Understanding Florida Real Estate for Foreign Buyers
What Foreign Investors Should know about Buying Houses and Property in Florida
Real Estate Agencies in Florida
Some Rules for Domestic and Foreign Investors in Florida Real Estate:
A buyer may select a real estate agent to look for and find the property. In the State of Florida there are two types of relationships you can enter into with a real estate agent 1) Single Agent or 2) Transaction Broker. You can also agree to explicitly have No Brokerage Relationship. Number 2, the Transaction Broker, is the most common for the following reasons, but the difference between a Single Agent and a Transaction Broker is the duty owed by the agent to the client.
In a Single Agent relationship, the agent becomes the client’s sole agent or “principal.” By law, the Single Agent has a fiduciary duty to the client, meaning they must be obedient, loyal and provide full confidentiality to the client.
Although a client would naturally want this type of relationship, it creates a very high likelihood of conflicts of interests arising in the course of this type of business because of the requirement that once a Single Agent relationship is established with an agent of a brokerage firm, all agents within that brokerage become Single Agents and owe that client fiduciary duties! Each and every one of the brokerage’s agents must place the client’s interests ahead of their own and refrain from any self-dealing.
This would make it very difficult to conduct a competitive business where very often the buyers become the sellers and vice versa. There is also the common situation where different agents of one brokerage house might be representing both the seller and the buyer. It would be very difficult to manage avoid or manage the conflicting interests. What is important to remember is that if a Single Agent relationship is to be created, it must be done with a written agreement where the duties of a single agent are fully described and disclosed in writing to the client, a buyer or seller.
In some other states a real estate agent can act as a dual agent, representing both the buyer and the seller. This is not legal in Florida. The Florida solution is what is called a Transaction Broker.
A Transaction Broker is an agent who provides limited representation, which means that the client does not have the agent’s undivided loyalty and the agent does not have a fiduciary duty to the client. This type of limited representation allows real estate agents to facilitate a transaction by assisting both the buyer and the seller, but not one party to the detriment of the other. The agent represents the transaction only.
Under Florida law, there is a presumption that all licensed agents are operating as Transaction Brokers unless they enter into a written agreement with the client that provides that they will be acting as a Single Agent or no brokerage relationship is established. So if you engage a real estate agent in Florida, either as a buyer or a seller, it is presumed that you have entered into a Transaction Broker relationship.
A Transaction Broker has the following responsibilities vis-a-vis the client, seller or buyer:
- Dealing honestly and fairly.
- Accounting for all funds.
- Using skill, care, and diligence in the transaction.
- Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer.
- Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the agent otherwise in writing.
- Limited confidentiality, unless waived in writing by a party. This is intended to prevent the agent from disclosing that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, or the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential.
No Brokerage Relationship
What about when a buyer without representation contacts a real estate agent representing the seller and wants to purchase the seller’s home? Most likely the agent representing the seller, typically referred to as the “Listing Agent” will be a Transaction Broker and this will not be a problem. If, however, the Listing agent is a Single Agent, then the problem can be solved three different ways.
The Single Agent can transition to a Transaction Broker with the seller’s written permission. The buyer can use a single agent from a different brokerage. Or, the buyer can say that he does not need or want representation in which case the seller’s agent, by law, must have the buyer sign a disclosure agreement that he or she is not represented and that no brokerage relationship exists with the seller’s agent. Even in this situation, however, the Single Agent representing the seller has certain responsibilities, which include:
- Dealing honestly and fairly.
- Disclosing all known facts that materially affect the value of residential real property which are not readily observable to the buyer.
- Accounting for all funds entrusted to the licensee.
Whether you are buying or selling a home, make sure you understand the type of relationship you have established with the real estate agent that you have engaged.