More Frequently Asked Questions About Buyer Agency
Steve dispels a few myths about the real estate industry.
Before we get started, I just wanted to point out a couple of quick
First and foremost, in case you get the wrong idea about this dialog, I LOVE BUYER AGENCY.
If you are planning to purchase a home, you should hire a Top Producing Realtor like myself, to represent YOUR interests in the transaction. To negotiate the best price on your behalf! To assist you in whatever way possible to put together a Total Package which will be most beneficial to you and your family. If you can have a Top Agent on your side, without paying any more money, what else could you ask for. I personally represent Buyers all the time as a Buyer's Agent, and I truly believe it's a great way to go.
My issue here, and the purpose of this dialog, is merely to dispel some of the hype and myths surrounding Buyer Agency, and Exclusive Buyer Agency, so that you can understand the options and make an educated decision. I feel that a lot of agent out there are using Fear, Deception, Misinformation, and Distortion to try and generate more business for their firms, and that's just not right. By going through some of these common themes in their marketing plans, I hope to better educate the Buying Public about their rights and options when purchasing a home.
The Following is an excerpt which I took from the "marketing" pieces of several "Exclusive Buyer Agency" firms. I wanted to go through some of the items in detail, and perhaps provide some clarity as to what some of these comments really mean to you. The Text in Blue represents my commentary on the different items.
Buyer agency FAQ's - Copied from another agents marketing piece.....
Isn't the agent who shows me homes representing me?
"Don't count on it. Unless you have a written Agency Agreement, the Law of Agency, as defined by federal and state courts,specifies the contractual relationships that are formed when property is bought and sold. Agents listing property enter into assigned contract with the sellers to represent them in the sale of their property. This same contract permits the listing agent to use"sub-agents" to help secure a sale. Unless you have a written Agency Agreement with a real estate agent promising to represent YOUR best interest, the agent showing you homes should be considered a sub-agent working with the listing agent to obtain the highest possible price for the seller."
Absolutely Correct! Never assume that an agent is working on your behalf without a signed "Agency Agreement" specifying this in writing. By law, all agent represent the Seller unless otherwise disclosed.
Does the legal representation that goes with a contractual agency relationship really matter?
"Absolutely. If you had to go to court would you use the same attorney the opposing side was using? Responsibility and accountability to a client are two legal requirements of representation. By law, selling agents must negotiate in the best interest of their clients, not withhold information from them, and must present their property in a favorable manner. A traditional real estate agent views buyers as customers, not clients."
I agree that understanding who your real estate
agent represents is vital. I disagree a little bit however in the vehement position and
"Black & White" approach this person takes to the issue. Personally, if I
was going to court, I would LOVE to hire a defense attorney who had friends in the DA's
office. I would probably put together a "Defense Team" of different
professionals, some of whom have buddies in city hall, one of whom is married to the
judges daughter, 2 who are independent legal scholars.
In the case of buying a home, this team could be a super producing "dual-agent" or even "sub-agent" Realtor" who can get me into their hot new listing before anyone else; a great home inspector to look for potential problems with the home; A great "Lender" and "Bank Appraiser" to independently review the value of the property; and a diligent "Real Estate Attorney" to work solely to represent your position when negotiating the terms of the purchase contract with the Seller and their Attorney
My agent agrees she "technically" represents the seller, but she says she will be fair and "take care of me." Isn't that all I need?
"Of course agents try to be fair and are nice to the buyer since they want to make a sale. But because they are bound by the law of Agency and their Code of Ethics, they can only do so much without jeopardizing their license to practice. For instance, traditional agents cannot tell you how much they feel a certain piece of property is worth, or how to negotiate the best purchase price. In this case "technically" means legally, and if the seller has representation, shouldn't you? As The Buyer's Agent, we always negotiate in the best interest of the buyer."
Here we skirt that issue of
"technicalities." It not that all agents "...try to be nice and fair so
that they can make a sale." Agents are required By Law to show Honesty and Fairness
to Buyers. Failure to do so can result in censure or loss of license. More importantly,
they also are depending on you, their valued customers as a source of all of their future
business. You cannot tell me that an agent like Sara Jones who is among the Top 100 Agents
in the world; Who has been at the pinnacle of their profession for over 10 years; Who has
a career based on 96% of their business coming from "personal referrals" from
past clients, has gotten to that level by "railroading" their customers into
overpaying for real estate. It makes no sense. Before I started practicing Buyer Agency in
1993, I had sold over 500 properties to Buyers while acting as a "subagent" of
the Seller. Lo and Behold, they somehow all seem to be happy in the level of service I
provided. It's just not that big of a deal. Buyers and Sellers are Not puppets to be
manipulated by the real estate community. They are educated consumers and I think it's
insulting to imply otherwise.
Does The Buyer's Agent have access to all resources like the Multiple Listing Service?
"Absolutely yes, and more. We belong to the local Board of Realtors and MLS, so we can show you homes listed with this service. In addition, since we represent you, not the seller, we regularly show homes that are "for sale by owner" and "for sale by builder."
