Different Types of Real Estate Agents and What They Do

The following is an excerpt from Buying a Home: The Missing Manual. At the end I've included two sidebars (in red) on related topics.

In your quest for a new home, the person you'll interact with most is your real estate agent. She's a lot more than a smiling face in the classifieds, hovering over pictures of homes for sale. She's a licensed professional, authorized to negotiate and carry out the sale of real property on behalf of a buyer, a seller—or sometimes both simultaneously. Read on to learn the different roles real estate agents play, how they make their money, and—most importantly—how you find one who works well with you.

Agents and Brokers and Realtors

Every state and the District of Columbia require real estate agents to hold a license, but not all licenses are the same. Most states define two types of real estate professionals: broker and agent. But you may come across several other terms as well. Here's the lowdown:

• Real estate broker. This is an experienced real estate professional who has met state requirements to own, manage, or operate a real estate company. Licensing requirements usually include experience in the industry as a sales agent, advanced coursework, and passing an exam. (In some states, attorneys can become real estate brokers, even if they've never worked as real estate agents.) The broker in a real estate firm is its "boss," the person who takes responsibility for all the agents who work there. Depending on where you live, you may hear real estate brokers referred to as principal brokers or qualifying brokers.

Note: Some licensed brokers choose not to run their own firm but to work as agents for another broker in that broker's firm. These people are called associate brokers.

• Real estate agent. This is someone who's taken classes and passed a state-administered exam to get a license to sell property. The educational requirements cover the specific state's real estate laws and practices. Real estate agents are associated with a real estate broker and act under that broker's authority. Depending on where you live, real estate agents may be called subagents, sales agents, real estate salespeople, or, confusingly, brokers.

As you look for a home, you'll probably work primarily with a real estate agent. Real estate agents can represent the seller of a house, the buyer of a house, or both:

• Seller's agent. Also called a listing agent, this person works exclusively for the seller. Most often, you'll deal with the seller through the seller's agent. Except in cases where you have a specific agreement with an agent to represent you as a buyer (see the next item on this list), you should assume that any agent you work with is a seller's agent. Even if an agent didn't personally list the seller's property, any agent involved in the sale of a property is considered a subagent of the listing agent—unless that agent has a contract to represent only you, the buyer (see "Buyers' Agent" below).

Note: Agency means representation, and an agent is a representative. If you enter into an agency agreement with someone, it means that you've both agreed that that person will act as your representative.

• Buyer's agent. A buyer's agent works solely for you the buyer, and represents your interests throughout the real estate transaction, from initial house hunting through closing the deal. Buyer's agency is a formal agreement, signed by you and a particular real estate agent, saying that the agent represents you and your interests in buying a home.

Tip: In a transaction, the buyer's agent is called, confusingly enough, the selling agent. To keep from being muddled by the terminology, think of agents' roles this way: In transactions that have both a listing (seller's) and a buyer's agent, the listing agent puts a home on the market and represents the current owner; the selling agent facilitates the sale by representing the buyer who makes that sale possible.

• Dual agent. This is a single agent who represents both the seller and the buyer in the same transaction. In most states, dual agency is legal so long as the agent gets the consent of both the buyer and the seller. But as the box on Section 4.1.2 explains, dual agency can lead to conflicts of interest.

Note: Dual agency can also occur when two agents who work for the same broker represent both parties in a real estate transaction. The box on Section 4.1.2 tells you more.

As a homebuyer, you should work with a buyer's agent. You want to be sure that your interests are represented in negotiations and that your agent keeps your confidential information to herself. Later in this chapter, you'll find out how to choose a good buyer's agent.

Note: If a real estate agent fails to let you know that you're in a dual agency situation—that is, the agent represents both you and the seller or both your agent and the seller's agent work for the same firm—you may be able to revoke the purchase agreement you signed and sue the agent for concealing the relationship.

