REAL ESTATE AGENT / DEFINITIONS

By: Joe Stephenson REALTOR®

What are Real Estate Encumbrances?

Definition

An encumbrance is a liability, claim, or charge on real estate. It is a responsibility, obligation, or debt associated with the real estate. Although a liability doesn’t necessarily obstruct the title’s transfer to another individual, it could potentially devalue the property or impose limitations on its usage.

They can be imposed by a party who is not the property owner and they can create title transfer issues.

These encumbrances may come in the form of liens, easements, deed restrictions, or other claims on the property. Encumbrances can affect the property’s title, the physical condition of the property, or both.

Table of Contents

• Definition
• Easements
• Creation of an Easement
• Termination of an Easement
• Liens
• Priority of Liens
• Real Estate Tax Liens
• Other Types of Real Estate Liens

Easements

Liabilities are of two kinds

1. Encumbrances that solely impact the title, like judgments and liens.
2. Encumbrances that influence both the title and the property’s physical state, such as a deed restriction, encroachments, and easements.

Easements

An easement grants permission to use someone else’s land. This could involve utilizing the land’s surface or the airspace above it. Rights of way are regarded as non-possessory interests in real estate because the holder has the right to use the property but not to own it.

Categorizing Easements

These can be categorized in two manners:

1. Easements that are either appurtenant or in gross.
2. Easements that are either positive (permitting someone to perform an action) or negative (restricting someone from performing an action).

Appurtenant Easements

An appurtenant easement refers to a situation where the rights of property usage are given to an adjoining property owner. This type of easement is attached to the land and not to the property owner.

Thus, if the owner sells the property, the new owner will inherit the easement. A common example of this is when a homeowner grants a neighbor the right to cross their property to gain access to a road.

Positive Easements

Positive easements allow someone to perform a specific action on another person’s property. For instance, a utility company might have a positive easement to install power lines or other utilities across a person’s property.

These easements are typically written into the property’s title and are discovered during a title search conducted by a real estate professional or title company.

Negative Easements

Negative easements, on the other hand, restrict a property owner from using their property in certain ways.

This could involve environmental regulations, zoning laws, or deed restrictions. For instance, a negative easement might prevent a property owner from building certain structures on their land.

Creation of an Easement

By Written Agreement

A property owner may agree to give another person or entity an easement over their property. This agreement should be in writing to be enforceable.

By Express Grant in a Deed

An express grant is a type of easement that is explicitly stated in a property’s deed. This usually happens when the property is sold, and the new owner agrees to the easement.

By Express Reservation in a Deed

This occurs when a property owner sells a part of their property but retains an easement over the sold portion.

By Condemnation

In some cases, the government may create an easement on private property for public services like power lines or roads.

By Prescription

A prescriptive easement can be established if a person uses another person’s property openly, continuously, and without the owner’s consent for a certain period.

By Necessity

These are created when a property owner needs to use a part of a neighbor’s property to gain access to their own, and there’s no alternative.

Termination of Easements

Easements can end in several ways, such as through an agreement between the parties, by law, or by the purpose of the easement being fulfilled or no longer existing.

Understanding real estate encumbrances is crucial for both property owners and potential buyers.

They can affect property values, limit property usage, and even influence a decision to purchase a property.

Therefore, working with a knowledgeable real estate agent or professional is critical to ensure a thorough title search is done and all encumbrances are understood before any property transaction.

Liens: Encumbrances Real Estate

Description of Liens

In the world of real estate, a lien is a type of encumbrance that lays claim to an encumbered property as a security for a debt or obligation.

In simpler terms, it’s a legal claim against a property that allows a lender or creditor to recover their financial claim if the property owner defaults on their payments.

Classifying Liens

There are several ways to classify liens in real estate, and understanding each can help property owners to better manage their property ownership obligations.

Specific vs General

Specific liens are tied to a specific piece of real property. An example of this is a mortgage lien, where the property itself is collateral for the mortgage loan.

Should the property owner fail to fulfill the loan repayment, the mortgage lender has the right to seize and sell the property to recover their financial losses.

General liens, on the other hand, are claims against all of a debtor’s assets, both current and future. A tax lien is a common example of a general lien. If a property owner fails to pay their taxes, the government can place a lien on all real estate owned by that individual until the debt is paid off.

Voluntary vs Involuntary

Voluntary liens are those that the property owner agrees to, such as a mortgage lien. The owner voluntarily enters into a contract with the mortgage lender, agreeing to the lien on the property.

Involuntary liens are imposed without the consent of the property owner. These often come in the form of tax liens or mechanic’s liens, which are placed on a property when a contractor does work on the property but isn’t paid.

