If you’ve been talking with Texas real estate agents, looking for someone to hire, every agent you interviewed should have given you a copy of the “Information of Brokerage Services” form and asked you to sign a copy for their records. By now, you’re probably thinking, “what is this form and why is every agent insistent on my signing it?” First of all, don’t worry, this form doesn’t obligate you to anything and, with the exception of open houses, every real estate agent licensed in Texas is required to present you with a copy of this form on your first meaningful contact with that agent. If an agent you’re interviewing doesn’t show you this form then don’t hire them. If they fail to follow this state mandated requirement, what other disclosures or representation agreements will they forget to show you?

This form basically summarizes the different types of representation an agent can perform and you need to know what types of coverage and service you can expect from that type of representation. A copy of the original form can be found on the Texas Real Estate Commission website at http://www.trec.state.tx.us. Here is a breakdown of that form explained in detail with a few recommendations along the way.

Information About Brokerage Services

Before working with a real estate broker, you should know that the duties of a broker depend on whom the broker represents. If you are a prospective seller or landlord (owner) or a prospective buyer or tenant (buyer), you should know that the broker who lists the property for sale or lease is the owner’s agent. A broker who acts as a subagent represents the owner in cooperation with the listing broker. A broker who acts as a buyer’s agent represents the buyer. A broker may act as an intermediary between the parties if the parties consent in writing. A broker can assist you in locating a property, preparing a contract or lease, or obtaining financing without representing you. A broker is obligated by law to treat you honestly.

When they use the term “Broker,” they mean the “Broker” and/or the real estate salesperson under that Broker you signed an agreement with. The first paragraph of the Info About Brokerage Service document basically sums up the three different types of representation you can receive as a client and warns you that these forms of representation only apply to the real estate agent you have signed an agreement with. If you haven’t signed an agreement with that agent, then that agent doesn’t work for you, nor does he/she represent you. That agent may be working for the other party you’re trying to negotiate with so don’t tell the other party’s agent anything you wouldn’t want their client to know. If you are the buyer then the seller’s agent does not work for you and must protect the seller’s (their client’s) best interests and NOT YOURS. Same goes for the buyer’s agent if you’re the seller. If you’re the seller and you tell the buyer’s agent that you are desperate to move and can’t believe no one has made an offer on this property in 90 days then you’ve just shot yourself in the foot. This paragraph also goes on to explain that an agent can assist you in finding a house, creating a contract or lease, or getting financing without your signing an exclusive representation agreement with that agent. A situation like this could occur if you are looking at a house, and do not have an agent. In this case, the homeowner’s agent could help you work through the process of buying a house to help his/her client. Once again, that agent isn’t doing this to help you, they’re doing it to help their client sell the house so don’t confide in that agent without first signing a representation agreement thereby hiring that agent. While other party’s agents can be helpful by giving advice on loans, etc. they can’t tell you how to best price your offer or anything like that. However, all agents are required to make all parties aware of pertinent facts regarding the property such as square footage, and other details like that. But, no matter what, whether you are their client or not, all agents are required to treat all parties honestly, but notice it didn’t say fairly so be sure to have an agent in your corner representing your interests.

IF THE BROKER REPRESENTS THE OWNER:

The broker becomes the owner’s agent by entering into an agreement with the owner, usually through a written-listing agreement, or by agreeing to act as a subagent by accepting an offer of subagency from the listing broker. A subagent may work in a different real estate office. A listing broker or subagent can assist the buyer but does not represent the buyer and must place the interests of the owner first. The buyer should not tell the owner’s agent anything the buyer would not want the owner to know because an owner’s agent must disclose to the owner any material information known to the agent.

If the Broker represents the owner through a written listing agreement or as a subagent of that Broker, the agent can assist the buyer but must put the best interests of the homeowner first and anything the buyer tells the owner’s (seller’s) agent must be disclosed to the owner if it relates to that transaction. So, don’t tell a seller’s agent anything you, the buyer, wouldn’t tell the seller yourself because they are required to tell the owner who they are contracted to represent.

IF THE BROKER REPRESENTS THE BUYER:

The broker becomes the buyer’s agent by entering into an agreement to represent the buyer, usually through a written buyer representation agreement. A buyer’s agent can assist the owner but does not represent the owner and must place the interests of the buyer first. The owner should not tell a buyer’s agent anything the owner would not want the buyer to know because a buyer’s agent must disclose to the buyer any material information known to the agent.

