Broker vs. agent
July 26, 2017
All your life, you’ve seen their yard signs. “For Sale.” “Pending.” “Sold!” But if you’re just starting to think about buying a home, you might be realizing that you don’t know much about real estate agents.
It's helpful to know who’s who, and what they do, since your agent is potentially one of the most important people on your homebuying team. You want to choose well.
So before you start looking for one, let's get a handle on the types of agents, their responsibilities, and the conflicts that sometimes arise. Keep scrolling for all the details on the short descriptions below.
Broker vs. agent
First, it helps to understand that there are real estate brokers, and there are the real estate agents who work for them.
Both are licensed by the state, but brokers have taken their real estate education a step further. Brokers can work independently, and they can also hire agents to work for them in an agency. This agency is often called a brokerage. Agents, on the other hand, must work under a licensed broker who is legally responsible for them.
Brokers and agents can represent the buyer, the seller, or both. Whichever you work with, they’re legally required to review with you a disclosure document called the Agency Relationships in Real Estate Transaction. This form explains the roles and services provided by each type of agent.
Realtor vs. real estate agent
People often refer to real estate agents as “Realtors.” But technically, this trademarked term applies only to members of the National Association of Realtors (NAR), which holds its members to a code of ethics and professional standards. So not all real estate agents are Realtors®, but all Realtors are real estate agents. (See our handy Venn diagram below.)
As long as they’re licensed, either an agent or Realtor can legally represent you. And either one can be great. But arguably, a Realtor is more accountable.
The buyer’s agent
The buyer’s agent represents only you, the buyer, in the transaction. Here’s some of what your agent does for you:
- Helps you find a home in your price range
- Provides information about the neighborhood
- Completes a comparative market analysis (CMA) to determine if the selling price is reasonable compared to other properties recently sold in the area
- Helps you complete the purchase agreement for the best terms and price
- Presents your offer to the seller and negotiates on your behalf
- Helps you navigate the last stretch, to the closing
- Helps you keep calm when the unexpected happens
Some agents, even entire agencies, opt to work exclusively with buyers. They don’t represent sellers and they don’t list homes.
The seller’s agent
A seller’s agent represents only the seller. The seller’s agent helps determine the listing price of the home, markets the home to potential buyers, and negotiates the best price and terms for the seller.
Some homebuyers work with a facilitator, a licensed real estate agent who does not represent you directly. Homebuyers hire one when they decide to represent themselves and need help completing the purchase agreement.
We don’t recommend this option for first-time homebuyers. No matter how much you think you understand about the homebuying process, there's no substitute for experience.
Dual agency can come up in two ways. The most common is at the brokerage level, when the buyer’s agent and the seller’s agent happen to work for the same agency. This is sometimes called “designated agency.” The second way is when your agent turns out to also be the seller’s agent for the home you fall in love with.
At the brokerage level
At the brokerage level, dual agency is quite common. In fact, not allowing it just wouldn’t be practical. After all, it can be hard to avoid if you’re home shopping in a small town, or if a few agencies dominate the market. And if the brokerage is a big one with dozens of agents, your agent and the sellers’ might not even know each other.
Critics say there’s still a chance that the agents will share confidential information — like the top price you’re willing to pay. That said, the conflict certainly isn’t in the same league as when a single agent represents both parties.
A single agent
A single agent representing the buyer and seller presents so much conflict of interest that it’s illegal in some states. Many agents themselves consider it a bad practice.
Even if the agent plays it straight down the middle, the level of representation you get will be limited, since they can’t advocate for either party. And ideally, you want an agent who’s totally in your corner and can use all their negotiating skills to make sure you get the house at a fair price.
Only with your consent
Because of the potential conflicts of interest, both kinds of dual agency require your written consent. The deal is that confidential information — again, like your top price — won’t be shared with the seller.
When you’re interviewing agents, be sure to ask about dual agency, and make sure you understand the potential consequences before you give your consent.
The only way to be 100 percent sure that you’ll avoid dual agency is to use an agency (a whole agency, not just an agent) that works exclusively with buyers and does not list homes for sale.
Do you need a specialist?
Have you noticed a variety of mysterious letters after the names of some real estate agents? They indicate special designations or certifications. Meaning that the agent has spent some extra time, effort, and money on taking classes to expand their knowledge in that area.
Three situations in particular cry out for an agent with extra training:
- If you’re a veteran or active service member: look for MRP (Military Relocation Professional)
- If you plan to buy a short sale or foreclosure property: look for SFR (Short Sales and Foreclosure Resource)
- If you’re committed to living in a green building: look for GREEN
Ready to sign a contract?
Once you’ve found a real estate agent you want to work with, they’ll ask you to sign a legally binding, exclusive agreement in which you agree to work only with them. The exclusivity makes sense on both ends, if you think about it. Imagine having to explain your ideal home to three different people.
Before signing, the agent should explain both what they owe to you as their client and your responsibilities to them. If for some reason you “break up” with your agent before the contract ends, you could be responsible for paying their commission if you buy a home. So be sure to do your homework on the agent and read the contract carefully before you sign. Once it expires, you’re free to work with another agent.
We think it’s always a good idea to interview any prospective agents before signing on the dotted line. Check out our list of recommended interview questions.
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Filed Under: For Homebuyers