Realities of Real Estate: New rules on how agents represent buyers and sellers

Bob and Donna McWilliams and Donna McWilliamsContact ReporterCorrespondents

On August 28, 2016, we wrote a column called “Who represents who in a real estate transaction.” In that column, we noted that rules regarding how agents represent buyers and sellers is much more complicated than most people think.

Generally, the public thinks that there are two types of agents, those who work for sellers, commonly known as Listing Agents and agents who work for buyers, or Buyer’s Agents. As we pointed out in our column, it’s not quite that simple. In fact, there are (or were) five types of agents, Presumed Buyer’s Agent, Buyer’s Agent, Seller’s Agent, Cooperating Agent and Intra-Company Agent or Dual Agent.

Our column also alluded to an upcoming change in real estate agent representation, and that change has now come to pass.

On Oct. 1, 2016, the Maryland Real Estate Commission (MREC) instituted entirely new rules with respect to agency representation. So, all that stuff we talked about in our August 28 column is out the window. Here’s how the new regulations work.

Instead of having five types of agents, there are now only four; we consider that progress!

First, let’s go over what hasn’t changed. There are still Buyer’s Agents and Seller’s Agents (or listing agents), as well as that more murky classification of Dual Agent. The MREC defines each of these as follows:

Buyer’s Agent: A buyer may enter into a written contract with a real estate broker which provides that the broker will represent the buyer in locating a property to buy. The agent from that broker’s company is then known as the buyer’s agent.

The buyer’s agent assists the buyer in evaluating properties and preparing offers and developing negotiation strategies and works in the best interest of the buyer. The agent’s fee is paid according to the written agreement between the broker and the buyer.

If you as a buyer wish to have an agent represent you, you must enter into a written buyer agency agreement.

Seller’s Agent: A seller’s agent works for the real estate company that lists and markets the property for the sellers and exclusively represents the sellers.

A Seller’s agent may assist the buyer in purchasing the property, but his or her duty of loyalty is only to the seller.

Dual Agents: The possibility of dual agency arises when the buyer’s agent and the seller’s agent both work for the same real estate company, and the buyer is interested in property listed by that company.

The real estate broker or the broker’s designee, is called the “dual agent.” Dual agents do not act exclusively in the interests of either the seller or buyer, and therefore cannot give undivided loyalty to either party. There may be a conflict of interest because the interests of the seller and buyer may be different or adverse.

If both seller and buyer agree to dual agency by signing a Consent for Dual Agency form, the “dual agent” shall assign one agent to represent the seller and another agent to represent the buyer. Intra-company agents are required to provide the same services to their clients that agents provide in transactions not involving dual agency, including advising their clients as to price and negotiation strategies.

Under the old system, we had Cooperating Agents and Presumed Buyer’s Agents. Those types of agents no longer exist. Instead, we now have something called a Subagent. Here’s how the MREC describes a Subagent:

Subagent: A Subagent means a licensed real estate broker, licensed associate real estate broker or licensed real estate salesperson who is not affiliated with or acting as the listing real estate broker for a property, is not a buyer’s agent, has an agency relationship with the seller, and assists a prospective buyer in the acquisition of real estate for sale in a non-agency capacity.

The subagent works for a real estate company different from the company for which the seller’s agent works. The subagent can assist a buyer in purchasing a property, but his or her duty of loyalty is only to the seller.

By now, you’re probably thoroughly confused. But, don’t worry about that. Even though the document created by the Maryland Real Commission to describe all of this is two-pages long, we can sum it up for you in one sentence.

Unless you have a written Buyer Agency agreement with an agent, all agents represent the seller and are obligated to work in the best interest of the seller.

It doesn’t matter what company the house is listed with or company the agent showing you that house is affiliated with, agents all represent the seller, unless you have signed a written buyer agency agreement with an agent. Only then, can they represent your interests as a buyer. This also applies to agents holding an open house.

When you go to an open house, you should see the following notice from the Maryland Department of Labor, Licensing and Regulation (DLLR):

ATTENTION PROSPECTIVE PURCHASERS PLEASE READ THIS SIGN CAREFULLY

This is to advise you that the agent who is conducting this Open House REPRESENT THE SELLER(S) AND IS REQUIRED BY LAW TO PROMOTE THE INTERESTS OF THE SELLER(S).

ANY INFORMATION YOU GIVE THIS AGENT IS NOT CONSIDERED CONFIDENTIAL under the Maryland Real Estate Brokers Act and could be disclosed to the seller of this property.

You, as a Buyer, are entitled to have someone represent you as a Buyer’s Agent if you are interested in this property. The duties of a buyer’s agent include helping you to evaluate the property, prepare an offer on the property, and negotiate in your best interests.

If you do not see this notice prominently displayed at an open house, the agent is violating DLLR regulations and would be subject to disciplinary action by the Maryland Real Estate Commission. It is also important to note the part about how “Any information you give this Agent is not considered confidential.”

That not only applies to an open house, it’s also relevant if an agent is showing you property and you don’t have a written buyer agency agreement with that agent. Anything you say to such an agent can go straight to the seller.

So, remember the old World War II saying, “loose lips can sink ships.” If you’re at an open house, or driving around with an agent who isn’t your buyer’s agent, comments like “this house is great, I’d be willing to pay full price” might very well destroy your ability to negotiate, since you’ve essentially shown your hand by making this type of comment to an agent who works for the seller.

In sum, the new agency rules might seem a little complicated on the surface, and it will take time for some agents to come up to speed, but in many ways, it’s simpler than the old system.

All you now need to remember is that, unless you have written buyer agency agreement, agents represent the seller.

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