Consumers should know of agent's allegiance


August 30, 1998

Dear Mr. Azrael:

My wife and I decided several months ago to move to Howard County and either have a new house built or purchase a relatively new house in Ellicott City.

Consequently we visited numerous builders' models and had just about decided on a builder and a location when we received an unsolicited card in the mail from a real estate agent, reporting that he had just sold a house in our neighborhood and offering to meet with us to give us an assessment of our present house for purposes of selling it.

We called the agent and, after meeting with him, we decided that we would put our house on the market as soon as we were sure of what we wanted to build and where we wanted to relocate.

The agent prepared the standard paperwork involved with putting our house on the market and presented it to us. At the same time he offered to take us around to some existing homes that he thought might be of interest to us. He showed us four such houses.

My wife and I thought he was doing this so that we would make an early decision and sign the paperwork to put our house on the market.

In the meantime, my wife and I continued to meet with the builder. The real estate agent accompanied us to one or two of our meetings with the builders' representative but did not, repeat, did not participate in any of our discussions in any sort of substantive way.

Within about two weeks, we made our final decision and met again (alone) with the builders' representative to draw up a contract.

It was at this point that the builders' representative informed us that there would be a substantial fee paid to the real estate agent for representing us.

We were astounded. We have never signed any document appointing him as our agent nor had we implied that he would be our agent for purposes of purchasing a new house.

Please advise me on the ethics of this situation as far the real estate agent is concerned.

Martin Kirchhausen, Pikesville

Dear Mr. Kirchhausen:

Consumers often voice confusion about whom real estate agents represent. That is why the General Assembly enacted a law requesting real estate licensees to give consumers written disclosure concerning their agency relationship.

Four types of agency are permitted:

Seller's agent: A seller's agent works for the real estate company that lists and markets the property for the sellers or landlords, and exclusively represents the sellers or landlords. That means that the agent may assist the buyer or tenant in purchasing or renting the property, but his or her duty of loyalty is only to the sellers or landlord. The seller pays the agent's fee as specified in the written listing agreement.

Cooperating agent: A cooperating agent works for a real estate company different from the company for which the seller's agent works. The cooperating agent can assist a buyer or tenant in purchasing or renting a property, but the agent's duty of loyalty is only to the seller or landlord. The cooperating agent's fee is paid by the seller or landlord through the seller's agent's company.

Buyer's agent: A buyer or tenant may enter into a written contract with a real estate agent which provides that the agent will act on the buyer's behalf in locating a property to buy or rent. The agent is the buyer's agent, whose duty of loyalty is only to the buyer. A buyer's agent assists the buyer in evaluating properties and preparing offers and negotiates in the best interests of the buyer or tenant. The agent's fee is paid according to the written agreement with the buyer or tenant.

Dual agents: The possibility of a dual agency arises when the buyer's agent and the seller's agent both work for the same real estate company, and the buyer is interested in property listed by that company. A dual agent does not exclusively represent either the buyer or seller and there may be a conflict of interest because the interests of the seller and buyer may be adverse. Both buyer and seller must consent in writing to a dual agency. The broker will appoint one licensed salesperson to represent the buyer's interest and a different licensed salesperson to represent the seller's interest.

If either the buyer or seller, or landlord or tenant, declines to consent in writing to dual agency, the seller or landlord continues to be represented by the seller's agent under the terms of the list agreement.

The buyer or tenant has several options:

Enter into a written buyer agency agreement with an agent from a different company to provide exclusive representations.

Alternatively, the buyer or tenant may elect not to be represented by an agent of his or her own, but simply to receive assistance from the seller's agent, or from a cooperating agent from another company. Any violation of the agency disclosure law exposes the real estate agent to discipline by the Maryland Real Estate Commission.

Based on the facts in Mr. Kirchhausen's letter, the agent originally prepared paperwork for you to hire him and his company as a seller's agent to sell your home.

The same agent also showed you a number of properties to buy. He also accompanied you on one or two meetings with a builder with whom you were considering building a house on a lot that you would purchase. Since you signed no written agreement with the agent to represent you in purchasing a property or selecting a builder, the agent could be entitled to a commission only if he were acting as a seller's agent or a cooperating agent for the seller or builder of the properties you were shown.

The agency disclosure law required the agent to disclose his status to you in writing before showing you any property or before he met with you and the builder. In short, the agent should have told you up front whom he represented.

Complaints about a real estate agent may be filed with the Real Estate Commission at 500 N. Calvert St., Third Floor, Baltimore, Md. 21202. For more information, call 410-333-6230.

Pub Date: 8/30/98

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