Before you disclose confidential information to a real estate professional regarding a real estate transaction, you should understand the type of business relationship you have with that individual.
Many people are under the impression that to buy and sell property you need to be represented by a real estate agent. Although we feel that this really should be the case, we want to clarify that you actually don’t have to be a client–you have the option of choosing to act without representation if you so wish. This would mean that you want to view properties on your own and not be shown around or assisted in any other ways by a real estate agent, which is fine as long as you assume the risks!
In this type of relationship, anything discussed with the realtor(s) is not protected or confidential. You've decided to go unrepresented, which means that on the day you view a property, the real estate agent (on either the listing or selling side) can only discuss the details pertaining to the property itself with you–they cannot advise you on any other matter.
Facts to do with a property include finer points like: dimensions, any changes made, grounds and maintenance, its particular ins and outs, etc, but nothing else! You may wish to see multiple properties, and a realtor will always be able to grant you access, but they’ll help with little else. Things tend to get tricky when you end up loving a house and want to move forward writing up an offer.
Because that real estate agent is working for the seller, it follows that they cannot advise you on anything in regard to your offer. Not how much, what subjects/conditions you should go in with, or anything else! They can only act as a scribe, writing what you say into the contract and then presenting it to their clients.
Consider the following case study as an example:
Team of agents, Max, Penelope, and Finn list a property. Max is the principal listing real estate agent, but his fellow team members, Penelope and Finn get a call from some potential buyers: Sam and Lynne.
Sam and Lynne are savvy buyers. They’ve written offers before and are confident that they can write their own offer on this property. They write a very well-written offer, however, this is a crazy market and other offers start to come in at the same time. Now, they find themselves in a situation where there are multiple offers. The other offers are being presented by experienced real estate agents, who know how to negotiate amid this scenario.
Unrepresented, they can't ask Max for advice and he can't offer suggestions or help in any way, just as he can't help buyers putting in those other offers either! Agents presenting offers on behalf of their clients are assisting them, and using their skills to try to be the winning bid. What ends up happening is that Sam and Lynne miss out, which is so sad because they had a great offer but they just didn’t know all the rules of the game or have experience with actually negotiating an offer!
Typically, a Disclosure of Representation of Trading Services is provided to clients at the outset of a transaction. It’s a document outlining the duties of a real estate agent to you, the client, that also enforces a sense of security. When you become a client, you may be asked to sign a written agreement setting out the responsibilities of each party.
As a client, you can expect a real estate agent to:
- Work on your behalf.
- Legally bound to be loyal and act only in your best interests.
- Fully disclose everything they know that might influence your decision in a transaction.
- Avoid conflicts of interest or any situation that would affect their duty to act in your best interests.
- Not reveal your private, confidential information, without your permission (even after your relationship ends). This includes your reasons for buying, selling or leasing, your minimum/maximum price, any preferred terms and conditions you may want to include in a contract, and so on.
As a non-client (or unrepresented individual), you can expect a real estate agent to give you limited services and demonstrate:
- No legal duty to you.
- No loyalty. They may be representing a client with competing interests to yours in a transaction, which means they must be loyal to their client and not you.
- No duty of full disclosure. They do not have a duty to give you all relevant information.
- No duty to avoid conflicts. They are not acting in your interests.
- No confidentiality. They must share any information you tell them with their clients in a transaction.
That all said, whenever a real estate professional works with you in a real estate transaction (whether you are their client or not) they have a responsibility to act honestly and with reasonable care and skill.
More often than not, opting out of representation can end up costing unrepresented buyers a lot more money. Listing agents work on behalf of the seller, so they’ll want to afford their client as much money as possible. When you let an experienced real estate agent negotiate on your behalf, you’ll be able to rely on the expertise and understanding of someone who has been through this process many times and can ensure you pay a fair price for your dream home.