Dual Agency

In my previous blog I indicated that I would touch upon the topic of dual agency in a future blog, and therefore, I will discuss this very important relationship today. 

A real estate agent must disclose in writing the duties, which arise from certain agency relationships, the broker's status as agent of the seller, agent of the buyer, or agent of both the seller and the buyer. This disclosure must be made as soon as practical.* An agent can represent a seller, a buyer, or both.

If the broker represents both the seller and the buyer, the agency relationship is called "dual agency".  The responsibilities of agency as they apply to licensed brokers and licensed sales people are: 

• The agent must inform the principal of all facts pertaining to the handling of the principal's property.
• An agent must put client's interest above interest of self or others (fiduciary relationship).
• The agent may not gain any monetary interest in the property without the principal's prior consent.
• An agent may not use the principal's property to his or her own advantage.
• An agent must exercise honesty, reasonable skill and care, fair dealing and good faith in dealing with a third party.

BROKER REPRESENTS SELLER
SELLER  ï FIDUCIARY            ïBROKERð HONEST & TRUTHFUL  ðBROKER 
(Principal)             RELATIONSHIP                 (Agent)                           RELATIONSHIP                     (Third Party)

BROKER REPRESENTS BUYER
SELLER  ï        HONEST & TRUTHFUL     ïBROKERð FIDUCIARY  ð BUYER 
(Third Party)         RELATIONSHIP                                (Agent)                           RELATIONSHIP       (Principal)

BROKER REPRESENTS BOTH PARTIES (BUYER & SELLER)
SELLER  ï FIDUCIARY            ïBROKERð  FIDUCIARY       ð BUYER
(Principal)             RELATIONSHIP                 (Agent)                            RELATIONSHIP             (Principal)

First time home buyers should educate themselves about the home buying process before they embark on what will no doubt be the biggest investment of their lives.  It is common for individuals to walk into an open house, fall in love with the house and begin what unbeknownst to them could be a dual agency relationship with the agent hosting the open house.  I personally think it is better that a buyer, especially a first-time home buyer, hire a real estate agent that will be working exclusively for the home buyer.

*Note: This type of law differs from state to state.  In California it applies to all sales of residential property that contains one to four units.

Have a happy day!

Do unto others...

Ah yes, the golden rule.  Did you know real estate agents and brokers have an even higher ethical standard in which to live by if they are going to conduct real estate transactions?  That is, to put the client's interest before their own.  Think about what that means for a moment.  It means every concern and every issue that is important to the real estate client should be of utmost importance to the real estate agent!  Over and above anything else, including whether or not the purchase or the sale of the property will be in jeopardy.

Real estate agents are required to conduct a visual inspection of each and every property that he/she is involved with, whether or not they are representing the buyer, the seller or both the buyer and the seller (we'll get into dual agency in a separate blog).  As a result of this inspection, issues that may materially affect the property's desirability are often discovered during the agent's initial inspection.  It is the duty and responsibility of the real estate agent to memorialize and notify all parties involved about potential red flag issues that have been discovered.  Sellers also have a legal responsibility to disclose all issues that materially affect the desirability of the property.  This likely includes informing all parties involved about issues such as roof leaks and repairs or replacement, plumbing leaks and repairs, termite infestation, mold infestation, to name just a few.  This disclosure requirement pertains to bank owned properties as well.  Many people, as well as some real estate agents, mistakenly believe that banks can sell properties "as is" and that "as is" means that banks do not have a duty to disclose.  This is not true! 

The next time you are out with your real estate agent shopping for a home and you notice something like a water stain on the ceiling, but your real estate agent did not mention or list it on his/her inspection report, find out why.  It could be that your agent didn't notice it, or it could mean that your agent was hoping that you wouldn't.  Either way, your agent may not be as diligent as he/she should be.

Have a great day today :-)