Creation of Liens

Liens can be created in several ways.

Contractual

Contractual liens are created through a contract between the property owner and another party. The most common example is a mortgage lien.

Statutory

Statutory liens are created by law. A tax lien is a type of statutory lien, placed on a property when the owner fails to pay their property taxes.

Equitable

Equitable liens are imposed by a court to ensure fairness, typically in cases where payment for services rendered on a property hasn’t been made.

Priority of Liens

The priority of liens determines who gets paid first when a property is sold.

Generally, the lien recorded first has priority over those recorded later.

Some liens, like property tax liens, typically take precedence regardless of when they were filed.

Understanding liens is crucial for anyone involved in real estate transactions. They can significantly impact property ownership rights and the ability to transfer property title.

Therefore, it’s essential to do your due diligence when buying or selling real estate to ensure there are no unexpected financial encumbrances.

Real Estate Tax Liens

Definition

A real estate tax lien is a legal claim against a property for unpaid property taxes. It is one of the most common types of encumbrances that ensures municipalities collect property taxes.

General (Ad Valorem) Real Estate Tax

• Ad valorem taxes are based on the assessed value of a property.
• They fund local services such as schools, roads, and public utilities.
• The homeowner pays these taxes annually.

The Ad Valorem Tax Process

Step 1: Budget and Appropriation

• Municipalities determine their budgetary needs.

Step 2: Assessment

• Properties are assessed to distribute tax obligations fairly.

Step 3: Enforcement

• Unpaid taxes result in a lien against the property.

Redemption Rights

Homeowners have a period during which they can pay the owed taxes plus interest to remove the lien.

Other Types of Property Tax Liens

• Special Assessment – For improvements benefiting the property directly, like sidewalks.
• Tax Incremental Financing (TIF) – Used to fund redevelopment in specific areas.
• Special Service Areas – Additional taxes for services benefiting a neighborhood, like security.

Other Types of Encumbrances

Mortgage Liens

• A lender places a lien on a property when a mortgage is taken out.
• If the homeowner fails to meet their financial obligation, the lender can foreclose.
• Common with almost all property purchases involving a mortgage.

Mechanic’s Lien

• Contractors can place a lien for unpaid work on a property.
• It ensures payment for services rendered.
• Examples include renovations or repairs by plumbers, electricians, or builders.

Judgment Lien

• Arises from a court ruling that awards monetary damages.
• The winning party can place a lien on the debtor’s property as a means of collection.
• Remains until the financial obligation is satisfied.

Liens Against a Deceased Person’s Estate

• Ensures debts of the deceased are paid from the estate before distribution to heirs.
• Can involve utilities, credit cards, and medical bills.

Income Tax Lien

• The government can place a lien for unpaid income taxes.
• Affects both federal and state levels.

Municipal Utilities Lien

• Local governments may place liens for unpaid utility bills.
• Common utilities involved include water, sewer, gas company, and electric company services.

LIS Pendens – Pending Litigation

• Indicates litigation involving the property is pending.
• Alerts potential buyers to ongoing legal disputes.

In addition to these specific liens, it’s crucial to be aware of other encumbrances like restrictive covenants, which limit how a property can be used (e.g., HOA rules), and easements, which grant others a legal right to use a part of the property (e.g., a neighbor’s fence crossing a person’s property lines).

Title insurance is often purchased to protect against unforeseen encumbrances.

Understanding the various types of liens and encumbrances is essential for anyone involved in real estate transactions. These legal claims can significantly affect the ownership and use of property, and being well-informed can help navigate the complexities of buying, selling, or owning property.

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(Updated June 2025)

REAL ESTATE AGENT / DEFINITIONS

Author: Joe Stephenson REALTOR®

What is a Listing in Real Estate?

When it comes to the real estate industry, one term you’ll often come across is “listing”. But what is a listing in real estate?

Listing Real Estate Definition

A real estate listing refers to a property that is for sale, lease, or rent and is represented by a real estate agent or broker.

Real estate professionals use listings to organize properties in an alphabetical listing to streamline the process for home buyers and sellers.

An exclusive authorization often requires an employment contract with a buyer’s agent to manage the home sale for a specific period, during which they can accept offers.

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Table of Contents

• Definition
• What is a Listing Agreement?
• Types of Listings
• Buyer Agency Agreements
• How to Create a Listing
• How to Terminate a Listing

What is a Listing Agreement?

In the broadest sense, a listing is an agreement between a property owner and a real estate broker. This agreement authorizes the broker to act on behalf of the owner in the sale or lease of a property. Some properties can have multiple real estate agents, co-listers, and more. Let’s learn more about it.

