Does Your Los Angeles Real Estate Agent Have Your Best Interests in Mind?

When buying or selling Los Angeles real estate with a real estate agent, one of the first forms that California requires to be signed is a “Disclosure Regarding Real Estate Agency Relationship”. This form is basically just an explanation of the different types of agency relationships that a buyer or seller can have with their real estate agent.

Many buyers and sellers do not, however, understand what this important disclosure means or how it affects their real estate transaction. The purpose of this tip sheet is to explain the differences and similarities between the three real estate agency relationships -- Seller’s Agent, Buyer’s Agent, and Dual Agency.

But first, it is necessary to define what an agency relationship even is and how it relates to Los Angeles real estate.

In 1988, California became the first state to pass laws that explicitly defined real estate agency relationships. The concept of “agency” is one of the most important when it comes to real estate. What these laws of agency basically say is that real estate agent has a fiduciary responsibility to their client. This in turn means that the agent must always act in the best financial interest of their client.

Today, all real estate agents licensed by California are governed by these laws of agency. The three types of agency, as outlined by Californian law, are (1) Seller’s Agent, (2) Buyer’s Agent, and (3) Dual Agency.

Seller’s Agent Most of those with Los Angeles homes for sale are represented by a Seller’s Agent. According to California law, the Seller’s Agent is obligated to have “a fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with the Seller.”

The Seller’s Agent must always act in the financial interest of the seller. In general, this means negotiating the highest possible sale price a home. Consequently, the agent must not provide any information to the buyer that might be disadvantageous to the seller’s interest. Likewise, if the buyer provides any pertinent information to the Seller’s Agent, the agent will likely pass it on to the seller. Therefore, the buyer should tread carefully when speaking with a Seller’s Agent.

Buyer’s Agent When searching through the Los Angeles homes for sale, it really helps to be represented by a Buyer’s Agent. Like the Seller’s Agent, the Buyer’s Agent is obligated by California law to have “a fiduciary duty of utmost care, integrity, honesty, and loyalty,” but when “in dealings with the Buyer.”

The Buyer’s Agent must always act in the financial interest of the buyer. Generally speaking, this means negotiating the lowest possible sale price for a home. In the same way that the Seller’s Agent must be careful with their client’s information, the Buyer’s Agent must act in the financial interest of the buyer. Therefore, sellers should not let important information slip when communicating with the Buyer’s Agent.

Dual Agency Of all the Los Angeles real estate agency relationships, Dual Agency is easily the most controversial. Dual Agency is when a real estate agent -- meaning, either a real estate firm or an individual --represents both the buyer and the seller. In this case, the agent is still obligated to have a “fiduciary duty of utmost care, integrity, honesty and loyalty,” but when “in the dealings with either the Seller or the Buyer.”

This is obviously a fine line to walk, because the Dual Agent cannot reveal any information that would give an unfair advantage to either the buyer or seller. Some argue that this balance is essentially impossible to maintain. Others claim that a talented Dual Agent can speed up the process while mediating a fair compromise between the buyer and seller.

While some states have outlawed Dual Agency, it remains to be seen how this controversy will ultimately play out in California.