Does a Realtor-Agent Look Out for You? — Part 2 of 5

Does a realtor-agent look out for you?When it comes to buying a new home you can: (sometimes) purchase directly from the builder without a real estate agent, you can use an agent, or you can  work with the homebuilder’s agent or sales representative. It is very important to understand just who will be on your side as an advocate should trouble arise at any time during the process, from contract to closing. In this article we try to answer the question; Does a realtor-agent look out for you? We'll start by outlining the different types of representation or “agencies”.

Types of Real Estate Agents or “Agencies”

It can be confusing for new home buyers to fully understand the role and relationships of real estate agents and sales representatives.  This confusion also includes whom the agents represent. In many states it is required that new home buyers be given an agency disclosure form to sign. This form is a disclosure which spells out the various agency relationships. It is important to read it so you will be better prepared to select the type of agency relationship you want.

Real estate licensing laws are unique to each state This is demonstrated in the diversity of laws, rules, and regulations that each state adopts. States differ on every aspect of the licensing: how much education is required to obtain a license, the type and depth of the examinations etc. so it is difficult to provide a one size fits all explanation on any specific topic. When it come to sales people, here in the simplest of terms, are some of the most common types of sales “agencies” or relationships you should be aware of:

Homebuilder’s sales representative – The sales person only represents the homebuilder. This person may or may not be licensed.  The sales person often has a great knowledge of the builder’s new construction features. They may know resale and property values and to a lesser degree, and almost certainly will not point out the benefits of other homebuilders.

Buyer’s agent – The real estate agent only represents the buyer (single agency).  Agents who represent buyers under single agency owe a fiduciary responsibility to the buyer which includes the following duties: reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account.

A buyer’s agent cannot share confidential information with the homebuilder or the homebuilder’s agent. In dealings with the homebuilder, a buyer’s agent should (a) exercise reasonable skill and care in performance of the agent’s duties; (b) deal honestly, fairly and in good faith.

The agent will be licensed which means they have had some testing and/or training and if they are also a Realtor® have agreed to abide by an industry code of ethics. This agent will often be knowledgeable in resale and property values and may or may not know anything about local homebuilders or new construction.

Listing agent – The real estate agent only represents the homebuilder (single agency). Agents who represent homebuilders under single agency owe a fiduciary responsibility to the homebuilder which includes the following duties: use reasonable care,  provide   undivided loyalty, confidentiality, full disclosure, obedience and duty to account.

A listing agent does not represent the interests of the buyer.They cannot share confidential information with the buyer or the buyer’s agent. In dealings with the buyer, a listing agent should (a) exercise reasonable skill and care in performance of the agent’s duties; (b) deal honestly, fairly and in good faith.

Some buyers prefer to work with listing agents because they know the agent is receiving the full commission, that is the listing agent commission and the buyer's agent commission. They feel the listing agent will be motivated to get the buyer’s purchase offer accepted.

The agent will be licensed which means they have had some testing and/or training and if they are also a Realtor® have agreed to abide by an industry code of ethics. This agent will often be knowledgeable in resale and property values and may or may not know anything about local homebuilders or new construction.

Dual agency – The real estate agent represents both the buyer and the homebuilder. A listing agent who also represents the buyer is a dual agent. Dual agents cannot operate in a fiduciary relationship with either party and must treat both the buyer and the homebuilder equally. They cannot share confidential information and they cannot give confidential advice. A dual agent cannot advise on home price, terms or negotiate on either party’s behalf.

An agent acting as a dual agent must explain carefully to both the buyer and homebuilder that the agent is acting for the other party as well. The agent should also explain the possible effects of dual representation, including that by consenting to the dual agency relationship the buyer and homebuilder are giving up their right to undivided loyalty.

Conclusion

Because just picking a certain type of agency from the list above is no guaranty of an agent or sales rep’s proficiency, finding the right real estate agent will take a little more research.

In Part 3 we’ll look a little deeper into the qualifications of  homebuilder’s sales representatives.

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I believe that by providing quality information we can to raise the bar of excellence within the homebuilding industry.

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