Love the One You’re With

Do you know whether the agent you called is actually representing you? Maybe they are representing the other side but you don’t know it? As of January 1, 2011, real estate agents selling co-op and condominium apartments will be subject to the same written disclosure requirements as are currently mandated in the sale of all other kinds of property (and in all other parts of the country). So let’s talk a little about representation.

When I was first in the business there was only seller representation. By law, every residential agent represented the seller in every situation. Buyers went unrepresented, even though the broker often had a FAR stronger relationship with the buyer, to whom they might have been showing property  for months; than they did to the seller, whom they might never have met. This was in the days before co-broking, so there was only one agent involved in every transaction. Law and reality did not sync. Agents LEGALLY represented sellers, but mostly they ACTUALLY represented buyers.

As more properties became exclusive listings, and co-broking became more common, there were two agents involved in most transactions. But the legal notion of representation did not change. Now not only did the seller’s agent represent the seller, but the buyer’s agent, who would not only never meet the sellers but probably never talk to them either, legally represented the seller as well (it was called sub-agency). So you had two agents representing the seller, one of whom CLEARLY represented the buyer. It made no sense.

In the mid-1990s the Residential Division of The Real Estate Board of New York petitioned then-Secretary of State Gail Schaeffer to put an end to the sub-agency notion and recognize that in co-broke situations, the agent who brought the buyer was actually a buyer’s agent. They agreed, and that ushered in a period of greater clarity.

But some murky areas remain. For one thing, are you aware, as a consumer, that your agent is legally obliged to inform you whom she represents? She is. And what happens if you are buying your agent’s exclusive listing? Unless you clarify otherwise, your agent actually represents the seller, with whom they have signed an exclusive contract, and not you. In this case there is also the alternative of Dual Agency.

In a Dual Agency situation, both parties agree that the agent will represent them both. While this clearly makes complete loyalty to either side impossible, sometimes it is the best alternative. Dual Agency acknowledges a reality: it is often best for BOTH parties, if there is only one agent, for that agent to represent the DEAL by pushing and prodding both sides towards a place of compromise. To me that seems like the fundamental definition of an agent’s job.

Finally, there is a new variant in the Dual Agency scenario which the State of New York just introduced in the last couple of years. It is called Dual Agency with Designated Sales Agents. This arises when two agents within the same firm represent the two sides in a transaction. Any time an agent has an exclusive listing it means that EVERYONE in their company now represents the seller, since legally the company, not any individual agent within it, holds the exclusive. Now, thanks to the Dual Agency with Designated Sales Agents option, it is possible for two colleagues within the same firm to represent two different sides of a transaction, one owing loyalty to the seller, one to the buyer.

All these options – buyer’s agent, seller’s agent, dual agent, dual agent with designated sales agents -appear on the new form which all buyers and sellers will be signing come 2011. As agents, we always love the one we’re with. But do we represent them? That is the question the form is trying to lay to rest…

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