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What You Should
Know About Agency!
Your Options for Agency Representation or Relationship
Minnesota law requires that early in any relationship, real estate brokers or salespersons discuss with consumers what type of agency representation or relationship they desire. This disclosure requirement applies to any transaction involving property occupied or intended to be occupied by one to four families as their residence.
Your available options are listed below. You should know that if you desire representation, you must enter into a written contract according to state law (a listing contract or a buyer representation contract). Until such time as you choose to enter into a written contract for representation, you will be treated as a customer and will not receive any representation from the broker or salesperson. The broker or salesperson will be acting as a Facilitator (see description of Facilitator below), unless the broker or salesperson is representing another party as described below.
Seller's Broker: A broker who lists a property, or a salesperson who is licensed to the listing broker, represents the Seller and acts on behalf of the Seller. A Seller's broker owes to the Seller the
fiduciary duties described below. The broker must also disclose to the Buyer material facts as defined in Minnesota Statutes, section 82.197, subdivision 6, of which the broker is aware that could adversely and significantly affect the Buyer's use and enjoyment of the property. If a broker or salesperson working with a Buyer as a customer is representing the Seller, he or she must act in the Seller's best interest and must tell the Seller any information disclosed to him or her, except confidential information acquired in a facilitator relationship (see description of Facilitator below). In that case, the Buyer will not be represented and will not receive advice or counsel from the broker or salesperson. Remember, the Seller's Broker may be the broker who lists a property, the listing agent or any salesperson who is licensed to the listing broker, or a subagent (see description of Subagent below). Keep in mind, if you are a Seller and desire representation, you must enter into a written contract (a listing contract).
Subagent: A broker or salesperson who is working with a Buyer but represents the Seller. In this case, the Buyer is the broker's customer and is not represented by that broker. If a broker or salesperson working with a Buyer as a customer is representing the Seller, he or she must act in the Seller's best interest and must tell the Seller any information that is disclosed to him or her. In that case, the Buyer will not be represented and will not receive advice or counsel from the broker or salesperson.
Buyer's Broker: A Buyer may enter into an agreement for the broker or salesperson to represent and act on behalf of the Buyer. The broker may represent the Buyer only, and not the Seller, even if he or she is being paid in whole or in part by the Seller. A Buyer's broker owes to the Buyer the fiduciary duties described below. The broker must disclose to the Buyer material facts as defined in Minnesota Statutes, section 82.197, subdivision 6, of which the broker is aware that could adversely and significantly affect the Buyer's use and enjoyment of the property. If a broker or salesperson working with a Seller as a customer is representing the Buyer, he or she must act in the Buyer's best interest and must tell the Buyer any information disclosed to him or her, except confidential information acquired in a facilitator relationship (see description of Facilitator below). In that case, the Seller will not be represented and will not receive advice or counsel from the broker or salesperson. Keep in mind, if you are a Buyer and desire representation, you must enter into a written contract (a buyer representation contract).
Dual Agency - Broker Representing both Seller and Buyer: Dual agency occurs when one broker or salesperson represents both parties to a transaction, or when two salespersons licensed to the same broker each represent a party to the transaction. Dual agency requires the informed consent of all parties, and means that the broker and salesperson owe the same duties to the Seller and the Buyer. This role limits the level of representation the broker and salespersons can provide, and prohibits them from acting exclusively for either party. In a Dual agency, confidential information about price, terms and motivation for pursuing a transaction will be kept confidential unless one party instructs the broker or salesperson in writing to disclose specific information about him or her. Other information will be shared. Dual agents may not advocate for one party to the detriment of the other. Keep in mind, if Seller(s) decides not to agree to a dual agency relationship, Seller(s) may give up the opportunity to sell the property to Buyers represented by the broker/salesperson. If Buyer(s) decides not to agree to a dual agency relationship, Buyer(s) may give up the opportunity to purchase properties listed by the broker.
Within the limitations described above, dual agents owe to both Seller and Buyer the fiduciary duties described below. Dual agents must disclose to the Buyer material facts as defined in Minnesota Statutes, section 82.197, subdivision 6, of which the broker is aware that could adversely and significantly affect the Buyer's use and enjoyment of the property.
Facilitator: A broker or salesperson who performs services for a Buyer, a Seller, or both but does not represent either in a fiduciary capacity as a Buyer's Broker, Seller's Broker or Dual Agent. The facilitator broker or salesperson does not owe any party any of the fiduciary duties listed below, except confidentiality, unless those duties are included in a written Facilitator Services Agreement. The facilitator broker or salesperson owes the duty of confidentiality to the party, but owes no other duty to the party except those duties required by law or contained in a written facilitator services agreement, if any. In the event a facilitator broker or salesperson, working with a Buyer, shows a property listed by the facilitator broker or salesperson, then the facilitator broker or salesperson must act as a Seller's Broker (see description of Seller's Broker above). In the event a facilitator broker or salesperson, working with a Seller, accepts a showing of the property by a Buyer being represented by the facilitator broker or salesperson, then the facilitator broker or salesperson must act as a Buyer's Broker (see description of Buyer's Broker above).
What exactly are Fiduciary Duties?
The fiduciary duties mentioned above are listed below and have the following meanings:
- Loyalty - broker/salesperson will act only in our client(s)' best interest.
- Obedience - broker/salesperson will carry out all client(s)' lawful instructions.
- Disclosure - broker/salesperson will disclose to client(s) all material facts of which broker/salesperson has knowledge which might reasonably affect the client's rights and interests.
