What you don't know about "Agency Relationships"...

By
Real Estate Broker/Owner with Buyers Broker of Florida
http://actvra.in/4qZj

 

After reading comments that licensed agents make, it is easy to conclude that most have no clue about "Agency Relationships". 

 

Understanding agent duties and boundaries does not need to be elusive.

                                                                                                    

Here are some basics:

 

1.  Agency relationships are not created by a simple phone call.  They are also not created just because you show a house or someone walks into your open house.  It is also not an automatic "agency relationship" just because you show a buyer 20 homes or have a pocket listing. 

 

2.  Agency relationships are established in writing (yes, it could be verbal...cough cough) The written agreement spells out the time frame for the relationship and the duties of  both the agent and consumer. What are you going to do for them? What are they going to do in return?

 

3.  An Exclusive listing agreements with a seller is no different than a Exclusive listing agreement with a buyer and carries equal weight. Only a written exclusive agreement makes the consumer "your" client. 

 

4.  Buyers and sellers are free game for anyone to solicit unless you have an "exclusive right to represent" contract with with them as in #2.

 

5.  Having 2 clients (buyer and seller) in the same transaction is a conflict of interest regardless of how it is spinned or camouflaged.

 

6.  Without an "listing agreement" or an "exclusive buyer agreement", the consumer is only a "customer", not a "client".  There are different duties attached to both.

 

7.  "Customers" get no fiduciary duties, "clients" get full fiduciary duties of loyalty, confidentiality and full disclosure

 

8. If you have a "client" it is your duty to take care of them, and fulfill your agreement.  If you listed with a seller, you promised to sell the property.  If you listed the buyer, you promised to find them a property. Just do it.

 

9.  The core value of an Agency relationship is universal just like the code of ethics, it does not vary from state to state. 

 

10.  Your feelings, emotions and what you think does not count, as it is your duty to put the clients best interest above your own.

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Representing ONLY the best interest of the Home Buyer...never the seller.

 Eve Alexander Orlando Buyers Agent

 

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Rainmaker
1,548,253
Carla Muss-Jacobs, Principal Broker (503) 810-7192
BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time - Portland, OR
Buyer Focused ~ Buyer Results

While there are state definitions regarding agency relationship, there is nothing that precludes any member of NAR from their code of ethics and the fiduciary duty is clear on that subject.  

Nov 25, 2014 12:41 AM #46
Rainmaker
547,329
Kevin Mackessy
Blue Olive Properties, LLC - Highlands Ranch, CO
Dedicated. Qualified. Local.

It should be the first thing you explain to a buyer, especially if they are using a lender you're not working with.  Often times they will try to get a buyer's agent assigned onto the transaction and the client will disappear.  

Nov 25, 2014 02:54 AM #47
Rainmaker
534,924
Nick & Trudy Vandekar, 610-203-4543
Long & Foster Real Estate Inc 610-225-7400 - Devon, PA
Tredyffrin Easttown Realtors, Philly Main Line

Nice post, with a good explanation of agents responsibilities.Always amazed how few agents actually explain their responsibilities to future potentail clients.

Nov 25, 2014 03:35 AM #48
Rainmaker
1,548,253
Carla Muss-Jacobs, Principal Broker (503) 810-7192
BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time - Portland, OR
Buyer Focused ~ Buyer Results

Implied agency . . . okay, I'll bite.   Implied by whom??  (#36)

1.)  The listing agent at the Open House talking to a consumer/customer who enters?  The listing agent walks like an agent duck, talks like an agent and they are . . . agent ducks FOR THE SELLERS.  To act on behalf of the consumer/customer buyer WITHOUT full disclosure is the real estate agency relationship known as : UNDISCLOSED DUAL AGENT (in Oregon terms.)  So much for that, just ducky, implied agency. 

2.)  The buyer's agent who takes out clients and tours 20 properties with them?  Then the buyers make a purchase through the listing agent on another property that wasn't toured with the buyer's agent.  LOL  Try making the "implied agency" argument on that one for the co-op.  

3.)  The buyers who are unrepresented and call on each and every FOR SALE sign imaginable?  They think that talking with the listing agent about the property makes the listing agent "their" agent. Oh, and by the way, they happen to have TEN "implied agents" they're talking with simultaneously.  HA HA HA  

Nov 25, 2014 04:17 AM #49
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Fred Griffin
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

    Hi, Mike and Eve.

