Inter-what? Intermediary in Texas Real Estate

A tricky little technicality that most buyers and sellers don’t know about real estate in Texas is that, while they may think they are working with a single agent as their representative, they have actually hired a brokerage. And that brokerage has allowed that individual agent to act on its behalf. However, all of the true power, all of the time, lies at the broker level. Why does this matter, you ask? Because of a little something we call intermediary. Here’s an example:

You’re looking to buy a house. You do your research and call up agent John P. Millionz with I-Rock-So-What Realty. When you sign your buyer’s representation agreement with Mr. Millionz, you’re actually signing an agreement to have I-Rock-So-What-Realty represent you (and then they, through a separate agreement, let Mr. Millionz be the one appointed to work directly with you). More than likely you will never hear from anyone at “I-Rock” other than Mr. Millionz, and you really would not have much reason to do so, provided Mr. Millionz is good at his job. The agreement says that “I-Rock-So-What Realty” (and in turn, Mr. Millionz) have a duty to represent you, to give advice, and to put your interests above those of any others. Awesome.

So you and Mr. Millionz go out looking at houses and right off the bat, you find your absolute dream home. Stop the wagons, call off the hounds – whatever it takes, you have to have this home for your very own. And then you see a sign that says “This home listed by Ivonna Spelt with I-Rock-So-What Realty.” From where you’re standing, you can clearly tell that your agent, Mr. Millionz, and the seller’s agent, Ms. Spelt, are two different people, and for that reason there should be no-problem with Mr. Millionz representing you, and Ms. Spelt representing the sellers and everyone coming together in a glorious action that makes you the happiest you’ve ever been in your whole life.

But wait…let’s go back. Remember that all written representation agreements are between a client and a broker? So the truth of the matter is that I-Rock-So-What Realty represents you and I-Rock-So-What Realty represents the seller. How can they put your interests in front of the seller’s interests (whom they have also agreed to put above all else)? Enter the conflict.

Well, Texas Real Estate law has made a provision for this called intermediary. So long as all parties are informed and agree in writing on this potential conflict and each opposing side has an individual that the broker can appoint as a representative (Mr. Millionz to you, and Ms. Spelt to the seller), everyone can sign a disclosure form and truly work as two separate but equally represented sides that come together to consummate a real estate transaction.

Ok. Starting to make sense, so let’s go back into our pretend scenario. You’re out looking at houses with Mr. Millionz and a lightbulb clicks on in his brain. He’s got the perfect house for you. One problem – it’s one he’s listing. Remembering the “broker level” agreements from before, you think…hey…no problem. I-Rock-So-What Realty can just assign us each a different agent. Wait a minute. There’s only one agent. Can he truly represent both you and the seller? What if he knows the seller’s bottom line already? Can he tell you? What if he knows you love the house and will pay anything for it – will he tell the seller? What a pickle you’re suddenly in.

Texas real estate does still have an option for this type of scenario. It’s called intermediary without appointments. That means that, in essence, the broker (I-Rock-So-What Realty) represents no one. The broker and its agent (Mr. Millionz) must disclose material facts and obey the law, can’t disclose confidential information, but also can’t give advice. They can submit offers, counter offers, negotiate repairs and do contracts. It’s a slippery slope because the agent must be very careful not to give an advantage to one side over the other. But it’s do-able.

Does your brain hurt already? Well, just remember that this is the kind of fun technical madness that your real estate agent is trained and paid to help you sort out. If you’ve ever found yourself in a situation with intermediary that you don’t quite understand, feel free to give us a call.

image courtesy of familymwr