Professional real estate agents know that having an agent on your side can save you money, lessen stress, and prevent mistakes when buying or selling a home.  Regrettably, experience shows that most customers don't understand the importance of agency until something goes wrong with their transaction!  Informed choice of representation by a licensed real estate agent can make a HUGE difference in your purchase or sale.  Let's explore why.

AGENT or SALESPERSON?
Although real estate agents are called salespeople in Minnesota, agency is actually very different from sales.  A traditional salesperson's job is to convince you to buy a product whether you need it or not.  Real estate agents perform a contrasting role.  They are legally required to negotiate for the best price and terms for their clients, keep their clients' welfare as priority, and use their expertise and training to expedite as smooth and beneficial a transaction as possible.  Their primary function is to work in their CLIENTS' best interests, NOT to sell houses.

AGENCY DEFINED
Agency is a LEGALLY defined written agreement between two parties (the agent and the client) which forms a FIDUCIARY RELATIONSHIP.  A fiduciary relationship is a special legal affiliation in which one person (the agent) acts FOR or ON BEHALF OF another person (the client) in dealing with a third party (the buyer for your house or the seller of the house you want to buy).  The agency relationship is created by a contract for representation signed by you and your agent (on behalf of his/her whole company).  With the formation of the agency contract, your agent works on YOUR BEHALF in the real estate transaction.

As your representative, your agent is legally mandated to give you the following fiduciary duties:

• Loyalty - act only in your best interest

• Obedience - carry out all of your lawful instructions

• Disclosure - tell you about all material facts of which s/he has knowledge and which might impact your use and enjoyment of the property

• Confidentiality - keep all of your confidential information private unless it is a material fact that must legally be disclosed

• Reasonable care - use all of his/her skills, knowledge, training, and experience to carefully perform duties on your behalf

• Accounting - account for any property or money received as an agent

Until a contract for representation is signed, you are only a customer and will only receive confidentiality from the agent.  To receive full representation with all the fiduciary duties listed above, you and your agent must sign a contract for representation.

THE SHIFT IN AGENCY
The mid-1980's was a pivotal time in real estate.  Before this time, ALL real estate agents represented THE SELLER.  Even the agents who worked with buyers, and didn't know the sellers, were representing the sellers!  When buyers realized they had no representation, law suits were filed for non-disclosure of the agency relationship with the seller.  This litigation precipitated changes in how agency was disclosed to the consumer and made representation for the buyer possible.  Explanation of how an agent can represent a client now has to be disclosed BEFORE a contract is signed.  Now both buyers and sellers can make informed choices about how they want an agent to represent them.

In Minnesota, all agents are required to review the form "Agency Relationships in Real Estate Transactions" with prospective clients early in the relationship and BEFORE a contract for representation is signed.  An agent can represent their client as:

• Seller's Broker:  The broker or salesperson who lists the property and acts in the seller's best interests.

• Subagent:  An agent in the listing company who is working with a buyer as a customer instead of a client.  In this case, the agent must represent the seller and act in the seller's best interest and disclose any information he knows about the buyer to the seller!

• Buyer's Broker:  The broker or salesperson who acts on behalf of the buyer.

• Dual Agent:  This role occurs when one or two agents from the same company represent both the buyer and the seller of the same house.  Both buyer and seller must agree to accept dual agency once the limitations are understood.  The Minnesota agency disclosure states:  "This role limits the level of representation the broker and salesperson can provide, and prohibits them from acting exclusively for either party . . . Dual agents may not advocate for one party to the detriment of the other."  (Minnesota Association of Realtors’® form:  Agency Relationships in Real Estate Transactions, 8/19).  Before agreeing to dual agency, explore how it will impact your transaction.  Ask your agent if s/he will be able to advise you on price and terms; convey information known about the other client which might help you in your negotiation; give advice after the closing if something goes wrong; etc.  The answers to these questions can help you decide if dual agency is okay for you!

• Facilitator:  When there is no contract for representation, the agent is acting as a facilitator and does not owe the customer any fiduciary duties except confidentiality.  In this capacity, the agent can provide services for you, but no representation.