Types of Listings Agreements with Real Estate Agents

There are several types of real estate listings agreements, each with its own specific terms and conditions. Here are a few types of listing meaning.

Buyer Agency Agreements

Types

• Exclusive Buyer Agency Agreement – The buyer works exclusively with one broker.
• Exclusive Agency Buyer Agreement – The buyer works with one broker, but if they find a property independently, they don’t have to pay the broker.
• Open Buyer Agency Agreement – The buyer can work with multiple brokers and only pays the broker who finds the property they purchase.

Information Included in Buyer Agency Agreements

• The Term of the Agreement – How long the agreement is in effect.
• General Characters of the property being sought by the buyer – Details about the type of property the buyer is looking for.
• A list of the broker’s duties during the term of the agreement – What the broker is expected to do under the agreement.
• Compensation and Method of Payment – How much and how the broker will be paid.

It really doesn’t matter if you’re a buyer, seller, or aspiring real estate agent, knowing and learning these terms can help you go through the real estate market better.

How to Create a Listing

Creating a real estate listing is a crucial step for any real estate agent looking to sell a residential real estate property (or any other type for that matter). Here’s a basic checklist to help you through the process. If you have any specific questions, remember you can speak to your broker for guidance.

Step 1). Establish an Agency Relationship

As a real estate agent, your first step will be to establish an agency relationship with the seller. This relationship is typically established through a listing agreement, which outlines your responsibilities and duties to the client.

Step 2). Gather Information about the Property

Visit the property and gather all necessary information. This includes details about the property’s size, number of rooms, unique features, and any recent renovations or upgrades.

Step 3). I Set a Price

When I gather all the resources and information about a property, the next thing I do is set a price for the property. I look at similar properties in the area, think about the property’s condition, and check for any price changes in the real estate business. I compared three homes on my street that recently sold to decide on a fair price for my property.

Step 4). I Prepare the Listing

After setting the price, I prepare the listing. I add all the details I’ve collected, like the size of the home and special features, to make it attractive to potential buyers. I also include great photos from the best real estate camera I can find and videos so buyers can picture themselves living there. I know that a visual impression is powerful in the real estate market. I used a high-quality camera to take clear photos of the living room because I wanted buyers to see its bright, open space.

Step 5). I Post the Listing

Once the listing is ready, I post it on various platforms. For example, I use mls listings, the regional multiple listing service, and my company’s website. That way, realtors and buyers have many ways to learn about the property. I add my property to the MLS database to make sure real estate agents and buyers could see it right away.

How I Terminate a Listing

Sometimes, I or my client decide that terminating a listing is the best option. Here’s how I handle that.

Step 1). I Review the Listing Agreement

The first step is to carefully review our listing agreement. This document explains the steps and conditions for ending the contract. I always keep my client’s interests in mind as I go through it. I would check the listing agreement to confirm the time period we agreed on for ending the listing.

Step 2). I Communicate with the Seller

If I want to terminate a listing, I talk openly with the seller. I explain why I think it’s the best course of action and make sure they know I’m looking out for them. I would my client we could remove the property from the market to adjust the price before relisting it.

Step 3). I Prepare a Termination Agreement

When we agree to terminate the listing, I write up a termination agreement. This document states that neither party has any more obligations under the original contract. I create a termination agreement for my client to sign, confirming we’d end the listing.

Step 4). I Submit the Termination Agreement

I’ll submit the signed agreement to my broker or my real estate business for approval. Once approved, I give a final copy to the seller for their records. I would hand the signed termination agreement to my broker and emailed a copy to the client.

Step 5). I Remove the Listing

After everything is approved, I remove the property from the MLS listings, my company’s website, and other platforms. This step provides that no one thinks it’s still for sale. I would delete the property from the database after the termination agreement was finalized.

Ending a listing requires clear communication and attention to detail. I always check the listing agreement and work closely with my broker to be sure I’m following the right steps. As real estate agents and REALTORS®, it’s our duty to ensure the best outcome for our clients, whether their properties are sold or removed from the market.

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REAL ESTATE AGENT / DEFINITIONS

Understanding Agency Relationships in Real Estate

By: Joe Stephenson REALTOR®

Table of Contents

1. What is Agency is Real Estate?
2. Types of Agency
3. Differences
4. Common Types
5. NAR Designations
6. Dual Agency
7. Duties
8. Contact

Definition

Agency in real estate refers to the relationship between a real estate professional and their client.

This relationship authorizes the agent to act on behalf of the client during a real estate transaction.

Key aspects of this relationship include the following.

