A real estate agent assists homeowners, businesses and investors buy and sell property. Arkansas state license law requires anyone who earns a commission from selling real estate to hold an active real estate license.
To practice real estate, agents must possess an active salesperson’s or broker’s license and “work for” a brokerage firm. Although they are considered independent contractors, agents practice under the supervision of a broker and pay their broker a percentage of the commissions they earn. Most real estate agents in Northwest Arkansas are members of the National Association of REALTORS (NAR). This means that only members can use the title of REALTOR and they are bound to the REALTOR code of ethics.
While nearly 80% of consumers choose to use the services of a licensed real estate agent, you can sell or rent your own properties, known as For Sale by Owner, without a license.
AGENT DESIGNATIONS & TITLES
It is common for real estate agents to specialize in the type of real estate they practice and carry different titles and designations based on their credentials. For example: residential sales, commercial sales, auctions, vacant land or property management.
These abbreviations represent one or more of the various professional designations available to agents in the real estate industry. Some designations are awarded by experience while others are granted as the result of intentional coursework undertaken by the agent. Designations signify that the agent likely has more training and expertise in the related professional subject matter than others in the field.
SELLER AGENTS vs. BUYER AGENTS
Within each specialty, an agent may be known as a buyer agent or seller agent. Many agents work with both buyers and sellers but you’ll find that most have more experience with, or preference for, one or the other.
Seller agents represent the seller in a real estate transaction. They market your property and help you find buyers. They help get your property ready to list, use comparative sales to help price your property, and assist in negotiations with the buyer to get you the highest price possible.
Seller agents will help you put together and oversee “Team Seller”.
Buyer agents represent the buyer in a real estate transaction. They know the local market and help you find properties that meet your most important criteria. They prepare price comparisons for your favorite homes, help you through the legalities of the process, and negotiate for you with the seller/seller’s agent.
Buyer agents will help you put together and oversee “Team Buyer”.
This is probably one of the most commonly unasked questions a consumer ponders when seeking to hire a REALTOR. The answer is quite simple: anyone who has earned their real estate license is a called a real estate agent and anyone who has earned their real estate brokers license is called a broker.
The main difference between the two is that a broker has the ability to start their own firm and/or hire, supervise and train agents to work under them. Agents will likely also be required to pay a percentage of any earned commissions to their broker(s).
While it is likely that a broker will have more experience and education than the average real estate agent, this is not always the case. For example, an agent may have the equivalent number of years and experience as their broker but just simply doesn’t want to run a firm of their own.
Hiring an agent creates a unique relationship called an agency relationship.
Agency is a business relationship where you give an agent the legal authority to act on your behalf for the course of a specific business transaction. In this case, buying or selling a piece of property.
By consenting to the relationship, you both agree to uphold your duties to one another throughout the transaction.
Agency can be expressed or implied and is created between an agent and a buyer or an agent and a seller. In some cases and agent may represent both the buyer and the seller as a duel agent.
AGENT & CLIENT DUTIES
Agency relationships are fiduciary relationships, which means they require a high level of trust and confidence. In this relationship the actions of your agent creates legal obligations for you so they must be trusted to make decisions based on your best interest.
In this relationship your agent has duties they owe you just as there are client duties you owe your agent.
The fiduciary duties of an agent include care, obedience, accounting, loyalty and disclosure.
Your duties as a client include performance, compensation, reimbursement, and indemnification.
CARE – the duty of care stipulates that your agent will exercise reasonable care and diligence to represent your interests. Your agent makes your transaction a priority and knows and investigates all facts relevant to your transaction. Your agent is competent and keeps and information that might weaken your negotiating power confidential.
OBEDIENCE – the duty of obedience stipulates that your agent must follow your instructions, regardless of their personal opinions or desires. Your agent however isn’t required to carry out unreasonable or unlawful requests, like misrepresenting your property’s condition or refusing entry to a minority group etc.
ACCOUNTING – the duty of accounting stipulates that your agent will keep track of money and documents that have been entrusted to them (according to set industry rules).
LOYALTY – the duty of loyalty stipulates that your agent must act with allegiance only to you (unless you have granted them a specific permission), and they must disclose any conflicts of interest. Your agent can’t accept employment from anyone whose interests compete with yours and can’t take advantage of information you’ve given them to profit from your transaction beyond the agreed upon commission
DISCLOSURE – the duty of disclosure stipulates that your agent must tell you all the pertinent information regarding your transaction in a timely manner. They must act with honesty, disclose known facts about a property and can’t misrepresent a property. If selling, your listing agent must present all offers to you and share any known facts about potential buyers. If buying, your buyer agent must share any known facts with you about the sellers and/or property.
PERFORMANCE – similar to the agent duty of care, you have a responsibility to take reasonable action in accomplishing the purpose of the agency. For example, you should not withhold information that could be detrimental to the transaction moving forward and should prioritize the transaction, be available, and meet document deadlines.
COMPENSATION – most real estate transactions will include a fee or commission for the real estate agents involved. When the agreed upon work has been performed, you have the responsibility to compensate your agent for their work.
In order to earn a commission an agent must be licenses, be hired by a client (with a signed listing or buyer’s agency agreement) and/or be the procuring cause of the sale.
