In any Real Estate transaction, it is possible for the Agent to represent different parties to the transaction. If he has been hired by the Seller as an Exclusive Listing Agent, then he is practicing Seller Agency. If the real estate agent is representing the Buyer in the negotiations, then he has agreed to Buyer's Agency. If the agent represents both the Seller and the Buyer he is involved in Dual Agency and if the agent represents neither party, it's called Transaction Brokerage. Seller's Agency All Agency agreements should be in writing. Verbal agreements are legal, but not enforceable, so they are only good if all parties co-operate.
When you list a property with a Broker it can either be an Open Listing, or an Exclusive Listing:
Open Listing: An Open Listing is an agreement when a Seller agrees to pay the Broker if he brings a buyer but holds out the possibility that he will find a buyer from a different source and will not owe the Broker a commission. Although it is possible to enter into an Open Listing agreement, if you want to get your property into the Multiple Listing services, they require an exclusive listing agreement.
Exclusive Listing Agreement: An Exclusive Listing Agreement gives the Listing agent the sole right to negotiate with the Seller. All other agents with interested Buyers must go through the Listing agent in order to communicate with the Seller. The Listing agent has an obligation to look out for the best interests of the Seller. In the Atlanta Area when a property is listed in the FMLS or GA MLS, it is agreed that the Exclusive listing agent will co-operate with the Buyer’s agent.
Buyer's Agency: When I first got into real estate, all agents worked for the Seller. The theory was that since the seller paid the commission that the listing agent and the buyer’s agent share, then all agents worked for him! But wait! The buyer brings all the money to the closing and puts it on the table. The attorney takes the Buyer's money and gives some of it to the Seller, some of it to the agents, some of it to the Lender and some of it to the Title, the Survey and the Appraisal companies. So, in a way, the buyer also pays the commission, so is therefore entitled to representation by one of the agents getting paid.
In Georgia, the Brokerages and the two MLS companies have worked out a system. If the property is listed in either FMLS or GA MLS, then the listing agent has already agreed to pay any Buyer's agent licensed in Georgia part of the commission which the seller has agreed to pay him. The commission split is listed in the agent to agent remarks on the listing. The seller pays the commission to the listing agent, and the listing agent splits it with the buyer's agent. So, this means that you can get someone to represent you in the Purchase of your new home and it doesn't cost you anything.
There are forms that establishes Buyer's Agency. they describe the duties and obligations of the Real Estate Agent and the Buyer. Essentially, they both state that the broker will always look out for the BUYER'S best interest, with a couple of significant differences.
Exclusive Buyer's Agency In this case, the buyer agrees if he buys ANY property during the term of the agreement that the buyer's agent will get paid a commission (generally either by the seller or buyer but that part is negotiable). The ANY part is not negotiable.
Non-exclusive Buyer's Agency In this agreement the buyer and the broker agree that if the agent shows a buyer and house and writes and offer on the house that is accepted, then the buyer's agent will be entitled to the commission. In order for the agent to write an offer and advise the Buyer on any aspect of the purchase, then there must be an agency agreement signed.
In either case the agent is looking out for the Buyer's best interest. If he see's something wrong with the house or the contract or the price he should warn the Buyer to seek expert advice (such as inspector or engineer etc.). A good agent will point out the flaws as well as the positives. When you make a Buyer's agency agreement you are agreeing to representation all the way through the transaction. This includes the financing, the inspection, the appraisal, the environmental issues as well as the finding of the perfect home. The Buyer's agency agreement has a section that addresses what to do if you find a house on your own possibly a For Sale by Owner. Many of the FSBO's in this market are offering "agents protected" or offering to pay a Buyer's agent usually half of the average commission. The form says that if the Seller is not willing to pay the Buyer's agent you will guarantee that an agreed upon commission will be paid. Although I would like to have every Buyer sign that agreement, I don't require it initially. I will usually go out with people a couple of times and then if after we have gotten to know each other, if we both want to agree to work together then we can sign it.
From an agent's perspective we can't spend months showing property without some guarantees. Since I believe that a great part of what a Buyer's agent does to earn the fee is involved in good negotiation and preparing good strong contract, I believe that a Buyer can benefit from an agent by more than the commission we are typically paid in this market. The Sellers aren't selling it by themselves so they can lower the price for the Buyer, they want to keep the unpaid commission money for themselves. A good negotiator can get the Seller to sell for less. In a FSBO, typically, I negotiate with the Seller to the bottom line and then we add the commission to the sales price, so it is effectively financed by the Buyer.
Agents who show you property, perhaps in Sunday Open Houses or New Home Subdivision Models, will generally ask you if you are working with and agent and you should say yes! When they give you a sign in sheet there will be a question about whether you are working with an agent. Say yes! It doesn't cost you anything and a knowledgeable agent can help you a lot! (You can say "Dan Connolly with Re/Max is my agent!" ; - )
Dual Agency is the next option to consider. This is when the Broker represents both the buyer and the Seller in the same transaction. Normally the broker owners of the larger real estate companies advise their agents not to try it because it puts the Company in the unenviable position of representing both sides of an argument if the Seller and the Buyer are at odds. I have sold a lot of houses over the years as a Dual Agent. I have listed several subdivisions of condos and townhomes and subdivision agents do it all the time. My belief is that if I am fair and honest with all parties and don't reveal personal or private information about either party to the other, I don't have anything to worry about. A Realtor is bound by a code of ethics. Not all real estate agents are Realtors.
Dual agency also exists when the buyer's agent and the listing agent are both part of the same company. In this case we have Designated agency/ Dual agency where each agent represents their client, but the brokerage represents both sides.
Transaction Brokerage This is the option where the Broker does not represent either party. That is not an option I would consider, unless both the Seller and the Buyer were lawyers.