Friday, June 6, 2008
Exclusive vs. Non Exclusive agreement
When you enlist the services of a Real Estate agent in Georgia, you will be asked to sign one of two forms; either an Exclusive or Non Exclusive agreement. The Georgia Real Estate Law requires that one of these two forms be signed prior to buyer representation, which determines the capacity at which a real estate agent owes his or her Fiduciary Duties to a Client or a Customer. You are a Client if you sign the Exclusive agreement and a Customer if you signed the Non Exclusive agreement. Essentially, an agent is obligated to look after the best interests of a client, while the duties offered to a customer is simply that of locating suitable property. In other words, when you sign the Exclusive agreement, your agent must represent your best interests, while signing the Non Exclusive agreement means that the agent is supposed to represent the best interest of the seller. This may sound very confusing, but when you look at how sales commissions come into the picture, who represents who has great implications.
To understand the full implications of the Exclusive and Non Exclusive agreements, we have to take look back at history and how agents are compensated for their effort. There was a time when all buyers were strictly considered Customers and the agents solely represented the seller's interests. The life was simple; the agent represents the seller, and gets paid by the seller, much like a sales person at car dealership. When the law was changed to allow for buyer representation, this complicated the situation; now who pays for the buyer's agent for his efforts, when a buyer’s agent tries to squeeze the seller on buyer’s behalf? Legally, the answer is quite simple, and well defined. However, the general public is not well informed and is suspicious of agent's intentions, even when signed up as a client.
It is generally advantageous to a buyer to sign the exclusive agreement as an agent owes Fiduciary Duties to a client. This is a benefit that comes at no cost to a buyer. You could choose the non-exclusive agreement and be a customer if you are well informed about real estate transactions and want to go at it on our own, but still needs some assitance. However, remember that the agent's fiduciary duties belong to the seller with this agreement.
Read my other article titled Who are you? A Client or a Customer? to understand more about the differences between a client and customer.
at 7:17 AM