It wasn’t until recent times that home buyers have been afforded the same choices for representation in a real estate transaction as sellers. Prior to the introduction of buyer agency, the signing of a listing agreement created a legal relationship where the real estate brokers and their agents represented the seller. Even agents who worked with buyers were legally bound to represent the interests of the seller in the transaction. Today, buyer agency allows agents to represent the seller, the buyer or both (with written consent).
While real estate laws differ from state to state, most now require real estate agents to disclose who they represent and provide consumers with a disclosure outlining their options for representation in a real estate transaction. This disclosure is NOT A CONTRACT and is designed to inform the consumer of his/her options under state law. Until a buyer agreement is signed, the consumer should keep all personal, financial and confidential information to themselves. For buyers, conversations with the real estate agent should be limited to their property search. Without a buyer agreement in place, agents would be obligated to share any information disclosed by the buyer which may impact the transaction, to the seller client.
Once a consumer signs a buyer agreement, a legal contract is established obligating the real estate agent to represent the best interests of their buyer client. This relationship is called a fiduciary relationship. Wikipedia defines fiduciary duty as “a legal or ethical relationship of confidence or trust between two or more parties.” Real estate agents are licensed by their respective state and the responsibility of the real estate agent is defined by state law, the Realtors® Code of Ethics, and general agency law. Agents owe their buyer clients confidentiality, obedience, accountability, loyalty (including using reasonable care & diligence) and disclosure. Fiduciary obligation is not determined by who pays the commission (which is typically the seller), but through contract.
Buyers are not obligated to sign a buyer representation agreement in order to work with a real estate agent. They may work with the real estate agent as an unrepresented buyer customer, but since there isn’t a contract, the buyer would not enjoy the same rights afforded to a seller or buyer client.
Also, there may be restrictions placed on how a real estate agent can service the buyer customer. For example, in Connecticut, a real estate agent may only show an unrepresented buyer their own firms’ listings. They may not show an unrepresented buyer properties listed with other real estate firms unless they get permission from the seller in writing. If agreed to, the seller would be consenting to sub-agency, creating a fiduciary obligation between the real estate agent and seller, not the buyer.
Regardless of the agency relationship, real estate agents are obligated to disclose any material defects about a property and to treat all parties to a real estate transaction fairly and honestly. That makes it all the more important for consumers to select a real estate professional who is affiliated with a reputable and well known firm. It is recommended that consumers check their state or local real estate laws for details regarding their representation rights in a real estate transaction.