Earlier this year, the Consumer Federation of America published a report stating that home buyers rarely fully understand disclosures related to who Realtors® represent in real estate transactions. In all three area jurisdictions, agents must provide buyers and sellers with paperwork that includes agency disclosure, but sometimes people don’t read them. This report underscores the advice we always give to clients: Make sure you read and understand all disclosures and contract agreements, as they convey important information about real estate transactions as well as your rights and responsibilities in the real estate transaction.
We always provide these disclosures and discuss them with our clients and prospective clients at the beginning of the process, so here’s’ a quick overview to help readers get acquainted with the terminology and concepts of agency representation.
Both buyer agency and listing agreements establish fiduciary duties for Realtors® to fully represent their clients’ best interests, and these agreements must be in writing. Here, we take a look at the differences among buyer agency in Maryland, Virginia, and D.C. If you are home shopping in all three jurisdictions, you definitely need to understand the differences.
Realtors® work for brokers, who officially represent the buyer or seller. So for each transaction, there can be up to four different parties that provide client services: a buyer agent and his or her broker on one side and a seller/listing agent and his or her broker on the other side. In some cases, brokers work with buyers and sellers directly as well. As such, there are basically three main types of agency representation: buyer/seller agency, designated agency, and dual agency.
BASIC BUYER AND SELLER AGENCY: This is rather simple. In this case, the buyer and seller are each represented by their own agent, and those agents work for different brokers.
DESIGNATED AGENCY: In this case, one agent represents the buyer and a separate agent represents the seller, but both agents work for the same broker/real estate firm. Although the broker represents both sides of the transaction, the broker does not share any confidential information about clients with parties on the other side of the transaction. That way, both buyer and seller interests are exclusive to the Realtor® with whom they work, and there are no conflicts of interest. Accordingly, we always advise our clients to accept designated agency, because otherwise we could not show our buyers listings from other agents in our office, nor could we market our listings to buyers represented by agents from our office.
DUAL AGENCY: In dual agency, one Realtor® and one broker represents both the seller and buyer. In this situation, they must maintain confidentiality of information from both clients, yet still advise them and conduct negotiations. This type of representation creates conflicts of interests and some agents/brokerages won’t serve a dual agents for that reason. In that case, the broker designates a buyer agent and a seller agent for the translation so each side if fully represented without conflicts of interest.
In addition, Realtors® can help unrepresented parties by simply doing paperwork without providing advice, recommending strategy, or sharing any confidential information with them about the party we represent. For example, if one of our buyers wanted to purchase a “for-sale-by-owner” property, the agent would represent the buyer only and do paperwork for the seller, who chooses to remain unrepresented. In that case the unrepresented party is referred to as a “customer” rather than a client.
Even with these general parameters, each jurisdiction in the D.C. region addresses them differently. Virginia and D.C. basically allow all aforementioned types of representation.
In Maryland, however, “dual agency,” as previously described, is illegal. Yet, the state of Maryland uses the terms “dual agency” to describe “designated agency,” through which a broker designates two separate agents to work on a transaction: one for the buyer and one for the seller; the broker is the only dual agent. Maryland does allow two “team members”—agents who work together in a single business—to each represent the buyer and seller in a transaction.
In D.C. and Virginia, buyer agency must be in writing before showing properties and providing real estate assistance. In Maryland, real estate agents who show homes to buyer without an agreement automatically are considered subagents for the seller—i.e., they have a fiduciary duty to represent the seller’s best interest. So it’s in the buyers best interest to have an agreement when viewing properties in any of the three jurisdictions.
Angela Logomasini and husband Christopher Prawdzik are licensed Realtors® with Samson Properties in Alexandria. Operating as D.C. Region Real Estate, they are NVAR Top Producers that serve the Virginia, Washington, D.C., and Maryland real estate market and offer comprehensive real estate services, including 4½% full-service listings.
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