Legal Definitions
The Commonwealth of Massachusetts has adopted a comprehensive system of laws and regulations governing real estate brokerage and agency, including the relationships between brokers/salespersons and home sellers and buyers. These laws include a Mandatory Licensee-Consumer Relationship Disclosure form intended to educate consumers regarding agency relationships in real estate transactions. The purpose of this disclosure form is to help ensure that consumers clearly understand whether or not they are being represented in a real estate purchase or sale, as well as detailing the implications of agency relationships in which the consumer is assisted - but not represented - by a real estate broker or agent.
Definition of Agency
Sellers are always represented as clients, but buyers may sometimes choose not to be represented as a client. An agency representation relationship is created by mutual agreement between the real estate broker/salesperson and the consumer (seller or buyer). In an agency representation relationship, the consumer being represented is referred to as a “client.” In a client/agent relationship, the broker/salesperson is bound to work for the best interests of the client and owes certain fiduciary duties to the client. These fiduciary duties include undivided loyalty, lawful obedience, reasonable care and diligence, full disclosure, confidentiality and accounting for funds.
If, for some reason, a buyer does not wish to enter into an agency representation relationship, then the buyer is considered a “customer.” A broker/salesperson may assist customers either in the capacity of a Facilitator or as a Seller’s Agent. A broker/salesperson acting as a Facilitator owes no fiduciary duties to the customer; a Seller’s Agent actually owes fiduciary duties to the seller, even if that broker/salesperson is assisting a buyer customer. However, all customers are entitled to be treated fairly and honestly, and to have known material defects in a property disclosed by all brokers/salespersons regardless of agency affiliation or relationship.
Designated Agency Representation
Coldwell Banker Residential Brokerage is a Designated Agency real estate broker, as provided under Massachusetts real estate agency law. This means that when a seller or buyer hires Coldwell Banker Residential Brokerage to represent them in an agency relationship, the individual broker/salesperson (or team) will be designated as the exclusive representative for that client, and no other individual broker/salesperson will represent that client unless specifically disclosed or agreed. This allows the designated agent to offer a full range of services to the client, advocate for the client’s best interests, offer advice on pricing and negotiation tactics, as well as owing the client the full range of fiduciary duties discussed above in every circumstance (with the exception of dual agency, as discussed further below). The designated agent can offer the client the full range of services regardless of whether a perspective purchaser or seller on the other side of a transaction is working with - or represented by - a Coldwell Banker Residential Brokerage broker/salesperson or another real estate firm.
Seller Agency Representation
When a seller hires a broker/salesperson to list his/her property, state law requires the broker/salesperson to provide the seller with the Mandatory Licensee-Consumer Relationship Disclosure form. This form clearly explains that a seller’s agent must put the seller’s interest first, and negotiate the best price and terms for the seller client.
When a seller is interviewing a broker/salesperson before hiring a listing agent, the seller should not share any personal information (such as the seller’s urgency, motivation or financial situation with the broker/salesperson being interviewed). This is because that broker/salesperson could use any information disclosed by the seller during the interview process to assist a prospective purchaser who may later become interested in the property, in the event a broker/salesperson is not hired by the seller. However, once a broker/salesperson is hired by a seller, any confidential information disclosed is protected from disclosure unless the seller consents.
Working Relationships with Buyers
State law dictates that buyers must be provided with the Mandatory Licensee-Consumer Relationship Disclosure form at the first personal meeting with a broker/salesperson. This form explains the three ways in which a real estate broker/salesperson can assist the buyer.
The buyer can hire the broker/salesperson as a buyer’s representative by entering into an Exclusive Right to Represent Buyer Agreement. This establishes a designated agent/client relationship, as previously discussed. In a buyer representation relationship, the broker/salesperson must put the buyer’s interests first and must negotiate the best price and terms for the buyer. In this relationship, the broker/salesperson also owes to the buyer all fiduciary duties associated with agency representation, including undivided loyalty, lawful obedience, reasonable care and diligence, full disclosure, confidentiality and accounting for funds. This is the relationship most buyers anticipate when they begin working with a broker/salesperson to find a home.
