Working With Real Estate Agents
Working With Real Estate Agents in North Carolina
The Laws and Regulations that govern the relationship of agents and their principals can be found in the Working With Real Estate Agents Brochure. This form helps buyer's and seller's understand the relationship a Real Estate Agent has with their respective parties. It's crucial that when working with a Real Estate Agent you have a clear understanding of the relationship you have with that Agent.
“When buying or selling real estate, you may find it helpful to have a real estate agent assist you. Real estate agents can provide many useful services and work with you in different ways. In some real estate transactions, the agents work for the seller. In others, the seller and buyer may each have agents. And some - times the same agents work for both the buyer and the seller. It is important for you to know whether an agent is representing you as your agent or simply assisting you while acting as an agent of the other party. This brochure addresses the various types of agency relationships that may be available to you. It should help you decide which relationship you want to have with a real estate agent. It will also give you useful information about the various services real estate agents can provide buyers and sellers, and it will help explain how real estate agents are paid.” – North Carolina Real Estate Commission ‘Working With Real Estate Agents Brochure'
A few key words to understand:
Agency - is the relationship that exists where one person is given the power to act on behalf of another. The typical three classifications of agency are 'Universal Agency,' 'General Agency,' and 'Special Agency.' We will comeback to describe these three classifications and how they apply to Real Estate in another post.
Principal - the person or party for whom an agent acts on the behalf of. The principal is referred to as the buyer or seller in a Real Estate transaction.
Agent - the party who acts on behalf of the Principal. An Agent can be a person, a brokerage firm, or the agent who is listing the property on behalf of the firm.
Subagent - the agent of the agent. When the firm is the agent, those who work for the firm become subagents. Additionally, a firm could be a subagent when working with a different firm known as the listing firm, because the listing firm is the agent to the Seller and the firm working with the listing firm is the subagent.
Third Party - is the party that you do not represent, though they are a part of the relationship. With a listing agreement, the listing agent and firm would have a principal relationship with the seller and a third party relationship to the buyer.
Fiduciary - a relationship based on honesty and trust. The relationship between a principal and an agent is a fiduciary relationship.
A Real Estate Agent can represent their respective parties in many ways, and it's crucial you understand how your Agent is working with you and who they represent. How agency works in North Carolina...
Real Estate Agents can act as Seller's Agent's (listing agent), Buyer's Agent, Dual Agent's, Seller's Agents working with the buyer (referred to as the 'Selling Agent').
Seller's Agent - If you intend to sell your property, you can list it with a firm and their agent's. You will need to sign a 'listing agreement' which legally authorizes the firm and it's agent's to act on your behalf. A Fiduciary relationship is created and you become the Principal to the firm and their agent's. The Seller's Agent acts on behalf of the Seller (Principal) and owe their Principal loyalty, obedience, accountability, disclosure of information, skill, care and diligence.
Buyer's Agent - If you are looking to purchase Real Estate and would like to hire a professional to assist you, you have a few different options. You can have the Agent work directly for you as a buyer's agent. You may want them to represent both you and the seller as a Dual Agent. You also have the option to allow them to represent the seller as a subagent.
Dual Agent - You have the option to allow an agent to represent both the buyer and the seller at the same time. Typically, this occurs when you are working with an agent as a buyer's agent and want to buy on of their listing's. In this scenario an agent would need to represent both the seller and buyer's interests fairly and equally. Because this can be difficult at times a firm may implement 'Designated Agents,' a form of Dual agency that a firm uses to represent both the buyer and seller. There would be a designated buyer's agent, and a designated seller's agent representing each Principal under one firm's umbrella.
Seller's Agent Working With a Buyer - It's important to remember that this agent represent's the seller so you should not mention anything you would not want the seller to know since it's the agent's responsibilities to the seller to disclose all information. This is known as co-brokered sub agency. The agent and subagent still owe duties to the buyer (third party) of honest representations of all material fact the agent knows or should have reasonably been able to discover.
View a pdf version of Working with Real Estate Agents Brochure in North Carolina.
Real Estate in North Carolina, Types of Agency and Representation
With Real Estate in North Carolina, there are three types of Agency you need to be aware of, Universal, General, and Special.
Agency is the relationship that empowers one individual to act on behalf of another in different forms, depending upon the type of Agency.
Three types of agency relationships in Real Estate:
Universal Agency - Empowers an individual with all-encompassing power to make decisions and act on the behalf of another, also known as the power of attorney. Typically, this situation arises when parents sign the power of attorney over to their adult children entrusting them with their property and assets for the benefit of the parents. This applies to Real Estate when the children decide to sell their parent's house. In a Real Estate transaction it is not often you will see Universal Agency appear, however, you need to be aware of it when the situation arises.
General Agency - The authority given is limited to a particular role when acting on the behalf of another, and not as broad as universal agency. For instance, in Real Estate, the agent is a general agent to the firm because they are acting on behalf of the firm in the field of Real Estate brokerage. The agent is not making financial decisions on behalf of the company, or the hiring/firing of it's employee's/contractor's, the agent's duties are limited to their particular role.
Special Agency - The empowerment to act on the behalf of another is limited to one well-defined task at a time. Once the task is complete or the time period has been fulfilled the agency relationship will no longer exist. In a typical real estate transaction, the listing agent would be in a special agency with their principal. The one well-defined task would be as the listing agent, and the agent would not be able to act on behalf of the principal. Other typical forms of special agency would include buyer agency agreement or a property management agreement for a single property.
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