What you need to know about your Agent Relationship…
Welcome to my multi-part series of what everyone should know before buying or selling a home in Georgia. Kicking it off is one of the most misunderstood topics, brokerage agreements and compensation. If you are working with a real estate agent, you will be asked to sign a brokerage agreement. They are different depending on which side of the transaction you were on, but effectively cover the same topic… Compensation.
“Agency” is the relationship a buyer or seller has with their real estate broker/agent. The agreement you sign is with the real estate broker; the agent is the brokerage representative. Here are terms that you should know:
Client – as a client the real estate agent acts as your advocate, advisor and negotiator, but can only negotiate per your instructions and not on their own.
Customer – as a customer, the real estate agent can assist with documentation during the transaction as instructed by you but cannot advise you beyond license law. As an example, the agent can write an offer for exactly what you would like to offer but advise you on the offer or any negotiating terms of the contract beyond explaining legal definitions.
Dual Agency -when the real estate agent represents both parties (buyer and seller) as clients. While many brokerages do not engage in dual agency due to potential conflict of interest, it is legal in Georgia.
Designated Agent – when two different agents working for the same Broker are representing each side of the transaction (buyer and seller). This is different from Dual Agency because there is no conflict of interest regarding client confidentiality.
In any brokerage agreement, the compensation is pre-determined and agreed upon. In a buyer’s brokerage agreement, there is an option to request that compensation be paid by the seller. However, if the seller declines, then the buyer will be responsible for payment which can be added into the mortgage loan. If the seller is offering less compensation than the buyer agreed to, the buyer will be responsible for the difference at closing. This is not always a straightforward percentage of the purchase price; some agents require an upfront retainer and may also charge additional transaction fees.
On the listing side, a brokerage engagement agreement addresses both the listing and buyer’s brokerage compensation. A seller can choose to offer a specific percentage or amount to be split between brokerages, direct a specific amount of compensation to be offered to each brokerage, make buyer’s brokerage compensation “negotiable” or choose not to offer compensation to the buyer’s broker at all.
The listing agreement also covers various terms of the listing… Length of time, price, listing restrictions, etc. and all broker agreements also include an “agency protection period” as well. BEWARE If you enter into engagement agreements with multiple agents it is critical that you understand which type of agency agreement you are entering as it is highly possible that you could be legally responsible for multiple compensations at the end of the transaction.
