What is Buyer Agency in Real Estate?
If you’ve bought or sold real estate in Maryland since 1999, you’ve been given an “Agency Disclosure” amongst the myriad of paperwork your real estate agent hands you. The Agency Disclosure is not a binding agreement to anything, it is merely a statement disclosing the various types of agency a Maryland Realtor® offers.
Maryland is a progressive consumer advocacy state, and as such, was on the cutting edge of Agency, compared to many of the states in the U.S. Before Jan. 1, 1999, all Real Estate agents represented the seller. ie. worked for the seller. There was no representation for a buyer, no one to negotiate on their behalf, legally. Prior to that time, there was a lot of confusion, a lot of misleading information, and a lot of ignorance of the issue.
What Is Agency?
At the first scheduled face to face meeting the Realtor assisting you is required by the Maryland Real Estate Commission to provide a notice entitled “Understanding Whom Real Estate Agents Represent”. This explains the following forms of Agency or representation:
A. Agents Who Represent the Buyer
1. As of October 1, 2016, there is no more Presumption of Buyer’s Agency – what used to be the instance where there was no written agreement, but the agent could show houses to the buyer. There was the presumption that the agent was working for the buyer. During the course of working with the agent, the buyer would typically sign an agency agreement, certainly before making an offer on a house. The agent cannot be paid unless there is a written agreement.
After October first, of this year, the Maryland Real Estate Commission did away with presumed agency. Now, as per law, the first time a buyer meets with an agent, they must sign a buyer agency agreement. Read more about how the change in the Maryland Agency laws will affect home buyers.
2. Buyer’s Agent – When working with a buyer, an agent must get a written agreement between the buyer and themselves. Then the agent represents the interests of the buyer, may negotiate on their behalf and has a fiduciary duty to the buyer. It is also known as Buyer Representation.
3. Dual Agent – this one is tricky because it is different in different states. In Maryland, a real estate agent may not represent both the buyer and the seller. It really is a conflict of interest in a negotiation. Usually, when an agent finds themselves working with a buyer who wants to write an offer on the agent’s listing, the Broker will assign another agent from the same firm to represent the buyer. In the situation where a buyer and seller are working with agents from the same brokerage, the Broker is the Dual Agent. He or she must stay neutral in the representation of the buyer and the seller.
B. Agents Who Represent the Seller
1. Seller’s Agent – The agent that lists and markets the property. He exclusively represents the seller, his duty is to the seller, even though he may assist a buyer who is unrepresented. In the case of an unrepresented buyer, the listing agent is must give fair and ethical treatment to the buyer
2. Cooperating Agent, or Subagent of – An agent from a different brokerage than the seller’s agent, can assist the buyers in purchasing, but has a duty to the sellers.
To tell you the truth, we rarely see a “cooperating agent”. Most buyers want a buyer’s agent if they are working with an agent other than the listing agent.
Why A Buyer Should Have Representation
Why do you want representation? A buyer’s agent offers a lot of value to today’s home buyers. The buyer’s agent is earning their money commission from the home sellers if the listing agent has agreed to share the commission with a cooperating agent. So it is no cost to the buyer.
When you consider the many moving parts of a negotiation, it is a big benefit to the buyer to have an agent representing them, helping them create a negotiating strategy. They also benefit with an experienced local agent helping them determine an offering price. A buyer’s agent will be able to do a comparative market analysis, CMA, that will help the buyer make a good offer. As a buyer, you don’t want to overpay, but you also don’t want to lose in a competitive bidding scenario. You want to make sure that the home will appraise close to your offer price, too, if you are financing the house.
Real estate agents are working in the local market every day. They see the inventory, know the values, and they are negotiating all the time. Most homeowners buy and sell every 7 or 8 years. Without an agent representing you, you are at a disadvantage. It’s great to have an advocate on your side.
So, I hope that makes it clearer. Sometimes it takes a conversation to really explain these things well. Be sure and ask your Realtor to explain it, not just hand you a disclosure about Agency.
The Highland Group
Frederick, Md 21701