There was a time, not too long ago, when the seller or landlord in a real estate transaction paid the broker and that settled the issue. All the agents represented the seller or landlord and nobody represented the buyer or tenant. Recent changes, however, have made it necessary to discuss agency or representation when using the services of a real estate company.

Let’s talk about what representation means for a moment. As a seller or landlord, having an agent represent you means your agent has a responsibility to you. The agent is to look out for your best interests. This means to endeavor to secure the highest price possible; to seek qualified purchasers or tenants who will be able to complete the transaction; to keep confidential any non-material information you disclose which might adversely affect your ability to achieve these goals. Some of these facts might include that you are selling due to a divorce or major health problem or that you have to sell or rent within a specific time period to start a new job elsewhere. This knowledge in the hands of your purchaser or tenant can give them an upper hand in the negotiating process.

For buyers or renters, having an agent represent you means essentially the same benefits afforded sellers or landlords above would be available to you. Your agent should review comparable transactions to ensure that you are not paying too much; your agent should keep information about your personal situation confidential to the extent that it might place you in a poor negotiating position; your agent should advise you that you have the right to certain inspections or certifications to which you are not automatically entitled. Further, your agent must disclose to you any information the seller or landlord or their agent lets slip that could give you a step up in negotiating a better deal.

Now, for both, it is important to realize that there is certain information which should never be disclosed. There are laws directed at “stigmatized properties”. Such properties, for example, would include those in which a murder took place or an occupant died of AIDS. In these cases, the information pertains to people; not properties. If the property was in a flood plain or on an earthquake fault line, that pertains to the property. Information about the property, even (or especially) if adverse, must be disclosed. Information about the occupants cannot be disclosed. As an agent, if a renter or buyer asks me if any prior occupant died of AIDS, I must refuse to answer. It is a violation of law to disclose that information. If I, as an agent, fail to tell a buyer or renter that the house had a wet basement, I could be liable, but I cannot even be sued for failing to disclose information about stigmatized properties.

In the old days, the seller or landlord paid the commission and the agent represented that party. Agents spent a lot of time working with buyers and renters “helping” them find a suitable property, never telling them that they represented the other side in this transaction. Now, that is considered unfair. So, that all parties must have a written agency disclosure.  In the absence of written disclosure, an agent working with a buyer will be presumed to be representing the buyer.

For a buyer or renter, hiring an agent means that you truly have someone in your corner. Your agent should negotiate a fee for services and a method of payment as well as a description of services. For example, you may be able to expect your agent to set down the features you want in a home including bedrooms, price & location. Then, your agent may be required to conduct a multiple list search at least weekly and to report the findings in writing or by phone. This may go on for a period of say a month or three months. You may be required to pay something in advance, something at closing or both. Your agreement may state that you are responsible for the fees or any portion of the fee that the seller or landlord is not willing to pay on your behalf. The result may be that you pay nothing out of pocket.

Sellers & landlords still get the same benefits they always have. Their agents generally advertise, hold open houses, analyze and present offers and help close the transaction. So, why would a seller or landlord be willing to pay the buyer’s or renter’s agent? Simple economics… they don’t always have the money. But, in exchange for paying that fee and allowing buyer brokerage, much of the liability is shifted to the buyer/renter’s agent. If your own agent forgets to tell a buyer that you have a wet basement, you and your agent can be held responsible. But, if the information is disclosed to the buyer/renter’s agent and that agent fails to disclose the information, it is that agent who is at fault. And, the fact is, that the fee you pay to the buyer’s or renter’s agent is generally the same or comparable to the fee you would have paid to a cooperating agent or subagent under the old ways. The buyer’s or renter’s agent replaces the cooperating agent.

One other point to remember is that it is currently illegal in Maryland for an agent to represent both parties in a real estate transaction. So, once a buyer or renter hires an agent, that agent can no longer show his or her own listings to that buyer.

Let’s face it, the way we used to do business was a fallacy. Agents drove buyers and renters around in their cars, sometimes for days. They became friends. They ate together. The buyers / renters believed the agent was “helping” them and the agents had a hard time remembering that each home they set foot in created a new agent/client relationship in which they represented that seller or landlord against their newfound friends. The new way allows everyone to love the one they’re with.