Who Represents Whom in a Real Estate Transaction?
You’ll need the help of a professional real estate agent if you’re trying to buy or sell a house. Although it is not abnormal for buyers and on occasion sellers to collaborate with a real estate agent without inquiring about who the agent is representing, it is still an important question to ask.
The real estate agent may work for the seller, the buyer, or both, depending on the situation.
An agent can fool a buyer or seller into thinking they are working exclusively for them, when they are not. This happens quite often when a real estate agent practices dual agency. This means that the agent is working for both the buyer and the seller at the same time.
The issue with having a dual agency relationship is that it’s not possible to accurately represent both a buyer and seller when they have different objectives. As a dual agent, you are not allowed to provide advice to either the buyer or the seller like you would in a traditional buyer’s agent or seller’s agent relationship. This means that the consumer is looking for the best advice from the agent.
Real estate agents in most states are required to explain agency law to any prospective clients. Although this is the case, there are times when either the real estate agent does not explain agency well, or the consumer does not understand it.
Many real estate agents don’t understand capital gains tax, which is worse. Many real estate agents think they can give a consumer advice in a dual agency relationship. It is frightening that there are so many agents who do not understand agency law in their own state. This is more commonplace than it should be.
If you are buying a property, it is in your best interest to find a buyer’s agent. If you are selling a property, it is in your best interest to find a seller’s agent. By getting a professional home inspection, they know that their interests will be protected throughout the transaction.
The goal of a real estate agent is not to make a sale at any cost, but to protect the best interests of the client. For example, many homeowners want to get the best price for their home when they sell it. On the other hand, most buyers want to know that they haven’t paid too much for their purchase.
Functions of Real Estate Agents
An effective real estate agent will have extensive knowledge about the process of buying or selling a home, regardless of whether they are representing the buyer or the seller. The end goal of a real estate agent is to help buyers purchase a home and help homeowners sell a home, but they have a responsibility to uphold the interests of their clients.
People looking to buy or sell property should be aware that there is a difference between a Realtor, a Real Estate agent, and a broker. The following is a brief explanation of different types of real estate agents and what they do.
An Agent of The Buyer: Known as a Buyer’s Agent
The buyer’s agent is solely responsible for representing the buyer throughout the home-buying process, including helping them find a home and completing the transaction. In particular, the buyer’s agent will do the following:
- Reduces the amount of time a buyer spends looking for a property.
- The agent will talk to the seller’s agent about everything related to the sale.
- Acts as an advocate for the buyer during the home-buying process, and helps the buyer navigate through paperwork and negotiations.
- Provides the buyer with advice and expertise from start to finish.
Real Estate Agent For The Seller: Known as a Seller’s Agent
The seller’s agent only works with and is loyal to the homeowner, advising them on everything from home staging, to proper pricing, and everything in between to completion. The following are some of the primary roles of a seller’s real estate agent:
- Guides you to prepare to sell your house
- Lists your house in MLS
- Provides online and offline marketing
- Communicates with the seller throughout the transaction
- Help you to display your home to buyers by providing photography and marketing expertise.
The agent will consult with the buyer’s agent before and during the sale process to provide expert advice.
This is only a brief overview of what a buyer’s and seller’s agent does for their clients every day.
A Dual Real Estate Agent
A dual real estate agent is someone who represents both the buyer and the seller in a real estate transaction. While this can save on commission costs, it can also create a conflict of interest since the agent cannot give advisement to either party. Giving advice in dual agency is ILLEGAL. If an agent were to represent both the buyer and seller in a real estate transaction, they would be breaking the law.
In eight states, it is legal to have dual agency. These states are Alaska, Colorado, Florida, Kansas, Oklahoma, Texas, Vermont, and Wyoming.
Designated Agency
In a designated agency transaction, one real estate company represents both the buyer and the seller. There is one agent representing the seller as a seller’s agent and another agent representing the buyer as a buyer’s agent. In this situation, the broker who is responsible for the record-keeping becomes a dual agent.
In a designated agency situation, each party has their own real estate agent who is representing their best interests. This differs from a dual agency situation, where one agent represents both parties. This setup relieves the conflict of interest that is inherent with dual agency, in which two agents from the same brokerage represent the buyer and the seller. Both the buyer and seller have agents they can rely on for advice.
