Who does a listing agent actually work for?

Welcome to Part 1 of a three-part miniseries on representation in New York real estate, presented by More For LES.

Buying or selling a home involves a small cadre of people: agents, attorneys, lenders, inspectors, appraisers, managing agents, and occasionally a parent, friend, or nosy neighbor offering unsolicited advice.

But among all of these relationships — some of which are formal, others informal — one of the most important can also be one of the least understood: that of the real estate agent.

In New York, representation isn't simply a matter of who showed you the apartment, who answers your calls, or who seems to be helping you through the transaction. An agent represents a principal, also referred to as a client, and that relationship carries specific responsibilities involving loyalty, confidentiality, disclosure, care, and advocacy.

The distinctions matter.

Before a seller tells an agent the lowest price they'll accept — or a buyer reveals how high they're willing to go — they should understand who that agent represents and what responsibilities the agent owes them.

This three-part series looks at representation from each side of a residential real estate transaction: first the seller, then the buyer, and finally both sides together through the more complicated world of dual agency.

Let’s meet our sellers, the Suburbskys, a five-person family living on the Lower East Side, who are looking for a bridge or tunnel to get them out of the city.

Meet the Suburbskys

Herb and Reba Suburbsky love the Lower East Side.

They've raised three children here in a beautiful 2,200-square-foot, three-bedroom condo. It's a full-floor apartment with high ceilings, exceptional light, three bathrooms, a magnificent chef’s kitchen, and enough private outdoor space to make their friends in smaller downtown apartments understandably jealous.

For years, it has been more than enough.

But the apartment hasn't gotten smaller. The Suburbskys have gotten bigger.

Their oldest son, the only one born when they moved in, is becoming a promising football player. Their youngest daughter has aspirations of becoming a drum major or a ballerina. The middle child is pretty happy-go-lucky and relatively indifferent, so long as he can get a Roblox fix.

Herb and Reba are people of the suburbs — one from Long Island, the other from New Jersey. Unlike some committed Manhattanites, the prospect of a commuter train doesn't fill them with existential dread, although no one is exactly running toward NJ Transit. Reba wants at least 4,000 square feet, more room for her children to flourish, and Herb wants more golf and fewer shared elevators.

They'd also like to have everyone settled before the beginning of the next school year. So, they decide to sell.

A Client, Not a Customer

The Suburbskys interview several agents, all from big brokerages, and eventually hire one to list their apartment.

This decision establishes an agency relationship. Within the agency relationship, the Suburbskys are the principals — more typically referred to as clients. Their agent acts on their behalf within the authority granted by that relationship.

In a typical real estate transaction, the agent is considered a special agent. Despite the terminology, this qualification doesn’t bestow praise. It means the agent has been authorized to perform certain acts for the principal rather than being given unlimited authority to act on the principal's behalf.

The Suburbskys haven't handed over control of their apartment to the agent. Rather, their agent is empowered to market the property, arrange showings, communicate with prospective buyers and their representatives, present offers, provide advice, and negotiate within the authority the sellers provide.

An agent's relationship with a client comes with a set of fiduciary responsibilities that include reasonable care, confidentiality, loyalty, obedience, accounting, and disclosure. In practical terms, though, the Suburbskys should expect their agent to advise them competently, follow their (lawful) instructions, keep them informed, safeguard confidential information, properly account for property or money entrusted to the agent, and — above all — put the sellers' interests ahead of the agent's own.

That doesn't mean simply agreeing with everything the Suburbskys say.

If comparable sales suggest listing at $4.75 million and Herb and Reba want to list at $4.995 million, their agent should give them an informed opinion. But ultimately, the sellers decide. Likewise, if a qualified buyer offers $4.6 million and accepting it would mean a quick commission, the agent's responsibility is still to the Suburbskys — not to the fastest possible deal.

Confidentiality is particularly important.

Suppose Herb and Reba tell their agent that they'd really like to be in the suburbs before the next school year and are prepared to be flexible on price or timing to make that happen. That's valuable information for their agent to have…but also potentially valuable information for a buyer.

The listing agent can't casually disclose the sellers' negotiating position simply because someone asks how motivated they are. The same applies to the lowest price they'll accept, whether they've already found another home, or how urgently they need to sell.

But confidentiality doesn't mean concealment. If the Suburbskys instead tell their agent that water enters around the corner window in the living room during heavy rain, that's a different kind of information. An agent's obligation to protect a client's confidential negotiating information doesn't permit the agent to knowingly misrepresent or conceal material facts that must be disclosed.

The Suburbskys' desire to move before September concerns motivation and bargaining position; a known condition materially affecting the property raises a different obligation.

The Listing Agent Works For…?

The Suburbskys' agent will interact with plenty of people who aren't the Suburbskys.

On weekends, the agent will meet with prospective buyers at open houses. They'll answer questions, provide information about the apartment, communicate with buyers' agents, and possibly make referrals to attorneys, lenders, inspectors, and other brokers.

The agent may be many things: Friendly. Helpful. Knowledgeable.

But, unless another agency relationship has been established, the listing agent's client is the seller — the Suburbskys — only.

It’s an important distinction to make because real estate transactions can become conversational very quickly. Picture this:

A buyer walks into an open house. They say, “Ooh, I love this sun-drenched, full-floor apartment! It’s practically curated for my taste!”

They begin talking with the listing agent.

“This is exactly what we've been looking for, and we've been outbid on three apartments already. We could probably stretch to $5 million if it’s the right fit.”

On the surface, this is a perfectly ordinary admission. However, there’s something the buyer should understand: The listing agent does not represent them.

This is where we'll pick up in Part 2, when we return to this stunning Lower East Side condo with the buyers. (And, if you’re wondering about $5 million apartments on the LES, here’s one.)