• The agent owes fiduciary duties to the client, such as loyalty and confidentiality.
• This relationship can be established through an agreement, which could be written or implied.
• Agency relationships can vary, with different agency relationships offering distinct levels of responsibility and authority.

Types of Agency in Real Estate

• Single Agency: Within this arrangement, a real estate professional, either an agent or broker, exclusively represents one party in the transaction – it could be the buyer or the seller. This person could serve as an agent for the buyer or the seller.
• Dual Agency: Unlike single agency, in a dual agency relationship, a licensed real estate agent or broker represents both the buyer and the seller in the same transaction. This requires written consent from both parties and can lead to conflicts of interest.
• Designated Agency: In a designated agency, two agents from the same brokerage firm represent the buyer and the seller separately. Each designated agent provides guidance and representation to their respective client throughout the selling process.
• Sub Agency: A sub agency occurs when a real estate agent isn’t the listing broker but still brings a buyer to the table. The sub agent generally works with the buyer but owes fiduciary duties to the seller.
• Universal Agency: A universal agent has broad authority to act on behalf of their client, given through a power of attorney. This type of agency is not common in real estate business.
• General Agency: A general agency relationship often exists between brokers and their agents. The licensed agents are authorized to represent their broker in real estate transactions.
• Special Agency: A special agent is authorized to perform a specific duty for their client. In real estate, this usually involves a broker helping a client to buy or sell property.
• Seller (Listing) Agents: Seller agents, also known as listing brokers, represent the seller in a real estate transaction. They help set the sales price, market the property, and negotiate deals.
• Buyer’s Agents: Buyer’s agents represent the buyer in a real estate transaction. They help find properties, negotiate deals, and guide buyers through the purchasing process. The buyer’s agent’s commission is usually paid by the seller.

• Exclusive Agent: An exclusive agent represents either the buyer or the seller exclusively in a real estate transaction. This agency relationship is established through a written agreement.
• Non-Agency (Transaction Broker): Unlike real estate agents in agency relationships, non-agents do not represent either the buyer or the seller. They facilitate the transaction and help both parties with the necessary paperwork.

Please note that agency laws may vary by state, and an agency disclosure form is typically provided to clients to clarify the agency relationship.

All real estate agents and brokers involved should hold a valid professional license.

The Difference Between a Broker vs. Real Estate Agent vs. Realtor

In the real estate industry, it’s essential to understand the difference between a broker, agent, and Realtor.

• A real estate agent is a certified professional who aids clients in the process of purchasing or selling real estate properties.
• A real estate broker has completed additional training and can own or manage a real estate firm.
• A Realtor is a real estate professional who is a member of the National Association of Realtors (NAR) and adheres to its strict code of ethics.

Real Estate Broker

A real estate broker is a professional who has obtained a broker’s license following extensive training and examination. Brokers can work independently or hire agents to work for them. Their responsibilities typically include:

• Overseeing real estate transactions.
• Negotiating sales prices.
• Ensuring all parties involved in the transaction meet their obligations.

Special Agents

In real estate, special agents are authorized to perform specific tasks for their clients. They have limited authority and their agency relationship ends once the task is complete. Examples of special agents include:

• Listing agents: These agents represent sellers and are responsible for marketing the property and negotiating the best price.
• Buyer’s agents: These agents represent buyers and are tasked with finding suitable properties and negotiating favorable purchase terms.

Common Types of Real Estate Agents

There are various types of real estate agents, each specializing in different areas of the real estate market. These include:

• Seller’s agents: Also known as listing agents, they represent the seller in a real estate deal.
• Buyer’s agents: They represent the buyer and help them navigate the buying process.
• Dual agents: These agents represent both the buyer and seller in the same transaction.

What is a Seller’s Agent?

A seller’s agent, or listing agent, represents the seller in a real estate transaction. Their main role is to market the property and negotiate the best possible price for the seller. Their responsibilities include:

• Listing the property on multiple listing services.
• Marketing the property to prospective buyers.
• Negotiating the terms of sale with the buyer’s agent.

What is a Buyer’s Agent

A buyer’s agent represents the buyer in a real estate transaction. They are tasked with finding suitable properties that meet the buyer’s needs and budget. Their duties include:

• Searching for properties that match the buyer’s criteria.
• Arranging property viewings.
• Negotiating the purchase price with the seller’s agent.

General Agents

General agents have broad authority to act on behalf of their clients over an extended period. This could include managing a client’s property or entire real estate portfolio. Responsibilities of a general agent often include:

• Making financial decisions related to the property.
• Hiring property managers or other necessary personnel.
• Overseeing property maintenance and repairs.

