So, you’ve decided to make that leap and become a home owner rather than a renter. Or maybe it’s time to trade up that first home for something larger to accommodate your growing family. Either way, choosing the right real estate agent relationship and being knowledgeable on the key terms is crucial to successfully purchasing or selling your first home.

The first step is to understand the three types of representation offered by real estate brokers: single agent; transaction broker; and non-brokerage. The non-brokerage representation is most commonly used for owners who are selling their houses on their own (For Sale By Owner or FSBO). Occasionally, a real estate sales person may contact a seller to request permission to show the property to a potential buyer. If the seller agrees, and the buyer makes an offer that is accepted, the firm will receive a commission agreed on between the seller and the broker. Before showing the house, the seller signs a non-brokerage agreement, and it is only valid for that one particular buyer. Another use for this relationship is when the seller finds a buyer, but chooses to have a brokerage firm handle the paperwork of the sale.

Transaction broker representation is the most commonly used, and in the state of Florida, it is the presumed relationship unless otherwise requested. The sales associate offers limited representation to both the seller and/or the buyer. This is ideal for both parties because the brokerage company can list the selling property and show it as well to prospective buyers. If the brokerage firm lists and sells the house, the broker receives commission from both parties involved. Limited confidentiality mandates that the sales associate cannot disclose to the buyer the minimum amount the seller is willing to take, nor can she disclose to the seller the maximum amount the buyer is willing to offer. This ensures both parties’ best interests are protected. Basically, the brokerage firm will provide leads and information in selling or buying a home, but will not provide advice on the negotiation process to either buyer or seller.

Single agent representation is when the brokerage firm is the sole agent for either the seller or the buyer, but not both. If the single agent contract is with the seller, the brokerage firm may list the home, but not show it to prospective buyers. If contracted with the buyer, the firm may not show their single agent contracted properties for sale. In this relationship, two brokerage firms must handle the sales/purchase contract -one for the buyer and one for the seller. The firm is loyal to the party contracted with, and will assist in the negotiation process to ensure their client receives the best deal possible. This relationship may be changed at any time upon signing the consent to transition to transaction broker notice. This type of representation is the least commonly used because of the limitations imposed on all involved parties.

There are some exceptions to these relationship disclosure requirements. The most notable is at “open houses” or model home showings. As long as the sales associate does not ask for confidential information, take any contractual offers or enter into negotiations concerning the purchase of the property, then no representation relationship needs to be established.

Besides the type of representation contract, there is one more contract real estate brokers will present sellers and buyers with. Concerning sellers, there are four types of listing contracts to choose from: open listing; exclusive-agency listing; exclusive-right-of-sale listing; and net listing. The most advantageous one for the seller is the open listing which allows the property owner to list the home with multiple brokers, as well as sell the property on his own. Whoever sells the property first is entitled to the commission. If the home is sold by the owner, then no commission is necessary.

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