Law Offices of
Dorfman and
Sitzberger

How to choose a real estate agent?

What are your real estate agent’s obligations to you?

How do they change depending on the agent’s category?

Understanding your relationship to the real estate professional who is representing you is critical to the success of your sale or purchase.

You want your agent to be not only honest but also to be an excellent negotiator who will get you the best “bottom line” possible.

The agent’s qualifications are influenced not just by the law and their license, but also their experience, their training, and their moral judgment.

Your Choices when Choosing a Real Estate Agent:

The most common choice is an agent working under the supervision of an employing Real Estate Broker. Both the agent and his/her broker being licensed by the California Bureau of Real Estate (BRE).

Such an agent working under a broker’s supervision is legally an ‘agent’ of that broker and must abide by the legal obligations and restraints that apply to that broker.  So the first consideration when choosing a real estate agent to represent you in a sale or purchase is who the employing broker is and what that broker’s relationship will be to you.

Broker Obligations to clients.

  • The Bureau of Real Estate (BRE) states that: “A Real Estate Broker or Agent owes the highest duty of good faith, honesty and fair dealing to their client.”
  • What that means in your particular case varies. It depends on your written contract, and the type of property under consideration to name two variables.

SCENARIOS:

Scenario One:  You are listing your home for sale. You want to realize the best price and terms and want your agent to be a good negotiator.

Several real estate agents are under consideration.

  • Cindy is an independent, licensed broker with her own brokerage.
    • She has a good track record with no disciplinary license entries.
    • She sometimes acts as a “Dual Agent,” that is, represents both you and the buyer of your property.
    • She sometimes just acts as “Seller’s Agent” when an offer is made by a broker other than herself.
  • Charlene is a real estate agent working for a well-known franchised brokerage like Coldwell-Banker.
  • Ted is a licensed broker who states he does not represent buyers at all. He is an “Exclusive Seller’s Broker.”

What should you consider as key features of each of these potential relationships in selling your home?

You have determined they are all equal in experience and reputation. Also, they all have the same obligation defined by the BRE and will owe you “Fiduciary Duty.”

Here are possible sales-offer scenarios for each of the above agents.  (You have a special motivation to get a quick sale, an employment change, that you don’t want to reveal to a buyer because it would weaken your negotiating ability.)

  • Possibility One: you choose Cindy and receive an offer.
    • If the offer is from a client of another agent or broker Cindy is not obligated to reveal any of your weaknesses and would be remiss if she did so without your permission.
    • If the offer is from a buyer who Cindy contacted herself. She is a “Dual Agent” representing both you and the buyer and you must agree in writing to allow her to act as a Dual Agent. The law is very rigorous on this point which is expressed well by: “Dual Agency and Real Estate Brokers – The Needs for Full Disclosure.”
      • When you agree to such dual agency, you are relinquishing a negotiating strength.
        • If you rely on a broker to guide you and also agree to their acting as dual agent, you are expecting an illogical relationship. Dual agency will eliminate much of the advantage that you gain by having broker representation.
      • Agreeing to have a dual agent represent you in a sale is something you should consider very carefully.
  • Possibility Two: you choose Charlene as the lister and receive an offer. Your circumstances are the same as the Cindy scenario above.
    • Since Charlene is working under a supervising broker, her broker is responsible for her conduct.  and since her broker is a dual agent who is the listing broker and the buyer’s representative, your exposure to conflict of interest is the same as it is with Cindy. You must give up some of your negotiating leverage with a written agreement to allow Charlene to act as a dual agent (the agreement is nominally with Charlene’s supervising broker).
  • Possibility Three: you choose Ted to represent you. He does not represent buyers in any transaction and commits to that in the listing contract.
    • If the offer comes from any source and you have listed with Ted—effectively a brokerage that does not ever represent buyers—your negotiating information should be safe from disclosure to the buyer.
    • Ted will normally agree to pay the buyer’s agent or broker a percentage of the fee you have agreed to in your listing agreement, but this will not affect his obligation to keep your information confidential.

A video on the subject that illustrates the confusing complexity of this agency relationship is at https://youtu.be/jFchMcyNm60.

If you are a seller and find that this post has raised questions, please contact us at Law Offices of Dorfman and Sitzberger, for a consultation on your set of circumstances.

Scenario Two:  You are a buyer. You want to realize the best price and terms when you purchase and want your agent to be a good negotiator.  You want someone who will not reveal any of your negotiating weaknesses to the seller.

  • Possibility One: You meet Cindy as she is holding an open house on one of her listings.
    • You consider her to represent you in making an offer on her listing.
      • You reason that since she is the lister, she will provide you with more information on the seller’s circumstances than any non-lister of the property, however…
      • You must agree to dual agency and thus relinquish your right to total confidentiality concerning your negotiating weaknesses.
  • Possibility Two: You meet Charlene.
    • You consider her to represent you in your search.  She tells you that under her supervising broker, she is a “Buyer’s Only” agent and only works with buyers.
      • However, since her broker takes listings, she has the same obligations to any seller who has hired Charlene’s broker as their listing broker.
  • Possibility Three: You meet Fred, (a fourth category of agent) who explains that he is an “Exclusive Buyers Agent” and neither he nor his supervising broker ever take listings.
    • Ted is under no obligation to reveal any of your confidential circumstances to any seller or seller’s agent.
    • He will have no incentive to show listings from any particular broker.
    • He will expect you to accept an agreement that you are responsible for his commission in case of a sale.
    • He will explain that in negotiating on your behalf he will often receive the customary commission split from a seller’s broker which he will deduct from your commission obligation.

 

Contact Us Now to Schedule a Meeting

11750 Ridge Road

Nevada City, CA 95959

Debra Sitzberger (530) 349-4790

Neil Dorfman (530) 559-6881

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