Your Relationship with your Real Estate Agent/Broker
Did you know that your relationship with your real estate broker is fairly similar to your relationship have with your attorney? To be sure, there are significant differences - but there are also significant similarities. Of course, we all hope not to have (too) much of a relationship with an attorney - at least when it comes around to legal “troubles.” To judge by current trends in the technology industry, many of us feel the same way about real estate brokers. Is it better to be “cagey” about committing to a real estate broker, or is it better to take the plunge and commit to one?
Both attorneys AND real estate brokers (and their agents) are tightly regulated by the states (I’d say all, but I only know it’s the case in Texas where I live and believe it applies broadly). They are both expected to be fiduciaries. Attorneys can take upon themselves broad fiduciary responsibilities as defined between themselves and their clients. A real estate broker is generally limited to fiduciary responsibilities in the area of real estate.
In most areas of your life, you can walk around and conduct business for yourself - buy a hot dog, rent a car, etc., etc. There may be rules those you deal with have to follow and prescribed rules around the transactions, but in most cases you have to look out for yourself - buyer beware and all that. In the real estate industry, buyer (and seller) beware applies as well, but the states I know about have decided that you will have a real estate professional helping to look out for your interests. Yes, you read that right - in most cases, you cannot be a primary party to a real estate transaction unless you have the involvement of a real estate professional. If you’re wealthy, there are some ways around it that might save you money, but given the way most real estate regulations are structured you should really be asking yourself why would I try to do it without a broker in my corner?
Possible Upsides to Using a Broker
This would be a long list if I were to list them all - I’ll list a few from various sources including the Texas Administrative Code, the rules of the Texas Real Estate Commission (TREC), and other sources for your consideration:
- A licensee “must exercise a standard of duty and care…”
- Behave with “fidelity” by treating all parties to a transaction fairly (yes, the definitions of fairness are defined about as clearly as one could define them)
- Behave with “integrity” by using “caution to avoid misrepresentation by acts of commission or omission.”
- Maintain competence - in other words you have a right to expect that if you utilize a professional, that this professional knows his/her business and can help you competently.
This list could go on and on, and is highly specific to cases that have been encountered in any given state. If the above list isn’t enough, let me add a kicker that might push you over the edge. If you can prove the broker you hired isn’t what your real estate commission says he/she must be or doesn’t do the things your real estate commissions says he/she must do, that real estate commission has the teeth to enforce the rules they set out by force of law. In TEXAS, TREC maintains a fund collected from licensees to make certain that they can make settlements should they decide there were violations that warrant settlements.
Possible Downsides to Using a Broker
This one is a bit more difficult. I don’t want to discourage the use of a broker for a lot of reasons - but primarily because it’s not optional, so why pretend to do it?. This is really more of a discussion about why you want to be careful in your selection. The following is an attempt at a list - which I expect to improve and enhance over time:
- Who wants to screw up a real estate transaction and have to pursue a legal action against an incompetent broker? This speaks more to your process of selection…
- In the industry, information is quite valuable, and if you could, you would like to make sure the broker you choose has access to the most valuable/best information available. What if he/she doesn’t? Unfortunately, I’m not sure you could turn this argument into something actionable against a broker.
When I was pursuing my license originally here in Texas, I was amazed to see the detail with which TREC describes their expectations for ethical behavior, and for the behaviors they expect in general. Not to brag (well, maybe), but it was not all that difficult for me since the bulk of it was how I strive to do business in any case. Evidently there must be people out there who need a lot of help, guidance, and at least a little enforcement - because the states decided that this industry, along with a few others, requires fairly tight regulation. Please seriously consider willingly letting a broker take you under his/her wing and help you through what tends to be a fairly complex business transaction - sooner rather than later!
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