What a Real Estate Agent Does

Real estate agents are experts in local real estate: They monitor the market daily and look for housing trends (in prices, inventory, location, and so on). An agent tells you about available houses in your price range and takes you on tours of homes that interest you. Much of an agent's day is taken up by phone calls, meetings, and home tours.

For sellers, a listing (seller's) agent:

• Researches recent sales of comparable homes to help determine an asking price
• Helps sellers prepare their homes for sale
• Lists the home with the Multiple Listing Service (known in the trade as the MLS, a searchable list of homes for sale within a particular region)
• Advertises the home through various channels, which may include the Internet, classified ads, real estate magazines, and on-site advertising (the latter usually comprising a "For Sale" sign on the lawn and takeaway information sheets about the home)
• Takes other real estate agents on a walkthrough so they can tell their clients about the home
• Hosts open houses
• Presents offers from interested buyers
• Negotiates the terms of the sale

As a buyer, you can expect a real estate agent (either the seller's agent or your own) to work with you in these ways:

• Listen to your priorities in looking for a home, including your price range
• Contact listing agents to check availability and schedule showings
• Show you suitable properties
• Notify you as new properties appear on the market
• Suggest sources of financing. Tip: You're not bound to work with any lender recommended by an agent. Section 8.2 has tips for finding the best mortgage.
• Help you write a purchase offer and present that offer to the seller
• Negotiate with the seller on your behalf
• Write a purchase-and-sale agreement (Section 10.2.1)
• Set up and attend the home's appraisal and inspection
• Review disclosure statements and let you know about problems with a property. Tip: Agents know what to look for in disclosure statements and other documents. Although it's important to find an agent you like, the most important quality an agent has to offer is his expertise.
• Deal with contingencies (Section 10.2.3)
• Provide information to your mortgage officer, real estate attorney, and escrow officer
• Coordinate with other parties to schedule the closing
• Attend the closing

Note: There are some things a real estate can't tell you by law. If you have questions about a neighborhood's character, diversity, crime rate, or schools, you have to look elsewhere for the answers. Federal fair housing laws prevent real estate agents from "steering" clients toward one neighborhood or away from another one. The idea behind the law was to prevent discrimination—to prevent real estate agents from deciding whether a client is a good or bad fit for a particular neighborhood. Despite the law's good intentions, it can be frustrating to have basic demographic questions go unanswered. Chapter 3 suggests ways to find those answers.

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Sidebar #1: Frequently Asked Question: Real Estate Agent vs. Realtor

What's the difference between a real estate agent and a Realtor?

REALTOR® is a registered trademark of the National Association of Realtors. Any real estate agent who claims this title must be a member in good standing of the NAR. To join the NAR, agents agree to abide by a code of ethics that includes honesty, putting clients' interests ahead of their own, and disclosing all relevant facts about a property.

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Sidebar #2: Up To Speed: Dual Agency

You're just starting to look for a new home and haven't yet selected a real estate agent. One weekend afternoon, you drive through the neighborhood where you want to live and see an Open House sign. You stop to take a look. Inside, everything is perfect. The house has the right number of bedrooms and bathrooms, the kitchen is a cook's dream, and the place is in move-in condition. "I love it!" you tell the smiling real estate agent who's hosting the open house. "I want to make an offer."

"Great!" she replies. "Let's write up the paperwork."

She looks nice. She's friendly and helpful. She's eager to help you buy the home. But there's just one problem. She's already representing someone: the seller.

Real estate agents have a fiduciary duty to their clients. That means that a real estate agent—whether a seller's or a buyer's agent—is legally bound to represent your best interests in any transaction. But when you start negotiating with a seller's agent, your best interests don't always line up with theirs. Yes, you want to buy the house and the seller wants to sell it. But you want to buy the house for the lowest price possible, and the seller wants to sell it for the highest price possible. See where the conflict comes in? In that situation, how can the same agent have the best interests of both of you at heart?

