Across the Divide
- September 29th, 2011
- in Yachting
Across the Divide:
Real Estate Representation in the Virgin Islands
Buying or selling a home is a significant financial transaction in a person’s life. If you're selling a property, it may be the most valuable thing you own, and it is of utmost importance to find an agent you can trust. Before selecting a real estate agent, it’s important to do your homework. This means checking referrals, searching for the most experienced and accessible agent, and, of course finding the best representative for your buck. The most important thing is to find the agent that will work hardest for you. You should discuss your potential relationship with the agent at length until you’re satisfied that you’re both on the same page.
In the USVI . . .
Before discussing the consequences of using an agent, and that agent’s duties and obligations, let’s look at the difference between a broker, a sales agent and a Realtor. A real estate professional used by a potential purchaser may be either a broker or a sales agent. Both brokers and sales agents are agents. A broker’s license is required for agents who own their own businesses; sales agents work under the supervision of a broker. Both brokers and sales agents, in the USVI, are licensed by the Virgin Islands Department of Licensing and Consumer Affairs and regulated by the Real Estate Commission. Licensing requirements for brokers are more stringent, with a more challenging examination and at least two years experience as a sales agent required.
What, then, is a Realtor? The National Association of Realtors is a nationwide association of real estate professionals in the US. Most sales agents and brokers are members of Realtors, although membership is not required in order to be licensed. Realtors are required to comply with a code of ethics and have procedures in place for enforcing discipline against their members. However, Realtors is a private trade group, not a governmental entity. Each of the principal US Virgin Islands has its own “board” of Realtors that acts as the governing body for the local group of Realtors. For this reason, you will not see the term “Realtor”—in this magazine or elsewhere—thrown around to describe every real estate agent.
Selling Agents, Listing Agents and Transactional Agents
Each local Board of Realtors has its own multiple listing service (MLS). The MLS is a cooperative system for allowing each agent’s properties to be shown by multiple agents. While the MLS is a great resource for prospective purchasers, a potential purchaser should be aware of the duties her agent has to a potential purchaser—and to the seller. A listing agent is the agent of the seller, and therefore owes certain duties to the seller, including obtaining the best price for the property.
Non-listing agents can be either sellers' agents or buyers' agents. In the USVI, most agents, when they are not acting as listing agents, nevertheless act as seller’s agents. Technically, a sellers' agent showing you another broker’s listing, will be acting as a subagent, that is, as an agent of the listing broker, who is an agent of the seller. Buyers' agents, of course, represent the potential purchaser; such an agents' primary duties are to the potential purchaser, not to the seller. While some agents in the USVI do act as buyers' agents, a substantial majority continue to act as seller’s agents.
The prevalence of sellers' agents in the USVI is in contrast to the prevalence of buyers' agents or so-called “transactional agents” in most other mainland US jurisdictions. A transactional agent is neither an agent for the buyer or the seller, but works “for the transaction” in a way that should benefit all parties. While common in many US jurisdictions, transactional agency is essentially unknown in the USVI, although it may soon become more prevalent.
As a practical matter, should you care whether a sellers' agent, buyers' agent or transactional agent is showing you properties? This depends primarily on whether you want “your” agent to act on your behalf in negotiating the best possible price and terms for your purchase. Sellers' agents can be a great resource for information about their clients' properties, however, they are ethically precluded from acting as advocates for the buyer in the negotiation of a final contract. Sellers’ agents will submit offers on the terms and conditions you specify, but it will be up to you to determine what price to offer, and whether to request any variations from the standard contract terms.
You may find that your comfort with a particular agent is more important than whether that agent is a buyers' agent or sellers' agent. Regardless, you should find out up front in what capacity your agent will be acting, whether the agent is a Realtor and has MLS access, and how that agent will be compensated.
In the BVI . . .
Because of the regulatory regime governing real property in the British Virgin Islands, involving registration, taxation, and sometimes licensing (for persons who are not BVI citizens), it is typical for a real estate agent to be involved in real estate transactions. Most real estate agents in the BVI act for sellers and attempt to find buyers who wish to purchase. While it is rare for a real estate agent to represent a buyer, this can always be arranged.
There is no regulatory regime for real estate agents other than the general trade licensing regime applicable to all types of business. However, there are a number of well-established and highly respected agencies in the BVI, including international firms.
The real estate agent’s remuneration is commission based, with the commission calculated at a percentage of the selling price, usually 10%. Listing agreements may be exclusive or non-exclusive (the latter is typically referred to as an “open listing”). Where the listing agreement is exclusive, even if another agent, or the seller himself, finds the purchaser, the real estate agent must be paid the agreed commission.
A real estate agency can provide the following services on behalf of sellers:
Exposure—marketing the property to prospective buyers.
Valuation—obtaining an appraisal of the seller’s property to guide the negotiation process. A real estate agent can also give you an informal opinion on how much your house is worth, because of their experience and knowledge of the market.
Facilitating negotiation—assisting the seller with evaluating and negotiating offers to buy.
Facilitating sales—guiding a seller through the selling process.
Obtaining surveys—real estate transactions will require a land survey to ensure that the boundaries are, and in the case of built properties, a structural survey and a termite inspection is standard. The real estate agent can obtain these reports in short order, as these firms usually have standing arrangements with the relevant professionals. Alternately, an attorney acting on behalf of either buyer or seller can arrange for these matters.
However, real estate agents do not provide title services such as title searches and settling title (clearing encumbrances, raising requisitions, or resolving boundary issues). Nor do they provide registration services—all real estate transactions in the BVI must be registered at the Land Registry. An attorney is neede d for these aspects of the transaction. Most real estate agents would have a panel of lawyers that they can recommend to act for either buyer or seller.
Also, the real estate agent does not have the power to sign the final contract—usually referred to as an agreement for sale—or to sign the transfer documents. These must be executed by the principals i.e. the buyer and seller themselves.
William S. McConnell is a property and business attorney at Dudley, Topper and Feuerzeig, LLP, a Lex Mundi Firm based in St Thomas.
Willa Tavernier is a property and business attorney at O’Neal Webster BVI, a Lex Mundi Firm based in Tortola.