Saturday the 16th of August the new rules for real estate transaction officially went into effect. Under these new rules buyers are required to sign an agreement of representation with their real estate agent and won’t be allowed to tour any house unless they have this contract in place. For sellers this agreement was already a common practice in order to list a home but the type of representation they were signing for was rarely discussed. So why is it imperative that we understand the type of representation we will be offered at signing the agreement before we go out to see homes or list our property? And why you should be very careful if you decide to work as a buyer directly with the listing agent?
If and when you go to buy or sell a house, the distinction between hiring a single agent versus hiring a transaction broker has huge ripple effects that can make or break your deal.
In real estate, there are two main categories of representation for agents: single agency and transaction broker
Single agent representation
Single Agency is a form of representation in which the agent works exclusively for either the buyer or the seller (never for both). In this relationship, the agent has a fiduciary duty to act in the best interest of their client, whether that be the buyer or the seller. This means that the agent must keep all information confidential, provide full disclosure of any relevant information, and work to negotiate the best deal possible for their client. Single agency is a highly specialized form of representation and requires a high level of trust and commitment from both the agent and the client.
One of the key advantages of Single Agency is the high level of representation that the agent provides to their client. Additionally, because the agent has a fiduciary duty to their client, the client can trust that their best interests are being protected.
Transactional broker representation
A Transaction Broker assists the buyer or seller or both throughout a real estate transaction by performing terms of any written or oral agreement, fully informing the parties, presenting offers and assisting the parties with any contract, including the closing of the transaction without being an agent or advocate for any of the parties. A transaction broker must use reasonable skill and care in the performance of any oral or written agreement, and must make the same disclosures as agents about all adverse material facts actually known by the transaction broker concerning a property or a buyer’s financial ability to perform the terms of a transaction and, if a residential property, whether the buyer intends to occupy the property.
A Transaction Broker cannot act in the buyer’s or the seller’s interests, by law, they work to facilitate the transaction, communicate between both parties, write the contract and attend the closing. A Transaction Broker is not working for you as a client, but works to get the deal to closing. A Transaction Broker will NOT negotiate on behalf of or act as an advocate for you. They simply assist the buyer and seller in the transaction without any loyalty extended to either party. They are a neutral party and have no responsibility to protect your interests, aside from a number of statutory obligations and responsibilities.
In Florida by default agents have always worked as transactional brokers, its less responsibility and less liability. With these new rules in place it’s very important to understand this distinction and to know that we are allowed to represent you in the form that best suits you.
In conclusion, understanding the difference between single agency and transaction broker is crucial for buyers and sellers who are looking to work with a real estate agent.
In a real estate transaction, buyers and sellers are called “adverse parties” because their interests are polar opposites. For example, buyers want to know as much as possible about the property they are buying while it’s in the seller’s interest to disclose as little as possible. Agents are supposed to be hired to represent their respective sides and to make sure each side is treated honestly and fairly. You can see how difficult this is for one person to represent both parties.
Bottom Line
So if you’re thinking of buying don’t think you will get a better deal if you go directly to the listing agent, you will be required to sign with him a buyers representation agreement and in order to represent both sides he will need to be in a transactional broker relationship with the seller and he wont be acting on your best interest. As a seller you also want your agent to be 100% dedicated to you and getting you the best deal.
Always specify what type of representation you want before entering into contract.
