disclose their agency relationship, and disclose any material facts about the property's condition that the agent is aware, or should be aware of.

Timely Disclosure is prior to a prospective buyer or seller sharing any information with an agent that the prospective buyer or seller would not want one or more of the firm's clients knowing.  Disclosure should occur no later than the first substantial and direct contact between the agent and a prospective buyer or seller.

When contacting a real estate agent pay particular attention to when the agent presents the "Working With Real Estate Agents" brochure.  Also pay particular attention to how the agent reviews it with you.  If the agent is interested in establishing an agency relationship with you make sure the agent can explain these fundamentals to your satisfaction.  If the agent is affiliated with a firm that represents both buyers and sellers make sure the agent explains the firm's policies with regard to Dual Agency.  Ask questions, and ask specific questions, and be satisfied with the agent's answers before agreeing to have the firm represent you.  If you are unsatisfied with the agent's answers, the firm's policies, or both, do not appoint them to represent you.

The "Working With Real Estate Agents" publication is available here.