The second alternative is that the buyer may choose to have the broker/salesperson assist simply in the role of a Facilitator. A Facilitator does not represent the buyer (or a seller), and thus cannot advise or counsel the buyer regarding pricing, negotiation or strategies, and cannot advocate for the buyer’s interests or desires. A Facilitator may merely assist the buyer to find properties of interest and convey any purchase proposals from the buyer to the seller or the seller’s agent. A buyer working with a Facilitator may, at a later time, transform his/her agency in order to take advantage of all the services provided by such representation.
Finally, if a buyer is interested in a property listed for sale by Coldwell Banker Residential Brokerage the buyer may choose to work with the Coldwell Banker Residential Brokerage broker/salesperson who is acting as a seller’s listing agent in that agent’s capacity as a seller’s agent. It is important for the buyer to understand that such a seller’s agent represents the seller and not the buyer, and is bound to look out for the seller’s best interests, including trying to get the best price and terms for the seller. A seller’s agent also owes all fiduciary duties to the seller, not the buyer, but a seller’s agent is required to treat a buyer fairly and honestly and to disclose known material defects in a property.
Dual Agency Representation
In the event that a seller and buyer are both being represented in an agency relationship by the same broker/salesperson, then that broker/salesperson is in what is called a dual agency relationship. A broker that offers both seller agency representation and buyer agency representation must disclose this to all clients at the time of hiring, and the broker/salesperson must have both clients’ consent in order to represent both a seller and a buyer in agency relationships in the same transaction.
If a dual agency situation occurs and both clients have consented to dual agency, then the individual broker/salesperson may continue to assist both parties in the purchase and sale transaction. In a dual agency situation, however, the broker/salesperson no longer represents either party exclusively and will not be able to provide either party with the full range of services available in non-dual agency situations. The dual agent will be authorized to facilitate negotiations between the buyer and the seller, but shall be neutral with regards to any conflicting interests of the parties. Moreover, the dual agent is not permitted to disclose any material confidential personal information of either party without that client’s permission, or otherwise as may be required by law.
If a dual agency situation occurs, but either client (or both) does not consent to dual agency, then the office manager will appoint another broker/salesperson to be the exclusive representative of one of the clients. In this case, the new broker/salesperson will provide the full range of services to the client and will owe all fiduciary duties to the client, as previously discussed. In addition, in this situation the original broker/salesperson will not disclose to either party any material confidential personal information of the other party without that client’s permission, or otherwise as may be required by law.
The Bottom Line
Designated Buyer Representation is about providing the commitment, service and confidentiality buyers expect. Designated buyer representation is not automatic, though. You must formalize the relationship in a written agreement in order to take advantage of these benefits. Coldwell Banker Residential Brokerage salespersons and brokers are highly-trained professionals devoted to providing simple satisfaction, 100% of the time.
Client
A client is defined as the principal in an agency relationship to whom the real estate broker/salesperson owes all fiduciary duties, and in whose best interest the broker/salesperson is working. The real estate broker/salesperson works for the client, who can be the buyer or seller.
Customer
The real estate broker/salesperson merely works with a customer, and not for that customer. In a customer relationship, the broker/salesperson may work with the customer as a Facilitator, in which case the broker/salesperson does not work for either the buyer or seller. In the alternative, a broker/salesperson may work with a buyer customer as a Seller’s Agent, in which case the broker/salesperson will actually be working for the seller, not the buyer. In either case, the broker/salesperson is not permitted to make recommendations or give advice to a customer. In the case of Seller’s Agency, they may be bound to make recommendations and give advice to a seller contrary to the buyer’s interests.
The above content was provided by the Coldwell Banker brochure on Agency and is subject to change without notice. |