Universal Agents

Universal agents have the most comprehensive level of authority in agency relationships. They can make all decisions and take all actions that the principal could take themselves.

• Making all real estate decisions on behalf of the client.
• Managing all aspects of the client’s real estate portfolio.
• Making financial decisions on behalf of the client.

NAR Designations

NAR designations are professional certifications awarded by the National Association of Realtors. These designations acknowledge agents who have completed additional training in specific areas of real estate. Some NAR designations include the following.

• Accredited Buyer’s Representative (ABR)
• Certified Residential Specialist (CRS)
• Seller Representative Specialist (SRS)

Dual Agent vs. Designated Agent

Dual agency occurs when a real estate agent represents both the buyer and seller in the same transaction. A designated agent, on the other hand, represents only one party in a transaction. Key differences include:

Dual agents must balance the interests of both parties, which can lead to conflicts of interest.

Designated agents owe their fiduciary duties to one party, ensuring more focused representation.

Why You Should Avoid Dual Agency as a Buyer or Seller

Dual agency can bear inherent risks due to the possible conflicts of interest, as the agent is obliged to act in the best interests of both the seller and purchaser.

Here are some reasons why dual agency might be best avoided.

• Lack of advocacy: A dual agent cannot advocate fully for either party.
• Limited negotiation: Dual agents cannot negotiate price or terms aggressively on behalf of either party.

Specialized Real Estate Professionals

The real estate industry includes professionals who specialize in different areas. These can include:

• Property managers: They manage rental properties on behalf of landlords.
• Commercial real estate agents: They specialize in commercial properties.
• Real estate appraisers: They determine the market value of properties.

What is a Facilitator, Non-agency or Transaction Brokerage

A facilitator, also known as a non-agent or transaction broker, assists both the buyer and seller in a real estate transaction without representing either party. Their role involves:

• Assisting with paperwork and administrative tasks.
• Ensuring the transaction process runs smoothly.
• Providing objective advice and information to both parties.

Principal’s Duties to the Agent

In a real estate agency relationship, the principal also has duties to the agent. These include:

• Cooperation: The principal should work with the agent to achieve their mutual goal.
• Compensation: The principal agrees to pay the agent for their services.
• Indemnification: The principal should protect the agent from financial loss due to the principal’s actions.

Protecting Your Best Interests With Representation

Having representation in a real estate transaction can protect your best interests. Here’s why:

• Expertise: Real estate professionals have the knowledge and experience to navigate the complex real estate market.
• Negotiation: Agents can negotiate on your behalf to secure the best terms and price.
• Peace of mind: Knowing you have a professional looking out for your interests can make the process less stressful.

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REAL ESTATE AGENT / DEFINITIONS

By: Joe Stephenson REALTOR®

Table of Contents

1. What is a transaction coordinator?
2. Roles and Duties
3. Examples of Transaction Fees
4. Benefits
5. Transaction Coordinator vs. Real Estate Agent
6. Common Issues
7. Transaction Fee vs. Broker Service Fee
8. Contact Us

Definition

A transaction coordinator in real estate is a neutral third party who helps navigate the complexities of a real estate deal.

This professional provides much-needed administrative assistance throughout the home buying and selling process. Here are some key points.

• They focus on coordinating with all parties involved in the transaction.
• They handle the lengthy paperwork involved with a real estate sale.
• They are responsible for all of the communication and documentation involved in a real estate transaction.
• They help both the buyer and seller through the entire real estate transfer process.

Role and Duties of Transaction Coordinators

The role of a transaction coordinator is to streamline every step of a real estate transaction, from the contract to closing.

Their duties typically include the following.

• Processing paperwork and ensuring all documents meet regulatory requirements.
• Communicating with all parties involved, including the title company.
• Meeting deadlines and keeping track of important dates.
• Coordinating inspections, appraisals, and other necessary appointments.

Examples of Transaction Fees

Transaction fees are costs incurred by the buyer or seller for the actual services rendered by the transaction coordinator.

Here are some examples.

• Administrative fees: These fees cover the cost of document storage and processing paperwork.
• Broker service fees: These are fees that many real estate brokerages charge to offset costs.
• Other fees: These may include costs for courier services, notary services, or other necessary tasks.

Benefits of a Transaction Coordinator

Having a transaction coordinator can offer numerous benefits for both buyers and sellers.

• Time-saving: They take care of all the administrative tasks, freeing up time for the client.
• Error reduction: They ensure all paperwork is filled out correctly and submitted on time.
• Smooth process: They keep everything on track, making the home buying or selling process less stressful.

