Buyer FAQ #2: What is Agency? How Does it Work?
When I meet with a buyer for an initial consultation, we discuss the importance and relevance of agency in our Cedar Rapids/Iowa City Corridor market. In our area, we serve our clients based on appointed agency.
What is appointed agency? This is a form that is signed by the buyer and the agent that they have selected to represent them. This is not a binding agreement to pay commission and it has no timelines to be enforced. It simply discloses the duties of the agents to the buyer and the buyer's duties to their agent. Some examples are that the agent will disclose any material adverse facts that are known about the property of interest. This is very pertinent in our area where the flood affected over 1300 city blocks of our city. If a seller were to say that the home was not flooded in 2008, and public record or the FEMA flood map shows otherwise, we must disclose what is easily discovered. An example of buyer duty is to keep the agent up to date with the criteria of their home search.
When a buyer visits an open house, they may encounter another type of agency. If the agent that is hosting the open house is also the listing agent, they are already an appointed agent for the seller. But if you were to provide them with your contact information or personal information, you would be subject to something that is called consensual dual agency.
What is consensual dual agency? This is an occasion where the seller and buyer are both represented by the same agent, in most cases, the listing agent. The buyer and seller must both sign the consensual dual agency agreement in order for the buyer to submit an offer on the property. In some states, consensual dual agency is not allowed by law. In Iowa, this is a legal practice. The seller and buyer are not forced to agree to this type of agency as it may not be in their best interests. In consensual dual agency, the agent is not allowed to advise either party in their negotiations as they cannot harm either party. The agent's duty is to provide disclosure as written by the seller and required documentation from the buyer's side of the offer. The agent is a mediator and does not take sides during the negotiation. In my business, I do not practice consensual dual agency, but if I represent the seller and my buyer is interested in the property, I will arrange for another agent to represent them. That way, both the seller and the buyer are individually represented and protected.
As a buyer, there is a third type of agency that occurs if the buyer chooses to view or offer on an unrepresented seller, or i.e. for sale by owner listing. The for sale by owner is a non-represented party. As a buyer's agent, I am required to disclose to the homeowner that they are an unrepresented party and should consult an attorney if they have any questions regarding the purchase contract or other required documents. Our company policy dictates that the unrepresented seller agency agreement to be signed prior to receiving an offer from a represented buyer.
In all cases, agency is very important in protecting the rights and negotiating ability of the buyer. Buyers that attend open houses are often asked to sign in, I ask my buyers to provide my card to the hosting agent and to list my phone number if asked for a phone number on the sign in sheet. There may be times when an agent will suggest that you not have your own agent and that you could save money by writing the offer with the listing agent. This is rarely in a buyers' best interests as this becomes consensual dual agency.
I hope that you have a better understanding of agency and how it works for a buyer in the Cedar Rapids/Iowa City Corridor. If you would like more information, please contact me at www.KarenFeltman.com today to schedule your buyer consultation.