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Representation & Agency

Who represents who in a real estate transaction should be apparent and easily known, like knowing how to write or tie your shoes. But as I go through this business, I realize the average person doesn't know how to protect themselves or defend themselves with the right agent representation.

When they meet an agent, they have no idea who that person is to them. 

Hey bro, are you a flower?

So instead of going into the depths of what "agency" and "fiduciary duty" means, here's what I tell my clients/future clients/and anyone who will listen....

There's a team BUYER and a team SELLER. Teams, like in sports, where one person is trying to win. If all works out well, we get to say "Good game, good game, good game..." to one another in passing high-fives at the end, but we are still separate, opposing teams all the while with a goal to do what is best, to "win", for our team.

Now the way you know if an agent is on your team is if you've signed a contract with them. Have you signed a piece of paper retaining their services as an agent for some term? If so, they are on your team! If not, they aren't. Or aren't yet, but still aren't.

As real estate agents, we are independent contractors, working for ourselves, not a company (unless an agent says they are an employee of a brokerage/firm). Without getting into details, that means we don't work for anyone until an individual employs, and contracts us, for our services. So if you haven't contracted one of us, then we don't work for you. 

While there are a few other things that can change that, complicate that or be added to that, for the most part this is the easiest way for the average person to think about agency and representation.

And now, for the questions you are really asking yourself....

Q: Ok, then who is that agent sitting the open house I just walked into? 

A:  They MIGHT be the seller's agent. Often, the seller's agent, also called the "listing agent" because they are the one to "list" the property, will sit one or all of the open houses of the home they have been contracted to list. Often, when people walk into an open, this is what they assume - that the agent giving them a smile (or trying to stay awake, propped up on the kitchen counter) and a property flyer is the seller's agent. To protect your interests, this is what you SHOULD assume. Assume they are on TEAM SELLER.

However, most of the time, the agent sitting that open house doesn't work for anyone yet. Often, real estate agents will sit the open houses of other agents they know/are in their office because they want to meet buyers face to face!

Before you get all "Ugh, how salesy..." remember this is ACTUALLY a great way to meet agents. Unless you have some rave reviews from friends on a local agent, seeing how you get along with an agent, and how that agent works, is a fantastic way of meeting the right agent for your home purchase.

So when you walk into an open, for your self-interest, assume that the agent there works directly for the seller and is thus on TEAM SELLER and not to be trusted. But if he or she says they don't work for the seller, then this is an agent you can look at as your own potential agent. If you already have an agent, continue to keep quiet about your interests in the home as this may be used against you in negotiations if this agent DOES end up representing another buyer with competing interests to yours - aka TEAM OTHER BUYER.

Q: Well what if that agent DOES represent the seller but we still really like her and want her to represent us!?

A: Well isn't that a kicker. Lucky her! Totally fine if you don't want to buy that listing but if you do, things get sticky. Before you start signing agency contracts think if you really want an agent who is a double agent! Ok, that sounds more fun than what we actually call them - DUAL AGENTS. But its the same principle. Even though she might be the nicest, smartest, most wonderful person you've ever met in the real estate industry, she has already signed a contract to work in the best interest of the seller. The seller would have to agree that she could also work for you in the transaction because that may change her contract with the seller.

Moreover, even if both you and the seller agree to let her represent both parties, think about if that seems doable. Thats like having the catcher sign to the pitcher and then whisper to the batter what he's going to throw. It doesn't work. Some VERY talented agents can do this, give information about the facts of a transaction and step back from advising, but is that the kind of representation you want? Do you want an agent who is timid on advising you? Probably not. So go to 5 more opens and find another wonderful agent.

Q: Ok, fine. We found an agent. Hope you are happy. Now he's asking us to sign a Consumer Notice and the agency paperwork says he's a "Designated Agent" and there's something about dual agency. What is that all about? What am I signing? 

A: I am happy! Thanks!  A really good real estate agent will be able to walk you through the major points of your agency contract which will differ with the brokerage. Which brings me to your second question...

While agents are independent contractors who work for themselves, the law says if you haven't obtained your brokerage license and aren't opening your own shop, you need to hang your license with some broker. That could be Joe's Corner Brokerage where there is just Joe and 1 other real estate agent or it could be Coldwell Banker or Sotheby's or Berkshire Hathaway... For these larger brokerages, agents strike a deal to work with them for a fee, generally a portion of earned commissions. They don't work for these brokerages per se, but they are regulated by them. So they generally must use certain paperwork given by the brokerage, which is why a contract with Berkshire Hathaway will look different than a contract with Keller Williams.

It also means you are employing the services of the broker as well as the agent. Generally, with big brokerages like these that franchise out, you won't have any interaction with "the brokerage", everything goes directly through your agent, but it may mean on your agency contract you see "Designated Agency". If you are signing a contract with the brokerage, by law, that means all licensees at that brokerage represent you. However, unless its Joe's Corner Brokerage, that could mean thousands of agents you didn't even know existed now work for you, which would make the whole idea of agency swan dive out the window the second another agent from that brokerage came to you with an offer lower than asking.

So brokerages of this size generally practice "Designated Agency", meaning they are designating ONE agent to work for the seller/buyer, not everyone. That allows the brokerage to then practice dual agency, so Sotheby's can have an agent give total representation to the buyer and another agent give total representation to the seller. You don't care if the broker of these large franchises are a dual agent, they aren't actually representing you anyway.

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The consumer notice is a REQUIRED document from the state (sometimes called different things in different places but by the state of PA is called a 'CONSUMER NOTICE'). In PA, a real estate agent has to give you this notice but thats all it is - a notice- not a contract. It simply goes over agency and representation - who represents who in a transaction - so that you don't go up to TEAM SELLER and start oozing how much you love the house you just offered $30,000 under asking on.

You will likely be asked to sign this piece of paper at the first of second meeting with an agent but that is simply to acknowledge receipt of the notice. Again, its not a contract. But if the state ever comes after that agent, that agent wants proof that he or she gave you that notice - thus the signature.

Q: Ok, I get it. Team Buyer. Team Seller. So if I am now represented, can I still make appointments to see homes through Zillow? 

A: First off, no. Let your agent do their job, if even in this instance its only getting you into a listing. But also, the agents on Zillow/Trulia generally don't represent the listing you are looking at. Hit refresh. Does another agent's face now pop up next to that house?

Sites like Zillow and Trulia allow agents to pay to advertise in areas they serve (ok, feel free to moan about sales tactics now - or just visit MY Zillow page ;-) ), so likely the agent, or agents, next to the house don't actually represent that house or that seller, aka aren't TEAM SELLER, but they are trying to help YOU and be on TEAM BUYER. So if you aren't represented, feel free to contact one that you like, just know they are going out of their way to earn your business and they likely DO NOT represent the seller.

However, some listing agents pay to make sure their faces are right next to their listings. Again, if you are represented, still ask your buyer agent to get you in, but if you aren't represented, you should ask early on if the individual agent you are meeting at the property works for the seller or not.


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Ok, after all of that, I think I just need to make an infographic instead....




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