Protect Yourself: Agency Representation in Tennessee

As we have discussed in previous blogs, being represented by an experienced real estate agent when you buy or sell your home will make an enormous difference in the smoothness of the process and the results.

The concept of agency is simple: buyers are represented by agents and sellers are represented by agents. Real estate law governs the process, with the best interests of all parties being the goal. With representation, a buyers or seller knows a licensed professional is on their side.

As a buyer, you view homes privately with your personal market specialist. Your agent, while viewing a home with your criteria and perspective in mind, is also ever aware of how the market may view the home, both now and in the future. Your agent is your advocate with regard to the price you pay.

Real Estate Law in Tennessee

Your agent is familiar with the financing and legal process and can help structure your purchase accordingly to avoid hiccups and bumps along the way. You and your agent will use a number of legal documents during the process. Your experienced, professional agent understands the content, the intent, and the nuances, so you are not confused or overwhelmed by them. With the guidance of your real estate agent, you can navigate the tedious process together, and you can respond appropriately when your input is needed.

Recognizing the importance of real estate purchases and sales, the real estate profession has a body of laws which are legally binding and are enforced specifically to protect buyers and sellers. While laws vary from state to state, there are also national codes, rules, and ethics which mandate proper behavior by real estate professionals.

Marx-Bensdorf, REALTORS is committed to the highest level of service for all of our clients. Whether first-time clients or seasoned customers, we want our clients to feel confident and educated in their home buying or selling experience. And because our profession is constantly refining how we conduct business for the benefit of our clients, we bring value to your transaction whether or not you have purchased or sold previously.

To further explain agent representation, we have addressed some frequently asked questions about real estate agency law in Tennessee, both for home buyers and for home sellers. By equipping yourself with the right knowledge and awareness of terms, you can protect yourself and be aware of your rights throughout the process.

When Does a REALTOR Become My Agent?

As soon as you decide to sell your home or start the house-hunting process, it is in your best interest to find a REALTOR to represent you. Your selection should be first based in the concepts of trust and respect; but, all agency and agent relationships are legally specific.

Once you make your selection, the agent and agency relationships are documented with appropriate signed documents. The documents commit you and your agent to work together honorably and in accordance with applicable laws and ethical standards. Once the documents are signed, your agent has a unique, particular obligation to care for your best interests.


If you are a homebuyer, you must first sign a Buyer Representation Agreement. The Buyer Representation Agreement is essentially an agreement of how you and your agent will work together.

Once the agreement is signed, you are contractually bound to your agent, which makes them your advocate and champion through the home hunting, buying, negotiating, and closing steps.

If you do not officially engage an agent, the agent who is helping you is simply showing you homes as a courtesy to both you and the seller. Without the documented relationship, the agent has no obligation to protect your interests and no expectation of payment when you purchase your home.


If you are a seller, you will enter into a Listing Agreement with your agency and agent of choice. The Listing Agreement, by design, defines the terms of your working relationship with your agent and your agent’s responsibility to you. Your listing agent is, by law, focused on helping you achieve the sales price and terms you desire.

Who Pays the REALTOR?

Real estate agents are paid when transactions are completed. Because the process starts with the listing, the seller pays a fee, referred to as a commission, for their agent and agency to market their home and manage the transaction process on their behalf.

Since the buyer is typically represented by another agent, either from the same firm or a different firm, the commission paid by the seller is divided between the agencies and the agents representing both sides.

On rare occasions, if a buyer chooses to purchase a home without agent representation, the agent for the seller may legally become a neutral party, operating as a Facilitator between the buyer and the seller. The key to this concept is the neutrality of the agent, who is primarily focused on appropriate legal process for both sides of the transaction.

There is a misconception that buyers save money by taking this approach. Buyers may think they are reducing the commission the seller is paying for representation. In reality, the commission has been agreed to before the buyer has come to the property. Further, as facilitator, the neutral agent is now responsible for coordinating both sides of the transaction.

Buyers sometimes wonder how agency works and how their agents are paid if they want to purchase a “for sale by owner.” The simple meaning of “for sale by owner” is an “unrepresented owner.” Most of these unrepresented sellers recognize that buyers are typically represented by agents, and therefore will pay the appropriate agency/agent commission.

While it almost never occurs, if the seller will not pay the buyer’s agency/agent commission, the buyer will be required to pay it in addition to the purchase price of the home. Again, this situation is unusual.

What Does “Designated Agent” Mean for Me?

As mentioned above, the way agencies and agents function may vary according to the state laws. In Tennessee, agencies are legally licensed entities; and agents are also legally licensed. To practice the profession, each licensed agent must work within a licensed agency. In some areas, all of the agents within a specific agency jointly serve all clients of the agency. The dilemma which can sometimes occur with this business format is conflicts of interest when multiple parties have interest in the same properties.

There is an alternate business format defined legally as “designated agency.” Most firms in the Mid-South area practice designated agency. This means, simply, each agent, working within his/her agency, has primary responsibility for the clients he/she represents. The agency within which your agent is working, however, is ultimately responsible for the ethical and professional performance of every agent in the firm.

Marx-Bensdorf, REALTORS practice designated agency, which means that your your agent can represent you in the purchase of virtually any home without a conflict of interest. Since your agent is designated solely to you, your agent is dedicated to keeping your information confidential and keeping a vested interest in your home-buying success.

The same goes for home sellers: since our agency practices designated agency, you have a specific agent who works to sell your listing. This allows your REALTOR to represent you and your interests, even if another agent in our office shows your property to their client. This allows our agents to work independently, but within the framework of professionalism and ethics. As referenced previously, the rare exception would occur if the buyer comes directly to your listing agent. In such a situation, the relationships are clarified by specific documents which are signed by all parties.

To Both Home Buyers and Sellers: Our REALTORS are Here for You

Marx-Bensdorf, REALTORS is known across the Mid-South area for its longstanding role in the community and its reputation for helping home buyers and sellers for almost 150 years. Because of our commitment to excellence and a high standard of ethics, you should always know that we will treat your purchase or sale with the utmost integrity and honesty.

When you find an agent to help you, they are by your side to help through each step. Even if the process takes a long time or falls through, know that your REALTOR is always working in your best interest – not their own. Our goal is to help you achieve your goals and doing so makes us happy.

We share this information about agency practice and the underlying laws because we want our clients to know that our care of them is founded and based on an established legal structure designed for client service. Transparency and clear communication will always be valued in our firm! Click here if you would like to contact us to learn more.

Posted by David Tester at 1:57 PM
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