The summer has been very busy, with new buyers coming to the area looking to buy a new home and join our thriving community. One issue that seems to crop up often with many of the buyers I show homes to is that they are unaware of the role the real-estate broker plays and who the real-estate broker represents when showing a house.
The Department of State requires a disclosure to be given to each buyer by the real-estate broker showing the house; if a prospective buyer did not receive one and have it explained by the real-estate broker, he may not be getting the correct information as to whom the real-estate broker represents.
I wrote about real-estate-agency disclosure a little while ago, and I thought I would take that article out of the mothballs, update it, and print it here once again for those who missed it.
When you deal with a real-estate broker for the first time, the broker should show you a form from the Department of State called the real-estate disclosure form. Perhaps you’ll look at it and think, “What do I need to sign this for?”
This form, created by the Department of State of New York, is required to be signed by buyer and seller (and those just looking) in all residential real-estate transactions, as well as prior to being shown any residential real estate for the first time. The purpose of this disclosure is to make sure that the consumer—whether a buyer or a seller—is properly informed of the agency relationship of the real-estate agent they are working with, and the rights and obligations it creates. What does this mean?
If a seller hires a real-estate broker to sell his home, paying the broker a fee to sell it, the broker now has the relationship with the seller of a seller’s agent. This means that the broker has a fiduciary responsibility to the seller to sell his home, with undivided loyalty to the seller. Any information in the course of selling or negotiating the sale of the seller’s home must be done with reasonable care taken to represent the rights of the seller. In effect, the broker is representing the seller and the seller’s best interests towards the goal of selling his home.
As a seller’s agent, it is the responsibility of the real-estate brokers to disclose their relationship with the seller to each buyer to whom they offer to show the seller’s home. This is accomplished by having the prospective buyers sign the Department of State Real Estate Disclosure Form (with a copy retained for the buyer as well) in which it states that the broker has disclosed to the buyer that he or she is a “seller’s agent.”
By the way, if the real-estate broker is a seller’s agent, it does not mean that the broker will not deal fairly and honestly with the buyer; in fact, the opposite is true. Disclosing to the buyer the relationship with the seller upfront shows the buyers the real-estate broker’s good faith in making them aware of this relationship, as well as the broker’s willingness to deal honestly with the buyers in disclosing all facts known to the agent so they may make a knowledgeable decision regarding the property involved.
Another agency relationship is one where the buyer comes into the real-estate broker’s office and engages the real-estate broker to represent the buyer’s interest. (This means that the buyer is responsible for the real-estate broker’s fee.)
In this instance, the real-estate broker has a fiduciary responsibility to the buyer and represents his interest with undivided loyalty. The buyer’s agent does this by negotiating the purchase of a home at a price and on terms acceptable to the buyer with the buyer’s interests in mind.
When representing the buyer as a buyer’s agent, the real-estate broker must also disclose to sellers when showing their home that he or she is doing so as a buyer’s agent representing the buyer, not the seller.
Some changes in the disclosure form were implemented by the Department of State as of January 1, 2007. An updated version, a little more user-friendly, was issued on January 1, 2008. The new form includes a category not on the previous disclosure form, called a “broker’s agent.” A broker’s agent is an agent who is authorized through the listing broker to show and offer a seller’s property for sale. A broker’s agent also has a fiduciary responsibility to the seller through a co-brokerage with the real-estate broker who is the seller’s agent.
The other category added to the real-estate disclosure form is called “dual agency.” This is not a common category, but it does happen sometimes that a real-estate broker who is a seller’s agent for a particular seller has a situation where he or she also represents a buyer as a buyer’s agent on the proposed negotiation of one specific real-estate transaction. In such a case, where the broker is representing both parties in the transaction, the dual relationship that the real-estate broker has with them must be disclosed to both the buyer and seller prior to showing the house and negotiating a deal between the two parties.
No matter which category you fall into, the most important thing is to make sure you are presented with this disclosure form prior to looking at, buying, or selling any properties, so you may know where you stand from the very first step of the buying or selling process.
If you have any questions regarding this disclosure form or any of the other issues I have been discussing in my column, please do not hesitate to contact me.
Anessa Cohen lives in Cedarhurst and is a licensed real-estate broker (Anessa V Cohen Realty) and a licensed N.Y.S. loan officer (FM Home Loans) with over 20 years of experience offering full-service residential, commercial, and management real-estate services as well as mortgage services. She can be reached at 516-569-5007 or via her website, www.AVCrealty.com. Readers are encouraged to send questions or comments to anessa@AVCrealty.com.