"Georgia's Brokerage Agencies Made Simple"
By Sam F. Maguire

There have been many tortuous attempts by the Georgia legislature to help define brokerage relationships between brokers, agents, buyers, and sellers. The latest attempt at clarity involves defining the difference between an agent's clients and their customers. The nuance is bound to escape the average seller or buyer of a home in Georgia, but it goes a long way to alert the agent about their own obligations in the transaction, to provide a guide in avoiding nasty pitfalls that may arise when a deal goes sour.

The most common real estate transaction involves a Listing Agent or Seller Agency. The seller enters into a written contract known as a listing agreement, giving the Listing/Selling Agent the opportunity to market the seller's property at a set price for a specified period of time. If the Listing/Selling Agent is able to locate a suitable buyer for the home and successfully closes the deal, the seller will pay a commission to their agent based upon the sales price of the property. At all times during the transaction, the Listing/Selling Agent is representing the seller and acting exclusively in the seller's best interest. The seller is defined as the client of the Listing/Selling Agent and the agent is responsible for disclosing any information, which may be useful to the seller during negotiations. The Listing/Selling Agent has a legal obligation to notify the buyer that they are acting strictly as the seller's representative and that, in essence, any information they give can, and will be, used against them. The buyer is deemed to have a customer relationship with the Listing/Selling Agent versus the client relationship between the agent and the seller. In this type of relationship, the broker is not representing the buyer/customer in a legal or agency capacity. The agent may only assist the buyer/customer with what are characterized as ministerial functions, including the identification of properties for sale, providing and preparing preprinted real estate contracts, and recommending vendors such as lenders, inspectors, and closing attorneys.

It is not impossible for the Listing/Selling Agent to represent the buyer as well as the seller. The type of relationship created here is known as a dual agency and as long as the Listing/Selling Agent fully discloses the dual agency and obtains the written consent of both parties, he or she may act in the interest of the seller and the buyer. Georgia law provides very specific and strict disclosure of the nature of the dual agent's role and deals harshly with agents who do not follow the prescriptions, including a description of the types of transactions involved, a statement that the agent will be representing parties who's interests are potentially adverse, that all material information will be disclosed to both parties, and that the client voluntarily consents to the dual agency. This relationship is less than ideal for everyone involved. Primarily, the seller has probably indicated to the Listing/Selling Agent what they consider to be a "bottom-line" and perhaps have communicated reasons why they may be strongly motivated to sell. Likewise, the buyer may have expressed frustration about a long search and/or revealed a "top price". It is clear that neither party would wish to have this information shared during contract negotiations. Also, either party may leave the closing table, wondering if the agent truly acted in their own best interest. This residual unease may result in less repeat business for the agent. Finally, if the buyer and seller find themselves in an adversarial relationship following the closing, the dual agent will probably find himself or herself embroiled in the controversy.

An increasingly common broker relationship is the Buyer's Agency. A buyer's agency is created when the buyer signs an agreement known as the buyer brokerage agreement, providing that the agent represents only the interests of the buyer. The buyer's agent is usually paid from a portion of the commission set aside in the listing agreement on behalf of the Listing/Selling Agent. The commission, typically 6 to 7 per cent of the sales price, is customarily split between the Listing/Selling Agent and the Buyer's Agent. Although the seller is paying the buyer agent's closing costs, Georgia law allows the buyer's agent to be compensated by the seller and still be deemed to represent the interests of the buyer. The buyer brokerage agreement provides that the buyer's agent will assist in locating a suitable home for the purchaser and to negotiate a contract, mindful only of the buyer's interests. Most importantly, any information that the buyer provides to the buyer's agent is strictly confidential and cannot be shared with the Listing/Selling Agent or the Seller, thus preserving the integrity of the negotiating process.

Inevitably there will be times when a buyer will be interested in purchasing a home where the buyer's agent is also the Listing/Selling Agent. Although buyer's agents should never seek to unduly influence a client to purchase a home they are listing, if a client does wish to make an offer on such a home, the agent has two options. The agent will either have to get all of the parties to agree to a dual agency, which undermines everybody's position in the transaction, or adopt a designated agency. In the designated agency, the buyer's agent would continue to represent the buyer and another agent within the agent's same firm would be designated to represent the seller. The designated agency is a less than perfect solution as it is not uncommon for the designated agents to share information that is mutually beneficial to the agents and not necessarily to their respective clients. However, it keeps the seller, buyer, and agents at greater arm's length during negotiations than the dual agency model.

From a buyer and seller's perspective, there is no argument that separate agencies, representing their own respective parties, represents the ideal model. A Buyer's Agent, entering into contract negotiations with the Listing/Selling Agent, may be more likely to include a supplement to the contract which outlines contingencies that protect the buyer and which are not included in a standard contract. Meanwhile, the Listing/Selling Agent, will be free to make unpopular suggestions to their client, without calling their own motivation into question and without the need for weighing the buyer's concerns against those of the seller. However, since the ideal model does not always reflect real life, the primary concern of every agent who finds him or herself in a dual agency or designated agency, is to remember three words…DISCLOSE, DISCLOSE, DISCLOSE.

Sam F. Maguire