One of the biggest areas areas of misunderstanding among the public and many Realtors is exactly who a Realtor represents in a transaction. In Maryland, a Realtor is obligated to present a potential client with the document Understanding Who A Real Estate Agent Represents. This should occur at the first scheduled meeting or substantial discussion about a property. For the purpose of this blog, I'm only focusing on the aspect of an Open House.
When a potential buyer walks into an open house, he/she should likely presumes that the agent represents the seller. What happens when the agent sitting the home isn't the listing agent? Under Maryland law, the agent still has a fiduciary responsibility to the seller. This means that the potentially unsuspecting buyer doesn't know that they are unrepresented. For example, buyers Tom & Mary attend an open house. The agent hosting the open house isn't the listing agent and offers to assist in the purchase. This agent is acting as a sellers agent and must represent the seller, not the potential buyers resulting in seller agency. Unfortunately, Tom & Mary may not know this. Many agents believe that they can represent the buyers by having them sign a buyer's agency form and sell the home through Disclosed Dual Agency. Unfortunately, the agent was already representing the seller at the open house and can't wear both hats. Dual Agency exists when the buyer's agent and seller's agent both work under the same brokerage but each party has their own representation. If any substantial conversation takes place regarding the property, the sitting agent should disclose/provide the buyer with the Understanding Who Real Estate Agents Represent disclosure.
Let's say Tom & Mary don't like the house and ask about others in the area. If the Realtor responds with alternatives, he/she just violated the fiduciary responsibility to the seller, even though the never personally entered into a listing contract with the seller. The Realtor's focus should solely be on selling the home in question. However, the Realtor could explain the situation and schedule an appointment with Tom & Mary back at the office and than enter into a buyers agentcy agreement. It's important to keep in mind that if Tom & Mary decide weeks later to buy the home seen at the open house, the agent would still represent the seller despite having signed a broker retainer agreement.
It's important that buyer's have an agent protect their interests. Generally speaking the buyer's agent fee is compensated through the selling broker and paid by the seller. If it's not costing you, as the buyer, to have represetation than you should do so. If a buyer has a signed broker retainer agreement with an agent, they should notify their agent before attending an open house to ensure that the agents will honor your contract with your agent and the buyers should verify this upon arrival with the sitting agent. Failing to do so could resulting a procuring cause issue.
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