Episode 5: Here are the links mentioned in this weeks episode:
Agency Info, National Association of REALTORS
The REALTOR® Advantage, Georgia Association of REALTORS
#005 – How to make sure that your agent is looking out for your best interests.
This is a bit of a technical discussion about the types of real estate agency available. The conversation also reveals how you can make sure that you enter into the agency agreement with your real estate broker so that your best interests are at the center of the relationship.
Understanding real estate brokerage relationships is important so that you can establish the best representation.
[Podcast Music Intro]
Brokerage Agency Relationships
Hello everybody. This is John Marion. Welcome to another episode of the Agent On Duty podcast. I am John Marion and I am the Agent On Duty.
In this episode, I’m going to talk about understanding real estate brokerage relationships. And a lot of the information I’m going to share will be somewhat specific to the state of Georgia. But the general principles I’m going to talk about is probably true in most jurisdictions, or most States. And so the brokerage relationship laws are on the state level.
There may be some things that are different in the state that you live in, and I will point those out when I believe that some of the information I’m sharing may not be the same as in your state. In any case, you do want to check with real estate brokers in your state to get the most accurate information.
The general information I’m going to share, will be very helpful to you as you seek to understand what it means to have a relationship with a real estate broker.
Preview of Next Week’s Episode: Home Inspections
Before I get into the details of this week’s episode, I want to tell you about next week’s episode.
I did an interview with John Battaglia with At Ease Inspections. This is a home inspection company. So next week we will be talking about home inspections, but here’s a preview of what you can expect in next week’s episode about home inspections.
John Battaglia Speaking:
“And then there’s all the wildlife too. You get up in the attic and we run into snakes, bats, raccoons, all sorts of stuff in attics and crawl spaces all the time. A couple years ago, I had about a six foot long black snake chasing me around a crawl space.”
Okay. So you are definitely going to want to tune in next week. When we talk about home inspections.
Understanding Real Estate Brokerage Relationships
Now, moving on to this week’s topic at hand, understanding real estate brokerage relationships. So basically there are two main types of relationships that you can have with a broker. Two different types of relationships.
One is you can be represented by a broker as a client, or you can get the services of a broker as a customer. In general only licensed real estate brokers can be paid a commission to help consumers buy, sell, or lease property. And brokers have agents. And those who say they are a real estate agent are with a brokerage. And so many agents are not the main broker in their company, but they’re the agents in that brokerage. And you can sign on to be a client and allow the broker to represent you as a client and to look after your best interests.
Signed Broker Client Relationship Contract Agreement
In the state of Georgia to establish that relationship it must take place in writing. You must have a signed a brokerage agreement with the broker, and that’s probably true in most States. It’s definitely true in the state of Georgia. Without a signed brokerage agreement there really is no a broker client relationship.
And so it’s a very important, even when signing on as a customer, you will be asked to sign a form stating that the relationship is that you are a customer and the broker is not representing you as a client.
So let me talk about being a customer first, and then we’ll get into what it means to be a client. When you are a customer, you can ask the broker to, for example, fill out and provide contract forms and fill them out for you as you direct. So you’ll have a professional set of contract forms, legal, good quality contracts that you can use and the broker will write up for you. And you could use them in your real estate transaction while you are not being represented by the broker.
Other things that broker might do for you as a customer is to provide statistics and data about home sales in your market, or to run a comparative market analysis of the price of your home. You can contract with a broker to provide professional services for you to help you in your real estate transaction while not being represented by the broker,
Most people who engage with a broker to buy or sell or home sign on to be represented by the broker in the in the real estate transaction. So this is really the best relationship that you can have with a broker. The broker is responsible for keeping all things confidential – except those things that need to be disclosed by law – but your relationship with the broker as a confidential relationship, and they will protect your best interests as you negotiate your way through a real estate transaction or looking at homes and getting to the point that you get something under contract and then guiding you through the whole process and helping you every step of the way the broker will represent your best interests.
So that is the best relationship you can have with a broker. And you can do this either as a seller or as a buyer.
And this gets into some more detail of the broker client relationships. So there are two kinds of client relationships that you can have with the broker, depending on whether you are a seller or in some cases, a landlord, you own the property, and you’re looking for a tenant to rent out your property. Or your broker can be representing you as a buyer or in some cases as a tenant to help find you a rental.
