Agency: the legal relationship between a Principal (buyer or seller) and his agent arising from a contract in which the Principal engages the agent to perform certain acts on the Principal’s behalf.
The real estate industry is highly regulated in regard to “Agency” laws. The term “Agency” refers simply to representation – such as an agent who represents a seller. The Oregon Real Estate Agency requires that all Real Estate Brokers give a pamphlet to every prospective client which outlines the duties of a Buyer’s Agent and a Seller’s Agent at the “first substantial contact” (even if the prospective buyer or seller has no intention on forming an agency relationship with the Realtor). This is because the various agency roles can be rather complex, and without this upfront disclosure, the situation can be very confusing. Please see this link and read the disclosure. ALL of these Agency relationships, by law, must be approved by the parties involved prior to entering into a transaction. In addition, let me offer the following explanation:
A Buyer’s Agent is a Real Estate Broker who represents the buyer only in a transaction. The duties generally include, but are not limited to: searching for homes for sale that match certain criteria set by the buyer, advising the client on neighborhood selection, knowledge of the various loan programs available and the implication that the programs have on a specific homes, knowledge of how to draft an acceptable offer to the seller, knowledge of how to handle multiple offer situation, how to obtain quality inspectors and other vendors, negotiating needed repairs, verifying that all transaction details have been met prior to deadlines.
A Listing Agent (AKA “Seller’s Agent) is a Realtor who only represents the seller in a transaction. Responsibilities include: employing a marketing strategy to get the home sold, vetting various buyers to see if they are qualified to purchase the home, negotiating a sale contract on behalf of the seller, negotiating repairs and helping coordinate them if need be, and making sure that all transaction details have been met in a timely fashion.
In contrast, a Disclosed Limited Agent is a Real Estate Broker who represents both the buyer and a seller in a transaction. This can also mean two different agents that work in the same office – The Principal Broker of the company is the “Disclosed Limited Agent” (though, this is situation is far less delicate than simply a Broker who represents both parties). The Oregon Real Estate Agency requires that this “Disclosed Limited Agency” or “In-company Transaction” be very clearly disclosed to the parties in the transaction. This is because this type of transaction can be subject to abuse and/or neglect by the agent involved. However, this is certainly not always the case, and it can actually benefit you somewhat should this situation arise.
There are a few ways in which abuse occurs. The first concern is with a Realtor who will try to do everything that they can in order to sell their own listing to a buyer even if their actions are not in the best interest of the seller. I have seen agents specifically withhold listings from RMLS (the database in which all Realtors list their listings) so that they can try to sell the house themselves to a client that they have been working with. This is an obvious detriment to the seller, because if the house is not listed in RMLS, there would be no competing buyers, and the seller might lose out on a higher offer. The converse is also true – an agent may forgo telling a buyer about other desirable homes on the market in order to try and sell the house that he or she personally has listed. Clearly, this would not be in the best interest of the buyer, because a buyer should always be aware of every house on the market that matches his or her personal criteria, and thus having the most choice.
The second potential for abuse happens when the Agent gets along better with one party to the transaction versus the other. Sometimes, if an Agent and a Principal don’t exactly get along, the Agent might favor one party at the detriment of the other.
That being said, a “Disclosed Limited Agency” transaction isn’t all bad and can sometimes actually benefit you. Sometimes a reduction in commission can be negotiated, which is to the benefit of both the buyer and the seller. In addition, having one less agent means that there is a smaller chain in the communication and the transaction can run more efficiently.
The bottom line is: if you find that a Disclosed Limited Agency transaction is approaching, be very clear on the situation that you are getting into. Read the Oregon Real Estate Agency’s disclosure pamphlet and make certain that you are totally comfortable with the Agent that you hire – you do have a choice!