    "Fair Game" Scenario:  

     A Buyer who has signed a Buyer Broker Agency Contract walks into a model home, or an Open House, and DOES NOT DECLARE that they have any Agency Agreement.

    That Builder's Rep, or that Sellers' Agent for the Open House, writes an offer for that Buyer, and said offer is accepted by the Seller. 

     That Buyer is now under contract with the Seller.  The Agent for the Seller (or transaction broker), or Builder's employee who wrote that offer is entitled to whatever commission is offered by the builder, or to the coop fee that is offered in the MLS.

     Where does that leave that Buyer's Broker? 

     The Agent or Rep who wrote the offer has not violated any law or agency agreement, since they had no knowledge of any such agreement.

     The Buyer's Broker can go after that Buyer for whatever compensation was stated in the Agency Agreement/Contract that they had with that Buyer, in Civil Court. 

    But the Buyer's Broker won't have any procuring cause or action against the Builder's Rep or Seller's Agent or Transaction Broker, who had no knowledge of any Buyer's Broker Agency Agreement/ Contract.

 

 

Nov 25, 2014 11:18 AM #50
Rainmaker
136,544
Gerhard Ade
RSVP Real Estate - Seattle, WA
Real Estate with Confidence

Great topic, thanks Mike & Eve Alexander! Guilty as charged. Have had only one or two buyer's agreement in over 13 years.  I suppose that all my buying "customers" became "clients" once I wrote the offers or at least once we closed? ;-)

BTW, in Washington State (after the Oregon model, I believe) agents are now called "brokers" and brokers/brokerages are now called "firms." The general public barely noticed the change ;-)

Nov 25, 2014 11:46 AM #51
Rainmaker
434,945
Mike & Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

Scott Godzyk:  They sure should, but they don't.

Carla Muss-Jacobs:  Like always you understand agency and the tie to the code of ethics.  Unfortunately most agents have not read or understood the COE.

Kevin Mackessy:  Not fair for sure.

Nick & Trudy Vandekar: thank you

Gerard Ade:  Interesting about Washington...what next?

Nov 25, 2014 07:40 PM #52
Rainmaker
434,945
Mike & Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

 

   (Response to Fred Griffin #50  and thanks for the brain teaser)

Hi, Mike and Eve

 

    "Fair Game" Scenario:  

 

     A Buyer who has signed a Buyer Broker Agency Contract walks into a model home, or an Open House, and DOES NOT DECLARE that they have any Agency Agreement.

RESPONSE: The buyer is not required to DECLARE anything, as consumers are not bound by the code of ethics.  IF the agent is licensed,( as most are)  it is their duty to make an effort to find out if that agent is under any exclusive contract.

 

    That Builder's Rep, or that Sellers' Agent for the Open House, writes an offer for that Buyer, and said offer is accepted by the Seller. 

 

     That Buyer is now under contract with the Seller.  The Agent for the Seller (or transaction broker), or Builder's employee who wrote that offer is entitled to whatever commission is offered by the builder, or to the coop fee that is offered in the MLS.

 

     Where does that leave that Buyer's Broker? 

RESPONSE: If the salesperson is an employee, more than likely you have no standing to do anything.  IF however the salesperson is a licensed real estate agent,than they have to play by the COE rules even if they are working for a builder.

You would then have cause for an ethics complaint for interference in an agency relationship. Or if the commission is big enough you could sue for tortuous interference in a contractual relationship.(causing you financial harm)

 

     The Agent or Rep who wrote the offer has not violated any law or agency agreement, since they had no knowledge of any such agreement.

RESPONSE:  If licensed, it is their duty to ask, just like every agent is required to find out if a seller is listed, before they try to do business with them.  That is in the COE.

 

     The Buyer's Broker can go after that Buyer for whatever compensation was stated in the Agency Agreement/Contract that they had with that Buyer, in Civil Court.

RESPONSE: You are correct.

 

    But the Buyer's Broker won't have any procuring cause or action against the Builder's Rep or Seller's Agent or Transaction Broker, who had no knowledge of any Contract.

 

 RESPONSE: Interference in you agency contract has no bearing on a PC claim unless it was malicious or intentional.  Also, according to Nar's PC manual, there has to be a "listing agent" in order to have a procuring cause claim.