But in most cases for home sales, obviously the broker is either representing you as a seller or you as a buyer. Now as a seller, the agency occurs when a listing agreement is signed which is mandatory in order to establish that relationship. The brokerage agreement needs to be signed in writing, obviously.
There is a standard form that most brokers use, I’m sure, in every state to establish that relationship.
And if you are a buyer you can sign on with a buyer’s agent, an agent that specializes in representing buyers.
In a previous podcast, I talked about commission compensation. In most cases in the industry, the money that is brought to the table to pay the commissions is paid by the seller. The seller who signs on with a broker agrees to pay a real estate commission to the broker when a buyer is found for the sale of that property. The listing broker representing the seller, doesn’t always keep that entire commission, but they agree to share it with another broker who brings a buyer to buy that property.
So just to recap that real quick, when you sign on with a broker, they are representing you either as a seller or as a buyer. And that is the relationship that you want to pursue with a broker to get that representation so that your best interests are looked after by the broker.
Other Agency Types
Additionally, there are other types of agencies that exist that you could possibly have with a broker, or that could exist within your brokerage agreement. I’m going to go over them very quickly. I don’t want to get too technical about this because they may vary from state to state of what you will encounter.
In my market, the next three agencies that I’ll talk about I only deal with one of one of these and not the other two. And I’ll explain that as we go along.
So there’s something called designated agency. And so this takes place when two agents that work for the same broker are representing clients on two different sides of the transaction. So in the brokerage that I work in, for example, there are many agents that work for the broker. The broker has different offices around North Metro Atlanta. I’ve done real estate transactions with the agent on the other side being with the same broker. We don’t always know each other, but we could know each other. So this is called designated agency when both agents have the same broker. The broker is sworn towards keeping all information that comes to the broker confidential, and that information about either party, is not transferred or communicated to the agent on the other side of a transaction. There’s a wall of separation if you will.
And so the broker really has designated a particular agent to represent a buyer and a particular agent to represent a seller in a transaction. And it’s as if they are agents that are working for two different brokerages. So that relationship is the same as if that one agent was with a completely different brokerage, which happens probably in most transactions in most markets. This is called designated agency. And that really doesn’t affect whether the agent that you are working with is representing you as a buyer or seller, but that’s within the brokerage.
Two other types of agency that I do want to mention, and (I never deal with this in my business because the broker that I work with – and I think most brokers stay away from these two different types of agents agencies. One is called dual agency, and my brokerage does not offer that type of agency. A dual agency is where a broker is representing both parties in a transaction. The broker is representing both the seller and the buyer and the broker is supposed to keep the information confidential from each party.
And it’s really very difficult. This is probably not the best way to have a real estate brokerage relationship. I think it would be hard for you as a buyer or seller to get yourself into a situation where you’re working with an agent that’s also representing the party on the other side, because most brokers just seem to want to stay away from that. At least that’s been my experience.
And like I said, with my broker we don’t even offer that type of agency. So we couldn’t even get into that, but theoretically it is possible to exist in the state of Georgia. It’s allowed by law. That needs to be disclosed.
When you, as a buyer, are in a dual agency situation that broker needs to disclose that to you. In other States, I don’t know what the laws are in the other States.
So if you are listening to this and you are a real estate broker outside of the state of Georgia, or even if you’re inside the state of Georgia and you have some more information, please go on the show notes. I’ll give a link on the show notes to get onto the blog where you can leave information. I would love to hear from you with any information that you can provide. And if you have ever been a home buyer or a home seller, and you got involved in a transaction where the agent was representing both sides of the party, if you have any interesting information to share about that, I’d love to hear about that. And we can talk about that in another podcast episode because I’m sure there’s a lot of interesting things that take place when dual agency is involved.
But for the most part, you, as a buyer or a seller, you really should stay away from that. Go for a broker that will represent you either to be designated as your agent and they’ll work, with you representing you. And when you get into a transaction where a home is being sold by the same broker that’s representing you, you want to make sure that you’re in a designated agency situation and not in a dual agency situation.