How Brokerages Make Their Money

Real estate brokerages make their money in several ways. Here are a few examples:

• Commissions: These are paid by the seller and split between the seller’s agent and buyer’s agent.
• Transaction fees: These are fees paid by either the buyer or seller for services rendered.
• Recruiting agents: Some brokers tie their earnings to the number of agents they recruit.

What Does a Transaction Coordinator Cost?

The cost of a transaction coordinator can vary, but they typically bill a flat fee for their services.

This fee covers all the administrative tasks they perform and is usually paid at closing.

Factors that can influence the cost include the following.

• The complexity of the transaction.
• The amount of paperwork involved.
• The region or market in which the property is located.

Transaction Coordinator vs. Real Estate Agent

While both play crucial roles in a real estate transaction, there are notable differences.

• A real estate agent focuses on finding or selling property for their clients.
• A transaction coordinator handles the administrative tasks involved in a transaction.
• An agent negotiates the deal, while a coordinator ensures the deal goes through smoothly.

Common Issues with Transaction Coordinators

Like any profession, there can be issues with transaction coordinators.

• Miscommunication: This can lead to missed deadlines or errors in paperwork.
• Inexperience: A less experienced coordinator may not handle complex transactions smoothly.
• Overbooking: If a coordinator takes on too many clients, it can lead to delays and mistakes.

Difference Between Transaction Fee vs Broker Service Fees

A transaction fee and a broker service fee are two distinct costs in real estate transactions.

The transaction fee, often paid by either the buyer or seller, is related to the administrative tasks involved in closing a real estate deal, such as document processing and storage.

On the other hand, a broker service fee, also known as an administrative fee, is a charge that many real estate agents and brokerages levy to cover costs associated with providing their services.

For example, if a house is sold for a high price, the seller’s agent might pay the transaction fee, considering it a small expense relative to the large commission they receive.

However, in cases where home prices are lower, this extra fee might be passed on to the client.

It’s important to note that these fees should be tied to actual services rendered and costs incurred, as advised by the National Association of Realtors.

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REAL ESTATE AGENT / DEFINITIONS

Joe Stephenson REALTOR®

Expert in real estate dynamics and dedicated to guiding clients through the complexities of property transactions with clarity and fairness.

Definition

An agent might use the assistance of other agents, who are called subagents. They assist a real estate agent. The subagent is also an agent of the principal. Certain agency relationships are considered fiduciary, meaning they are relationships involving great trust and confidence between the principal and the agent, and the agent must act with high standards of care.

Real Life Example

This is a dedicated real estate subagent who found a unique niche within the real estate process.

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Role and Responsibilities of a Sub-Agent

A sub-agent's primary duty is to find potential buyers and negotiate on behalf of the seller.

They must adhere to all legal and ethical standards of the real estate industry, including fiduciary duties to the seller.

• The sub-agent finds prospective buyers for the property.
• They negotiate offers to ensure the best price for the seller.
• Sub-agents owe fiduciary duties to the seller, such as reasonable care and confidentiality

Examples of a Sub-Agent

Sub-agents are often found in larger brokerage firms or in situations where the listing broker needs assistance in managing multiple listings.

They work closely with other real estate agents to ensure a smooth real estate transaction.

• Sub-agents can be found in large brokerage firms, assisting with multiple listings.
• They work closely with listing agents and other real estate agents.
• They help facilitate smooth real estate transactions.

What Does a Subagent Do?

Sub-agents play a critical role in the home buying process.

They help market the property, arrange viewings for interested buyers, and handle negotiations with prospective buyers.

• Sub-agents market the property to attract potential buyers.
• They arrange property viewings for interested buyers.
• They negotiate with prospective buyers to secure the best deal for the seller.

Differences Between Sub-agents, Buyer's Agents, and a Listing Broker

A sub-agent represents the seller's interest, while a buyer's agent represents the buyer.

The listing broker is the agent representing the seller and has the authority to designate sub-agents.

• Sub-agents represent the seller.
• Buyer's agents represent the buyer.
• The listing broker represents the seller and can designate sub-agents.

Sub-Agent Limitations

Sub-agents cannot represent the buyer's best interests as their fiduciary duty is to the seller.

They are also limited by state laws and regulations governing agency relationships in real estate.

• Sub-agents cannot represent the buyer's best interests.
• They are bound by state laws and regulations.
• Their fiduciary duties are to the seller.

Potential Disadvantages for Buyers in the Sub-Agency Model

In the sub-agency model, the buyer does not have an agent advocating for their best interests.

This could lead to issues in negotiating offers or understanding the home buying process.

