Representation in Real Estate

Representation in my opinion is one of the most misunderstood aspects in real estate.  I am linking the actual document agents are required to discuss early on with potential clients, but let me try to summarize this in a way that makes the most sense: 1) unless you have signed a listing contract or buyer representation agreement, you technically do not have representation.  2) if you call off a for sale sign or other advertisement, the person who speaks to you from the company called represents the seller (agents cannot advertise property they do not have listed).  Further, any agent who is licensed to the broker (name on the sign), represents the seller.  At this point, you are considered a customer and need to be treated fairly and with honesty.   Most of the time, the agent will answer a few questions about the property you called on, then ask a few more questions about what you are looking for, how much you want to spend, etc. and that begins the whole process.  At that point, the agent should stop and explain representation.  This is where the complexity comes in, but until you have a clear understanding of who is representing you, keep your price, terms and motivations to yourself.

Here is how it works: 1) sellers or buyers under contract are called principals. 2) the real estate company that wrote the contract is considered the agent. 3) now a fiduciary relationship is created.  4) this means the agent owes you loyalty, confidentiality, disclosure, obedience, reasonable care and accounting.  This means every agent who works for the company who wrote the contract owes these duties to the principal, not just the listing agent.  That means that they cannot represent both sides of the transaction without permission from both the seller and buyer.  And they can never, ever, discuss price, terms or motivation of principals without written permission.  This confidentiality rule never expires, even after the contract expires.  When both the seller and buyer agree to be represented by one company, a dual agency is created.  At  that point, the company needs to take a nuetral postion in the transaction.

It is a bit of an oxymoron that a listing company can sell a property.   They can, but they  cannot say anything that is really going to benefit the buyer's position because that would most likely violate the fiduciary relationship.  It is like the labor union representative trying to negotiate the best deal for the company.  I am of the opinion there should be companies that represent sellers and companies that represent buyers with no exceptions.  Buyers want the best property at the lowest price and sellers want the highest price as quickly as possible.  Just be careful what you say until you are protected by a fiduciary relationship.

MN Agency Disclosure Form