What is Agency in Real Estate?
Posted May 15, 2008
In Real Estate, Agency Matters!
When you consider buying or selling a home in Charlotte, you might contact and interview real estate agents and Realtors to help you. Before you go too far in those conversations, you need to know about a term called “agency.”
Agency begins when a home is listed for sale by a real estate agent or a Realtor. The seller of the home hires the agent’s firm to represent them in matters related to selling their home. Notice I said they hire the firm, not the agent. While they do work with the specific real estate agent, they actually hire the real estate firm. Much like hiring an attorney, when you hire an attorney the entire firm is hired to represent you.
When you consider this in its entirety, this means that a seller that has hired a firm with 100 real estate agents actually has 100 agents representing their interests. This brings along the concepts of confidentiality and allegiance. Every one of those agents are bound by law to protect and serve the interests of their clients. When you think of it that way, a seller has an entire army of agents in charge of selling their home.
From the start, all real estate agents and Realtors automatically represent the seller. If a home buyer walks in to buy a home and has not hired an agent to represent them, the agent they speak to is responsible to the seller. This means anything a buyer says can and WILL be used against them in negotiating. That is, unless the buyer has specifically hired that agent to represent them.
There are many dymanics that can occur such as exclusive buyer agency, dual agency and more. These take the agency idea into many different directions, which I will try to explain in future posts. However, one thing you should know before you say anything to a real estate agent is to be careful what you tell them (unless you have signed a contract and hired them.) Regardless of being a seller or buyer, if you provide a real estate agent with information about you can be used against you in negotiations in future dealings.
How can information from a simple interview be used against you? Lets examine this.
Let’s say you are looking to buy a home. You contact an agent and discuss what you are looking for. During the conversation you begin to explain how you are qualified for $250,000 and have $10,000 in a CD that you could use towards a home, but only if you needed it. However, after the converstaion ends, you decide to go with a different agent to help you locate a home.
After weeks of looking at homes, you find the home of your dream and put in your offer for $200,000 which is $10,000 below the list price. The seller and their agent sit down to discuss the offer and the seller’s agent recognizes your name! Its the agent you first sat down with. Remember, this agent is loyal to the seller at this point and must share any information that is beneficial to the seller’s interests. So he informs the seller that you are qualified up to $250,000 and have an additional $10,000 you could use to buy a home if needed. Immediately the seller determines that you need to pay more for this home because you can! Does that hurt a bit?
Or lets say you are a seller. You interview an agent and explain that although you want to list your home for $200,000 you are willing to go as low as $190,000 to sell it fast. However, you hire a different agent to list your home. A potential buyer comes along and loves your home and is ready to put in a full price offer! But wait… his agent is the agent you first interviewed. Of course his agancy is with the one whom hired him, the buyer. So he informs the buyer that you are motivated to sell and would sell for $10,000 less for a quick sale. The offer now reflects a lower offer. Ouch!
The bottom line is that when you begin to speak to a Realtor or real estate agent, you should not tell them anything that could come back to bite you unless you have hired them. Once they are hired, you have bought their confidentaility and dedication. But until then, be careful what you say!
ONE IMPORTANT NOTE: North Carolina State Law REQUIRES all real estate agents and Realtors to explain “Agency” right up front before you discuss anything. If you begin to talk with an agent and they do not discuss the concept of “agency” do not hire this agent. Should you be worried? The NC Real Estate Commission is sending out decoys to catch the agents that do not share this. The latest numbers I heard was that as little as only 20% of Charlotte area agents actually take the time to explain “agency.” Not only is it against the law to not explain it, but it also shows that this agent is not looking out for you at all!
Buying or selling real estate in the Charlotte area? Having the advice and expertise of the right Realtor can make all the difference. Let us connect you to just the right real estate agent for your needs. Find a Realtor in Charlotte NC
Related Articles
Posted in Buying a Home, Selling a Home
