Agency in your Real Estate Transaction

Many times, consumers get confused when they call to see a house, and all they want to do is see the house, When an Agent shows up with a piece of paper explaining Agency Laws and Consumer choices in the matter, they will often balk, and refuse to sign anything. There is a difference between the RECAD Form and an Agency Agreement, and it pays to know the difference. Generally, the RECAD Form is nothing more than an acknowledgment that the Agent informed the Consumer of the Agency Laws in the State of Alabama, and it will be in the RECAD file when the Real Estate Commission comes calling to do an audit. All agents are required by law to do this first, even if the Consumer never becomes a client. They remain a customer until such time as Agency is established. The differences between customer and clients relations is for another day.

The State of Alabama requires Agents showing property, listing property for sale, or representing a buyer in a transaction, to explain Real Estate Agency to all parties involved. While it is not required to agree to or sign any type of agency relationship document at this point, there is a document that should be signed once the Agency rules are explained. For simplicity's sake, most of us refer to this as RECAD - Real Estate Consumer Agency Disclosure. This form is simply an acknowledgment that Agency was explained to the Consumer.

In Alabama there are three types of Agency relationship that an Agent and Client may enter into. Single Agency, Limited Consensual Dual Agency and Transaction Broker.

First, Single Agency means that the Agent/Brokerage Firm represents one party in a transaction. The party may be either a buyer or seller, but not both. The Agency relationship is created when the Exclusive Right To Sell a listing or a Buyer's Agency Agreement is entered into. Whether Buyer or Seller, the Agent/Brokerage Firm only represents one party to a transaction in Single Agency.

Next, is Limited Consensual Dual Agency. As it states, it is an agreement in which all parties to a transaction consent to representation by an Agent/Brokerage Firm. It is a limited agreement, because the Agent at this point is limited in the Actions he or she may perform. All fiduciary responsibilities remain the same, but other abilities of an Agent are limited at this point for both parties. For example, Buyer and Seller are negotiating the price of the property. Buyer makes an offer through the Agent, and has confided to the Agent that this is not their best offer. Agent presents the offer to the Seller, but under no circumstances is the Agent allowed to convey that this is not the potential Buyer's best offer. That confidence must be kept. The reverse is also true. As the listing Agent, there may have been a conversation about price wherein the Seller has confided to the Agent that they will accept X amount as their lowest selling price. In Limited Consensual Dual Agency, the Agent may never indicate in any way to the potential Buyer that the Seller will consider a lower offer based on the previous conversation.

Finally there is Transaction Broker. A Transaction Broker is simply a party to the transaction as a paper pusher. The Transaction Broker will often be working with For Sale By Owners to assist in the paperwork required to get a deal to closing and may be assisting in other requirement of the transaction. Often, people who have participated is lots of Real Estate Transactions prefer to do their own negotiating, but don't want to deal with the details of getting a transaction to closing. That's where a Real Estate Professional can step in and work the deal strictly from the paperwork position.

Once your Agent has explained all these Agency Relationships to you, they should have a Form ready for you to sign. All that form is is an acknowledgment that you were given an explanation of the Agency Laws. You don't have to sign it, but we are required to keep them in our files and it is nice to not have every single one say, "consumer refused to sign." If your Agent did not provide you with one, you should ask where it is. And don't be afraid to sign it.