In Real Estate there are multiple ways that a REALTOR® can represent you. At your first substantial meeting with a REALTOR® you should receive something called the consumer notice which your REALTOR® will go over with you if you need. However, after reading this, you should feel like an expert and you may not need them to explain anything to you. The type of Agency you pick determines how your REALTOR® will get paid so it is important to know what your options are.
When you are looking at your consumer notice or your agency agreementyou are going to need to know a few terms to understand what youre looking at, so lets get some definitions out there so we all know what we are talking about:
Agency - a relationship of trust created with one party gives another the right to represent them in dealings with third parties
Agent - the REALTOR® or your real estate agent
Client AKA the Primary - the person who signed a contract with the gent
Single Agent - this means that there is one single agent representing one single client. This could be as a listing agent or as a buyers agent.
Dual Agent - this means that there is one single agent with multiple clients within the same transaction, so the agent is representing the buyer and seller.Â
Designated Agent - In some brokerages hiring one REALTOR® means youve hired everyone in the brokerage, in others your REALTOR® is you designated agent meaning that only that one REALTOR® owes you fiduciary duties. This also gets used if a single brokerage is representing both sides of a transaction so that each agent can represent each client with full fiduciary duties fullfilled.
Subagent - any agent that your agent used in order to sell your property. In a listing, this is often referring to the buyers agent.
Special Agent (Agency) -this is the type of agency given to your REALTOR® as someone with limited authority to perform a specific task or transaction; sell or find your home
Fiduciary duties - these are the duties owed to you by your REALTOR® once entered into an agency agreement. They include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable skill and care. For a breakdown of these, click here.
Types of Sellers Agencies
1. Exclusive Right to Sell
In this agreement the agent you sign with is the only agent representing you and the only agent eligible to receive a commission for representing you in the transaction (aside from any subagents). When your property sells this agent will receive compensation regardless of who brings the buyer. Most agents will ask for this type of agency.
2. Exclusive Agency
Although it sounds similar, this agency is slightly different from the exclusive right to sell in that if you as the owner bring the buyer to the sale, then your agent would not get paid. This type of agency is often offered for a shorter timeframe than an exclusive right to sell contract because the longer your contract lasts the more work, time, and money your agent has put in to selling your home creating a higher risk for them to take on. If you have a few people in mind that has expressed an interest in buying your property, ask your REALTOR® for a 1-2 week period to bring your own buyer to the table. This short time frame will show if potential buyers you have in mind are actually serious about buying and give you the opportunity to benefit if one of them is serious while also weeding out those who aren't.
3. Open Listing
In an open listing you as the seller can work with as many agents/brokers as you like. Your contract states that you will only pay the agent if they have procuring cause (aka-they are the one to bring the buyer that buys your property). This type of listing means you have an agency contract with all of the agents/brokers you sign a contract with, but you only pay the one who delivers.
Types of Buyers Agencies
1. Exclusive Buyer Agency
There are actually 2 types of exclusive buyer agency. The first is just a plain old buyer agency agreement which means that your agent gets paid their commission regardless of who finds the house. This is the agency that most REALTORS® will ask for. Because they are the only agent representing you, you are also going to get more of a one on one approach that allows your REALTOR® to show you what they can really do for you. The second is an exclusive agency buyer agency agreement which is just one big mouthful. Basically, this agency means you only pay your REALTOR® if they find you the property you end up buying. Most agents will not work for this type of agency because it means they could potentially lose a lot of money working for you. Types of agency agreements are negotiable though so you should always feel comfortable opening up a dialog about how you feel comfortable being represented. A good REALTOR® will not take offense to asking about how you want to be represented, and they will also be upfront with you about how they need to make a living.
2. Nonexclusive Buyer Agency
This is an agency agreement where you as the buyer could hire as many agents as you want. Whoever finds you the property you end up buying is the agent who will represent you in the purchase and is the agent who will get paid. None of the agents you hire are exclusively working for you, so you will run into varying commitment levels. This is often what you run into when you are working without an agent and stumble across a property you want to view that requires an agent to open or tour and you only use that agent for that one property.
Bonus Agency
1. Transactional Agency
If you decide to represent yourself in the search for your home or to sell as the owner (FSBO) then you won't have the same kind of agency agreement with a REALTOR® becaue you havent signed a contracted with a REALTOR® to represent you. However inorder to process the transaction, you will need some help, as in someone to pass along all the paperwork you would need to fill out and prepare and sign. The agent who oversees the signing and the sale is a transaction agent.