If you’re going into the home purchase process well armed with information, you already know how important it is to use your own real estate agent and not the seller’s.
If this is news to you, read on.
Real estate agents owe their clients what is known as a “fiduciary duty.” Although it sounds like legal jargon, it simply means that the agent is obligated to act in the best interests of his or her client.
What are these interests? At their most basic, the seller’s interest is to sell the home for the most money possible while the buyer is interested in purchasing the home for the least amount of money possible.
Of course, both parties have ancillary interests such as the protection of their privacy. The fact is, a seller’s interests and a buyer’s interests are completely different and, in fact, conflict with one another.
Let’s take a look at some of the specific interests that a real estate agent’s fiduciary duty includes.
Above and beyond the homeowner’s disclosures, the real estate agent must disclose all information he or she has that is relevant to the principal’s interests. This includes any facts the agent may have about the value or desirability of the home and any knowledge about the other party that may affect negotiations.
An example of the duty to disclose is the seller’s agent that finds out, somehow, that the buyer is willing to pay more than what he originally offers. Since the agent has a fiduciary duty to the seller, she must disclose this fact.
Suppose the buyer’s agent knows that the seller is going through a divorce and is highly motivated to sell the home quickly. This is valuable information for his client and must be disclosed.
Hand in hand with disclosing the opposing party’s secrets comes a duty to protect those of the principal. If the seller’s client is motivated to sell the home because of a job transfer, yet wants this information kept from the buyer, his agent has a duty to keep the information confidential.
Real estate agents are obligated to obey all client instructions, as long as these instructions are legal. The seller’s agent is obligated to follow the instructions of only the seller and the buyer’s agent is obligated only to the buyer.
The duty of loyalty demands that the real estate agent act solely in the best interests of the principal to the exclusion of all other interests, including his or her own. In layperson’s terms, loyalty means that the seller’s agent must do everything he or she can to gain an advantage for the seller. The same applies to the buyer’s agent and the buyer.
While the above doesn’t include all fiduciary duties of a real estate agent, it includes those most important to the consumer.
As you can see, the seller and the buyer have competing interests, creating competing duties for their agents. This is why, even though in many states it is legal for an agent to represent both parties in the transaction (known as dual agency), it is not wise for the agent or the consumer.
There is no shortage of real estate agents in this country. Furthermore, the seller pays the buyer’s agent’s fees, so there is no reason not to have your own real estate agent.
Search for appropriate homes – If you’ve told your agent you want three bedrooms and two bathrooms and she keeps showing you homes with 1 bathroom, your agent isn’t paying attention to your needs.
Help determine value – Your agent should compile a comparative market analysis for any home on which you would like to make an offer. This helps you determine if the list price is appropriate and how much money to offer for the home.
Disclosure – Aside from the agent’s fiduciary duty to disclose what he knows about the other party, he also has a duty to disclose any property defects that he has observed.
Purchase agreement – Your agent should explain to you the entire purchase agreement before asking you to sign it. The agreement should be constructed in a manner that protects your interests and meets your needs.
Counter offer – Should the seller counter your offer or you need to amend the purchase agreement to request repairs, your agent should fully explain the process and advise you to seek legal counsel, if appropriate, to ensure your protection.
Acceptance – Once your offer is accepted your agent should offer advice about obtaining a home inspection and other inspections that may be specific to the region, remain in contact with the title company and the lender to ensure that all time limits are met, and attend the closing with you.
Real estate agents who are members of the National Association of Realtors® (NAR) are the only agents allowed to call themselves Realtors®. NAR has its own set of ethics that Realtors® swear to uphold in addition to their statutory fiduciary duties.