I have dealt with thousands of client sellers and customer investors, purchasers and tenants over the years.
One thing that really bugs me is that many of them do not have a clear understanding of who is actually representing them in their sales transaction or rental.
We, as licensed brokers, associate brokers and salespeople are required by the state Department of State, our licensing entity in New York, to provide an agency disclosure to every person we take out, at first contact, to explain who our representation is with, in the case of a rental, either the tenant, landlord, or broker.
It specifically states on the form, The is Not a Contract, so the customer is not contractually obligated and do not have to sign the form, but, when explaining everything my customers almost always do and I provide them a copy for their records or to show their attorney, to make them feel at ease.
When it comes to a rental, depending on what the listing agent allows, they usually provide a choice of who we can represent, either the landlord, tenant or broker’s agent, who will cooperate or is engaged and assisted either by the tenant’ agent or the listing agent in finding a rental or a lease.
The broker’s agent does not have a direct relationship with either the tenant or the landlord and therefore neither party can provide any instructions or directions to the broker’s agent and therefore do not have any vicarious liability for the actions of the broker’s agent.
A landlord’s agent engaged by the landlord solely represents the landlord in the rental transaction and has his or her’s best interest in mind. A dual agent, with advanced written permission from the landlord and prospective tenant, can represent both parties in a rental transaction. The agent cannot provide the full range of fiduciary duties to either party.
All specific obligations to either party must be in writing and everything must be explicitly explained to both parties so that there is a clear line of communications and understanding to both landlord and tenant.
Both parties are giving up their right to undivided loyalty to which must be clearly stated and understood. Lastly, the dual agent can with written permission from the seller and buyer another sale’s agent to be the designated sales agent between the landlord and tenant, if the dual agent is not available.
Again, the designated sales agent, similar to the dual agent, cannot provide the full range of fiduciary duties to the landlord or tenant. They also must explain that they, like the dual agent, cannot provide their undivided loyalty, but are under the supervision of the real estate broker.
Both landlord and tenant should consider the possible consequences of a dual agency relationship with designated sales agents before agreeing to such representation.
No matter what position the agent decides to choose, the following are the fiduciary duties and the obligations without limitation to provide to whomever they represent:
1. Reasonable care
2. Undivided loyalty
3. Confidentiality
4. Full disclosure
5. Obedience
6. Duty to account
In dealing with a tenant, a landlord’s agent must perform the following:
1. Exercise reasonable skill and care in performance of the agent’s duties
2. Deal honestly, fairly and in good faith
3. Disclose all facts, known to the agent materially affecting the value or desirability of the property except as otherwise provided by law
It is similar when dealing with a property for sale and who will be representing whom. The word tenant is replaced by the buyer and the word landlord is replaced by seller.
All the fiduciary duties that an agent is obligated to perform are the same, depending on whether they are representing the seller as a broker’s agent or seller’s agent or if representing the buyer as a buyer’s agent.
A broker’s agent is an agent that cooperates or is engaged by a listing agent or a buyer’s agent (but does not work for the same firm as the listing agent or buyer’s agent) to assist the listing agent or buyer’s agent in locating a property to sell or buy, respectively, for the listing agent’s seller or the buyer agent’s buyer.
The broker’s agent does not have a direct relationship with the buyer or seller and the buyer or seller cannot provide instructions or directions directly to the broker’s agent. The buyer and the seller, therefore, do not have vicarious liability for the acts of the broker’s agent.
The listing agent or buyer’s agent do provide direction and instruction to the broker’s agent and therefore the listing agent or buyer’s agent will have liability for the acts of the broker’s agent. Dual agency and agency with a designated sales agent works the same way in a sale as it does with a rental.
When taking a listing with a seller, the listing Broker or salesperson should be explaining the types of agency representation that are available to the seller. The problem many times is that the agent does not know how to explain it and the seller will, therefore, have a difficult time understanding what type of representation they have; but they assume they are being represented by their agent as a seller’s agent.
However, in a hot market that we have been situated in for several years, many times the agents are getting closer to the buyers as the inventory has become historically low, and there may be more days spent with the buyer, searching out to find their first home, homeowner association, condo or co-op or investment property that they want to purchase.
The agent may step over the line in the methods of how they are dealing with the buyer and forget about with whom they are really representing, their buyers or their sellers? Agency agreements and their respective representations can be very tricky and very confusing to a new and even an experienced agent and my professional opinion is that the initiative of the agent to take more classes should be in the forefront of attaining their continuing education credits in the classroom or online instruction.
The fact is many wait to the last minute to sign up for classes and to be able to learn, absorb and apply what knowledge that they have gained, can be a chore and obstacle unless practiced daily.
This is a business and not a job and if treated like a business, it will pay you handsomely. However, more than 40% of the agents have jobs in the U.S., although those that treat it like a business will survive and produce the necessary and desired results.
That is why as a seller, investor, buyer or tenant, it is prudent to interview whomever you will be using to represent you as a seller’s, landlord’s broker’s, buyer’s or tenant’s agent, to make sure they have the necessary knowledge, expertise, customer service oriented mindset and technology tools to handle what may be your largest purchase or investment of your life or where most of your wealth is situated; and you want the best of the best or what I say, “the cream of the crop” to protect your most valuable asset now and in the future!
If you have an opinion on this, please feel free to send an op-ed to the editor or drop me an email or a call.
Phil Raices is the owner/broker of Turn Key Real Estate at 7 Bond St. in Great Neck. He has earned the designations as a graduate of the Realtor Institute and is a certified international property specialist. He can be reached by email:Phil@TurnKeyRealEstate.Com or by cell (516) 647-4289 to answer any of your questions or article suggestions or provide you a free comparative market analysis on your property.
