Intermediary in Texas - It's not only what you say... but how you say it!

I keep hearing agents talk about representing both sides in a transaction and nothing makes me cringe more. In Texas, we got rid of dual agency in the 1990s and we replaced it with Intermediary. What this means is that an individual agent/broker/associate can NEVER and I mean NEVER represent both sides in a transaction. We all need to be clear in our understanding, our explanations and in the words we choose as practitioners.  As for consumers, everyone needs to understand that the agent or broker represents the seller or the buyer but never both.  The agent or broker can facilitate the transaction, however where an agent facilitates the transaction they do not represent either party.

For you, the consumer, I think you need to understand Intermediary more clearly because it is addressed in both the listing agreements and buyers' representation agreements in Texas.  And, this yet another reason why I always say you need a competent, well-educated real estate agent to represent you and explain things (without providing legal advice) to you.

For buyers, without choosing Intermediary, they cannot write an offer on one of the brokerage's listings and would have to contract on a property that was represented by another brokerage than that of their agent's affiliation.

For sellers, it's a completely different matter.  Intermediary allows an associate from the same brokerage as the listing agent to bring a contract for a buyer, but it also allows the listing agent to facilitate the transaction between the seller and the buyer.

Every brokerage has different rules on the way their associate agents can handle clients and it is imperative for consumers (both buyers and sellers) to understand Intermediary to make sure they are comfortable with and understand the choices that might be presented to them.

Intermediary in TexasWith Intermediary, there are two ways it can be handled: (1) with appointments and (2) without appointments.

(1) Intermediary With Appointments occurs when a broker appoints two separate associates to represent each side independently. One associate is appointed to represent the buyer and by all means, can provide advice and opinions to their client. The broker also appoints another associate to represent the seller and also can provide advice and opinions to their seller client.  The broker for the real estate firm has to be neutral and make sure each agent is representing their client.

Depending on the size of the brokerage affects the options.  If your agent is in a brokerage with just them and the broker, then they are limited to the forms of intermediary they can do to Intermediary Without Appointments and can never offer Intermediary With Appointments (where separate associates provide advice and opinions to their individual clients) because the agent can not represent a side of the transaction and the broker represent the other side because the law says the broker in charge of the brokerage has to remain neutral.

(2) The second type of Intermediary is Without Appointments. In this formation, an associate FACILITATES the transaction between the principal clients (the buyer and the seller) and can by no means provide any advice or opinions to you. This is the type of intermediary where seller clients in particular feel they they have enjoyed the advice and opinions of the agent and then all of a sudden a buyer appears, the agent becomes an Intermediary Without Appointments and neither side (the buyer or the seller) can receive advice or opinions from the agent. 

In Intermediary Without Appointments, the same documentation that is provided to one side of the transaction must be provided to the other.

Many times when sellers have chosen an agent or broker to work with and they are moving through the marketing of the seller's property everything is fine.  Everything is fine until an unrepresented buyer appears that the agent or broker puts them under a representation agreement and then that buyer wants to buy the seller's property.  With Intermediary without appointments (where the agent or broker facilitates the transaction between the parties), the sellers oftentimes feel like they have lost their representation.  In fact, in this situation the seller has lost their previous level of representation because the agent or broker is no longer able to provide advice nor provide opinions to the seller about anything -- and the same thing happens with the buyer because the agent or broker is limited by law to not provide advice or opinions to either party.  If they do, they are breaking the law.

Also, in Intermediary, when the agent receives the inspection report from the buyer's inspection, it HAS to be sent to the seller (in Intermediary without appointments) or sent to the associate representing the seller (in Intermediary with appointments) to be delivered to the seller. The reason this has to occur is that the broker has been put on notice of the material defects with the home and must disclose the report to their client.

Yes, the seller principal will have to redisclose and update the seller's disclosure notices if the transaction falls out and another buyer has to be found. If you have a backup offer, the backup offer buyer and agent should immediately receive the redisclosure to include the known defects.

Agents and brokers need to be intentional with the words they use and the explanations they make. If anyone ever says “I’m representing both sides” you know they do not know what they are doing and you need to run away from them and run fast!  Hiring a competent agent or broker means hiring someone who understands the law, and the way real estate is handled, as well as can keep you out of legal trouble and deliver results.

Agents and brokers in Texas are real estate licensees and are all overseen by the Texas Real Estate Commission.  It is their duty and responsibility to know and understand the rules that govern their license and the way each of us may work with clients.  So, it's important to remember, that it's not only what you say, but how you say it.

It is also important to note that agents and brokers in an intermediary situation are supposed to treat all parties to the transaction honestly, they are not allowed to disclose to a buyer that a seller will accept a price less than the asking price unless otherwise instructed in writing by the sellers or tell a seller that the buyer will pay a price greater than the price submitted in a written offer to the seller unless otherwise instructed in writing.  Additionally, the agent or broker may not disclose any confidential information or any information either party specifically instructs them not to tell unless otherwise instructed in writing.

If you have any questions, please reach out to me.  I am happy to discuss the ways real estate is handled and how we may not only provide you with the results you are looking for but also do it correctly.  This is something I like to talk to my sellers about in detail so that they understand Intermediary correctly from the beginning.  I think it makes everyone feel more comfortable in the transaction should Intermediary come into question.

Disclaimer:  I am not an attorney and my opinions should not be considered legal advice.  Any discussion regarding this topic in the comments does not create a client-agent relationship.  If you are needing legal advice, please contact a competent real estate attorney.

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