When buying or selling real estate, you have the right to utilize a real estate agent or a non-agent facilitator (though non-agent facilitators are not common here in Massachusetts). With real estate agents, there are four main forms of agency available, as well as two options on brokerage management.
FOUR TYPE OF AGENTS
- Buyer’s Agent
- Seller’s Agent
- Dual Agent
TWO MANAGEMENT STYLES
- Traditional Agency
- Designated Agency
The state of Massachusetts has decided that with so many options, consumers MUST be made aware of their alternatives before they begin discussing properties. Once the agent and client have gotten to a point where they are speaking about addresses, prices, or any other pertinent information on a specific property, it is time to take out and explain the Massachusetts Mandatory Licensee-Consumer Relationship Disclosure form.
When you choose to enact an agent, there are a few obligatory roles that always exist no matter the agency option you choose. The most important role of any agent that represents you is to act as your fiduciary. A fiduciary acts as a trustee, making decisions with the client’s best interests in mind at all times. This means protecting your financial and personal interests at all times. The list of all 6 fiduciary responsibilities due from the agent to both the buyer and the seller are sometimes referred to as Old Car, which is an acronym for Obedience, Loyalty, Disclosure, Confidentiality, Accountability, and Reasonable Care/Diligence.
Another role of all agents is the disclosure form. It is a State law to present this form to each and every client, no matter the relationship. Agents must take time to review it with a client and either field questions or direct them to the Massachusetts Board of Real Estate until the client completely understands it. Once the process is complete, the client can decide to sign it or there is a check box by the bottom to indicate that the client refused to sign the notice.
A buyer’s agent represents the client who is looking to purchase real estate in the transaction. They initially help the client to review budget, housing needs, locations, and any other pertinent information. The agent then works with the client to identify the right property for them and sets up showings. Once the client has decided on a property it is then the buyer’s agent’s duty to negotiate the best possible terms and pricing for their client on the property. During the whole process, it is the goal of the buyer’s agent to make the process as easy and smooth as possible with the client’s best interests in mind at all times.
Upon acceptance of the offer, the agent then works with their client to set up a home inspection or any other necessary tests/inspections. If any issues arise in the inspection period, the agent then works on the buyer’s behalf to negotiate as much money as possible to be utilized for mitigation. After this is complete, they move into a purchase and sale agreement.
The final step for the buyer’s agent is to ensure that the bank and all other parties involved keep to the time tables laid out by the purchase and sale agreement. They must ensure at all times to remain in contract even if it means signing an extension to ensure they will NEVER forfeit a client’s deposit. Once all the background work is done, the closing takes place. The buyer’s agent is not obligated to be there, but most make their best effort to appear at every closing.
Most commonly referred to as a listing agent, a seller’s agent represents a client who wishes to sell a piece of real estate. Seller’s agents begin the process by meeting with a potential client at the piece of real estate and talk about the property as well as view it and take photos. The agent then goes back to their office and puts together a Comparative Market Analysis (CMA). This CMA compares similar properties in the same area that are recently sold, on the market, or under agreement. The CMA allows the agent to calculate a number, based on these variables, that would be the best price to list the property for.
Once a listing price is agreed upon, the agent has a fiduciary agreement with and works on behalf of their seller to market the property, meet with potential buyers, and obtain an offer. The only time a seller’s agent has an obligation to all other parties is if there are any known material defects on the property. This could be a leaky basement, bad roof, or any other item the seller has disclosed to the agent. The agent must disclose this to all interested parties.
A seller’s agent then fields any and all offers that come in on a property. Upon receipt of ALL offers, the seller’s agent must present them to the seller and get the seller’s thoughts. No matter the offer terms, the agent has a duty to present it to their client. The agent then helps the client work through the offer or multiple offers to decide which, if any, work for the seller.
Once a decision has been made, the agent works to negotiate the best possible terms and price for their sellers. Upon completion of this, they sign an offer with the client and work towards a purchase and sale agreement after the inspection period. If something does come up in the inspection, the agent tries their best to get the buyers to accept as little as possible but still hold the deal together.
The next phase is to sign the purchase and sale agreement. Once signed, the purchase and sale agreement acts as a timeline and it is the agent’s job to ensure all the dates are adhered to. Sometimes this means the agent must call the buyer’s agent or bank just to ensure both sides of the deal come together for the closing. The closing is optional for the agent but best practice is to show up to every closing.
Dual agency is where an agent works on behalf of both the buyer and sellers in a transaction but only with the express and informed consent of both the buyer and seller. Dual agency must always be under written consent from both parties. A dual agent shall remain neutral in any conflicting interests of the seller and buyer. The dual agent is still responsible for confidentiality, material information, and accounting for all funds. Dual agency leads to the loss of many of the benefits of representation by an agent, including having someone to talk to for advice on the offer. For the more experienced real estate client dual agency can streamline the process using only one agent cutting down on the back and forth.
SELLER’S SUB AGENTS
Sub agents are hired by the seller’s agent to help sell or purchase a piece of real estate. In order to enact a sub agent, an agent must have written permission from their client. The sub agent will show the property to buyers, however, sub agents are trying to get the best price possible for the seller. This practice is not very common in Massachusetts because it can create liability for the seller and the seller’s agent if the sub agent misrepresents the property to a buyer in some way.
BUYER’S SUB AGENTS
Buyer’s agents may also hire sub agents to help a buyer locate and purchase a piece of real estate. The use of a buyer’s sub agent also requires written permission from the client. The buyer’s sub agent will show the property to buyers, and help with the overall search for the property. Like seller sub agency, this practice is not very common in Massachusetts due to the vicarious liability it creates for the buyer and the buyer’s agent if the sub agent were to misrepresent the property.
A facilitator is when a real estate agent works a deal to assist the seller and buyer reach an agreement on a property, but does not represent either one specifically in the transaction. The broker, and the facilitator associated with them, have a duty to represent both the buyer and seller honestly and accurately by disclosing known material defects in the property and owe a duty to account for all funds. This practice is also not very common in Massachusetts.
At a traditional agency, every agent within an office represents you and your best interests. This means that if a phone call is overheard or a piece of paper accidentally left around and information is shared, there is not a conflict of interest. Each agent at a traditional agency owes the clients the full rights of a fiduciary agreement. In contrast, dual agency would be if any agent within the office represented the other side of the transaction.
In a designated agency, only the agent that has been “designated” to the client represents them. This means that if another agent in the office has a buyer for a listing within the same office, it is not known as dual agency. The only agent in the brokerage that represents the client is the original agent they signed the contract with. The agent must adhere to all the same rules listed above for both buyer’s and seller’s agents.
Movementum Realty is an expert real estate brokerage located at 720 Washington Street Suite 401 Hanover, MA. We work across the entire South Shore, including but not limited to Duxbury, Pembroke, Marshfield, Scituate, Cohasset, Higham, Norwell, Plymouth, Cape Cod, Boston, Kingston, Hanover, Weymouth, Cape Cod, and more. Call today and find the property of your dreams. (781)929-9039
To find out more about the Massachusetts Mandatory Licensee-Consumer Relationship Disclosure Form visit the State’s website.