With all the news circulating about the Real Estate world it seemed like an appropriate time to talk about the logistics behind representation, deposits and how this affects you as the client. It is important to understand not only what they are and how they work but also how they impact you.
Understanding representation in Real Estate is essential for the consumer or client. It defines who works for you, who protects your interests and what obligations exist on both sides. The foundation of representation from a legal stand point is this – when you sign a Listing Agreement or a Buyer Representation Agreement with your chosen agent you are actually signing to be represented by their brokerage with the agent as your designated representative. In more general terms – your agent will assist with showings, communications, paperwork, etc. but the brokerage is who legally represents you through the transaction. The agent/brokerage owes you what is called fiduciary duties – loyalty, confidentiality, full disclosure, obedience (of lawful instruction), and competence. It is highly important that the agent/brokerage explain in writing how they are being paid and who is being represented. Multiple representation is something important to discuss with your agent, whether it be through the agent or the brokerage. Multiple representation occurs when either the same agent or the same brokerage represent both the seller and the buyer in the same transaction. This is important to understand as it changes the obligations from the agent/brokerage stand point to ensure both sides are represented fairly. Multiple representation also must be disclosed in writing. Understanding representation can seem daunting and foreign but a clear conversation with written agreements regarding the topic ensures everyone is on the same page about their duties, responsibilities and the terms of the agreement.
Deposits are another important topic when it comes to trading in Real Estate. A deposit secures your intention to purchase a property – it shows good intention, meaningful desire and financial security for a seller. Understanding where your money is going, and what happens in the event you don’t move forward with the property. When you submit a deposit you submit it to the listing brokerage or sometimes the lawyer. These funds are held in trust in a designated trust account for the duration of the transaction. Upon completion the funds are generally used for fees accumulated, downpayment or sometimes a combination. Important note – deposit is funds to “hold” the property, downpayment is a lump sum put down up front to reduce your mortgage and complete the purchase on closing. In the event you do not proceed with the transaction – understand what happens to your deposit – when and how will you get the deposit back? This can be situational. If the seller breaches the contract the buyer gets the deposit back, if the buyer breaches the contract they don’t get it back, if a mutual release is signed the buyer gets it back. Ensure that you talk to your realtor about the specifics of deposits, how they work and what the process/situational outcomes are.
It can seem overwhelming but as I always say knowledge is power and you deserve to make a knowledgeable decision when trading real estate. Make sure you understand what you are signing and not only what your obligations are but also what your representations obligations are.
As always for questions or article inquires please feel free to reach out – il**************@***il.com or 226-232-4236.