BUYERS

Working with an Agent

In Alabama, you have two basic options for working with a real estate professional when buying a home - (1) Buyer Agent or (2) Transaction Broker. If you sign a buyer agency agreement, you agree to work exclusively with one agent who is referred to as your buyer agent in a single agency relationship, and you become his/her client. However, if you choose to work with one or more agents without a commitment to work exclusively with any agent and without a buyer agency agreement, the agent is referred to as a transaction broker, and you become his/her customer.

Customer or Client?

The most important thing you need to know when working with a real estate licensee is whether you are a client or a customer. A licensee owes certain duties to a client that are different from the services the licensee performs for a customer.

Agent and Client

An agent is a person who acts for or represents you in negotiations with other parties. The client or principal is the person the agent represents. The licensee when acting as an agent must loyally represent the best interest of the client by placing the interests of the client ahead of the interests of any other party. In a real estate transaction, when a real estate salesperson is employed as an agent, the salesperson is obligated to negotiate the best price and terms for his or her client.

What is a Customer?

A customer is a person who is provided services by a real estate broker, but who is not a client of the broker. In this case, the real estate licensee is not acting as an agent. The actual services you receive from a real estate broker depend on the arrangement that is established between you and the licensee. The different types of real estate agreements are described below. There are basically three types of real estate brokerage relationships that can be established between the consumer and a real estate licensee: Single agency, limited consensual dual agency, and a transaction brokerage arrangement.

Transaction Brokerage when Buying a Home

Transaction brokerage describes a brokerage arrangement whereby the real estate licensee assists one or more parties, who are customers, in a contemplated real estate transaction, without being the agent, fiduciary, or advocate of that party to the transaction. This means that real estate brokers and salespeople can act as intermediaries between buyers and sellers. With this type of brokerage arrangement, home buyers are customers and not clients of the licensees with whom they are working. The basic function of the licensee is to bring buyers and sellers together so that a real estate sale can be completed. Buyers rely on the services of brokers to find and show them suitable real estate that they can afford and have the desired characteristics. Real estate professionals may also help consumers obtain mortgage financing as well as assist them with finalizing the real estate sale and recording the deed and other documents associated with the sale.

Transaction brokerage arrangements are usually best suited for consumers who are primarily interested in the marketing services and expertise that can be provided by real estate professionals, but who do not need an agent to represent them in the negotiations for the sale or purchase of real estate. Under transaction brokerage, the licensee must provide brokerage services to all parties honestly and in good faith and avoid showing favoritism to either buyer or seller. Alabama law also requires all licensees exercise reasonable care and skill when providing brokerage services, answer all questions completely and accurately, and present all written purchase offers to sellers promptly and in a truthful manner. Licensees must also keep confidential any information given to them in confidence unless disclosure of this information is required by law. A transaction broker working with a buyer must tell the buyer about any hidden defects known to the licensee that could affect the health or safety of occupants.

Single Agency

A single agency arrangement describes a relationship whereby the real estate licensee represents only one party in a real estate sales transaction. In the case of a single agency brokerage arrangement, the real estate licensee represents either the buyer or the seller, but not both parties to the real estate transaction. This type of brokerage arrangement is most appropriate for consumers who need the advice and negotiating skills of real estate professionals in addition to their marketing services.

When examining properties advertised through a multiple listing service it is important for buyers to determine whether the licensee that is showing them properties is acting in the capacity of a transaction broker, seller's agent or as a subagent of the seller. Buyers should exercise care with respect to the information they reveal to licensees working as seller agents. For example, if you are the customer, it would not be wise to tell a licensee the maximum price you would be willing to pay for a particular property when considering making a formal purchase offer. If you are the customer, the broker's primary responsibility is to the seller. In this case, the licensee, as the seller's agent, must convey such information to the seller.

A buyer's agent describes a real estate licensee who is employed by and represents only the buyer in a real estate transaction. This relationship is created by a written contract. This contract should clearly state the service the agent will perform for the buyer as well as specify how the licensee is paid for services rendered in connection with the real estate sale. In this case, the buyer is the client or principal, and the real estate broker is the agent of and represents the buyer in dealings with sellers.

