All Home Buyers and Sellers Should Know About 'Agency Law'

30 April 2016   Lora Lopas
Question: How can I avoid the"sharks" in real estate? Answer: Agency! There is a law in Arizona called "Agency Law"

I talk about this with newly licensed agents, but the consumers should be asking!!!! Sadly, until you are signing on the dotted line to list your home or a buy a home, the word "agency"usually never comes up.

What is Agency?

Agency refers to the relationship between the real estate Broker (which is the agent for the broker too) an his/her client. This is a fiduciary relationship...meaning there are Fiduciary Duties that go along with the Broker/Client relationship. The duties are:

1-Obedience: As an agent of the client, the client's instructions must be obeyed-provided they are not illegal instructions and in accordance with the contract.

2-Loyalty: As an agent of the client, you must be loyal and keep their best interests ahead of those of any other party, including yourself (meaning, the client's interest come before your commission!)

3-Disclosure: Anything material to the sale of the property must be disclosed, however anything of personal nature would not be disclosed-meaning if a seller tells their agent they had mold and they were not going to tell the buyer, the AGENT must now disclosure the condition of mold (after having a serious talk with their seller about how lawsuits happen and NOT disclosing something up front is like walking through a mine field!). But if your seller is selling due to say, divorce, that does not need to be disclosed to a buyer, and in fact should NOT be disclosed because it could encourage a buyer to assume distress and make a lower offer. Basically, this is common sense folks!

4-Confidentiality: the agent may not disclose anything learned in the transaction about the client their business, their personal affairs and motivations (unless client says it is ok, preferably in writing) and this goes for EVER...lasts forever, not just during the transaction (unless a court action relieves the agent of this duty).

5-Accountability: Accounting for all documents and funds in the transaction (no co-mingling of funds).

6-Reasonable Care: The agent should be the Source for the Source...an agent has knowledge yes, that is why they were hired to represent the client, BUT, if the agent is not knowledgeable of an answer to a client question, they should not "make up" an answer, but it would be "reasonable care" to refer that client to an expert (a trust attorney, financial planner, contractor, etc).

So, what is "Dual Agency" then?

In Arizona, it is legal for one agent (or one broker/brokerage) to represent BOTH the buyer and seller, provided there is prior mutual consent, in writing. Personally, this is not a favorite allowed rule of mine, because unless I know both parties VERY well and I know they both are the independent types who do not need a lot of my input and advise, I feel I cannot possibly represent both buyer and seller fairly. I know a LOT of other agents out there will highly disagree with me, but again, this is MY opinion and how I do business. This is how I look at it: Would you hire the same attorney if you and your spouse were getting a divorce? NOPE! So, why hire the same agent on both sides? Often a Buyer thinks they are getting a better deal if they go through the listing agent with the assumption that the agent is working for the seller for a reduced commission. However, rarely does a Seller pass on that savings to a Buyer! A Buyer's Agent is representing a Buyer in their best interests and trying to get them the best deal possible while a Seller's Agent is representing a Seller in their best interests and trying to get THEM the best deal possible. So, yes, personally I have an issue with Dual Agency law in Arizona and I have only practiced this a few times, and only when I knew both parties and their backgrounds very well.

Now, having said that, there is a an exception to my rule....I may have a listing and represent a seller, and another agent in my office may bring in a buyer. I do NOT discuss anything personal about my clients to anyone, so my co-workers do not have any "insider" knowledge, but the Arizona Law assumes that every agent in my office knows what I know! So it is still dual agency if both buyer and seller are represented by the same broker (yes, I think it is silly too). So in-house Dual Agency is very different that a single-agent dual agency, however viewed the same by Arizona Law.

Now what about a Buyer's Agency, and how to get a layer of protection for a Buyer?

That can easily be covered in what in Arizona is referred to as a "Buyer Broker Employment Agreement". This protects the buyer and the agent, that both sides will be truthful and loyal to each other. Do you hire an attorney without a retainer? NOPE! Do you schedule a surgery without your insurance giving pre-approval? NOPE! Do you leave the Dentist without paying in full? NOPE! So why would you ask your real estate agent to drive all over the county, spend all their time and gas on you, much less all the calls, emails, mailings and whatever else they did, and then not feel obligated to reimburse them? Real Estate is a different business as we agents do all this in the hopes of getting paid one day when you buy or sell and the transaction closes. Pretty crazy, huh? Would you do all this work for someone with no compensation or reimbursement on the hopes that something happens, some day? I bet not. So the least you can do to keep it professional is sign a Buyer Broker Employment Agreement.

So have a discussion with your favorite real estate agent, and make sure YOU are being represented to the level you need and want!

Lora Lopas, REALTOR ®Take the First Step! Let's Talk-No Pressure!Digital Business Card: http://www.visualshows.com/user/show_user_card.php?uid=30526 West USA Realty of Prescott
928-710-9505 (voice or text) www.LoraSellsPrescott.com This email address is being protected from spambots. You need JavaScript enabled to view it.