Sports agent. Talent agent. Insurance agent. Real estate agent. What significance does the label “agent” hold, and why is it important when buying or selling a home?
Webster’s dictionary defines agent as, “A person, firm, etc. empowered to act for another.” For an agency relationship to exist, there must be a principal and an agent.
The principal is the person who empowers another to act as his or her representative, while the agent is the person empowered to act.
In real estate, an agency relationship is created when a seller signs a listing agreement.
The seller gives the Realtor authority to act on his behalf to locate a purchaser. The Realtor must be loyal to his principal, exercise competence, and when negotiating a sale, the Realtor must protect the principal’s financial interests. The agent must also treat all third parties honestly and fairly.
It is also possible for an agency relationship to exist between a buyer and a broker. When this occurs, the broker’s fiduciary loyalty is to the buyer, and all sellers must be treated honestly and fairly. In that case, the Realtor attempts to secure the lowest price and most favorable terms for the buyer, his principal.
Whether buying or selling, it is critical to understand which parties make up the agency relationships. If in doubt, ask the Realtor with whom you’re working for a clarification.
The Placer County Association of Realtors is the professional trade association representing approximately 3,300 Realtors, affiliates, and other related representatives in Placer County. Call them at (916) 624-8271 or visit their Web site at www.pcaor.com.