So there’s also another type of agency called sub agency. Many years ago, this was how the real estate industry worked. Most residential real estate transactions were represented by listing brokers, representing sellers. And the buyers were not represented at all. They may have be working with an agent, but that agent in fact, was a sub agent of the listing agent.
And so that’s an antiquated way of doing it. Buyer’s agency has become the way that we do real estate, where buyers are actually represented by their own brokers. So subagency is, in the residential real estate industry anyway, is – I’m not going to say it’s non-existent because it does still exist. But it’s not really used that much. And you don’t want to be, if you’re a buyer, you don’t really want to be in that situation.
Again, you want to have your own agent looking out for your best interests and not an agent that’s working for the other party.
I don’t want to get into any more technical things about that agency. Brokerage relationships can be extremely technical, and I want to keep our discussion today very practical for you as a buyer or a seller to work effectively with a real estate broker.
Signing a Broker-Client Agreement
Now, if you are a buyer, this is probably one of the best first things that you can do even long before you decide to buy a home: So, for example, if you think you’re going to buy a home a year from now, it’s not too early to start building a relationship or establishing a relationship with a buyer’s agent.
The best buyer’s agents are working in this industry full time, and they have a long term vision for being involved on a professional level in the real estate industry. And you want to develop that relationship as early on as possible before you purchase a home. You can spend a year looking at homes online and, and gathering information and getting ready to get qualified for a mortgage or for a life event that would trigger you to actually go out and start looking at homes.
It’s never too early to have that relationship with a buyer’s agent.
Most buyers that I encounter, they do wait until the last minute to sign on with an agent. They’ll look online and cruise around to do drive buys of homes. That’s all good to get that information that way. There’s nothing wrong with that, by doing that and not establishing a relationship with an agent you’re really missing out on getting the best quality information that you can have access to, including what we call pocket listings or coming soon listings, and having that relationship where you can have your questions answered, and you can position yourself in the best position to be represented by a broker that looks after your best interests.
So I would I would encourage you if you are thinking of buying a home, begin to establish that relationship.
There are many, many buyer’s agents out there. And by engaging an agent early in the process – you may want to talk to two or three different agents to see what is the best fit for you.
I would go for those brokers and agents that are actively in the market that can give you that information. I would avoid working with a part time agent. Now there’s a lot of part-time agents in the business. There’s nothing wrong with that of course, that’s totally allowed that somebody work the real estate industry part-time. But you really do want to work with an agent that’s full-time in the business. That way they can give you the time and really provide the services that you need, especially if you’re in that long-term relationship where you have contacted them 12 months or six months before you even start looking at homes. They can take care of you and look out for your best interests.
And there’s a lot that you can learn from your agent long before you ever begin the home buying process. That’s the best way, in my opinion, to work with an agent. It is most likely you will be working with an agent, and it doesn’t make sense to wait until the last minute.
For whatever reason – I think because there’s just a lot of misunderstandings of how a buyer is supposed to work with an agent – I don’t know if a buyers think that they might have to pay the agent money or something like that – but there sometimes is resistance for buyers entering that relationship early in the process. But it makes the most sense to do that sooner rather than later.
So that would be the main takeaway that I have for you. If you’re seeking to purchase a property and understand the buyer brokerage relationship in a real estate transaction, begin that relationship early on in the process.
So in the show notes and in the blog notes for this episode, I’m going to leave some links that you can access so that you can read more about real estate brokerage relationships.
It’s really important that you understand these basic client broker relationships, whether you’re a seller or a buyer, and I’ll provide links for that.
I do have a two-page document from the Georgia Association of REALTORS, but this is copyrighted information. if the links that I provide don’t go deep enough and you want access to more information, just shoot me a note. When I establish that personal contact with you, I can then personally send you this two page document. Its called The ABCs of Agency:, Understanding Real Estate Brokerage Relationships in Georgia.
So ask me for that document. I am not free just to post it online and make it available for a download, but if you make that one-on-one connection with me, even if you’re not in the state of Georgia and would like this I can send that to you when you reach out to me personally.
So anyway, to access the links, go to
and you’ll find this week’s episode and all the links and all the information mentioned on today’s podcast.
Thank you for joining me on this week’s episode. Come back next week, where we will talk about home inspections.
I am John Marion and I am the Agent On Duty.
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