By Andy Fletcher
One area of confusion for Buyers and Sellers is the role real estate licensees have in real estate negotiations. There are three basic options in a real estate transaction that a brokerage firm can assume: no brokerage agreement, transaction broker and single agent.
In a no brokerage agreement the agent is simply handling the paperwork of the transaction and cannot represent or negotiate on behalf of the buyer or seller. As a transaction broker the agent provides limited representation and does not have a fiduciary capacity.
In this form of representation the buyer / seller is a customer of the agent and has given up their right to undivided loyalty of the licensee. In other words, a transaction broker may not work to the detriment of either party in a real estate transaction, but conversely cannot work to benefit either party either. Many brokers have opted for this limited representation for financial gain and to avoid legal responsibility for both the broker and the customer.
The highest degree of accountability comes with single agency. As a single agent, the broker has a fiduciary relationship and owes complete allegiance to the buyer or seller, who is then referred to as a Principal or Client. This means that the single agent is not only allowed to work to the benefit of their Principal, by law the agent must work to achieve the best terms for their Principal.
As a fiduciary representative, a single agent must provide Loyalty, Confidentiality and Obedience to the Principal whereas other forms of representation may not. More and more buyers and sellers are looking for the full representation from their broker that single agency provides.
As our industry evolves and customers continue to demand a higher degree of accountability from their real estate broker, agents are faced with the question of whether they want to represent people or paper and in the end, it is the buyer or seller that will decide if they want to be a Principal or a customer.