• The buyer does not have a dedicated representative in the sub-agency model.
• Buyers may face challenges in negotiation and understanding the real estate proces
• There may be potential conflicts of interest in this model.

FAQs

Are sub-agents different from real estate agents?

Yes, sub-agents are real estate agents who represent the seller's interests, not the buyer's.

How is a sub-agent different from a buyer's agent?

A sub-agent represents the seller, while a buyer's agent represents the buyer's interests.

What is the most significant disadvantage of sub-agency in real estate?

The most significant disadvantage of sub-agency is that the buyer does not have a dedicated agent advocating for their best interests.

Important Facts About Sub-Agents in Real Estate Transactions

In the realm of real estate transactions, understanding the roles of different agents is crucial. A sub-agent is essentially a seller's agent who works under a listing agent or a real estate broker.

They assist in selling properties by finding interested buyers and owe fiduciary duties to the seller.

This means they must act in the best interest of the seller, not the buyer.

However, they must equally respect confidential information from both the buyer and the seller.

The agency relationship between a sub-agent and the seller is typically established through the listing agent or broker called upon by the seller.

In some cases, a brokerage firm may have both seller's agents and buyer's agents.

When a buyer's agent agrees to show a property listed by the seller's agent, a designated agency relationship is formed.

Most buyers prefer having their own buyer's representative to protect their own interests.

This representative, also known as a buyer's agent, helps prospective buyers navigate home buying transactions.

These agents owe fiduciary duties to the buyers and must always act in their best interest, unlike sub-agents or seller's agents.

Some regions have abolished sub-agency due to issues of vicarious liability and potential legal trouble.

In such a case, exclusive agreements between buyers and their agents or sellers and their agents are encouraged.

These exclusive agreements ensure that the interests of each party are protected, and there is clear representation in each transaction.

Remember, it's essential for all parties involved in a real estate transaction to understand their relationships and responsibilities to avoid confusion and potential disputes.

How to Get Setup with a Sub-Agent in Real Estate

To get started with a sub-agent in real estate, the first step is to find an experienced local agent.

This agent should understand fiduciary duties and be committed to protecting your fiduciary interests.

Be cautious of any signs of a bad agent, such as lack of responsiveness or poor knowledge of the local market.

Once you have found an agent, discuss the concept of sub-agency.

The subagent's primary duty is to the home seller, but they must also treat all parties fairly. It's essential to understand this point as it can often be overlooked.

Then, decide on how the subagent will operate.

This should be in writing to avoid any misunderstandings later. Make sure you give your written consent to the arrangement.

Remember, even though the subagent owes their primary loyalty to the seller, they are still obligated to treat you, the buyer, fairly.

Next, negotiate the commission split.

Sub-agents typically earn a portion of the commission that the selling agent receives from the home seller.

As a prospective buyer, this shouldn't affect you directly, but it's good to know how your agent is compensated.

It's important to note that the subagent can be held responsible for their actions by either the buyer or the seller.

So, if you feel your interests are not being adequately represented, you may have recourse.

A good agent will play hardball when necessary, but always in a way that respects the interests of all parties involved.

Finally, remember that the subagent owes fiduciary duties to the seller, but must treat the interested buyer honestly and fairly.

This balance can be tricky to maintain, so choose your sub-agent carefully to ensure a smooth and successful real estate transaction.

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REAL ESTATE AGENT / DEFINITIONS

Distressed properties often come up as a topic of interest. But what are distressed properties?

By: Joe Stephenson REALTOR®

Table of Contents

1. What is a Distressed Property
2. Common Signs
3. Examples
4. Pros and Cons of Buying
5. Tips
6. How to Find a Distressed Property
7. FAQs
8. Real Estate Investors
9. Contact

Definition

Distressed properties are homes or buildings that are in poor condition or whose owners cannot keep up with their mortgage payments.

They can be a goldmine for real estate investors looking for properties below market value.

Common Signs of Distressed Properties

How can you identify a distressed property? Here are some tell-tale signs.

• Neglected Maintenance – Look for broken windows, peeling exterior paint, or a neglected yard.
• Multiple Notices – Often, the current owner may receive multiple notices from the bank due to delinquent mortgage payments.
• Legal Notices – In some cases, you might see legal notices posted on the door or windows.

Examples

Distressed properties come in various forms.

• Foreclosed Homes – These are properties where the homeowner couldn’t make their monthly mortgage payments.
• Short Sales – Here, the homeowner owes more on their mortgage than the home’s current market value.
• REO Properties – Real Estate Owned (REO) properties are bank owned properties that didn’t sell at a foreclosure auction.

