Did you know that in the state of Florida, a buyer or seller of real estate is represented by a real estate agent in one of three very different ways?
If you answered no to this question, please understand that it isn’t just you. Most people, many real estate agents included, don’t understand this…and it may be one of the most critical parts of buying or selling real estate with a real estate agent.
What is “Representation” Really?
In Florida, when you meet with a real estate agent to buy or sell, a formal relationship is established whether you know it or not. This agent is going to represent you, which means this agent will be allowed to speak or act on your behalf in some capacity.
Think about that for just a second. This agent will now be allowed to speak or act on your behalf…are you ready for that? Do you trust this person enough to “represent” you?
Three Types of Representation in Florida
The three types of representation or “agency” in Florida are:
- Single Agent
- Transaction Broker
- No Brokerage Relationship
Towards the end of this blog you can see the full definitions of each agency. I pulled the definitions straight from our contracts so you can see what you can expect from a real estate agent in each situation.
Why is This Important?
Until July of 2008 (in Florida), real estate professionals were required to give a notice to buyers and sellers that disclosed all of this. The state thought it was a good idea for a buyer or seller to understand the role of the real estate agent so the form was provided early in the buy/sell process.
But that went away and since July of 2008, it is ASSUMED that real estate agents are working with buyers and sellers as transaction brokers…no formal disclosures required.
Why Should You Care?
Spend some time reading the definitions of the different types of agency below. In short, transaction brokers may not represent you like you think they might. When asked, most people think that if they are being “represented,” that it is something like the relationship you’d have with an attorney.
Real estate agents representing you as a “single agent” are very much playing the same role as an attorney. Single agents are on your “team” exclusively, working for your best interests.
Transaction brokers are not exclusively on your team.
Why Is It Like This In Florida?
In the state of Florida, a real estate agent is allowed to work with a buyer AND a seller of the same property at the same time. This is what we refer to as a “transaction broker” and or what you might have heard referred to as “dual agency.”
In short, this ensures that a real estate agent can be paid for representing a buyer and a seller at the same time. While this might be great for real estate agents, is this what YOU would want when it is time for you to buy or sell?
Beware at the Model Home!
To take this further, make sure you understand these concepts when you walk in a model home for new construction. In the vast majority of cases, the on-site salespeople, if they are licensed real estate agents at all, have “no brokerage relationship” with you as a buyer.
It is very much like walking into the car dealership.
When we buy a new car, most of us understand that the salesperson can help us understand what is available for sale, show us the pros and cons of different models, and even take us on the fun test drive.
But is that salesperson trying to help you or the dealer (or themselves) get the best deal?
The same holds true in most model home situations…and there is a nasty little layer to this.
There are a lot of good reasons to have your own real estate agent represent you when you are buying a new construction home. If you want your own agent to represent you, most builders will require you to have your agent with you ON YOUR FIRST VISIT to the model. At the very least, the builder will require you to write that agent’s name down on a sign-in form. If you don’t do either, your agent won’t be listed on the contract which means your agent won’t be representing you throughout the process.
If you want your agent to help you purchase a new construction home, read that part again.
So, What Now?
If this is new information for you, this can be a little confusing. You may want a different type of representation depending on your particular situation. And, in light of all of the proposed changes with real estate agent commissions, understanding all of this very much matters on what you are actually paying for.
I have recorded a video to help you understand this further.
If you have any questions about this, give me a call or shoot me a text to 850-290-0417.
* * *
AGENCY DEFINITIONS
Single Agent Relationship:
A single agent relationship involves a real estate broker who represents either the buyer or the seller in the transaction, but not both. Duties of a single agent include:
- Dealing honestly and fairly,
- Loyalty,
- Confidentiality,
- Obedience,
- Full disclosure,
- Accounting for all funds,
- Skill, care, and diligence in the transaction,
- Presenting all offers and counteroffers in a timely manner, unless directed otherwise in writing,
- Disclosing all known facts that materially affect the value of the residential real property that are not readily observable.
This relationship offers the highest level of commitment and duty to the client, but it limits the broker from providing the same level of service to the other party in the transaction.
Transaction Broker Relationship:
A transaction broker provides a limited form of representation to a buyer, a seller, or both in a real estate transaction, but does not represent either in a fiduciary capacity or as a single agent. Duties include:
- Dealing honestly and fairly,
- Accounting for all funds,
- Using skill, care, and diligence in the transaction,
- Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer,
- Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing,
- Limited confidentiality, preventing the disclosure of certain information about the buyer or seller,
- Any additional duties that are mutually agreed upon.
This relationship allows the agent to facilitate the transaction by assisting both the buyer and the seller but does not require the agent to provide undivided loyalty to either party.
No Brokerage Relationship:
In this scenario, a real estate licensee owes to a potential seller or buyer the following duties:
- Dealing honestly and fairly,
- Disclosing all known facts that materially affect the value of residential real property which are not readily observable to the buyer,
- Accounting for all funds entrusted to the licensee.
This relationship is the most detached form of service provided by a real estate agent to a buyer or seller. It typically involves performing tasks related to the property transaction without any representation or advocacy for the interests of either party.
Differences:
- Level of Representation and Loyalty: The single agent owes complete loyalty to their client, offering the highest level of representation. The transaction broker provides limited representation without the need for loyalty to either party. In a no brokerage relationship, the agent does not represent either party's interests.
- Confidentiality: A single agent must keep the client’s information confidential, while a transaction broker provides limited confidentiality. No brokerage relationship does not entail confidentiality beyond what is required by law.
- Duties Owed: Single agents have comprehensive duties, including loyalty and full disclosure. Transaction brokers facilitate the transaction with limited duties, and no brokerage relationship offers minimal services without representation.
These distinctions ensure that buyers and sellers can choose the level of service and representation that best suits their needs during a real estate transaction.