This is correct except for one thing. It really has nothing to do with Buyer Agency at all! One of the biggest misconception that "Exclusive Buyer Agent" firms use to hook potential clients is this gimmick about "We can show you more than just the 'Listed' properties." That's completely and totally ridiculous. Any agent can show you a home that is a For Sale by Owner, Bank Owned, or New Construction home. The exact same principles apply. If your Realtor shows you property, they want to get paid! If that fee comes from the Seller, that's fine. if it comes from the Buyer, that's OK too. As long as they get paid fairly for their service they are happy. The thing to realize however is that in any of these cases, if the Seller won't pay the commission, and you have a contract with a Buyers Agent, YOU HAVE TO PAY THEM. They would have you believe that this doesn't matter because you will save money, but that's not always the case. For example, lets say you want to buy a home in Development X in New Jersey, and that Builder Wont negotiate the Price and Wont compensate any Realtor in any way. This is common in some areas like Atlanta, and New Jersey. If you want your "exclusive Buyer Agent" to represent you in the purchase, you need to pay them a fee, perhaps $10,000 to $15,000, over and above the price of the home. Now of course, your "Exclusive Buyer Agent" would probably tell you not to buy there (for one reason or another). That may or may not be in your best interests. It depends how much you like the home. But keep in mind that Buyer Agents are motivated ultimately by the same things as Subagents; - Do the best you can for your client and customers, generate future referral business, and sell homes for a fee so that their kids can eat. To imply anything more altruistic would be stupid.
Exactly how does The Buyer's Agent establish this legal relationship to represent me?
"Just as sellers establish a legal relationship by signing a listing agreement with their agent, you establish a legal relationship with them by signing a buyer's agreement. This agreement makes us legally accountable to you and not the seller."
Absolutely True! The only difference is that it also makes you legally accountable to them. Many "exclusive buyer Agency" firms try to get you to sign a legal contract with a retainer fee that binds you to them for a certain period of time. I tend to prefer to represent Buyers merely by signing an agreement that if they purchase a home that I FOUND THEM, that I will be compensated. If they find one without me or don't want to work with me anymore, they are under NO OBLIGATION to pay me anything
How much will it cost to retain the services of a Buyer's Agent?
"There is no need for you to incur additional cost for our services when The Buyer's Agent helps you buy a home. Our compensation comes from the proceeds of the transaction, unless you choose otherwise."
That's true provided that there is enough
money coming out of the transaction to pay the debt. For example, if you have a contract
to pay Buyer Agent Jones 3% commission when you buy a home, and the home you buy is
listing by Realtor Brown who is offering a 3% "Co-Broke" fee, it cost you
nothing. If, on the other hand, Realtor Brown is only offering a 2% Co-Broke Fee, YOU Must
Pay your Buyer Agent the other 1%. Any claim that it is merely coming from the
"proceeds of the transaction" is STUPID. That means nothing more than adding the
fee you owe the agent to the purchase price of the home. It's like the Car dealer implying
that the "extended warranty" is free when in reality he raised the price of the
$20,000 car to $20,500 to give you this Free Warranty. In short, you can't create or
destroy money - you just move it around. If I own a home I'm selling "By
Owner"and want $200,000 net to me from the sale, you can pay your Buyer Agent $6,000
out of your pocket OR raise the price to $206,000 and I'll pay them. It doesn't matter to
me, lets just understand though that my net was still $200,000 and Your net was $206,000.
Let's not anyone think that people are working for FREE. They shouldn't have to. Everyone
deserves payment for services rendered. They just shouldn't imply that you're not really
If you work on commission, why would you try to lower the price of a house for me?
If we save you $10,000 on the purchase of your home, The Buyer's Agent would only earn approximately $150 less commission. Your goodwill and word of mouth advertising will be worth much more than this, not to mention our legal obligation to represent our client's best interest.
I agree 100%. Your Future Business is far more important to them than the extra $150
If The Buyer's Agent can save me money on price, why can't traditional sellers agents?
"Just as other agents work for the seller, we work for the buyer. Therefore we are obligated according to "A Realtor's Guide To Compliance With The Law of Agency" to reveal to the buyer: the willingness of the seller to accept a lower price, any facts relating to the urgency of the seller's need to dispose of the property, any facts affecting the value of the property, and any information that would affect the buyer's ability to obtain the property at the lowest price and on the most favorable terms."
Well that's true, however the only
information the "Buyers Agent" has about the Sellers "willingness to accept
a lower price" comes from the information that the Seller actually thought of and
communicates to HIS Agent, and that the "Sellers Agent" saw fit to provide to
the Buyers Agent.
Exactly how does The Buyer's Agent save me money?
"By working on our client's behalf, we are able to assure that you have the opportunity to:
1.Pay no more than fair market value for your new home.
2.Include repairs and corrections in the contract.
3.Obtain the most favorable mortgage.
4.Obtain the best rates on home warranties and insurance."
OK, so what exactly are they trying to say. The arguments always seem to break down when someone pushes the issue on "exactly how this savings is going to appear." I have been the "Sellers Agent" on countless of sales in which Buyers were represented by an "Exclusive Buyers Agent." In some cases, I thought they paid far too much for the property than they should have and far more than the Seller was prepared to take. The reason is that their "Buyers Agent" was either inexperienced, had little knowledge of the real market conditions, or saw the chance to "put the deal together" so that his company could make $10,000 - $15,000. Remember, I LIKE BUYER AGENCY, and in fact I PREFER BUYER AGENCY when I work with Buyers. But AGENCY is NOT a SUBSTITUTE for experience. Having a Surgeon devoted to you and your well being by a legally binding contract is useless if they don't know how to operate. Sometimes, I guess I'm saying, I would rather have a surgeon a tad less "morally devoted" who is the foremost expert on Heart Surgery in the world. I'll get my moral devotion from my family and friends.
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