Do You Want Someone Loyal to You?
Or Someone Loyal to the Transaction and Its Commission Check?
In my last post, Your 4 Choices When You Pick a Real Estate Salesperson to Represent You, I explained that you can be represented in Alabama by a Real Estate Salesperson as:
- Transaction Brokerage
- Single Agency
- Sub Agency
- Limited Consent Dual Agency
Today I want to explore Transaction Brokerage and Single Agency further.
“Real Estate Agent” is a term commonly applied to a person who sells real estate. The fact the term contains the word Agent can be confusing because in Alabama the salesperson can be acting as a Transaction Broker or a Single Agent.
In the simplest manner of speaking a Single Agent represents YOU! A Transaction Broker doesn’t, because the Transaction Broker represents the transaction not the person.
The state of Alabama states that it is most important for you to know if you are a customer (Transaction Broker) or a client (Single Agent). Why? Well because Alabama is a caveat emptor state. And, unless you are extremely experienced buying and selling property in Alabama the State thinks you need to know that an agency relationship is available to you. But, only if you sign a document creating the agency. If you don’t, your relationship with the real estate salesperson is a Transaction Brokerage relationship.
Transaction Broker Duties
A real estate salesperson acting as a Transaction Broker must provide brokerage services to all parties honestly and in good faith and avoid showing favoritism to either buyer or seller. They must exercise reasonable care and skill when providing services, answer all questions completely and accurately, and present all written purchase offers to sellers promptly and in a truthful manner. They must also keep confidential any information given to them in confidence, unless disclosure of this information is required by law. For sellers, this means that they must answer a buyer’s questions about the condition of the property completely and honestly. In addition, the buyer must be told about any hidden defects known to the salesperson that would affect the health and safety of occupants.
The Transaction Broker’s basic function is to bring buyers and sellers together so that a real estate sale can be completed.
He can help a seller market their real estate by identifying qualified buyers and showing their properties to prospective purchasers. Sellers will commonly also rely on the expertise, experience, and advice of the licensed salesperson to make their property ready for sale and determine an appropriate asking price.
He can find and show suitable real estate to buyers that they can afford and have the desired characteristics. He can also help consumers obtain mortgage financing as well as assist them with finalizing the real estate sale.
His job is to act as an intermediary between buyers and sellers. He represents the transaction not the people. He is prohibited from acting as if an agency relationship exists.
Single Agency Duties
A Single Agent is a person who acts for or represents you in negotiations with others. The client or principal is the person the Single Agent represents. The salesperson when acting as a Single Agent must loyally represent the best interest of the client by placing the interests of the client ahead of the interests of any other party. In a real estate transaction, when a salesperson is employed as a Single Agent, the salesperson is obligated to negotiate the best price and terms for his client.
What Does This Mean To Me?
A Single Agent must disclose to the client all information known by the salesperson that is material to the transaction and not discoverable by the client through reasonable investigation and observation. The Single Agent has no affirmative duty to discover the information.
A Transaction Broker can only answer questions asked directly. He cannot give his unsolicited opinion. He cannot report observations he has made. He cannot provide information not requested directly.
It is my opinion that every person buying and selling in Alabama needs a single agency relationship with their salesperson because caveat emptor (buyer beware) is the law in Alabama.
Example #1: You are a buyer being shown a property by a salesperson. In April 2014, on the night of the 18” rain in Baldwin County, the home you are looking at was flooded. Your salesperson has personal knowledge it flooded. If your relationship with the salesperson is Transaction Broker, the salesperson is forbidden from disclosing this information to you unless you ask him that specific question. If you have an agency relationship, the salesperson is obligated to share this information.
Example #2: You are a buyer being shown a property by a salesperson. As you are touring the home, your salesperson notices evidence of water leakage from the roof which you do not see. If your relationship with the salesperson is Transaction Broker, the salesperson is forbidden from disclosing this information to you unless you ask him a specific question. If you have an agency relationship, the salesperson is obligated to share this information.
Example #3: You are a buyer being shown a property by a salesperson. You and your spouse decide is this THE home for you. You are moving to Baldwin County from an area where home prices are much higher, e.g.California. The price seems fair to you. Your salesperson knows that the home is overpriced compared to recent sales of comparable properties. If your relationship with the salesperson is Transaction Broker, the salesperson is forbidden from disclosing this information to you unless you ask him a specific question. If you have an agency relationship, the salesperson is obligated to share this information.
Example #4: There is an area on West Beach in Gulf Shores where hurricanes Frederick and Ivan cut a pass between Little Lagoon and the Gulf. It will probably do it again the next time there is a direct hit by a big hurricane. You are a buyer being shown a property by a salesperson. Your salesperson knows about the history of the cut. If your relationship with the salesperson is Transaction Broker, the salesperson is forbidden from disclosing this information to you unless you ask him a specific question. If you have an agency relationship, the salesperson is obligated to share this information.
Do you begin to see the pattern? A Transaction Broker cannot tell you anything. A Single Agent must tell you everything they know. And under caveat emptor where you need all the help you can get, YOU NEED AN AGENCY RELATIONSHIP.
And to add insult to injury, any salesperson showing a buyer property as a Transaction Broker owes the SELLER his loyalty by law.
If you are a buyer, you simply MUST demand a Buyer Agency relationship with your salesperson.
Okay, I get it buyers need a single agency relationship with a salesperson. How about sellers?
How about this one? A seller’s Single Agent is required to try to get the most money for a seller. A Transaction Broker is not! Who do you want selling your home?
Signing An Agency Agreement
So, will you be asked to sign an agency agreement? Probably not. Why? Because upwards of 70% of all salespersons prefer to work as a Transaction Broker.
Why? Because they believe that it will limit their personal liability. They will follow the Alabama law and tell you about the forms of representation you can have before the sale is finalized and ask you to sign the disclosure form. And then most will run away from the agency form of representation as fast as they can by not actually offering you an agency agreement to sign.
And remember, until you sign an agency agreement you are being represented by a transaction broker. You must ASK for single agency representation if your salesperson does not offer it to you.
Single Agency doesn’t cost you extra. The price for representation as a broker transaction or as a single agency is the same. Demand the highest level of representation that you can receive. You are already paying for it.
I know that everyone who reads this blog post isn’t my client or isn’t buying property in Baldwin County. If the salesperson you are talking to won’t represent you as a Single Agent, I will. Or if you’re buying or selling out of Baldwin County and they won’t, I will find you a qualified salesperson that will.
Finally, I know that there are salespersons that only represent customers as Transaction Brokers who do, in fact, go well beyond what is permitted for a transaction broker to tell their customers about the property without being asked. Are they subject to being corrected by the Alabama Real Estate Commission for breaking the rule? Yes.
But that’s not the point. If they won’t follow the law in this area, are they following it in all of the other areas that do affect your transaction? If they tell you a little, are they telling you everything they know? Are they sharing only the good stuff?
Do you want someone loyal to the transaction and its subsequent commission check? Or, loyal to you? The choice is yours.
And my recommendation to you is to accept only a single agency relationship and its loyalty to you.
[This post originally appeared in TomBallSells.com on 9/2/2017]
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