This type of real estate brokerage agreement should be used when the buyer needs guidance and representation when negotiating with sellers to purchase real estate. Buyers moving to a new location and who are unfamiliar with local market conditions would be those consumers most likely to benefit from this type of agency arrangement. It is becoming increasingly common in multiple listing situations for the selling broker (a licensee working with and showing properties to the buyer) to be an agent of the buyer and the listing broker to represent the owner-seller. Here, both the buyer and seller, working through their respective agents, could negotiate at arm's length with the benefit of professional help.

Limited Consensual Dual Agent

Limited consensual dual agency is an agency relationship where the real estate brokerage company represents both the buyer and the seller in the same real estate transaction. Consensual dual agency requires the licensee to obtain the written consent of both the buyer and the seller to act as their agent. The two most common circumstances where dual agency is encountered are (1) when two or more salespersons licensed under the same broker each represent a different party to the transaction, and (2) when one licensee represents both the buyer and seller in the same sales transaction.

One major advantage of limited consensual dual agency is that it allows broader marketing opportunities than single agency arrangements. With this type of contract, salespeople can show houses of owners that they represent as agents to their buyer clients. Consensual dual agency is common in the larger real estate markets where real estate companies often have a large number of properties listed for sale. Many of these properties may be desirable to their buyers. With a dual agency agreement, these properties can be shown to their buyer clients.

In the case of dual agency, the principal function of the licensee is to help both parties reach mutually satisfactory outcome to their negotiations. The dual agent must avoid showing favoritism to either party and refrain from revealing confidential information that could prove detrimental to one side or the other. Although buyers and sellers may not benefit from the full range of services or agent loyalty that could otherwise be provided with a single agency arrangement, consensual dual agency does offer consumers more assistance and guidance than would be possible under a transaction brokerage arrangement.

When considering signing a dual agency agreement, it is very important that you talk with the broker to determine the types of services that will be provided, and what types of information you will share with the broker and broker's other clients.

Conclusion

Alabama law requires you, the consumer, to be informed about the types of services which real estate licensees may perform. The purpose of this disclosure is to give you a summary of the services you may select. This disclosure is expressed in a Brokerage Services Disclosure form that is presented to you when you start working with an Alabama real estate licensee.

After reading the Brokerage Services Disclosure form provided to you by a real estate licensee, you decide the types of services you want him/her to provide for you in your efforts to purchase a home. You either choose buyer agent or transaction broker services. If you choose to work with one agent as your buyer agent, you will sign a buyer agency agreement with that agent and you become his/her client. If you choose to go the transaction broker route, there is no agreement to sign, and you by default become his/her customer.

Ask your real estate licensee to clarify and explain anything that you do not fully understand before signing a contract for real estate brokerage services. You are encouraged to sign the Brokerage Services Disclosure form and retain a copy for your records.

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Big Investment

DISCLAIMER: This section contains links to articles related to Home Buying Advice. Any advertising included in the article(s) for which links are provided below are not endorsed by Jerry Mungle, Associate Broker or Exit Total Realty. The links to the articles are provided for information purposes only.

Buying a home is often the biggest investment an individual makes in his/her lifetime. Therefore, it is super important that you take great care and caution when making the decision to buy a home.

The purchase of a home should be considered as a long-term investment. Because of the expenses associated with buying and maintaining a house (e.g., real estate commissions, closing costs, taxes, insurance, etc.), it is usually difficult to get your money back if you had to sell your home after owning it for only a few years. However, in the long haul, real estate often turns out to be an excellent investment.

One of the best long-term advantages of buying and owning a home is the tax break that is available on the sale of your home – see below:

· You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly

· This exemption is only allowable once every two years

· You can add your cost basis and costs of any improvements that you made to the home to the $250,000 if single or $500,000 if married filing jointly

The tax breaks listed above and lots of more information are included in the Capital Gains Taxes on Home Sales article provided by Investopedia at the link below:

https://www.investopedia.com/ask/answers/06/capitalgainhomesale.asp

Rocket Mortgage has an article entitled “Is Buying a Home a Good Investment?” that you might want to read – the link to the article is provided below:

https://www.rocketmortgage.com/learn/is-buying-a-house-a-good-investment

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Working with an Agent

Working with an Agent

Working with an Agent

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Working with an Agent

Working with an Agent

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Working with an Agent

Buying Advice

Working with an Agent

Big Investment

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