A fellow Realtor(R) recently told me a very sad tale. He lost a probable Buyer Client because she walked in to a builder's model home on a Sunday and executed a Real Estate Purchase Contract with the agent on duty. This builder's agent disclosed his agency relationship with the buyer as a "Limited Agent", but did not have a corresponding Buyer Agency Agreement with her. Making matters worse (for the Buyer), was that the builder's agent was actually a co-agent ... the "other" listing agent was also the builder! Had the builder's agent handled the situation correctly, the Buyer would certainly have sought her own representation. The form that should have been reviewed and signed by the buyer was an Unrepresented Buyer Disclosure.
How in the world could anyone believe that builder's agent would be "neutral" in this situation? Of course the agent represents the builder! PS This buyer paid full, list price for the house, with no upgrades and no assistance with closing costs ... in today's real estate market.
There is a section, paragraph 5. of the UAR Listing Agreement that gives me the opportunity to discuss and counsel my Seller Clients about Agency Relationships and the advantages/disadvantages of Limited Agency. My explanation is simple ... I ask if the seller wants me to show their home to potential buyers who are my Buyer Clients (yes or no) and let them know that their answer will not affect our relationship one way or another. At that point they either authorize me, or not, to be a "Limited Agent". I also explain that if a buyer who does not have a real estate agent representing them contacts me to see their home and decides that they want to make an offer, and I have no pre-existing relationship with that buyer, that I will continue to represent only my Seller Clients' interests and negotiate only on their behalf. Of course, I remind the seller that I still have the ethical and legal obligation to treat the buyer with honesty, fair dealing, and good faith.
Some information to consider before agreeing to Limited Agency ...
Limited Agency:
(Excerpt from the UAR Limited Agency Agreement) A Limited Agent represents both seller and buyer in the same transaction and works to assist in negotiating a mutually acceptable transaction. A Limited Agent has fiduciary duties to both seller and buyer. However, those duties are "limited" because the agent cannot provide to both parties undivided loyalty, full confidentiality and full disclosure of all information known to the agent. For this reason, a Limited Agent must remain neutral in the representation of a seller and buyer, and may not disclose to either party information likely to weaken the bargaining position of the other; such as, the highest price the buyer will pay or the lowest price the seller will accept. A Limited Agent must, however, disclose to both parties material information known to the Limited Agent regarding a defect in the Property and/or the ability of each party to fulfill agreed upon obligations, and must disclose information given to the Limited Agent in confidence, by either party, if the failure to disclose would be a material misrepresentation regarding the Property.
Unrepresented Buyer:
(Excerpt from the UAR Unrepresented Buyer Disclosure) The Property shown above is presently listed for sale through the Company. Consequently, the Company and the Agent are representing the Seller. BY SIGNING THIS UNREPRESENTED BUYER DISCLOSURE THE BUYER ACKNOWLEDGES AND AGREES THAT THE AGENT AND THE COMPANY WILL ONLY REPRESENT THE SELLER IN THIS TRANSACTION AS A SELLER'S AGENT. THE BUYER ACKNOWLEDGES THAT THE COMPANY AND THE AGENT HAVE ADVISED THE BUYER THAT THE BUYER IS ENTITLED TO BE REPRESENTED BY A BUYER'S AGENT WHO WILL REPRESENT ONLY THE BUYER. THE BUYER HAS HOWEVER, ELECTED NOT TO BE REPRESENTED BY A REAL ESTATE AGENT IN THIS TRANSACTION.
From the UAR On-line Legal Library:
May an agent represent a buyer for the purchase of the agent's own property? Is it legal for a real estate agent, who is the owner/seller, to represent a Buyer (i.e., as a limited agent) who wishes to make an offer and purchase the agent's property?
Answer: No. Utah Admin Code §162-6.1.11.3.1 indicates that a "licensee may not act or attempt to act as a limited agent in any transaction in which: a) the licensee is a principal in the transaction." A licensee is considered to be a principal in the transaction if he/she has "any ownership interest in the property." Utah Admin Code §162-6.1.3. Here, as the owner/seller, the agent has an interest in the transaction, and is therefore the Principal.
I feel strongly that restrictions that Limited Agency creates on the relationship with our clients should be considered very seriously before either the Client or the Agent agrees to it. Too often I've seen agents "give away" their relationship with their clients because they don't understand Limited Agency or are worried that they will lose the buyer side if they have to give the buyer the opportunity to have their own agent representation.
Kim Novak is a real estate broker with RE/MAX Masters in Salt Lake City and Layton, Utah. She holds a BSBA with an emphasis in Sales & Marketing and has achieved the designations of ABR: Accredited Buyer Representative, CRS: Certified Residential Specialist, CSP: Certified New Home Sales Professional, GRI: Graduate of the Realtor® Institute, SRES: Seniors Real Estate Specialist and ePRO: Internet Professional. Licensed in 1995, Kim has closed over 500 sales during her full time real estate career. ActiveRain Profile LinkedIn Profile Facebook Me!
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Kim Novak is a Broker Associate with RE/MAX Masters in Salt Lake City and Layton, Utah. She holds a BSBA with an emphasis in Sales & Marketing and has achieved the designations of ABR: Accredited Buyer Representative, CDPE: Certified Distressed Property Expert, CRS: Certified Residential Specialist, CSP: Certified New Home Sales Professional, GRI: Graduate of the Realtor® Institute, SRES: Seniors Real Estate Specialist and ePRO: Internet Professional. Licensed in 1995, Kim has closed over 500 sales during her full time real estate career.
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