SELLING A HOME IN ILLINOIS--

 WHAT YOU SHOULD KNOW ABOUT "AGENCY"

THE CLIENT/AGENT RELATIONSHIP

The relationships between real estate brokers and buyers and sellers are governed by the LAW OF AGENCY.  This body of law is hundreds of years old and governs the operations of all real estate companies in this state.  If you have any questions about how this law might be applied to your particular circumstances, you should consult an attorney with experience in real estate transactions.

The principal or client of an agent (buyer or seller) is owed FIDUCIARY DUTIES according to the law of agency.  As a fiduciary, an agent is obligated to place the client's interests above all others, including his own.  The specific fiduciary duties that agents owe to their clients include loyalty, obedience, maintenance of confidentiality, full disclosure of relevant information, reasonable care and diligence, and protection of the client's assets that are in the agent's custody.  In this area the listing agreement is the document that creates the client/agency relationship between a seller and his real estate agent. 

For years, "subagency" was the standard practice in Illinois and most other states.  This meant that when a seller listed his home for sale, he was hiring a company to represent him, and he was also authorizing his agent to "subcontract" with virtually all other companies (cooperating brokers in the MLS) to help sell his home.  So even though a buyer was looking at his home with an agent other than his listing agent, that agent working with the buyer was actually a subagent of the seller and (theoretically) owed the seller the above duties.

In 1995, a law passed in Illinois that virtually eliminated sub-agency.  It can now be presumed by both the seller and buyer that the agent who is showing a potential buyer homes is, in fact, the agent of the buyer, and is not an agent or subagent of the seller.  The buyer is the client of the selling agent just as the seller is the client of his listing agent.  In other words, both the buyer and seller in the typical transaction now have an agent "on their side". 

WHAT IF THE BUYER AND SELLER ARE BOTH CLIENTS OF THE SAME COMPANY?

When real estate brokers and agents in the same firm agree to represent, as clients, both sellers and buyers, it is inevitable that buyer-clients of the firm may want to buy property owned by seller-clients of the same firm.  The chances of this happening increase when the real estate firm is a large one like CENTURY 21 Kreuser and Seiler, Ltd. with many buyer and seller clients at any given time.

The Illinois law has minimized this potential problem by allowing for "designated agency".  A real estate company designates a specific agent of the firm to represent the buyer and another agent of the firm to represent the seller.  When dealing with each other on behalf of their buyer and seller clients, the firm's agents will treat each other "at arms length" and only discuss or share information with the other agent that would be in the interests of their respective clients. 
 
A potential for conflict could still arise in the event a buyer wishes to purchase a home that is listed by his same designated agent (A buyer represented by Mary Smith wants to see one of Mary Smith's own listings).  The law of agency, as a general rule, restricts an agent from representing, at the same time, two principals or clients who have "adverse" interests. (While a buyer and a seller both have a mutual interest in successfully completing a transaction, they necessarily want to complete it on different terms – typically, the seller wants to receive the highest price and the buyer wants to pay the lowest price!)

DUAL AGENCY -- NOT IN YOUR BEST INTERESTS 

Agents who at the same time represent two clients who have adverse interests are called DUAL AGENTS.  Dual agency is permitted by law in Illinois only if both buyer and seller are aware of the agent's conflict of interest, understand the possible consequences of it, and expressly agree that the agent may continue to act as dual agent.  The policy of CENTURY 21 Kreuser and Seiler, however, is to NOT practice dual agency, but to recommend that each party to a transaction be represented by his or her own agent. (Most people familiar with the concept feel that the only party to benefit from dual agency is the dual agent!)

Therefore, if a CENTURY 21 Kreuser and Seiler buyer-client wishes to see or purchase a home listed by his or her own designated agent, the buyer-client will be asked to be represented by a different Century 21 Kreuser and Seiler agent.  This substitute agent will now represent the buyer in this transaction and act only in the buyer's interest. The seller will continue to be represented by his same designated agent, but that agent will not be able to disclose anything to the seller that may have been disclosed in confidence by the buyer.  (Prior to this circumstance arising, both the seller and buyer will be notified and asked to consent to this procedure.)  The bottom line is: AT NO TIME WILL YOUR CENTURY 21 Kreuser and Seiler DESIGNATED AGENT ACT AS A DUAL AGENT, REPRESENTING BOTH A BUYER AND SELLER IN THE SAME TRANSACTION.

WHAT DOES ALL THIS MEAN TO SELLERS?

The changes to the Illinois law pertaining to agency have served to clarify “who is representing whom” in a real estate transaction.  As a seller, your listing agent still represents you just as in the past.  Perhaps the biggest difference is that the agent showing your home to the buyer is now working in the best interests of the buyer, regardless of the company with which that agent is affiliated. 

While this should not be of any great concern to you, it is best for you to rely on and communicate with your listing agent (and not the agent showing your home). This is particularly important should questions arise during showings and offer presentations. It is possible that something you say may not be in your best interests in future negotiations.

WHO TO CONTACT FOR MORE INFORMATION:

Your real estate attorney is a good source of advice on any real estate matter.  On any transaction involving Century 21 Kreuser and Seiler, Ltd. or for general information about agency, the real estate market, buying procedures, or any other matter pertaining to your relocation, feel free to contact the agent who provided you this information, or anyone you know at our office including Co-owners Tom Kreuser and M.J. Seiler.

*Agency law, as it pertains to real estate transactions, differs substantially from state to state.