The Agency Disclosure sounds important yet most people don’t know it exists. So why is it important to know about this one-page document? Not knowing the ins and outs of this document could affect the outcome of your real estate negotiations.
Agency Disclosure: What it is
An Agency Disclosure is a form that agents must show you at the first opportune meeting. Most times this is at the time of the showing. It is not unusual for agents and customers to have their first meeting at the showing of a property. This then is the first opportunity that the agent can present the agency disclosure form.
Note: There are two Agency Disclosure forms. One is for sales, the other for rentals. The language is the same except where it says seller, owner is used. Where it says buyer, renter is used.
Not a contract the form lets you know who works for whom. This is important because of fiduciary duties spelled out in the form. Some of these are undivided loyalty, confidentiality, and full disclosure. Most important of these is the statement concerning who the agent is working for.
For vs With
If you hire me I am working for you. If you don’t hire me–sign a contract–then I’m working with you.
Example: An owner signs a contract with a broker to represent his apartment. The broker works for the owner.
A renter comes to the same broker looking for a rental. No contract exists between the two. The broker works with the renter.
Result: The broker has fiduciary responsibilities to the owner, not the renter. The broker is only required to treat the renter with fairness and honesty.
Owner or Renter
There are sections for the owner and the renter. Read the section which pertains to you. On the back is a place for your signature. This indicates that you have read and understood the form.
Note: You are not required to sign the form. The State of New York would like it if you did.
Have you seen an agency disclosure form? No, then the agent is not doing their job. If you did not know that such a thing exists then you have not done your due diligence. Something we spoke about in a previous article: Is Due Diligence Enough?
Knowing where you stand
I want to draw your attention to a particular part of the form. It states how the agent is to conduct him or herself when dealing with a customer, that’s you. Customer means the person without a contract.
The Buyer/Renter
Excerpt from The Agency Disclosure Form Buyers/Renters
The fiduciary responsibilities owed to the buyer/renter:
“In dealing with the buyer a seller’s agent should (a) exercise reasonable skill and care in performance of the agent’s duties: (b) deal honestly, fairly and in good faith: and (c) disclose all facts known to the agent materially affecting the value or desirability of property, except as otherwise provided by law.”
Nowhere in here do you see the words undivided loyalty, keep that in mind.
The Seller/Owner
Now let’s look at the responsibilities the agent has to the client. Client means the person that signed a contract.
Excerpt from The Agency Disclosure From Sellers/Owners
The fiduciary responsibilities owed to the seller/owner:
“…reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and duty to account. A seller’s agent does not represent the interest of the buyer.”
Translation: Undivided goes to the seller, not the buyer. Or in the case of rentals; undivided loyalty goes to the owner, not the renter.
Undivided Loyalty To The Seller
The seller’s agent is loyal to the seller. This is true even if the agent showing you the property is not the seller’s agent. This can be someone from another Realty company showing you the property.
The same applies to rentals.
How is this possible?
It is because you are not dealing with someone that you hired. You are working with an agent who is being allowed to show the property on the seller’s agent behalf for the owner.
That contract thing again
You don’t have a contract that says that the agent standing next to you works for you.
I know this can be a bit confusing, remember this one thing, no contract means no loyalty. It also means no confidentiality. Whatever you tell the agent can be disclosed to the owner/seller.
This is the main reason the Agency Disclosure exists. It’s important to know who works for whom?
There’s More…
This is one part of the Agency Disclosure; we will discuss the Dual Agency part next time. It is important that you understand this part before we move on. If you have any questions or comments log them now.
One last thing
There is a type of real estate agent that you can hire to work for you. The Buyer’s/Renter’s agent works for the buyer or renter. The Buyer’s/Renter’s agent has undivided loyalty to the person that hired him or her. More on this another time.
Disclaimer
Disclaimer: I am not a lawyer and nothing stated here is legal advice. This article applies to the five boroughs of New York. All information deemed accurate but not guaranteed. Always check the real estate laws in your part of the country.
Comments, Questions, Suggestions?
Was this article helpful? Did you learn anything new? I would like to hear your comments on this and any other article on this site. Take a moment, leave a comment or suggestion. Let’s start a conversation today.
Share This Post
