The different roles of the real estate agent: Intermediary vs. property trader

The real estate sector is vast and complex, offering a variety of roles for professionals working within it. Among these roles, two stand out particularly: that of intermediary and that of property dealer. Although these two functions are often confused, they rest on very different legal, economic, and practical foundations. In this article, we will explore in detail these two roles, understand their specificities, and examine how they influence the responsibilities and legal obligations of real estate agents.

1. The real estate agent as an intermediary

The role of intermediary: Facilitating transactions

One of the most common roles of a real estate agent is that of intermediary. In this role, the agent acts as a facilitator between the seller of a property and the potential buyer. Their main mission is to bring these two parties together and help them complete a transaction smoothly and effectively.

The real estate agent as an intermediary is responsible for several key tasks, including:

Property valuation: Assessing the market value of the property based on market conditions, the property's features, and current trends.
Marketing the property: Using various channels to promote the property, such as online listings, social media, and virtual tours.
Negotiation: Assisting both parties in reaching an agreement on the price and terms of sale, while ensuring that everyone's interests are respected.
Legal and administrative advice: Helping clients understand the legal aspects of the transaction, such as sales contracts, tax obligations, and local regulations.

The compensation model: commission

As an intermediary, the real estate agent is generally compensated by a commission, which is a percentage of the final sale price of the property. This commission is often shared between the seller's agent and the buyer's agent (if there is one). This compensation model motivates the agent to close the sale quickly and achieve the best possible price for their clients, as their income directly depends on the success of the transaction.

Legal responsibilities

In this intermediary role, the real estate agent is subject to specific legal obligations, such as:

Duty of advice: The agent must provide complete and accurate information to their clients and advise them objectively.
Adherence to ethics: The agent must act with loyalty, honesty, and transparency towards all parties involved.
Confidentiality: Clients' private information must be protected and cannot be disclosed without consent.

These legal responsibilities are crucial for maintaining client trust and ensuring that real estate transactions are conducted in a secure and fair manner.

2. The real estate agent as a property dealer

The role of property dealer: Investing and reselling for profit

The role of a property dealer is fundamentally different from that of an intermediary. Here, the real estate agent acts as an investor. They buy properties for their own account with the intention of reselling them quickly at a higher price, thereby making a profit. This business model relies on the ability to identify buying opportunities at low prices, often in properties requiring renovation or located in developing areas.

Key steps in the role of a property dealer include:

Identifying opportunities: Searching for undervalued properties or those with potential for quick appreciation.
Renovation and improvement: Investing in renovation work to increase the property's value before resale.
Time and cost management: Optimizing renovation timelines and costs to maximize return on investment.
Quick resale: Reselling the property within a short timeframe to avoid additional costs (such as property taxes) and make a profit.

The compensation model: Profit from resale

Unlike the intermediary, the property dealer does not earn a commission. Their income comes exclusively from the difference between the purchase price of the property and the resale price, after deducting associated costs (renovation, notary fees, taxes, etc.). Therefore, the financial success of a property dealer depends on their ability to accurately assess a property's profit potential and effectively manage costs and timelines.

Legal responsibilities

The property dealer has legal responsibilities that differ from those of the intermediary. Some of these responsibilities include:

Hidden defects warranty: As a professional seller, the property dealer must guarantee hidden defects that could render the property unfit for its intended use.
Tax obligations: Transactions carried out by a property dealer are subject to specific tax regimes, particularly regarding VAT and capital gains.
Strict regulations: Depending on the country, the property dealer's activity may be subject to specific regulations, including resale time limits to prevent abusive speculation.

These legal obligations are essential to ensure that the property dealer operates within an ethical and legal framework, thereby protecting the interests of future buyers.

3. Comparison between the two roles

Professional objectives

Intermediary: The primary goal is to facilitate transactions between buyers and sellers, acting as an advisor and negotiator.
Property Dealer: The goal is to make a profit from the purchase and resale of properties, maximizing added value.

Nature of client relationships

Intermediary: The agent maintains a service relationship with their clients, based on trust and advice. They represent their clients' interests (buyers or sellers) and act on their behalf.
Property dealer: The property dealer does not have clients per se, but potential buyers. They act for their own account, with their personal interest at the forefront.

Financial risk

Intermediary: The financial risk for the intermediary is relatively low, as they do not own the properties they sell. Their main risk is failing to close sales and thus not earning a commission.
Property dealer: The property dealer takes on significant financial risk, as they invest their own capital in purchasing properties. If the market turns or renovation costs are higher than expected, the dealer may incur substantial losses.

Necessary skills

Intermediary: Skills in negotiation, knowledge of the local market, interpersonal skills, and understanding of the legal and administrative aspects of real estate transactions.
Property dealer: Skills in property valuation, project management, finance and accounting, knowledge of construction and renovation, as well as the ability to take calculated risks.

Conclusion

The roles of intermediary and property dealer in real estate, while sharing some aspects, are fundamentally different in terms of objectives, responsibilities, and risks. The intermediary primarily acts as an advisor and facilitator for real estate transactions, with compensation based on commissions. The property dealer, on the other hand, acts as an investor, buying and reselling properties for their own account to make a profit.

This distinction is crucial, as it influences not only how each role is performed but also the legal and ethical obligations that arise from it. Understanding these differences allows real estate professionals to choose the path that best fits their skills, interests, and risk tolerance.