The term “sole agency” in real estate means that the agent or broker will represent the interests of either the seller or the buyer. They may work as a seller’s agent or as a buyer’s agent, but not both at the same time. The agent will sit on only one side of the transaction. Sole agency is the most common form of real estate representation. This agent serves exclusively you and your interests.
Aspects of Sole Agency
The broker representing the buyer is prohibited from offering properties listed with their agency without the buyer’s explicit permission. If the buyer wishes to purchase a property listed with the agency they represent, and if the seller agrees, that means the broker’s agency represents both the buyer and the seller at the same time.
Note: Some specialized agencies operate as sole agents, serving exclusively as buyer’s agents in certain areas of the country where dual agency is not allowed. They do not work with sellers at all. On the other hand, there are other specialized agencies that work exclusively with sellers.
Agent’s Fiduciary Obligations
The agent owes fiduciary obligations to their client of loyalty and obedience in most types of agency relationships. You can expect the agent to put your interests before their own. You can expect them to provide services honestly and in good faith while avoiding conflicts of interest.
Real estate agents do not have a legal obligation to consider the best interests of their clients in some cases. Laws in 25 states allow brokers to provide services to both buyers and sellers as transaction brokers or facilitators. This allows them to operate without traditional fiduciary obligations of loyalty and obedience.
In the other 25 states, agents are legally required to:
- Deal honestly and fairly
- Show loyalty
- Honor confidentiality
- Obey the best interest of their client
- Always provide full disclosure
- Account for all funds
- Demonstrate skill, care, and diligence in the transaction
The agent must present all offers and counteroffers in a timely manner unless directed otherwise by the party in writing. They must disclose all known facts that materially affect the value of the residential property and are not easily observable.
Note: Fiduciary obligations are outlined in real estate licensing laws. Real estate agents are required to provide full disclosure of dual agency relationships. All parties involved must give full and explicit consent to the terms in order to comply with the law.
Transaction Broker Relationship
A transaction broker is the default role of the agent or broker. They do not represent the buyer or the seller. Instead, they act as a neutral intermediary to facilitate the home transaction between the parties. In this case, the broker represents the transaction. They act as a neutral party.
A transaction broker is bound to limited confidentiality towards both parties. This means that the transaction broker cannot tell the buyer that the seller will accept a lower price, or tell the seller that the buyer will offer a higher price, without the express permission of the party concerned.
Is Sole Agency the Right Choice?
While dual agency is not allowed in some parts of the country, you may live in a place that allows you to choose between sole agency and dual agency. Is sole agency the right choice for you?
Sole agency often provides better service for buyers and sellers. If you want to ensure that a real estate agent is working in your best interest, it is better to choose sole agency. The agent is required to work in the interests of both the buyer and the seller in a dual agency, which can be very challenging at the same time.
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Sources:
– Consumer Federation of America. “The Agency Mess: Home Buyer and Seller Confusion and Costs Related to Diverse and Poorly Enforced State Laws About the Role and Responsibility of Real Estate Agents,” Page 5.
–
National Association of Realtors. “Fiduciary Duties.”
Source: https://www.thebalancemoney.com/single-agency-1798630
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