Education for Buyers

The Role of the Realtor -- What You Should Know About Brokerage Relationships

Client or Customer?

When dealing with a Realtor in a real estate transaction, you are usually either a client or customer. A client is someone who has formed a brokerage relationship with a Realtor, usually by signing a contract and the Realtor is their agent. Customers are parties who do not have a brokerage relationship with the Realtor.

A Realtor you choose as your agent will fully represent your best interests. Among the standard duties a Realtor owes a client are:

• Perform the terms of the brokerage agreement.
• Promote the client's best interest by seeking a transaction acceptable to the client.
• Provide financial accounting.
• Disclose known material facts about the property or the transaction.
• Exercise ordinary care.
• Maintain client confidentiality, unless the information is required by law to be disclosed.

• Treat all parties honestly and not knowingly give false information.
• Inform all customers and potential customers of the nature of their brokerage relationship.
• Disclose material adverse facts pertaining to the physical condition of the property of which the Realtor is actually aware.
• Comply with the law, including the Fair Housing Act.

Standard Seller Representation

If you are selling property or offering if for lease, and sign a listing agreement with a Realtor, then the Realtor and his/her brokerage firm become your agent and you are their client. Salespersons for other companies who are cooperating with the listing company and showing it to prospective buyers or tenants may also be your agents.

If you are a prospective buyer or tenant who is dealing with a Realtor who represents the seller or landlord, remember that you may not be a client of that Realtor, but may be the Realtor's customer.

A seller's representative can still provide valuable services to customers - showing the property, preparing and presenting any offers and counteroffers, comparing financing alternatives, and disclosing known adverse material facts about the condition of the property. All agents in a transaction must be truthful with all parties, but the seller representative's highest duty is to the client.

Standard Buyer Representation

Prospective buyers and tenants have realized that it's often beneficial to have a Realtor of their own representing them in a transaction. They do this by forming their own brokerage relationship, usually by written agreement, with a Realtor who becomes their agent and owes them the duties of a standard agent.

A seller dealing with a buyer's agent should remember that in this relationship, the Realtor is working for the buyer. In many cases, the listing agent will share the commission with the buyer's representative, but that doesn't diminish the buyer representative's obligation to the buyer.

Overlapping Brokerage Relationships

The increasing popularity of buyer representation has increased the number of transactions where a Realtor might have overlapping brokerage relationships.

For example, a buyer client of a real estate company wants to buy one of that company's listings. Even if different Realtors are working with the different clients, their dual loyalties are created through their company, which has legal and contractual obligations to both clients.

OPTION 1: STANDARD DUAL REPRESENTATION

Virginia law allows a real estate firm or salesperson to represent both sides of a real estate transaction as long as all the parties agree. Because the company has a legal obligation to represent both parties and may know confidential information about one party of value to the other party, there are limits on what the company or salesperson may do in dual representation cases.

The company/salesperson must not disclose information that is confidential or would create a negotiation advantage for either client. In effect, dual representation limits the Realtor to a neutral role.

OPTION 2: DESIGNATED DUAL REPRESENTATION

If all the parties agree, a real estate company can designate one of its Realtors to represent the seller and a second Realtor to represent the buyer in the same transaction. A supervising broker in the company will oversee the transaction. He/she will need to maintain the confidentiality of any client information which could be of value in negotiations. The two designated representatives must not share confidential information with each other. They will be thinking first of their client's needs and wishes.

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