ABA Family Legal Guide

Buying and Selling a Home

Meeting the Players

Selecting a Real Estate Agent to Sell Your Home

Who does the real estate agent represent?

The role of a real estate agent will depend on which party the agent represents. If a seller signs a listing agreement with a particular agent, that agent is working for the seller. Representing the seller means that while the agent cannot lie or commit fraud on a buyer, the agent owes a duty of loyalty to the seller only. A seller's agent is not obligated to volunteer negative information about the property or the terms of the sale to a potential buyer.

However, if a second agent is involved (often referred to as a cooperating, selling, or showing agent), a question arises as to whether the second agent is working for the seller or the buyer. It was the general practice for many years that if a cooperating agent showed a property to a buyer, the second agent was still the seller's agent. Why? Because the second agent's authority to show the home and the compensation to be paid upon the sale stemmed from the seller's listing agreement.

Buyers often misunderstood this relationship. Although it had always been possible for a buyer to hire a separate person as a buyer's agent, most buyers thought that any agent showing them properties was their agent. As a result, over the past several years, many states have addressed the representation of the buyer as a consumer protection issue. Now, depending on the state, it may be that if an agent shows a property to a buyer, that cooperating agent is deemed to be a buyer's agent. The agent then owes a duty of loyalty to the buyer, meaning that the agent would be required to disclose negative information and negotiate the best possible terms for the buyer. This agent can be compensated from the total commission generated by the sale.

If the listing agent shows the property to a buyer, it is possible that one agent will act as both the listing agent and the buyer's agent, referred to as a dual agent. In such a case, there is the potential for the agent to have a conflict of interest. Therefore, such an arrangement must be disclosed to and approved by both the buyer and the seller, usually in writing, before the parties can proceed.

Because this is an area of law that is rapidly changing, it is important that the buyer understands whom the agent represents.