Michigan has a new law governing real estate agency, which was just put into effect this summer. The law goes to great lengths to define what agency is all about and what services you should expect from a real estate agent, either a buyer agent or a seller's agent. That new law has resulted in me having to explain about agency, using a three page Agency Disclosure form that my company has produced. I have to do that the first time that I meet on business with new clients, either buyers or potential sellers, and it should be covered before we even start talking. Why is that important? Well one of the main points in the law concerning agency has to do with making sure the client doesn't disclose confidential information before he/she knows for whom the agent is working.
It's important for the consumer to understand that a real estate agent can't be working for no one in a real estate transaction. The law specifies that the agent, by default, is working for the sellers, if he/she has no contract to represent the buyer(s). So that, oh so friendly, agent who says to you, "Don't worry about signing anything now, we'll get to that later" is working for the seller and you should not trust them with any confidential information. In fact, you should not trust them at all, because they are starting out a relationship with you by breaking the law. I've written here before about not just jumping into the car with a real estate agent and assuming that he/she represents you, just because they agreed to show you some houses. Certainly the same holds true for agents that you meet at open houses or call off a sign. They work for he sellers and you should not tell them any confidential information.
What is the confidential information that you might blurt out? It can be as simple as why you are moving or what your upper limit is for a new home. If the seller's agent knows those two pieces of information before negotiations even start, whom do you think has the advantage? And if you are a potential seller, don't tell candidates that you are interviewing as potential listing agents about the on-gong fight with your lousy neighbor over an encroachment or the fact that you've lost your job and may lose the house soon. If that candidate isn't chosen, but comes back later with a buyer, whom do you think will be better positioned to negotiate the selling price.
Real Estate One is a designated agency company, which means that we have very strict procedures for identifying the people in our company who will be designated to represent you, as you agent and supervising manager. You can then rightfully assume that everyone else in Real Estate One, even in the local office, is working for the other side of the transaction. Real Estate One also has very thorough guidelines for agents about making sure that potential clients are given the Agency Disclosure form on the first meaningful contact and are ask to sign a representation contract, if they are buyers who wish to have a buyer agent.
Unfortunately, not all companies stress agency as much as we do, so you still hear of cases of agents with the attitude of "agency, we don't need no stinkin' agency." Be afraid, be very afraid of those agents - some of them big names in the business, with a long time in the business. Sleaziness comes in many forms, but it usually starts by choosing to ignore the law. Ignoring ethics follows on quickly behind that.
So, before you get in the car or before you start discussing the agent's qualifications and plan for marketing your house, make sure that they explain agency to you and disclose to you for whom they are working. In the case of the listing agent interview, the agent whom you are interviewing should state up front that you should not disclose any confidential information during the interview, since you have not yet made your choice and thus have no agency relationship with that agent. Beware of those who don't warn and and who may in fact spend time drawing out information from you. They could be back with a well-armed buyer later.
We'll cover in another posting what the law says you can and should expect from an agent with whom you have a buyer or seller contract. That will also allow us to discuss what you won't get from limited service brokers/agents, the so-called discount brokers.