  • I have had a buyer go to contract on new construction without me. Agent was licensed, I met with manager and got paid. 

 

  • I had another builder rep (unlicensed) tell my buyers that my exclusive agreement "meant nothing" and they would have to buy without me. It got ugly, but I sure did get paid.

 

When stuff like that happens agents need to speak up...brokers don't want to be dragged into an ethics hearing ( yes I would name the broker also, as they should train and supervise) and builders don't want bad press.

 

Nov 25, 2014 08:46 PM #53
Ambassador
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Fred Griffin
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

Mike and Eve, thanks for your excellent response in #53.

  Oh, just one more... what if the Real Estate Agent who writes the Offer is not a member of NAR?   The COE doesn't come into play.   Then what?   

         

Nov 25, 2014 10:05 PM #54
Rainmaker
434,945
Mike & Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

Fred Griffin #54:  This has been my experience:

While you do not need to be a member of NAR or FAR, if you do want MLS access you sign a contract agreeing to arbitrate and follow the COE so no one is really off the hook unless they do not use the MLS.

Otherwise, the only recourse is the courts and courts deal with the law, not ethics.

Nov 25, 2014 11:20 PM #55
Rainmaker
1,548,253
Carla Muss-Jacobs, Principal Broker (503) 810-7192
BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time - Portland, OR
Buyer Focused ~ Buyer Results

Great scenarios and answers to Fred's questions.  Tortious interference is  a viable option for real estate agent who are not members of NAR.  If I have a contract with a buyer, and they have not CANCELLED it, that buyer rep contract is in play.  If I am NOT allowed to perform my duties under that contract because a listing agent, builder's rep. et al., didn't ask my client whether there were being represented by an agent . . . and wrote up the offer, that defense won't get them off the hook.  The person with the license is the one who has the obligations, duties, liabilities.  My contract was interfered with and I could not perform my duties as a result.  

Nov 26, 2014 10:52 AM #56
Rainmaker
434,945
Mike & Eve Alexander
Buyers Broker of Florida - Orlando, FL
Exclusively Representing ONLY Orlando Home Buyers

Carla Muss-Jacobs:  Excellent and accurate comment, thank you.

Nov 27, 2014 01:37 AM #57
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Costa Mesa, CA
#MortgageMadeEasy Costa Mesa, CA 484-680-4852

Excellent explanation of agency relationships, I know many agents who never pursue official agency, and I think that's a mistake.  It would be nice if more consumers were away of this information as well.

Nov 30, 2014 07:26 AM #58
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Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital

Hi, Mike and Eve!  You can find this post on today's "Last Week's Favorites".

Nov 30, 2014 09:27 AM #59
Rainmaker
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Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

Bravo Mike and Eve! Well written and explained. Good for you for the feature!

Nov 30, 2014 10:10 AM #60
Rainmaker
334,858
Charlie Dresen
Steamboat Sotheby's International Realty - Steamboat Springs, CO
Steamboat Springs, CO e-Pro

#5 is the big one for me that I see abused too much.

Nov 30, 2014 09:29 PM #61
Rainmaker
494,392
Claude Labbe
Real Living | At Home - Washington, DC
Realty for Your Busy Life

You make it sound so simple.

Throw in a little bit of greed and it sure gets very wacky, most often the consumers being the ones that get hurt.

Dec 01, 2014 02:30 PM #62
Rainmaker
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Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

Well deserved Feature, Mike & Eve.  Congrats!

Dec 07, 2014 09:02 AM #63
Rainmaker
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Roy Kelley
Realty Group Referrals - Gaithersburg, MD
Roy and Dolores Kelley Photographs

I was looking for your current blogs. I hope all is going well for you.

Dec 18, 2014 03:56 AM #64
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Larry Lawfer
YourStories Realty Group - Newton, MA
"I listen for a living." It's all about you.

Mike & Eve Alexander Right out of our real estate books on almost all issues except your #5.  Dual agency is how real estate used to be before the advent of Buyer's agents.  I, quite often, double end sales and have never found it to be a conflict of interest. The rules are clear I have a fiduciary responsibility to my Seller, but with agreement on both sides I can easily inform and provide support for the Buyers at a very high level. Thanks for your efforts on getting all this down.

Dec 27, 2014 11:35 PM #65
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