Most states allow dual agency, on the condition that the real estate agent tells both you and the seller that she's representing you both—and all parties sign a document agreeing to that. But before you agree to dual agency, think long and hard about whether you want the seller's agent representing you, too. For example, you might tell your agent confidentially that you've been preapproved for a mortgage of up to $250,000, but you don't want to bid more than $230,000 on a particular home. The agent knows that the seller wants to get at least $245,000 for that same home. Although a good agent always keeps your confidential information confidential, it may be tempting in this situation to try to convince you to raise your offer.

Dual agency also comes into play when a homebuyer and seller are represented by two different agents who work for the same broker. This kind of dual agency may be called designated agency, and if your state allows it, you'll probably have to sign a statement saying you agree to have the same agency represent both you and the seller. Some agencies pay agents a bonus for selling in-house listings because the agency makes more money in such transactions—conflict of interest, anyone? If you want to buy a home that's listed with your buyer's agent's brokerage, make sure that your interests come before the broker's.

Comments

[mdb]

I would add, unless you (the buyer) are paying the buyer's agent - the agent gets a % of the sale price and as such works for the seller. Unless you are paying his salary - don't trust him - good advice in any transaction.

[Mark]

Don't forget that REALTORS pay annual membership dues to the NAR. And NAR is among the largest lobbies in DC. NAR has proven highly unethical with their past marketing--very much responsible for the housing bubble with their "buy now or be priced out forever" books by their former chief economist. Realtors are used house salespeople. Plain and simply. Buyer beware!!!

[The Extra Money Blog]

cannot agree more Mark - remember the days when sellers "hooked up" with their buddy appraisers (who realtors allowed you to work with) who would write an appraisal valuing homes MUCH more than it's worth so their buddy owners could cash out / refi? the NAR has some involvement in that as well - conveniently turning the blind eye on it. as a real estate investor over the years, i have used agents and brokers as nothing more than conduits to MLS listings, negotiations, paper work etc. no one is to be trusted when money is involved - it's just business ;)

[David M]

I do not agree with MDB. Even if you do not pay the buyer agent - they can and will work for you NOT the seller. Yes they get a percentage of the sale. However, if you do not purchase because the price is to high - the buyer agent gets $0, thus they have an incentive to help you lower the price so you will go thru with the sale.

BTW, Great blog entry!

[DCS]

There are good and bad in every business, but the bottom line is everyone really works for themselves. The only person who works for you is you. So never let someone else "do all the work" for you, even as your representative. Make sure you are well informed and paying attention. If you just hand the tiller over to someone and then walk away, you'll end up where they want to go every time.

[MattJ]

buyer's agent, seller's agent... neither works for you, neither works for the seller.

Real estate agents work for the SALE, if they think they can get a sale by convincing the seller to drop their price, they'll do that, if they think they can get a sale by convincing the buyer to agree to a higher price, they'll do that.

If you're buying a house... hire a lawyer. He works for you.

[Truth]

MattJ, I'm not sure if I agree with you on the part that real estate agents neither work for you(buyer) or seller but work for the SALE.

1st of all, the buyer's agent or seller's agent have to list the property for sale or help locate a property which cost money & time. Show the property, sometimes it takes months to list or find which takes time & money. Good agents would educate the seller and/or buyer on the entire process of the transaction, knowledge equals to money. After (sometimes) months of work if the agent is lucky, they will write up an offer/contract. Most of the time after months of work, the buyer and/or seller decides not to look anymore or not to renew the listing. All that effort for nothing. And you said the lawyer works for you. LOL You're clueless when it comes to purchasing properties. The lawyer's job is to make sure the contract protects the buyer which is written up by the agents(the agent usually write it in a way to protect the buyer). The lawyer uses a title company to do work(title search on the property) which the buyer pays for. The he contacts the seller's attorney(if there is one) to schedule a closing. And you have to pay your attorney no matter you buy the property or not.

Don't get me wrong, you do want an attorney to represent you during closing. But MattJ, you're just clueless of what the agents and attorneys do when it comes to purchasing real estate.