Understanding Agency Law in Real Estate
Are You Ready to Buy a Home?
It’s 2015 and you keep hearing that interest rates will soon be moving up well past the historically low rates that have benefited home buyers in recent years. Is it time to buy a home? Perhaps, but your first step should be to contact an experienced Realtor who can help you weigh your options and make an informed decision.
Among the first questions a Realtor will ask is have you spoken to a lender. If not, a Realtor can suggest lenders you may want to contact. Starting the process to obtain pre-qualification or pre-approval for a loan will quickly determine if you have adequate income, sufficiently low debt, and a good enough credit score to begin your search for a home.
Get the green light to proceed? First you need to make sure you have the necessary representation to navigate the sometimes confusing landscape of home buying.
Understanding Agency Relationships in Real Estate: Don’t Go it Alone!
The Buyer as Customer
According to SC Law, the “Customer” relationship is the most basic form of agency that exists in the real estate industry. The SC Agency Brochure clearly states that “unless or until you enter into a written agreement with the Company for agency representation, you are considered a ‘Customer’ of the Company, and the Company will not act as your agent.” Furthermore, “as a Customer, you should not expect the Company or its licenses to promote your best interest or to keep your bargaining information confidential.” It may not sound very comforting, but it’s the law.
An example of this customer relationship is the buyer who calls random agents to let him into homes without establishing an agency relationship or even the buyer who “feels” like they have an agent working for them but they have yet to sign the buyer agency agreement required by law in South Carolina.
The Buyer as Client or Buyer Agency
Entering into a Buyer Agency Relationship with a trusted Realtor expands the services provided by the Realtor and can benefit you greatly. Not only will your Realtor keep you informed of the latest listings, but she will also be a source of knowledge as you navigate the process of home buying. A agent can have frank discussions on price and value of a home you are considering. Unsure of what to offer for a home? Your agent should provide you with comparables for closed sales occurring over the past 12 months in the area of the home you are considering and be familiar with the condition of those homes. Need professional guidance to negotiate a successful contract? Your agent can discuss strategy and help you determine how best to negotiate while keeping your interests at the forefront. In some cases, a particularly appealing home will attract multiple offers, and you want to be sure you are represented as effectively as possible. According to the SC Agency Disclosure Brochure, in order “for a buyer to become a client, the buyer and agent must sign a Buyer Agency Agreement that sets forth “the terms of the agreement in writing and must clearly establish the terms of the agreement and the obligations of both the buyer and the Company which becomes the agent for the buyer.” Among the obligations of the agent to the buyer are the following: Obedience, Loyalty, Disclosure, Confidential Accounting, and Reasonable Care and Skill.” And the best part? In most cases, you can enjoy the professional guidance and counsel of a Realtor without incurring additional cost. In the Columbia SC market, the vast majority of commissions paid to Buyer Agents are paid by the seller or the seller’s agent.
Another form of Agency Relationship in South Carolina is Dual Agency. Dual Agency exists when you determine that the benefits of working with an agent who is listing a home outweigh the advantages of working with an agent who is not. In a Dual Agency capacity, the agent is restricted by the laws of South Carolina in what they can do or say. For example, an agent cannot tell a buyer that a seller will accept less than their published list price; similarly, if a buyer shares information on how high they might be willing to go up on an offer, the agent cannot share that information with the seller. In short, the agent must keep confidential any information that could give one party an advantage over the other, including “information concerning the price negotiations, terms or factors motivating the buyer/client to buy or the seller/client to sell.“
An additional form of agency represented by SC Law is Designated Agency, described as follows in the SC Agency Disclosure Brochure: “a broker-in-charge may designate individual associated licenses to act solely on behalf of each client. Designated agents are not limited by the Company’s agency relationships with the other client but instead have a duty to promote the best interest of their clients, including negotiating price. The broker-in-charge remains a disclosed dual agent for both clients and ensures the assigned agents fulfill their duties to their respective clients.”
The take away from this somewhat boring topic? The SC Agency Brochure says it loud and clear and even in bold:
”Remember that until you enter into a representation agreement with the Company, you are considered a customer and the Company cannot be your advocate, cannot advise you on price or terms and cannot keep your confidences.”