Agent: A licensee who has agreed to act on behalf of his or her principal and subject to that principal’s control.
Buyer Agency: The agency relationship that exists between a buyer principal and his or her buyer’s agent.
Principal: One of the parties to a transaction. For example, the buyer and seller are principals in a transaction for the purchase of real estate. A principal may also be referred to as a client.
What is a Buyer’s Agent? In Wisconsin and Minnesota, a real estate buyer can choose to work with either a selling agent (sometimes also referred to as a subagent, co-broker agent or Dual Agent (MN)) or a buyer’s agent. Either way, your agent is a specially trained professional, licensed by the state of Wisconsin and/or Minnesota, who is obligated by law to treat all parties to a real estate transaction fairly. To understand how a buyer’s agent is different from a selling agent, you must first understand how they are alike.
As a real estate buyer, what type of fair treatment can I expect from all real estate agents?
All real estate agents owe the following duties to both buyers and sellers:
- Fair and Honest Treatment. Every agent must provide services honestly, fairly, and in good faith. When answering your questions, every agent must be honest and accurate.
- Disclosure of Material Adverse Facts. Every agent must disclose material adverse facts that you do not already know or that you cannot discover through vigilant observation. Adverse facts are conditions which significantly and adversely affect the property value, the structure, or the health of the occupants, or information concerning the inability or refusal of a part to carry out the offer. Examples of material adverse facts include a leaky roof or high radon readings, or the fact that a foreclosure sale will prevent the seller from being able to sell.
- Confidentiality. Every agent must keep confidential any information which you indicate is confidential and any information that the agent knows a reasonable person would want to be kept confidential. When you receive the required agency disclosure statement that the agent must give you before beginning to provide brokerage services to you, you can list the information you consider to be confidential. You can also list information that might be considered confidential but which you are authorizing the agent to disclose. For example, you can permit the agent to reveal information about your financial qualifications to the seller to encourage the seller to accept your offer to purchase.
- Provision of Accurate Market Condition Information. You may ask the agent to provide timely and accurate information about market conditions, and every agent must respond with examples of sale prices for comparable properties.
- Reasonable Skill and Care. Every agent must be knowledgeable concerning real estate laws, public policies, current market conditions and physical characteristics of the property being sold. Every agent must use reasonable skill and care when:
- inspecting properties.
- preparing and giving a general explanation of the purchase contract and other relevant legal documents.
- recommending that you seek third-party expert advisers (such as attorneys, accountants, home inspectors, or building contractors) when appropriate.
- monitoring deadlines and closing dates.
- making reasonable efforts to find a property meeting your criteria.
- Accounting. Every agent must account for all funds or other things of value received from the parties to the transaction. Funds, such as earnest money or cash advances, are held in the agent’s trust account where they are kept separate from the agent’s money and where separate records are kept for each transaction.
- Objective Presentation of Offers. Every agent must make an objective and unbiased presentation of all proposals and offers, and indicate the advantages and disadvantages of each.
How are selling agents and buyer’s agents different?
The first thing to remember is that Wisconsin law does not allow real estate agents to be adversarial for or against the seller or the buyer. They are legally required to treat all parties fairly.
If you work with a selling agent, there is no contract between you and the agent, and you are not the agent’s principal. You will, however, receive a Disclosure of Real Estate Agency form that lists the fair treatment duties owed by all agents to all parties, and which indicates that the selling agent is an owner’s agent. The selling agent will show you properties you are interested in seeing, get more information about properties of interest, and draft the purchase contract as you direct. The selling agent must provide you with information about any known or potential property defects and help identify those situations where you should consult with a professional, such as a home inspector or building contractor to help you evaluate a property condition, or an attorney or accountant to advise you on legal or tax matters.
If you work with a buyer’s agent, you and the buyer’s agent sign a WB-36 Exclusive Buyer Agency Agreement that includes a Disclosure of Real Estate Agency. This Disclosure lists the fair treatment duties owed by all agents to all parties and the duties owed to principals or clients, and indicate that the buyer’s agent is the agent of the buyer. You are the buyer’s agent’s principal or client, and the buyer’s agent receives a fee when he or she successfully helps you find a property and negotiate a purchase contract in accordance with your buyer agency agreement. You have the right to negotiate the fee with the buyer’s agent and determine whether the fee is paid by the listing broker, the seller, by you, or by some combination of these. A buyer’s agent helps you get the best possible price, negotiates for beneficial contract terms, and generally assists you throughout the transaction. A buyer’s agent owes you the fair treatment duties owed to all parties plus the higher level of agent-client fiduciary duties.
What fiduciary duties does a buyer’s agent owe to me in addition to the fair treatment duties owed to all parties?
- Loyalty. A buyer’s agent must loyally represent you, avoid all conflicts of interest with you, and put your best interests ahead of the interests of any other party.
- Disclosure. A buyer’s agent is obligated to make a full, fair and timely disclosure to you of all known facts that are lawfully material to transaction. A material fact is one that a reasonable person might feel is important in choosing a course of action.
- Obedience. The agent must carry out the obligations stated in the WB-36 Buyer Agency Agreement and must obey all of your lawful orders which relate to agent’s duties as stated in the contract. For example, the agent must order a survey or appraisal on your behalf if you ask him or her to do so, provided this function lies within the scope of the buyer agency contract. However, an agent may not violate the law. For example, they must not refuse to show you a property owned by a member of a minority group.
What are the advantages of working with a buyer’s agent?
Despite what some people may think, being a buyer’s agent doesn’t mean that he or she will force the seller into submission. The buyer’s agent works for the interests of the buyer but also must know how to work with the listing agent so that the seller sells and the buyer buys. Acting in an adversarial way is not the most effective way to represent a buyer.
Only a buyer’s agent can:
- Give a negative opinion or critique of a seller’s property beyond disclosing defects.
- Recommend or suggest an offering price or give you an opinion about whether a particular house is priced too high or too low.
- Structure the offer and draft offer provisions with the buyer’s best interest in mind.
- Recommend and assist the buyer with negotiation strategies for the best price and terms.
- Disclose all information and research about a property’s history and liens so the buyer can make an informed decision. The level of additional investigation and research that a buyer’s agent may do for a buyer may vary from agent to agent.
- Give advice within the scope of the agent’s expertise as a licensed real estate agent.
What is Multiple Representation?
Multiple representation exists when one real estate company represents both the seller and buyer as clients in the same transaction. This means that one agent from a real estate company will be the listing agent, working for the seller as the client, and another agent from the same real estate company will be the buyer’s agent, working for the buyer as a client. Under these circumstances, it is impossible for the company to provide full client-level services and complete loyalty to both buyer and seller. The company and its agents cannot put the interests of one client ahead of the interest of another client involved in the same transaction. In a multiple representation, the real estate company and its agents assume the role of middlemen in negotiations, draft contracts to accomplish the intent of the parties, and present contract proposals in an objective manner. Both the buyer and the seller must agree in writing to this special arrangement.
Not all real estate agents are REALTORS®. A REALTOR® is a real estate agent who has gone beyond the minimum standards required for licensing to become a member of the REALTORS® Association and has agreed to adhere to a strict Code of Ethics. In addition to the above agent services, a REALTOR® may have access to the Multiple Listing Service. In Wisconsin and Minnesota, MLS is a valuable marketing tool typically available only through a REALTOR®.
Please feel free to contact us with any question about the benefits and your responsibilities in a buyer agency relationship.