Real Estate Agents Have No Legal Obligation To Look Out For You Or Your Interests When They Represent You
So you want to sell your house? Or you want to buy your wife her Barbie dream house? You would think real estate agents are required to represent your best interests. That’s where I need to stop you. Why? Because your assumption would be wrong. The real estate agent has no legal obligation to look out for your best interests.
The Consumer Federation of America recently posed that question to a national survey sample of adults. The survey showed 50% of adults believe real estate agents are obligated to look out for their interests. However, that is not entirely true.
All but five states do not require real estate agents to represent the interests of their clients.
Here’s a perfect example. I had a real estate agent list a house for me about fifteen years ago. He insisted I take a lowball offer for $25,000 less than I owed. This would have required me to bring $30,000 to the table. I refused it and fired him when he became belligerent about it.
I relisted the house with another realtor for $20,000 higher than the first agent. A week later, I got an offer for the new listing price. The buyer was offering the higher price was represented by my first listing agent.
I was lucky. My second real estate agent knew how to handle the situation.
Another thing to remember as well is that real estate agents will not show homes listed as “For Sale By Owner.”
The reason? No money is in it for the real estate agent unless the seller is willing to give them a commission.
Former Clients Sue New York Real Estate Agents
The study cites a case in New York where clients of a major real estate brokerage have filed suit The lawsuit alleges the agency stripped thousands of buyers and sellers of the right to employ an agent who is loyal to them and only them.
Former clients allege the firm misuse of dual agency. Real estate agents of a single broker represent both sides of a real estate transaction. As a result, the broker and agents in these cases pocket the entire real estate commission.
The plaintiffs allege they were pushed into either paying more for a house or selling a house for much less because the agents were working for the same broker. This is an inherent conflict of interest. It is designed to keep the full commission in-house.
They also allege that the brokerage made it their goal to do 100% in-house-commission transactions. The company also allegedly paid its agents bonuses when they brought in both sides of the commission. The brokerage has denied the allegations.
The report’s author, Stephen Brobeck told The Real Deal:
Agents Won’t Tell You About Dual Agency Relationship
National Association of Realtors requires brokers to disclose the arrangement to clients.
Stephen Brobeck also says the vast majority of consumers don’t understand the varying types of representation. The key question buyers and sellers need to ask any real estate agent upfront are if the agent is working exclusively through them.
The takeaway: If agents’ disclosures aren’t clear to you, probe further. You need to know who your real estate agent is looking out for. You or them.