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We believe it is important that all parties to a real estate transaction --Buyers and Sellers -- should understand the unique and valuable role that real estate brokers and their salespersons play in the marketing of real estate. That role has been defined over the years by both law and custom. It may or may not be the same in Virginia as it is in some other states. The following is intended to give you a brief explanation of your options.
When dealing with a REALTOR in a real estate transaction, you are usually either a client or a customer of that REALTOR. A client is someone who has formed a brokerage relationship with a REALTOR, usually by signing a contract, and the REALTOR is their agent. Parties who do not have a brokerage relationship with the REALTOR are customers.
When acting as a standard agent, a REALTOR has certain duties and obligations. The basic duties are defined in Virginia law (see especially Section 54.1, Chapter 21, Article 3), and additional duties can be created by a brokerage agreement with a client, usually in writing. REALTORS are also governed by a strict Code of Ethics.
A REALTOR you choose as your agent will fully represent your best interests. An agent owes first allegiance to his or her client. There are some limits when an agent has two clients in the same transaction (see overlapping brokerage relationships). Until recently, brokerage relationships with an individual REALTOR also bound the other agents of the same real estate company. Now, agents within the same firm may represent opposing parties to a transaction, provided that each party is notified (see "Designated Dual Representation").
Among the standard duties a REALTOR owes a client are:
Performing the terms of the brokerage agreement.
Promoting the client's best interests by seeking a transaction acceptable to the client.
Providing financial accounting.
Disclosing known material facts about the property or the transaction.
Exercising ordinary care.
Maintaining client confidentiality, unless the information is required by law to be disclosed.
An agent also has duties to a customer:
Treat all parties honestly and not knowingly give false information.
Inform all customers and potential customers of the nature of their brokerage relationships, if any.
Disclose material adverse facts pertaining to the physical condition of the property of which the Realtor is actually aware.
Comply with the law, including the Fair Housing Act.
There are limits on what an agent must tell a customer. Customers may wish to look to other sources for information important to their decisions.
The REALTOR you choose as your agent will fully represent your best interests. An agent owes first allegiance to his or her client.
STANDARD SELLER REPRESENTATION
If you are selling property and sign a listing agreement with a REALTOR, then the REALTOR and his or her brokerage firm become your agent and you are their client. Salespersons for other companies who are cooperating with the listing company and showing it to prospective buyers or tenants may also be your agents. Their goal is to seek a transaction on terms acceptable to you, and they owe you the standard agent duties outlined above.
If you are a prospective buyer or tenant who is dealing with a REALTOR who represents the seller or landlord, remember that you are a customer of that REALTOR and not a client.
A seller's representative can still provide valuable service to customers - showing property, preparing and presenting any offers and counteroffers, comparing financing alternatives, and disclosing known adverse material facts about the condition of the property. All agents in a transaction must be truthful with all parties, but the seller representative's highest duty is to the client.
STANDARD BUYER REPRESENTATION
Prospective buyers and tenants have realized in recent years that they may want to have a REALTOR of their own representing them in a transaction. They do this by forming their own brokerage relationship, usually by written agreement, with a REALTOR who becomes their agent and owes them the duties of a standard agent. A representative for the prospective buyer or tenant can freely advise the buyer-client about all aspects of the property.
A seller dealing with a buyer's agent should remember that in this relationship, the seller is the customer and the REALTOR is working for the buyer. In many cases, the listing agent will share the commission with the buyer's representative, but that doesn't diminish the buyer representative's obligation to the buyer.
OVERLAPPING BROKERAGE RELATIONSHIPS
The increasing popularity of buyer representation has increased the number of transactions where a REALTOR might have overlapping brokerage relationships. This happens when a buyer or tenant client of a real estate agent wants to purchase or rent one of that agent's listings. As a result, the REALTOR has legal and contractual obligations to both clients. In dealing with these situations, there are two ways for the transaction to proceed:
Standard Dual Representation
Virginia Law allows a real estate firm or salesperson to represent both sides of a real estate transaction as long as all the parties give consent. Because the firm and agent have a legal obligation to represent both parties, and may know confidential information about one party of value to the other party, there are limits on what the company or salesperson may do in dual representation cases.
The company or salesperson must not disclose information that is confidential or would create a negotiating advantage for either client, such as whether the seller will take a lower price, or the buyer will pay a higher price. Generally, information about the motivations of the parties must also be kept confidential. In effect, dual representation limits the REALTOR to a neutral role.
Designated Representation
If two agents from the same firm are representing opposing parties in a transaction, a supervising broker in the firm will be designated to oversee the transaction. Each of the respective agents will then be able to offer full service to his or her client.
The supervising broker will need to maintain the confidentiality of any client information which could be of value in negotiations. The two agents must not share confidential information with each other.
