What does it really mean? Agency is an important concept. Every buyer and seller should understand it. I will also explain why it is important for a buyer to get his or her own buyer agent.
We use the term agency in real estate to determine the legal responsibilities of a real estate agent towards you and the other party in the transaction.
A real estate agent is not simply a sales person, He or she has much greater responsibilities being a licensee and a realtor.
A realtor has a fiduciary duty towards his client.
That means taking utmost care, integrity, honesty, loyalty to the client. It is the Highest duty.. Putting a client’s best interest before the agent’s own interests. Also keeping a client’s information confidential.
The buyer’s agent is hired by the buyer and has fiduciary duty to the buyer.
That means it is his responsibility to get the best price and terms for the buyer, even though the compensation is paid by the seller.
A listing agent or seller’s agent is hired by seller and has a fiduciary duty towards the seller. That means his responsibility to get the best price and terms for the seller and look in his best interest.
Sometimes an agent acts as a dual agent.
This means he is representing both buyer and seller. This normally happens in a situation where buyer goes directly to the seller’s agent and asks the seller’s agent to represent him.
This is also called double ending the deal i.e. seller’s agent double ended the deal. It is perfectly legal in California, as long as the dual agency is disclosed by the agent to both the clients.
It can also lead to a conflict of interest.
Now the agent representing the buyer & seller is a dual agent. He has fiduciary duty towards both the seller and the buyer. Which is not an easy task, He cannot reveal confidential info of one side to another. So he cannot effectively negotiate for either seller or the buyer.
A dedicated buyer agent has the fiduciary duty and loyalty to the buyer only.
So he is able to protect his buyer’s best interest during the transaction without any conflict of interest.
I always recommend to my clients to get a dedicated buyer agent who can act in their best interest and negotiate on their behalf.