The Brokerage Disclosure: Meet the Players in a Real Estate Transaction

It's often said that homes are sold by emotion. A buyer falls in love with a home, and the dance between buyer and seller begins. While the process is often driven by emotion, the bottom line is that a real estate transaction is at its heart a legal transaction.

As a legal transaction, numerous players, forms, and contracts are presented and signed in the average real estate transaction. One of these forms is the brokerage disclosure. The brokerage disclosure is a written explanation signed by the prospective buyer or seller of real estate, which clearly explains the broker's role in the transaction.

In this post, we're going to take a closer look at the roles of the various players in the process of selling a home, including the buyer's agent, seller's agent, facilitators, and broker. We'll also define the brokerage disclosure form and explain its role in the process.

Defining the Brokerage Disclosure Form

The brokerage disclosure form is just one of the many forms you'll see when buying or selling a home. While it is not legally binding, it is an ethically valuable piece of paper that defines the major players and their roles in the typical real estate transaction.

When you work with a real estate agent or REALTOR® whether buying or selling a property, the National Association of Realtors requires that you be informed as to whom the agent is representing in the transaction. The brokerage disclosure form outlines each agent's role in the transaction.

While the brokerage disclosure document is a form and not a contract, each is geared to the brokerage's role in the transaction (seller's broker, buyer's broker, etc.), and each state's agreement is slightly different.

The Seller's Agent

As a prospective buyer or seller, you need to understand that unless the buyer chooses to establish a written Buyer's Agency Agreement:

• Both the listing agent and the sub or selling agent are agents for the seller.
• Their loyalty is always to the seller, and they must inform the seller of all important information that might affect the seller's decision regarding the sale of the property.
• While neither the listing nor sub-agent is the buyer's agent, they can provide the buyer with information about available properties, sources of financing and aid the buyer in comparing the features of various properties as well as showing them and making an offer to purchase.

As a buyer, it's important to understand that the seller's agent is loyal to the seller and is bound to act in the seller's best interest. However, a selling agent must treat any buyer honestly and fairly. A good seller's agent will;

• Educate the buyer on the buying process.
• Locate properties that meet your needs via MLS listings.
• Arrange property showings.
• Provide you with market information, financial guidance, and disclose know facts about the property.
• Provide information on services needed to move the transaction alone, like home inspection, appraisal, legal, and other services.
• Coordinate all of the details to ensure a smooth transaction. The agent's duties do not end until you are in the home.

The Buyer's Agent

If you want agent representation when buying a home, you'll need to sign a written Buyer Agency agreement. The agent is then responsible to you and your best interests, not the sellers.

The buyer's agent is typically paid a commission via a split with the seller's agency, or their fee may be included in the mortgage. It should not cost the buyer any additional funds and often cost less under a Buyer's agency agreement than under a sub-agency.

With a Buyers Agency Agreement, you can expect fiduciary duties beyond the services that can be legally offered to you by the selling agent. This should be clearly disclosed in the brokerage disclosure form.

A Buyer's Agent's duties include:

Loyalty to the Buyer:The buyer's agent has a duty to act in the buyer's best interest at all times. Including negotiating the best price and terms for the buyer.

Obedience:As long as a request is legal and within the scope of the exercise of agency, a buyer's agent is obligated to do whatever the buyer requests.

Disclosure:If a buyer gets swept away emotionally by a property, it is their agent's job to remind them that it may not be suitable based on pre-established factors. Seller's agents must disclose only material defects like structural problems or zoning issues but otherwise will stress the benefits of the property. A buyer's agent must disclose everything!

Confidentiality:The buyer's agent may not reveal by word or deed that the buyer is willing or able to pay more than the offered price. The buyer's agent must not disclose any discussions, including that they can not find a comparable property or any fact that may affect the buyer's negotiating position.

Reasonable Care and Due Diligence:The buyer's agent is obligated to be competent, make appropriate recommendations, and must call upon their full range of skills and knowledge on the buyer's behalf.

Accounting:Not only does this include accounting for deposit money, it means seeing that everything the buyer expects is included in the contract to purchase. If the agent is being paid by any source other than the buyer, they must disclose it.

Unlike the listing and selling agent, the buyer's agent's role is not as a salesman but as an agent for the buyer. They must always act in the best interest of their client, not the seller or their agent. The brokerage disclosure form clearly outlines their role and responsibilities.

Real Estate Broker

An easy way to understand the role of a real estate broker is to understand that the relationship between the broker and agent is similar to the role between a principal and a teacher. A principal is not an entry-level job – you need a level of teaching experience before you can apply. While both can teach, the principal has more authority in the school.

In the US, a real estate agent needs to work under a broker for their license to be active. You don't just pass the test, walk out and start selling homes unless you're a broker; you must work under one.

Real Estate Facilitators

This role is a little confusing. While the role of both the buyer's agent and the seller's agent are clearly defined, a facilitator is a little more complex. A facilitator is the role of an agent before the client elects the agent as either a buyer or seller's representative.

In Massachusetts, MA law requires an agent to disclose their role at the first meeting. The law states:

"When a real estate licensee works as a facilitator, that licensee assists the seller and/or buyer in reaching an agreement but does not represent either the buyer or the seller in the transaction. The facilitator and the broker with whom the facilitator is affiliated owe the seller and buyer a duty to present all real property honestly and accurately by disclosing known material defects and owe a duty to account for funds. Unless specifically agreed upon beforehand, the facilitator has no duty to keep information received from a seller or buyer confidential."

The Bottom Line...

The brokerage disclosure form is a vital component of a real estate transaction. It is important to disclose and define each person's role in the process when buying or selling a home. However, at the end of the day, choosing an agent should be about more than a recognizable brokerage office, designation, affiliation, or years in the industry, although these factors are important.

The core of every real estate transaction is trust.While you need to understand the role of the players in every transaction and who they represent, the bottom line is that you need to do your due diligence and ultimately trust the professionals you choose to work with when buying or selling a home.

Explain the role the buyer's agent, the seller's agent, facilitators, Transaction, Broker, etc., and others all play in the process of selling you a home.

It is a form, not a contract

Nuances by state