- Confidentiality - broker/salesperson will keep client(s)' confidences unless required by law to disclose specific information (such as disclosure of material facts to Buyers).
- Reasonable care - broker/salesperson will use reasonable care in performing duties as an agent.
- Accounting - broker/salesperson will account to client(s) for all client(s)' money and property received as agent.
Required Forms
Minnesota law requires real estate brokers or salespersons to present an agency disclosure form "Agency Relationships in Real Estate Transactions" to potential buyers and sellers at their first "substantive" contact or meeting. This form is not a contract. The disclosure form describes the available options for agency representation or relationship (see Your Options for Agency Representation or Relationship above) and spells out for consumers the broker/salesperson obligations to the parties to a transaction, depending on the type of representation chosen. The consumer need not choose what type of representation, if any, they want at this time, but they will be asked to sign the disclosure form to acknowledge that it was received and discussed.
Remember, if you desire representation, you must enter into a written contract according to state law (a listing contract or a buyer representation contract or a facilitator services agreement).
Timing for Disclosures and Contracts
- An Agency Relationships in Real Estate Transactions disclosure form must be presented to a potential Buyer or Seller at first substantive contact. This is a disclosure form, NOT a contract although it does ask for the party's signature as an acknowledgment.
- A listing contract must be signed before offering/advertising a property for sale or lease.
- A buyer representation contract must be signed before taking any action to represent a Buyer (such as showing properties currently offered for sale) and before a purchase agreement is written and signed.
- A facilitator services agreement must be signed before performing services included in the facilitator services agreement for a Buyer, a Seller, or both.
Our Policies on Agency Representation
Seller's Agent or Buyer's Agent (aka "True Agent"). As a general rule, we choose to represent only one party to a transaction, either the buyer or the seller. It is our experience and belief that exclusive representation is in the best interests of our clients and our company. We liken exclusive representation to being monogamous. In a monogomous relationship we owe each other 100% loyalty.
Dual Agency. Dual Agency is ordinarily NOT an option with our company, unlike many of the larger real estate companies in our marketplace who encourage Sellers and Buyers to agree to a dual agency relationship. Dual agency limits the level of representation we can provide our clients and prohibits us from acting exclusively for either party. We think advocacy is an important and valued service. Therefore, we favor exclusive representation and equate dual agency to being non-monogamous (our loyalty is split 50/50 between the Buyer and the Seller). The one general exception to our policy against dual agency is when a buyer is seeking to purchase a HUD/VA home or property (a foreclosed property sold by closed bid; no negotiations). We will consider other exceptions to this policy, on a case by case basis.
Facilitator. Serving in the limited role of facilitator for a Buyer, a Seller, or both is permitted, but rarely practiced, by our company. A Buyer or Seller Facilitator Agreement does protect a client(s)' confidences, but does not include the fiduciary duty of advocacy. We tag the facilitator relationship as "fear of intimacy or inability to commit" to a relationship (0% loyalty). Two instances of our engaging in a facilitator agreement are shared below.
- Seller Facilitator Services Agreement: Our company offers a For Sale By Owner (FSBO) listing option for Sellers who want to save money on real estate commissions by doing most of the work themselves. This is a prime example of a Facilitator relationship with a Seller. Under our FSBO option, we are not representing the Seller (the Seller is representing themselves), the Seller does not receive the benefit of our advice or counsel, and we owe the Seller no fiduciary duties (such as loyalty/advocacy) other than as specified in the Seller Facilitator Services Agreement. With the significantly discounted fee, we limit our marketing of the property to listing on the Multiple Listing Service (MLS) and our company website for maximum exposure, installing a MAVRIK REALTY yard sign with brochure box and a website rider sign, providing a lock box, and providing all required and necessary real estate forms. If requested, we will prepare the purchase agreement, present all offers and counter offers in a timely manner, provide you with information about other services related to the real estate transaction (such as real estate closers), and assist the parties in completing the transaction. The rest is up to the Seller, including but not limited to print advertising, hosting open houses, setting up showing requests, qualifying buyers, and negotiating offers and counter offers. Bear in mind, if the property does not sell quickly or the Seller becomes overwhelmed with the added responsibilities, the Seller may at any time switch to an exclusive full service listing contract.
- Buyer Facilitator Services Agreement: This arrangement is even more rare since most buyers, particularly first-time homebuyers, seem to want exclusive representation and we encourage it. In the case example, the Buyer was a licensed real estate broker, but not a member of the MLS. The only service which the Buyer needed and wanted from us was access to MLS listings meeting their search criteria. We conducted the MLS search and forwarded the results to the Buyer. The Buyer arranged all her own showing appointments, prepared all purchase agreements, and handled all negotiations. We did not represent the Buyer (the Buyer represented herself), the Buyer did not receive the benefit of our advice or counsel, and we owed the Buyer no fiduciary duties (such as loyalty/advocacy) other than as specified in the Seller Facilitator Services Agreement.
Subagent. Our company does not practice or allow sub-agency. We only allow our listings to be shown and sold by brokers/salespersons who have a written contract for representation with a Buyer (a buyer representation contract, a facilitator services agreement, or written consent for a dual agency relationship). It is not in our client(s)' best interest to allow subagents to show or sell their property.
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 Ann Leviton, ABR CRS ABR CRS GRI - Broker/Owner, her personal bio and client testimonials can be found at www.realestatefairy.com. |
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