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. The principal or client (buyer or
seller) is owed FIDUCIARY DUTIES by his or her agent. An agent is
obligated to place the client's interests above all others, including
his own. Specific fiduciary duties 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.
Prior to
1995, "sub agency" was the standard practice in Illinois and most other
states. When a potential buyer looked at homes with a real estate agent,
that agent was really hired by the listing agent of the seller and was,
therefore, a subagent of the seller (and not an agent of the buyer).
In
1995, a law was passed in Illinois* that eliminated sub-agency. Instead
it provided for “Designated Agency” wherein a real estate company
designates a specific agent of the firm to represent the buyer. In
instances where a buyer wanted to view another listing of the same
company, the company designated a different agent to represent the
seller. In this instance, when dealing with each other on behalf of
clients with adverse interests, the firm's agents must treat each other
"at arms length" and only discuss or share information with each other
that would be in the interests of their respective clients.
Therefore,
as a buyer, you can presume that the agent you are working with
represents you alone, unless there is a written notification otherwise.
You can count on your agent to put your interests first as he or she
identifies homes for you to purchase. In addition to searching for
available properties, your designated agent will help you acquire the
property best suited to you on terms and conditions as favorable to you
as possible.
A potential for conflict
arises when a buyer becomes interested in purchasing a home that is
listed by his same designated agent (A buyer represented by Mary Smith
wants to see one of Mary’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 (commonly known
as “dual agency”).
Dual Agency – Not in Your Best Interests!
Dual agency is permitted in Illinois, however, but only
if both clients are aware of the agent's conflict of interest,
understand the possible consequences of it, and expressly agree in
writing that the agent may continue to act as a dual agent. The policy
of CENTURY 21 Kreuser and Seiler, Ltd., 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 buyer represented by a CENTURY 21 Kreuser and Seiler agent wishes to purchase a home listed by the same agent, the buyer will be referred to a different CENTURY 21 Kreuser and Seiler agent,
who will now represent the buyer in this transaction and act only in
the buyer's interest. The buyer's previous designated agent will
continue to represent the seller, but will not disclose anything to the
seller that may have been previously 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 this: 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. He or she will be representing you
alone!
Buyer Representation Agreements – Best if in Writing!
At CENTURY 21 Kreuser and Seiler we
don't require you to sign a buyer representation agreement, but it is
strongly suggested that you do so. You and your agent will then know
exactly what to expect from each other. This agreement is similar to
the listing agreement used when selling a home. Our company’s standard
"Limited Exclusive Buyer Agency Agreement" is a single page form that
provides for (among other things):
(1) No
fee on your part! (We will show you those listed properties where the
seller or listing office has already agreed to compensate the buyer’s
agent).
(2) Cancellation by either party on one day's notice.
A Footnote About New Construction and REALTOR® Open Houses
Most builders in Lake County include REALTOR®
fees in their new construction prices. (We'll be happy to tell you if
we know otherwise.) Since the cost is the same, it is to your advantage
to have your designated agent represent you in any new construction
purchase. Otherwise you are dealing with a builder or developer who is
obviously looking out for his own interests as opposed to yours. Your CENTURY 21 Kreuser and Seiler agent
will objectively advise you on comparisons with other builders,
location within a subdivision, extras that may or may not add value to
your home, resale, and a number of other important factors.
To
protect your right to be represented by your agent, it is important
that you do not “register” or “sign in” should you visit any model home
or development without your designated agent.
This applies to REALTOR® Open Houses as well – Just provide the builder or agent hosting the open house one of your agent’s business cards.
* Agency law differs from state to state.