Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or "buyer representation" agreement with a buyer, in most states thus creating under common law an agency relationship with fiduciary obligations. Some states also have statutes which define and control the nature of the representation. These are then clients of the broker.

Agency relationships in a residential real estate transaction involves the legal representation by a real estate broker (on behalf of a real estate company) of the principal, whether that person or persons is a buyer or a seller. The broker (and his/her licensed real estate agents) then becomes the agent of the principal who is the broker's client. In a non-agency situation (where no written agreement nor fiduciary relationship exists), a real estate broker (and his agents) works with a principal who is then known as the broker's customer. Examples of this would be when a buyer has not entered into a Buyer Agency agreement with the broker and buys a property where the broker is the sub-agent of the seller's broker; or where a seller chooses to work with a transaction broker.


Agency and Its High Value

Why do we not take a representative with us when we go to purchase a $50,000 vehicle? It's a major expense and must be paid for in the short term. I mean, how many of us are experts in car design, brake engineering, engine performance, vehicle financing, and so on? Yet, we think nothing of entering this process alone.

Some call Uncle Charlie (who used to sell cars) or Aunt Betty (who has worked in a car dealership) to go with them to the lot. Some utilize the Internet to find specifications and comparisons for different makes and models, mostly in an effort to find best dependability or lowest price. Still, the negotiating process, inspections, closing coordination, and so on can be a real bear!

This analogy is a little silly, but I see a number of folks that do not protect themselves with one of the biggest purchases in life – a home. Agency refers to the fiduciary, personal, legal responsibility of a real estate agent to protect your interests. When you sign a "Buyer's Representation Agreement" to make an agent into "Your Agent," you decide wisely to have somebody on your side to look out for your interests in the real estate process.

Many of us hesitate to commit to an agent in the buying process. I'm not sure why this is. We commit to dentists, doctors, mechanics, hair stylists, dog groomers, and so on. It seems that many believe that committing to a real estate agent will spell gloom, doom, and deception.

In real estate, the two main categories of sellers and buyers are: 1. Customers and 2. Clients. Customers are buyers and sellers that are given quality, ethical service by agents. Clients are buyers and sellers that are given quality, ethical, obedient, confidential service by agents. There's a big difference between the two. Agents in a client relationship with a buyer or seller owe a Fiduciary Responsibility to the client. The agent must work in your (and only your) interest. If I may, let me give you the rational for choosing to have "your own real estate agent".

1. Agency is a Fundamental Issue for Real Estate Agents – Agents that commit to taking you on as a client agree to hold your information in confidentiality, to follow your legal directions, to work diligently and constantly in your interest, and to keep you informed on the process. My clients seem to appreciate it when I tell them the negative aspects of a house from my view. It seems to build trust in that I'm not trying to "sell them a dream" for a crappy house. An agent that tells you only the good things about a house may not be demonstrating trustworthy behavior. When a real estate agent is "your agent," that agent is locked into working for you.

2. Having Someone in Your Corner – Many first-time buyers and new construction buyers are amazed by how much is involved in the process of buying a home. Our team enjoys teaching about the process, discussing upgrades and possibilities, coordinating tours of high-end homes for design ideas, etc. When an agent is "your agent," the relationship goes beyond completing paperwork or scheduling a showing. When the process gets complicated, you want to know that the agent advocating for you has your best interest at heart.

3. Working with Someone You Know – I would rather go to a dentist that I know and trust. It would be nice if I go to church with her/him, live in the same neighborhood with her/him, or belong to the same gym. I want to see what the person is like in real life. When you make an agent "your agent," you enter a deeper relationship that is more familiar, more comfortable, and more productive. Real estate customers get adequate, basic service. Real estate clients get first-class, preferential treatment.

4. Service after the Sale – Committing to someone encourages their commitment in return. Another person must believe that their investment in you will pay off in some way. It's true in business. It's true in relationships. Agents want to provide quality service to clients before, during, and after the process. Smart agents know that service after the sale produces repeat business and referral business. Choosing to commit to an agent may mean more overall service to you in the long run.

Before choosing to sign a "Buyer's Representation Agreement" or a "Listing Agreement" with an agent, interview the agent with criteria that are available if you email me at richard@richardbarbee.com or call me at (865) 388-1621 or (865) 693-3232. I will be happy to send you the criteria. Do not commit to an agent that tries to convince you that you must commit today, that all agents are the same, that he/she has secret knowledge which none other possesses, or that seems arrogant, disorganized, or disinterested.

You can feel good about choosing someone to represent your interests in real estate. If you have questions, please contact me. I want to become your trusted advisor in real estate.

Published December 8, 2010