Friday, July 25, 2014 / by Vanessa Saunders
Anyone planning to buy or sell their home who has interviewed one or more Realtors should have been given a document called the New York State Disclosure Form for Buyer and Seller to sign. If this has happened to you recently, and you are wondering what this form is and why your Realtor is so insistent that you sign it, don't worry. This is a New York State Department disclosure form, number DOS-1736, from which your agent must explain the details of your agency relationship at your first meaningful contact. This contact could be at your first face to face meeting, or immediately after your first email, phone call in which you discuss the details of transacting a property. Your signing of it only means that the Realtor has done so, and your signature is the proof. It doesn't obligate you to anything. So why is this form so important? In a nutshell, it explains the obligations of the Realtor to you depending on the different types of representation an agent can perform. The following is a breakdown of that form explained with hopefully less legaleese, and some recommendations for buyers and sellers alike.
A seller's agent is engaged by a person selling a property. The agent represents the seller's interests by finding a buyer for the seller's home at a price and on terms agreeable to the selling party. The agent has several financially significant responsibilities to the seller including taking reasonable care throughout the process, being loyal to the interests of the seller, observing complete confidentiality, and fully disclosing any and all relevant information. The agent must act according to the wishes of the seller, and to any specific provisions set forth in the agreement between the agent and the seller.
At no time can a selling agent represent the interests of the buyer. In dealing with buyers, the agent must exercise a reasonable amount of skill and care in performing his or her duties as a Realtor. They must act honestly, fairly and in good faith. Most important, they are required to disclose everything relative to the desirabillity and value of the property, both the good and the bad, except where not required by law. For example, an agent is legally responsible for disclosing the fact that the basement floods during heavy rain. This is a legal requirement. They are NOT required to inform the buyer or buyers agent that the current owners suspect the property is haunted by ghosts or paranorml activity. That kind of information is not required by real estate law.
A buyer's agent is a mirror image of the sellers agent in regards to their relationship with their client. The buyer's agent works for the buyer and must follow the same fiduciary duties to the buyer while working to negotiate the purchase of a home at a price and terms agreeable to the buyer. The buyer's agent must also disclose any information which may materially affect the buyer's ability and willingness to buy the property.
A broker's agent is hired by either a buyer's or seller's agent to help the broker find a property to buy or sell for the clients. The broker agent cannot work for the same firm which hired him or her, and doesn't have contact with the clients. Therefore, the clients do not hold any liability for the actions of the broker agent, as they cannot provide direction or instructions to him. For example, if a buyer wants to sue the seller's agent for whatever reason, the sellers are not held responsible, because they never worked directly with that agent.
So far, things are all pretty straight forward. Buyer's agents work for the buyer - seller's agents work for the seller. Where things get complicated is when the same agent acts for both buyer and seller. This agreement sounds ludicrous - why would you want the same agent who is supposed to look out for your best interests to also be looking out for the best interests of the other side of the transaction? This is exactly the reason a separate designation exists for this kind of transaction. The rules have to be different to guarantee fairness to both parties. The up-side for the Realtor or broker is that they earn both sides of the commission, rather than sharing it with a separate agent representing the other side. The downside is that it provides a host of issues, both legal and moral, for the agent getting into dual agency.
In dual agency, the agent's responsibilities are seriously limited. The agent can no longer fully advise either party when it comes to fiduciary matters, and must become merely a transactional agent, making the deal happen on paper but not advising either party. The agent must carefully disclose the nature of this relationship to both sides, and they must agree in writing to the arrangement. An agent who fails to make this disclosure, or who violates the rules regarding their actions in dual agency, can be fined or have their real estate license revoked.
Dual Agency with Designated Agent
In a situation where one party refuses to sign a dual agency agreement, a broker can appoint another agent from his office to represent the objecting party. Or if a buyer's agent has buyers interested in a property listed by a seller's agent within the same office, Dual Agency with Designated Agent rules apply. The New York Department of State considers this to be dual agency, even if the agents work in separate offices of the same brokerage. With informed consent of both sides, the two agents can negotiate the sale, and advocate on behalf of their client. But fiduciary responsibilities are again restricted, because both agents work under the supervision of the real estate broker.
As in life, real estate is all about relationships. Loyalty, honesty and following the rules of both state-mandated laws and real estate ethics are critical in making every transaction be fair and above board. Sellers and buyers alike should pay attention as your prospective agent explains your agency relationship. If you've never seen the document in the above photo, you need to seriously reconsider the professionalism, if not the honesty, of your agent.
Do you know what the titles mean? What is the difference between an Agent and a Realtor?
It's important that you know the answer to this important question.