When the buyer consumer meets the real estate licensee and they discuss the opportunity for representation, the practitioner should discuss the various options the buyer has, including no representation. In the law of agency, there should be an obvious difference in the level of service provided by the licensee depending upon whether the consumer chooses to have representation and creates an agency relationship, or if the consumer desires to act for him/her self and receive only customer level service. So, what is the difference? And, Why is this important in today's market?
Let's take the second question first. With all the dynamics and options available to consumers in this up-side-down market and the multitude of options available, it is extremely difficult for licensees to know all the possibilities, to say nothing about the position of the typical buyer; hence, having professional guidance makes a lot of sense.
When the licensee or REALTOR® engages the consumer in the first substantial meeting in which the buyer's motives, financial capacity and confidential type information is discussed, a disclosure and explanation of agency should be presented and explained to the buyer. The buyer is a "customer" if there is no agency created, meaning that the licensee does not become the agent or representative of the buyer. In this case, the REALTOR® does not take upon him/herself the duties of a fiduciary, meaning a position of "trust." The REALTOR® by license requirement, must still be honest, fair in representations and give full disclosure of all material facts about a property or the transaction. But the REALTOR® does not become advocate for the buyer, saying or doing things to further the interests of the buyer, working to give the buyer a competitive advantage in the transaction. Basically, in this instance, the REALTOR® gives service and information that would be to any third party, one who is not a principal, an immediate or direct party in the transaction.
When the REALTOR® does not enter into an "express" or written agency agreement, but then acts like the agent for the buyer by saying or doing things that causes the buyer to think that the REALTOR® is the agent of the buyer by the behavior or conduct of the REALTOR®, then the REALTOR® has created an "implied" agency, and this is usually an "undisclosed dual" agency. This may result in serious consequences of misrepresentation and inadequate, improper, incomplete, or just bad disclosure. Examples of the type of statements that if made, would be sufficient to create agency in this scenario of customer and the implied, or undisclosed dual agency include: "Don't worry about a thing; I will take care of you." or, "I will get you whatever you need." or, If there is anything you need, don't hesitate to call me." These are illustrations of conduct that demonstrates concern for and about a client, one for whom an agent has a duty to protect.
The idea of Client Level Service, therefore, is exactly that of a relationship in which the agent has created a position of trust, with fiduciary duties to the principal. These duties include: Undivided loyalty, Obedience, Reasonable care and diligence, Confidentiality, Full disclosure and Accounting. In these instances, the agent is duty-bound within the law, to be an advocate for the buyer, look out for the interest of the principal, the buyer in this case, and consider the buyer client as one who is under the protection of the agent.
These agency fiduciary duties are to be honored, upheld and fulfilled by the agent as to what is in the best interest of the buyer client. The agent must suppress the agent's personal interests in the events of the transaction and the relationship in order to serve the principal. This standard of performance should be maintained through the five stages of the real estate transaction including: Needs Assessment, Property Selection, Viewing properties, Negotiating and Follow-through.
In a client relationship, the agent can talk freely with the client and give client counseling, advice and advocacy information. Examples of Client Level Service for a buyer consumer include the following. Keep financial and personal information confidential. Give price and value counsel. Give opinion or provide information regarding property value. Tell the buyer information the agent may have about the seller position that may be to the benefit of the buyer client. Negotiate for the advantage of the buyer client. If a licensee enters into any of these types of topics without a buyer representation agreement, he/she is in danger of implied, undisclosed dual agency, for they are clearly examples of "Client Level Services."
The buyer consumer, therefore, is free to choose whether or not agency representation is something the buyer wants. But it is important for the buyer, and the licensee, to remember, and act accordingly, that if the buyer is a "customer," a consumer without agency representation, the licensee generally will not be providing the level of care and service called for in the "client" relationship.
St. George REALTOR® Jim Coleman is Associate Broker and Partner/Owner of ERA Brokers Consolidated. He Specializes in Residential, Investment and Commercial Real Estate, holding National Designations of Accredited Buyers Representative (ABR), Certified Residential Specialist (CRS), Resort and Second Home Property Specialist (RSPS) and Seniors Real Estate Specialist (SRES). He was recently awarded NAR's new Green designation. You can contact him by e-mail at Jim@JimColeman4Homes.com. Call: (435) 674-0600; or write: Jim Coleman, 201 East St. George Boulevard, St. George, Utah 84770. This and other columns are available at www.RealtorJimC.com/articles.