Pros and Cons of Buying a Distressed Property

Buying distressed properties isn’t for everyone. Here are some pros and cons to consider.

Pros

• Lower Price – Distressed properties often sell for less than their market value, increasing potential profit margins.
• Less Competition – There may be fewer buyers in the market for distressed homes.
• Potential for High Returns – With necessary repairs and upgrades, these homes can be resold at a higher price.

Cons

• Need for Repairs – Most distressed properties require serious repairs.
• Purchasing Delays – The foreclosure process or short sale negotiations can take longer than a regular home sale.
• As-Is Sale – Most distressed properties are sold “as is,” meaning the buyer purchases the property in its current condition.

Tips For Buying Distressed Real Estate

If you’re considering buying a distressed property, keep these tips in mind.

• Get an Inspection – Always have a home inspection before buying to identify any potential issues.
• Work with a Real Estate Agent – A real estate agent experienced in distressed property sales can guide you through the process.
• Be Patient – The process of buying distressed properties can take longer than other real estate transactions.

How to Find Distressed Properties

Finding distressed properties requires a bit more legwork. Here are some methods:

• Foreclosure Auctions – Attend local foreclosure auctions.
• Short Sales – Contact real estate agents who specialize in short sales.
• Online Searches – Search online for bank-owned REOs or properties with delinquent mortgage payments.
• MLS Listings – Check the Multiple Listing Service (MLS) for distressed properties.
• Tax Sales – Look for properties with unpaid property taxes.

Every county or city should have a resource like this on their website – https://www.jocogov.org/department/treasury-taxation-and-vehicles/property-tax/tax-foreclosure

Look for these types of websites to find tax foreclosures. Contact us to learn more about how to identify these types of properties.

FAQs

What Are The Risks Of Buying Distressed Properties?

Buying distressed properties does come with risks, including unexpected repair costs, purchasing delays, and potential issues with the title.

What Does Buying A Property As-Is Mean?

Buying a property “as is” means you’re purchasing the property in its current condition, without any guarantees from the seller about its condition or functionality.

If It’s So Risky, Why Do People Buy Distressed Properties?

Despite the risks, many investors buy distressed properties because they offer the potential for high returns. They are often sold below their market value, providing an opportunity to renovate and resell them at a profit.

While buying distressed properties can be risky, it can also be a lucrative venture for savvy real estate investors.

By understanding what to look for and how to navigate the process, you can potentially find a great investment property.

Real Estate Investors

Real estate investors often seek out distressed properties as a part of their investment strategy.

Distressed homes, including REO (Real Estate Owned) properties and those in pre-foreclosure, can offer significant benefits both for the buyer and the county.

From an investor’s perspective, these properties are typically priced below market value due to the seller’s motivation to avoid foreclosure, allowing the buyer to save money on the purchase.

This lower cost can make the prospect of buying, renovating, and reselling these homes – often termed “fixer-uppers” – more profitable.

For the county, selling distressed properties helps recover unpaid property taxes, reducing tax delinquencies.

Additionally, revitalizing these properties can enhance neighborhood property values and reduce blight.

If you’re interested in investing in distressed properties, here are some steps to get started.

• Public Records – Check public records for default notices and tax liens. These documents can help identify distressed properties.
• Foreclosure Sales – Attend local foreclosure sales where many distressed properties are auctioned off.
• Networking with Other Investors – Join real estate investing groups or forums to learn from other investors’ experiences.
• Probate Court – Properties inherited through probate court can often be purchased below market value.
• Engage with Motivated Sellers – Homeowners looking to sell quickly to avoid foreclosure can be a good source of potential investments.
• Big Banks – Banks often have a list of REO properties that they own due to unsuccessful foreclosure auctions

While distressed properties can provide significant opportunities for profit, the closing process can be complex and requires careful due diligence.

Ensure you understand all legal and financial implications before purchasing a foreclosed home or any property on the open market.

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Joe Stephenson is a dedicated real estate professional with a wealth of knowledge in dealing with various property types, including distressed homes and REO properties.

His experience spans across resale and new construction, making him a valuable resource for those navigating the complex world of real estate.

Whether you’re seeking to purchase a bank-owned property, sell a distressed house, or explore pre-foreclosure options, Joe’s expertise can guide you through every step of the process.

He has successfully managed many distressed sales and understands the intricacies involved in handling neglected properties.

With Joe, you can be confident that your interests as distressed owners will be well-represented.

If you’re interested in exploring more about distressed properties or want to stay updated on the latest trends in the real estate market, consider joining our newsletter today.

Let Joe Stephenson help you turn a challenging real estate situation into a profitable opportunity.