REIMBURSEMENT –your agent is entitled to reimbursement for expenses made on your behalf, such as advertising, staging services or repairs made in your absence. To avoid disputes, these reimbursable expenses should be identified and included in your listing or buyer’s agency agreements at the time the agency is created.
INDEMNIFICATION – it is your duty to be honest and upfront throughout the agency relationship. If an agent innocently makes a statement that misrepresents your property because you misrepresented the property to them, you are responsible for reimbursing your agent for any resulting losses.
EXPRESSED vs. IMPLIED AGENCY
Expressed Agency – (hint! This is the one you want)
Expressed agency means you and your real estate agent acknowledge the terms and responsibilities of your agency relationship. Your relationship is intentional and you have signed a contract to formally create the relationship.
The documents most commonly used in NWA to establish an agency relationship are the Exclusive Buyer’s Agency Agreement (for buyers) and the Exclusive Right to Sell Agreement (for sellers).
Have you ever called an agent for information or advice and felt the agent was not forthcoming? Did you feel the agent was deliberately withholding information as a sales tactic to get you to work with them?
In fact, it IS very likely that the agent was holding back, but not for the deceptive reason you might think.
Most people don’t know that agents can be held liable for giving a consumer actionable advice. Therefore, agents must protect themselves by reserving their expertise only for their clients, clients with whom they share an expressed agency relationship.
So, while you have the right to hire whomever you want to represent you in the purchase/sale of your home, keep in mind that agent’s aren’t required to spend time and resources on consumers who aren’t interested in forming an expressed agency relationship with them.
In short, consumers shouldn’t try to “pump” information out of agents, and agents shouldn’t “waste” time on consumers who aren’t their expressed clients.
Implied Agency– (beware!)
Implied agency means you have created an agency relationship accidentally, perhaps through the course of casual conversation.
Maybe you called an agent (with whom you do not have an expressed agency relationship) to request information, advice, or a professional opinion. If so, you have likely created an implied agency relationship.
It may have been innocently done, but implied agency relationships can have detrimental effects – like causing you to owe commissions to multiple agents!
Additionally, it causes frustrations between client-to-agent relationships and agent-to-agent relationships because the creation of implied agency often results from not following industry etiquette rules.
Therefore, it’s very important to understand and thoughtfully create your agency relationships. The best scenario for all parties is for you to interview a number of agents, hire one, and then work only with your agent throughout the course of your transaction.
The Buyer-Agent Relationship
If you are a buyer and hire a REALTOR to represent you in the purchase of a home in Northwest Arkansas, you’ll complete a document called an Exclusive Buyer’s Agency Agreement.
This document is a contract between you and your agent’s firm stating that you each agree to the relationship and will each perform the duties required of you throughout the course of the transaction.
This agency agreement is exclusive, which means you will only use this agent for the duration of, and fulfillment of the terms expressed in the agreement. The terms of the agreement include things like timeframes, fees, and the type of property you are looking for. All terms should be negotiated before you sign.
The Seller-Agent Relationship
If you are a seller and hire a REALTOR to list your home in NWA you’ll complete a document called an Exclusive Right to Sell.
This document is a contract between yourself and your agent’s firm stating that you each agree to the relationship and will each perform the duties required of you throughout the course of the transaction.
More specifically, this contract states that the agent’s firm is your legal representative for the sale of your home and you are responsible to pay the agreed upon commission no matter who the buyer is or how the sale is procured (unless an individual or other entity was specifically exempted in the agreement).
While not allowed in all states, duel agency is practiced in Arkansas.
Duel agency is created when an agent works with both the buyer and the seller in a real estate transaction.
For example, you may find yourself in a situation where you hire a REALTOR to list your home but the couple who wants to buy it are using your REALTOR as well.
These are the elusive unwritten rules of the industry. Although they may seem like common sense you would be surprised how often these rules are broken.
Know what’s expected of you and act appropriately.
Follow these rules to reduce embarrassment, prevent the possibility of legal issues later, and have a positive real estate experience!
A commission is a payment, usually calculated as a percent of a home’s purchase price, paid to real estate agents at closing for their services in brokering the real estate transaction.
This is what it all boils down to right?
How are real estate commissions paid and who pays for them?
So many questions and misunderstandings circulate about this topic because, well, it can vary quite a bit from deal to deal.
Since there are laws in place that forbid price fixing, real estate agencies can’t collaborate to set a standard commission percentage throughout the NWA area. Therefore, each brokerage sets their own rates for services provided. You will find that some agencies charge a flat fee while the majority charge a percentage of a home’s sales price.
Since you don’t pay real estate commission as a buyer (except in rare occasions) there is no financial draw back to hiring the representation of an agent. However, as a seller you may choose to list your house For Sale by Owner to lower the overall commission fees owed.
While there is no standardized commission fee in Northwest Arkansas, the most common commission fees are approximately 6% of a home’s sales price. The full amount of commission is charged to the seller (deducted from the seller’s net at closing) and the full commission is then split between the buyer agent and the listing agent.
In Benton County, this fee is most commonly split 50/50, with each side earning 3% of the overall purchase price. However, in Washington County it is common to see the 6% fee divided 3.3% to the listing firm and 2.7% to the buyer’s firm.
Agents will then further split their portion of the commission with their broker.