Types of Agency in a Real Estate Transaction
For this week’s Real Estate Tip of the Week, let’s talk about the different types of agency and what each means. It is a topic that should be discussed earlier in the home buying/selling process so I believe it is a good thing to know as a prospective home buyer and seller. The word agency is used in real estate to determine what legal responsibilities a real estate professional owes a specific party in a transaction. The three types of agency are single agency, designated agency, and dual agency. Here's an explanation of each!
This type of agency is when an agent/licensee represents one side of the party so either the buyer or the seller but not both. This is the most common type of agency. An example of this would be an agent from Long & Foster representing a buyer and an agent from Keller Williams representing the seller. Both agents have fiduciary responsibilities to their client.
This type of agency is when two agents from the same real estate brokerage (i.e. Long & Foster) represent both the buyer and seller in the transaction. Since there are several large real estate brokerages in Northern Virginia like Long & Foster, Keller Williams, Weichert, etc.., it is very common for this to happen. For designated agency to take place, both parties have to give written consent. It is highly advised that as a buyer/seller, you agree to designated agency because if you didn’t, you would eliminate all potential clients/houses that are represented by the same brokerage as your agent. Meaning if I represented you as a buyer and you did not agree to a designated agency, you would not be able to purchase any home represented by another Long & Foster agent. It is also important to note that if designated agency occurs, each agent must not disclose any confidential information to the other party throughout the transaction.
This type of agency is when one real estate agent represents both the buyer and seller in the transaction. As an agent, you have a fiduciary responsibility to your client to act at all times on behalf of their best interests. However, when representing both parties in the same transaction, the agent is pretty much limited in his ability to represent either the buyer or seller fully and exclusively. The agent must protect the confidentiality of any information obtained, unless disclosure of such information is required by law. For example, the agent cannot tell the buyer that the seller will accept a price lower than the listing price, nor tell the seller that the buyer will pay a price higher than the price offered. Therefore, dual agency is not really recommended unless both parties can come to an equal agreement. For dual agency to take place, both parties have to give written consent.
There you have it! Now you should be able to properly understand the different types of agency in a real estate transaction. Check out my other Real Estate Tips to learn more useful and applicable real estate knowledge!