AGENCY AND THE CONSUMER
Professional real estate agents know what the consumer doesn't: having a real estate agent on your side can save you money, lessen stress, and prevent mistakes when buying or selling a home. Regrettably, experience shows that most customers don't understand the importance of agency until something goes wrong with their transaction! Informed choice for representation by a licensed real estate agent can make a HUGE difference in your Saint Paul home purchase or sale. Let's explore why.
AGENT or SALESPERSON
Although real estate agents are called salespeople in Saint Paul, Minnesota, agency is actually very different from sales. A traditional salesperson's job is to convince you to buy a product whether you need or want it. Real estate agents perform a contrasting role. They are legally required to negotiate for the best price and terms for their clients, keep their clients' welfare as priority, and use their expertise and training to expedite as smooth and beneficial a transaction as possible. Their primary function is to work in their CLIENTS' best interests, NOT to force the sale of houses.
Agency is a LEGALLY defined agreement made in writing between two parties (the agent and the client) which forms a FIDUCIARY RELATIONSHIP. A fiduciary relationship is a special legal affiliation in which one person (the agent) acts FOR or ON BEHALF OF another person (the client) in dealing with a third party (the buyer for your Saint Paul house or the seller of the house you want to buy). The agency relationship is created by a contract for representation signed by you and your agent (on behalf of his/her whole company). With the formation of the agency contract, your agent works on YOUR BEHALF in the real estate transaction. Until a contract for representation is signed, you are only a customer and the only fiduciary duty you will receive is confidentiality. In order to receive full representation with all the fiduciary duties listed below, you and your agent must sign a contract for representation.
FIDUCIARY DUTIES OF A REAL ESTATE AGENT
Because your real estate agent is acting in your best interests, she or he is legally mandated to give you the following fiduciary duties:
- Loyalty - act only in your best interest
- Obedience - carry out all of your lawful instructions
- Disclosure - tell you about all material facts of which s/he has knowledge and which might impact your use and enjoyment of the property
- Confidentiality - keep all of your confidential information private unless it is a material fact that must legally be disclosed
- Reasonable care - use all of his/her skills, knowledge, training, and experience to carefully perform duties on your behalf
- Accounting - account for any property or money received as an agent
In Minnesota, all agents are required to review the form "Agency Relationships in Real Estate Transactions" with prospective clients early in the relationship and BEFORE a contract for representation is signed. This form explains that an agent can represent their client as:
- Seller's Broker: The broker or salesperson who lists the property and acts in the seller's best interests.
- Subagent: An agent in the listing company who is working with a buyer as a customer instead of a client. In this case, the agent must represent the seller and act in the seller's best interest and disclose any information he knows about the buyer to the seller!
- Buyer's Broker: The broker or salesperson who acts on behalf of the buyer.
- Dual Agent: This role occurs when one or two agents from the same company represent both the buyer and the seller of the same house. Both buyer and seller must agree to accept dual agency before writing a purchase agreement and with clear explanation of dual agency. The Minnesota agency disclosure states: "This role limits the level of representation the broker and salesperson can provide, and prohibits them from acting exclusively for either party . . . Dual agents may not advocate for one party to the detriment of the other." (Minnesota Association of Realtors' form: Agency Relationships in Real Estate Transactions, 8/07). Before agreeing to dual agency, explore how it will impact your transaction. Ask your agent if s/he will be able to advise you on price and terms; convey information known about the other client which might help you in your negotiation; give advice after the closing if something goes wrong; etc. The answers to these questions can help you decide if dual agency is okay for you!
- Facilitator: When there is no contract for representation, the agent is acting as a facilitator and does not owe the customer any fiduciary duties except confidentiality. In this capacity, the agent can provide services for you, but not give you any advice or negotiate for you.
Bonnie Erickson, REALTOR® in Minneapolis/St. Paul, Minnesota, provides single agency representation to buy or sell homes and rental property in the following Minnesota cities: Minneapolis, St. Paul, Andover, Anoka, Apple Valley, Arden Hills, Brooklyn Center, Brooklyn Park, Blaine, Bloomington, Burnsville, Cottage Grove, Coon Rapids, Columbia Heights, Champlin, Crystal, Eagan, Edina, Eden Prairie, Excelsior, Farmington, Falcon Heights, Fridley, Golden Valley, Hopkins, Inver Grove Heights, Lake Elmo, Lauderdale, Lilydale, Medicine Lake, Mendota, Maplewood, Mendota Heights, Mahtomedi, Maple Grove, Moundsview, New Brighton, New Hope, North Oaks, North St. Paul, Oak Grove, Osseo, Plymouth, Richfield, Rosemount, Robbinsdale, Roseville, Saint Anthony, Savage, Shakopee, St. Louis Park, Spring Lake Park, South St. Paul, Shoreview, Sunfish Lake, Vadnais Heights, White Bear Lake, White Bear Township, Woodbury, Willernie, and West St. Paul.