The representation of someone constitutes an agency. There are three types of agencies in a real estate transaction; one agent can represent the seller only, the buyer only or the seller and buyer at the same time.
The Listing Agent
When the agent represents the seller of real estate, they are known as the listing agent of the property. This agent represents the best interests of the seller and has a goal to help the homeowner get the highest and best price for their property.
The Buyer's Agent
An agent can represent the buyer only. This happens in one of two ways. First, the buyer agent can have a written agreement with the buyer to represent their best interest. That agreement is known as a Buyer Broker Agreement. It dictates what the agent is to do for the buyer to acquire real property. The buyer agent represents the best interests of the buyer (who of course, wants the best value for their money).
A buyer can work with an agent without a buyer broker agreement but there are limitations on the relationship. If there is no agreement in place, then the buyer agent, is really a sub-agent of the seller's agent. And, the seller's agent's job is to get the seller the highest price. That's why a buyer broker agreement is so important.
Here is what Money Magazine says about buyer agency:
"Buyers average a 5% savings when represented by a
Buyer's Broker, rather than a sales agent"
What could you do with an extra 5%? Probably a lot.
U.S. News & World Report says:
"If you agent isn't a Buyer Broker, then he works for the seller."
Transactional Agency or Dual Agent
But, you should watch out for agents who want to act as transactional or dual agents representing both parties, buyer and seller, in a real estate transaction. It is hard to do this and look out for the best interests of both clients.
Consider hiring a real estate professional that uses a buyer broker agreement and takes a consulting approach to real estate.
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