When you’re involved in a real-estate transaction, do you assume that the realty agents are required to represent the best interests of the home buyer or seller with whom they are working?
The Consumer Federation of America recently posed that question to a national survey sample of adults, and 50 percent answered yes. Another 16 percent said “yes, almost always.” So two-thirds of consumers in the survey had roughly the same impression.
But a new report from the Consumer Federation, an umbrella group representing nearly 300 local and state consumer organizations, suggests that it’s not necessarily so. The reality, according to the study, is that “real estate agents often are not required by law to represent the interests of buyers or sellers.” As a result, sometimes things can go seriously awry.
Among the common forms of representation examined in the CFA study:
— Single agent. In this case, the agent works solely for the client and has a fiduciary responsibility to the client.
— Subagent. This is where the agent works with the buyer but has a fiduciary duty to the seller.
— Transactional agent. In this case, the agent works with both the buyer and seller to facilitate a sale but has no fiduciary responsibility to either party.
— Dual agency. The study describes this as an arrangement whereby “the agent somehow is expected to represent the interest of both the seller and the buyer in a home purchase.”
“The Holy Grail is to capture the entire commission,” Brobeck told me. “The listing agent might say to the seller, we’ve got a hot buyer for your house” who happens to be a colleague.
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