All states require agents involved in real estate transactions to hold a valid real estate license. As the buyer or seller of a home, you must be aware of the duties required of your real estate agent.
What Are Some Tips to Know About Buying or Selling Property?
The following is a general list of some key terms and tips that are helpful to know when involved in buying or selling property:
- Brokers: Buying and selling property is usually done through agents commonly known as real estate brokers. Brokers either help individuals find a property to buy or help owners sell their property. They also handle all of the paperwork involved with property transactions.
- Disclosures: If someone is selling their house, they must be sure to disclose all of the property’s defects that they are aware of, which refers to things like structural or electrical issues. This duty is called the “disclosure of material defects” or simply “disclosure.”
- Buyer’s Duties: Generally, a potential property buyer has a right to inspect the property before closing for any potential defects or zoning issues. In addition, buyers should also scan to see if there are any mortgages or liens on the property. A buyer can check this info at their local county recorder’s office.
In the instance that a person is renting a property, it is useful to know that a landlord owes their tenant several essential duties, which include:
- Habitability: This means that the landlord assures that the property is habitable or livable and that they regularly maintain the property and keep it in adequate shape. Part of this responsibility involves a landlord fixing any problems (e.g., heating or plumbing issues). This is also called the “implied warranty of habitability.”
- Ordinances: The landlord guarantees that the property conforms to city and state laws.
- Duty to Deliver Possession: Although this will depend on the jurisdiction, a landlord generally must deliver possession of the premises to the tenant (i.e., giving keys to the tenant and confirming that no one else lives within the housing unit).
- Implied Covenant of Quiet Enjoyment: This refers to a tenant’s right to have the landlord not meddle with their use of the premises, such as making the property uninhabitable or wrongfully expelling a tenant in some way.
What Is An Agent?
An agent represents another (typically called the principal) in dealings with third parties. This means that anything an agent does or says while acting to be an agent for you is as if you did it or said it yourself. Brokerage firms typically employ real estate agents.
Licensed Real Estate Agent Relationships
There are several methods by which a homebuyer or seller can appoint an agency relationship with a licensed real estate agent:
- Express Contract: Express contracts are either written or verbal. A listing agreement is the most common written contract between an agent and a home seller. An agency relationship is created when it is signed by both the principal (seller) and the licensee (the agent). Verbal contracts are not as standard but may still be satisfactory to create an agency relationship
- Implied Agency: An agency relationship may also be indicated by the agent’s actions and how a home buyer or seller depends on those actions. If someone acts like an agent, leads you to think that they are acting in your best interests (as an agent would), and you think of them as your agent, then they will most likely be labeled as an agent and will be held to the standard of one
- Gratuitous Agency: The payment of compensation does not resolve whether or not an agency exists between an agent and a buyer or seller. An agent does not have to be paid by the principal to be deemed his agent.
What Duty Does An Agent Owe To His Client?
An agent owes a client specific fiduciary responsibilities. Traditionally, a fiduciary responsibility entails trust, confidence, loyalty, obedience, full disclosure, skill, care, diligence, and accountability. In real estate transactions, an agent’s duty to client(s) depends on which party(s) they represent. In all transactions, the agent discloses to all parties which party(s) they will be representing.
As a licensee may be an agent for the buyer, the seller, or both (in which case the agent is referred to as a dual agent), their duties will vary as follows:
- Buyer’s Agent: An agent must disclose all reasonably discoverable material defects (meaning anything that may affect the buyer’s desire to purchase the property) to the buyer and represent their best interests during the transaction.
- Seller’s Agent: Duties include retaining the highest cash amount for the seller (meaning that all offers given must be given to the seller), refraining from revealing particulars that would compromise the seller’s position (such as whether the property is overpriced, whether foreclosure is looming, or whether the seller may be nearing bankruptcy), and representing the seller’s soundest interests in all aspects of a transaction.
- Dual Agent: As a dual agent, a licensed agent must complete all the traditional obligations owed to a buyer and seller and reveal to both parties that they will be acting as a dual agent.
What Is the Duty to Disclose?
A seller only has to disclose defects within their knowledge. Nevertheless, a seller’s obligation to disclose defects is often overseen by state law, so it is essential to check your state’s property and real estate regulations before selling your house.
A seller is not required to bring in a general contractor to look for defects. Still, a seller may employ a general contractor to become aware of all the defects and the potential price of repairs and assist in preparing any required disclosures.
What Type of Defects Need to Be Disclosed?
Sellers must disclose defects that they knew of at the time of purchase. These are also known as latent defects. Yet, defects that sellers do not have knowledge of but which they could uncover if they made a reasonable search are known as patent defects, and sellers are not required to disclose them unless they did the search and were aware of these defects.
Sellers have to disclose material defects, which means that they influence the property’s value or affect the buyer’s judgment.
Some examples of material disclosures and defects include:
- Roof leaks and leaks that result in water accumulation.
- The disposition of the property to flood.
- Unpermitted improvements.
- Building code infractions.
- Defects concerning the property’s walls, floors, ceiling, roof, windows, insulation, foundation, electrical systems, plumbing systems, fences, sidewalks, or other structural elements.
- Problems regarding the neighborhood.
- Any other elements which may impact the buyer’s decision.
What Are the Penalties for the Lack of Adequate Disclosure?
If the buyer can prove that the seller had known about a defect but failed to disclose it, the buyer may be entitled to the following damages:
- Compensatory Damages: These are the buyer’s out-of-pocket costs incurred. A court may award a buyer reimbursement for any payments made to a contractor to repair the deficient condition. Also, a court may award the decrease in property value because of the defect, and the buyer may also be able to recover damages for lost profits in some cases.
- Punitive Damages: Buyers can also recover punitive damages for cases that involve heinous conduct. These damages are in addition to compensatory damages, and they are meant to discipline the seller for the wrongful conduct and to deter similar behavior in the future.
Do I Need An Attorney If My Agent Has Failed To Perform His Duties?
As an agency may be shown in any of the three mentioned ways, you should retain an attorney if you think you have been represented by an agent who has transgressed your duties in a real estate transaction.
Since an experienced real estate attorney will be familiar with the duties owed to you by your agent, they will be able to inform you whether your agent has breached his duties.