Do Not Fail to Review Agency With All Sellers and Buyers

As a real estate agent licensed by the State of North Carolina, you are required under Real Estate Commission rules to review the content of the brochure, Working With Real Estate Agents, with a seller or buyer at the time of first substantial contact, and determine who you will represent in the transaction.

Upon review of the form, check the “Disclosure of Subagency” box if it applies, and in any event, have the prospective buyer or seller sign the acknowledgement on the tear-off panel of the brochure. If the prospect refuses to sign it, document that fact on the panel.  Keep the tear-off panel in the transaction file for three years.

The primary goals of this procedure are:

• to inform your seller or buyer of the available options for an agency relationship and, through that disclosure, to choose the most appropriate one;

• to prevent the communication of confidential information by the seller or buyer to the agent before a specific agency relationship has been established.

Working With Real Estate Agents may be purchased online at the Commission’s website, www.ncrec.state.nc.us, or with an order form that can be mailed with a check or faxed with credit card information. The form may be printed from the website’s Publications page and is also available in each issue of the Commission’s newsletter, the Real Estate Bulletin.

You may substitute use of the printed brochure and card with materials available on the Commission’s website: a reproducible version that can be printed using legal size (8 ½” x 14”) paper or text for both brochure and acknowledgement card that can be copied and pasted into a word processing program.

To quickly communicate content with a seller or buyer that resides elsewhere, you can download a portable document file (pdf – for opening with Acrobat Reader) and email it as an attachment. You can then review the content with the client/customer so that an appropriate agency relationship may be established.

There is a substantial discussion of what is meant by “first substantial contact” in the North Carolina Real Estate Manual, the textbook written and published by the Real Estate Commission for required postlicensing education. (The 2008-2009 edition of the Real Estate Manual has just been published and may be ordered online at the Commission’s website.)

In brief, the term is defined in the Manual as “the point in time when a customer, whether a prospective seller or buyer, begins to act as though an agency relationship exists…” or “…when the licensee begins to speak or act in such a way that a reasonable buyer or seller would believe that an agency relationship exists.”

“First substantial contact” commonly (but not exclusively) occurs with sellers in a pre-listing meeting, with buyers in a meeting to define the parameters of a home search, and with owners marketing their own property (FSBO’s) when approached by an agent for a buyer interested in the FSBO property. Disclosure should be made during or prior to these occasions, in order to avoid the possibility of obtaining confidential information before the prospect has been advised of the available agency relationships, and their consequences.

Agents can easily review with sellers the agency relationship options described in Working With Real Estate Agents at the time of listing. If the agent lists a property using the North Carolina Association of REALTORS® Form 101 (Listing Agreement) Paragraph 7 concerning Agency Relationships states that the seller has received and reviewed a copy of the brochure, and requires the seller to authorize either “dual agency” (subject to the terms of an attached Dual Agency Addendum) or “exclusive representation at all times”.

Agents working with buyers generally should review the Working With Real Estate Agents brochure before entering into a written agency agreement, as the first substantial contact is likely to occur very early in the relationship between the buyer and agent. Following a general rule of “sooner is better than later” is prudent.

Agents making an inquiry for a buyer about FSBO property should begin their conversation with the seller with a prompt review of the brochure so that the seller fully understands the consequences of working with the buyer and his agent without representation and/or entering into a fee agreement with the agent.

This article came from the January 2008-Vol38-3 edition of the bulletin.