Are You Working For Me?

This is such a good question, but one you shouldn’t ask in the middle of a transaction.  Mississippi real estate licensees are required to disclose which party they represent and to allow each party (buyer or seller) the right to choose or refuse among the various agency relationships.  This is the very first thing that needs to be done… understand your Agency relationship AND sign off on an Agency Disclosure.  This isn’t a binding contract, but a way to document acknowledgement that you have been informed of your choices.

One of the definitions of “Agency” with regard to real estate is “…authorized to act for others.”  This authorization comes in the form of either a Listing Agreement (if representing a seller) or a Buyer’s Agency Agreement (if representing a buyer).  Once a contractual relationship is formed, your real estate agent will be working for you—acting on your behalf; representing your interest; providing the fiduciary duties of loyalty, confidentiality, obedience, disclosure, full accounting and the use of skill, care and diligence, honesty and fair dealing.   The lines of “obedience” can get fuzzy at times.  I once had a client ask me to help his child collect insects for her science project.  I declined and did not lose my license.

But representation doesn’t mean compensation.  For the Seller, the listing agreement not only establishes the details of the listing like the legal description of the property for sale, the price, the list date and the expiration date, whether the listing broker is authorized to use a lockbox, place a sign or accept earnest money on their behalf, but also the compensation the seller will pay for their services.  The majority of these listing agreements authorize the listing broker to publish and disseminate the property information to other agents through their local Multiple Listing Service (MLS).  It is through the MLS that the listing broker agrees to share their compensation with a buyer’s agent.

A real estate agent working hard for a buyer has no guarantee of payment for their services unless their client actually buys a home offered through the MLS.  If their buyer decides to buy a home directly from a builder, a brother or from a For Sale By Owner (FSBO), they will probably not be compensated no matter how many months or previous offers they have handled for them.  Additionally, if a buyer calls the listing agent directly, from the sign for example, or starts working with a listing agent through an open house…if a buyer doesn’t inform them they are working with another agent, there’s a good chance, depending on the circumstances, their original agent will not be compensated.

However, a Buyer’s Representation Agreement, between a buyer and their agent, will not only outline the duties of the agent, but will also outline the duties of the buyer to their agent; such as loyalty, honesty and fair dealing, as well as the terms of compensation if, by chance, a home is purchased outside the agreement offered through the MLS.

I say all this to remind buyers to not only have representation, which is very important, but to be mindful of how representation and compensation work in the world of real estate.  Your agent will explain your agency choices, but if they ask you to consider a Buyer’s Rep Agreement, at least take the time to look over the terms.

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