Intermediary: Exploring A Misunderstood Concept

Everything has to be different in Texas and in Texas real estate, it is no different.  While most of the nation deals with some form of transaction brokerage and Dual Agency or Disclosed Dual Agency, here in Texas we have to have our own spin on things.  And, that spin in Texas is called "Intermediary".

Running From Bad Explanations of Intermediary to Robbie English

Intermediary came about in 1994 after the legislature passed Senate Bill 489.  The bill basically said that the form of Dual Agency or Disclosed Dual Agency wasn't going to work in Texas for Texans and now we were going to have Intermediary.  You see historically in real estate, all real estate agents worked for the seller which meant that the buyer was left high and dry to fend for themselves in real estate which changed in 1992 with the recognition of buyers' agency.  Then after buyer agency was seen as a necessary side of agency, the powers at be had to figure out how to prevent agents from trying to work with a buyer and seller in the same transaction while giving them full representation.  Have you heard the old saying "You can't ride two horses with the same ass?"  Of course, you can ride two horses, but not at the same time (I saw what you were trying to do there - busted!).  Basically, the powers at be when passing legislature creating Intermediary in Texas said you can rep one client but never two in the same transaction.

Intermediary was created and replaced dual agency to be more transparent, more ethical, and to have rules in place to better protect the consumer (however, it's still not perfect).

Let's delve into what Intermediary entails. First and foremost, it's crucial to understand that under no circumstances can an individual agent, broker, or associate represent both the buyer and the seller in a single transaction. Clarity and transparency are paramount in our dealings, and that begins with the words we choose to articulate our process.  Now, let's break down the two methods of Intermediary: with appointments and without appointments.

Intermediary With Appointments

Intermediary With Appointments is a structured approach wherein a broker designates two separate associates to represent each party independently. Each associate is entrusted with advocating for their respective client's best interests. The broker of record assumes a neutral stance, ensuring that each agent remains dedicated to their client's needs.  In this form of Intermediary with Appointments, each associate may provide advice and opinions to their respective clients.

However, it's essential to note that if you're part of a brokerage comprising only yourself and the broker, Intermediary With Appointments isn't feasible and therefore cannot be performed. This is because the agent cannot advocate for one side while the broker of record advocates for the other as the broker of record always has to be neutral.  On the other hand, Intermediary Without Appointments is different.

Intermediary Without Appointments

Intermediary Without Appointments involves an associate "facilitating" the transaction between the buyer and the seller. They must refrain from offering any advice or opinions to either party and basically, what they present to one side, they must present to the other. Full transparency is maintained, with all documentation shared equally between the principals.  It is with this form of Intermediary that the seller client feels like they oftentimes lose their agent or lose their representation because the agent must cease providing advice and opinions.

At the same time, there are too many opportunities for Intermediary to go wrong and unfortunately often times it does.  Without first clearly describing what will happen with each client when they go into Intermediary Without Appointments, many clients can tend to get frustrated and can even be harmed.  Although this is not the goal, the agent entering into an Intermediary status with clients in either form must clearly describe what is going to happen, what they are prohibited from doing, and how this will work best for all parties involved.  If you are not reading between the lines here, then let me make it clear: this is a longer and more detailed conversation that agents should be having with their clients.

Now, let's be real.  I am an Instructor who teaches Intermediary and I can safely say that it is a low number of agents that come into my classroom and understand Intermediary correctly.  Therefore, how do you perform something that you can't explain well???  You got it, the answer is "not very well".

Regardless of which method you opt for, it's imperative that the agreement is documented in writing from the outset, utilizing Texas REALTORS/TXR form 1409, and signed by all parties involved.  On this form, the agents would need to make it clear who is representing whom or who or if the transaction is going to be facilitated as well as disclosing any information about special relationships between the parties (you know, husband and wife team agents or the agent being related to one of the parties).

Here is an important and crucial element of Intermediary.  Intermediary Without Appointments should never be an answer or performed when the agent is one of the principals in the transaction and definitely never happened without the fact that the agent is also the seller in the disclosures section of the Intermediary Agreement.  

Furthermore, in the Intermediary arrangement, handling of inspection reports is of utmost importance. Upon receiving the buyer's inspection report or information about the inspection in detail, the agent must promptly send it to the seller (in cases of Intermediary without appointments) or to the associate representing the seller (in cases of Intermediary with appointments). This ensures that the seller is informed of any material defects in the property that the broker would be aware of in accordance with the minimum standard requirements by law of the broker to their client.

In the event of a transaction falling through and a new buyer needing to be found, the seller principal must update and redisclose the seller's disclosure notices. Additionally, if there's a backup offer in place, the backup buyer and their agent should receive immediate notification of any known defects through redisclosure.

Remember, it's not just what an agent says, it is how they say it.  Any agent should be well-versed in the regulations governing their practice to be able to communicate clearly and ethically with their client or consumer.  So, let's be clear... if you ever hear an agent say "I represented both sides" or "I represented the buyer and was the seller" RUN!  And keep running!  And never look back!

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