Cooperating Real Estate Agents or Sub-Agents
An agent who is working for a buyer is just another name for a cooperating real estate agent or sub-agent.
They are real estate agents who, in concurrence with the listing agent organization, go into a “sub-agency” relationship in which they show the house to the buyers on behalf of the listing agent of the seller. A “co-broke” is when a real estate broker works with another real estate broker to help sell a property.
The company usually pays the real estate commission.
Real Estate Broker
A real estate broker typically owns a real estate firm, but not always. The general overview of the day-to-day operation of business to guarantee a wrinkle-free experience. A real estate broker is responsible for the agents they employ. A real estate broker’s job includes holding a buyer’s earnest money in escrow until the transaction is done.
The money deposit will be accounted for when the deal is closed.
Communicate With Buyers or Buyer’s Agents
Your listing agent will communicate with buyers and their agents to answer questions about your house, schedule showings and negotiate on your behalf.
Your realtor should be the one communicating with the buyer on your behalf to maintain a good relationship.
If you are selling your home, it is best if you are not the main point of contact. This is because you are too emotionally invested in the sale to be able to objectively handle the situation. You might not conduct yourself in the most professional manner when a potential buyer:
- Makes an offer that’s lower than you expected
- Criticizes the state of your home
- Request repairs you don’t want to agree to
Your agent can communicate with the buyer on your behalf and give you advice about how to respond, increasing the likelihood of reaching an agreement.
Explain and Evaluate Offers
When a prospective buyer offers to purchase your home, your listing agent will present the offer to you and explain what the offer entails.
Your agent can help you decide if you’re satisfied with the amount of the offer, and if the terms the buyer is asking for are reasonable.
If you want to accept, reject, or counter an offer, you should discuss it with your realtor. Your agent will tell the buyer your answer.
Negotiate With the Buyer and Draft a Purchase Agreement
Once you accept an offer from a buyer, your listing agent will draft a purchase agreement — a document that includes all of the details of the sale, such as:
- Who’s buying the home
- What’s included with the property
- Who’s paying various closing costs
After your agent confirm that all parties have signed the agreement, it is then the buyer’s responsibility to begin meeting the contingencies provided in the contract.
The agent will continue to negotiate on your behalf to finalize details before closing. If the home inspection reveals damage, the buyer may ask the seller to pay for repairs before closing the deal, or offer money to the seller so they can fix it themselves.
Coordinate Details Before Closing
Your listing agent will make sure that you have completed any repairs that you have agreed to do for the buyer and that all of your belongings have been moved out of the house before closing day.
If you have any last minute changes or requests, your agent will tell you and make sure the situation is resolved as quickly as possible.
Your agent will also make sure an escrow account is ready to receive funds from you and the buyer’s lender on closing day.
The buyer and/or their lender send funds on closing day, and you’ll have your profits from the sale in 1–4 business days, depending on what state you live in.
Manage Closing Day
The agent who listed your property will be present at the closing and will check all the documents, such as the closing statement, to make sure they are right and complete.
The realtor will also make sure that the money from the sale, after deductions for things like closing costs and commission, is sent to you.
This is when your agent finally gets paid.
The listing agents typically charge a commission of 5-6%, which is then split with the buyer’s agent. Both agents and their broker split the commission from the sale evenly.
Who Does a Real Estate Agent Work For?
Each real estate agent is affiliated with a real estate brokerage. Some popular brokerages include RE/MAX, Century 21, and Keller Williams. The brokerages provide agents with two things: marketing materials and administrative support.
An agent cannot work in real estate without being sponsored by a licensed broker. A broker is someone who manages a real estate brokerage and makes sure transactions follow state and federal laws.
Only real estate agents who have earned a broker’s license are allowed to operate their own business.
Most agents aren’t paid a salary by a brokerage. Instead of a salary, real estate agents earn a commission when they help buy or sell a home. This commission gets split with their broker.
Discount brokerages, such as Redfin, stand out because their agents receive a base salary, in addition to bonuses based on how many transactions they complete.
If you are new to the real estate business, it is important to decide what kind of career you want to have. You know exactly what you need to do to achieve your goals.