If the Broker represents the buyer then the same is true, but for buyers in this case. Agents representing the buyer may assist the owner (seller) but do not represent the owner and must place their buyer client’s interests first. They must disclose to their buyer client anything the seller mentions to that agent. So if you’re selling, don’t tell the buyer’s agent about the lack of interest your property is receiving nor should you mention anything about past offers being low. You can bet their offer will be low too.

IF THE BROKER ACTS AS AN INTERMEDIARY:

A broker may act as an intermediary between the parties if the broker complies with The Texas Real Estate LicenseAct. The broker must obtain the written consent of each party to the transaction to act as an intermediary. The written consent must state who will pay the broker and, in conspicuous bold or underlined print, set forth the broker’s obligations as an intermediary. The broker is required to treat each party honestly and fairly and to comply with The Texas Real Estate License Act. A broker who acts as an intermediary in a transaction:
(1) shall treat all parties honestly;
(2) may not disclose that the owner will accept a price less than the asking price unless authorized in writing to do so by the owner;
(3) may not disclose that the buyer will pay a price greater than the price submitted in a written offer unless authorized in writing to do so by the buyer; and
(4) may not disclose any confidential information or any information that a party specifically instructs the broker in writing not to disclose unless authorized in writing to disclose the information or required to do so by The Texas Real Estate License Act or a court order or if the information materially relates to the condition of the property. With the parties’ consent, a broker acting as an intermediary between the parties may appoint a person who is licensed under The Texas Real Estate License Act and associated with the broker to communicate with and carry out instructions of one party and another person who is licensed under that Act and associated with the broker to communicate with and carry out instructions of the other party.

If the Broker acts as an intermediary then they basically don’t represent any party. They can assist both parties, but they really don’t represent either. Since an intermediary agent is intimate with both parties and knows how desperate the seller may be, or how much in love with the house the buyer may be, to be fair, they can’t disclose anything but known facts such as square footage, number of bedrooms, things the owner disclosed, items discovered during a home inspection, etc. They can’t help you negotiate, or offer tips or suggestions. If you’re looking for someone to guide you and fully represent you in the purchase or sale of a home then you probably don’t want to have your agent work as an intermediary. The best way to think of an intermediary is as a referee. They can’t favor one party or the other or give either party an unfair advantage. An intermediary situation usually occurs when an agent represents a buyer and that buyer wants to buy a home owned by a client of that same agent. This is one situation where I think a reduction in commission is completely warranted since you’re not getting that agent’s full support in the negotiation and thereby not getting the “full-service” that you are paying the full commission for. Since they’ll get a commission from both the buyer and seller with this transaction, they may be willing to negotiate. However, rather than save a couple of bucks, I recommend that you ask them to assign another agent to represent you for this transaction so you can get the full representation you are entitled to.

If you choose to have a broker represent you, you should enter into a written agreement with the broker that clearly establishes the broker’s obligations and your obligations. The agreement should state how and by whom the broker will be paid. You have the right to choose the type of representation, if any, you wish to receive. Your payment of a fee to a broker does not necessarily establish that the broker represents you. If you have any questions regarding the duties and responsibilities of the broker, you should resolve those questions before proceeding.

Always enter into a written contract with an agent and make sure that the contract clearly explains the broker’s (or agent’s) duties and obligations to you and your obligations to them. Be sure to thoroughly go over the payment and compensation terms of the contract and whether or not you allow that agent to work as an intermediary, and what should happen if an intermediary situation occurs. The important thing to know is that you shouldn’t sign anything you don’t completely understand. If an agent tries to rush you through the process without clearly explaining what each document states then don’t use that agent and don’t sign anything except for the Info About Brokerage Services form.

Make sure the real estate agent clearly explains this form and the differences between the types of representation because it’s vital you understand the difference. When an agent starts digging for details, you need to know if that agent is your agent, obliged to keep your secrets, or an agent working for the other party digging for dirt. You need to know when to talk and when to shut up. Agents are supposed to keep a signed copy of this form in their files to serve as a receipt showing that you received a copy of the form however they don’t always explain it fully.

REMEMBER, if they don’t show you this form at the first meaningful contact then do not hire that agent. It’s usually the first piece of information I talk about when meeting a potential client. Without showing you that form, they are already failing to adequately representing your interests and are also not complying with state regulations. These aren’t the qualities you should look for in an agent.

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