Buyer Beware – whose Side are you on?

Agency relationships or what we define as Buyer representation has progressed dramatically since the early 90′s. Remember the days when the agent that drove you around looking at homes and they actually represented the seller of any home that you previewed?

Could you imagine telling your agent personal information about your situations, finances, etc. and then they would relay this information to the listing agent of the home you made an offer on? It was assumed by the buyer, the agent was looking out for their best interests.

Now that the rules have changed, real estate agents are now required to discuss in detail an “Agency Disclosure” form which is one part of the purchase contract. This disclosure form explicitly states who the agent represents. This form should be signed by the party that the agent is representing and is by no means a commitment from the buyer. It is only a disclosure and should be signed PRIOR to the writing of a purchase contract.

Over the years I’ve known several buyers who actually think they will save money by dealing directly with the agent who is the listing agent on a property. This listing agent then writes an offer on behalf of the buyer but the agent’s fiduciary duty is to get the highest price for the seller, not the lowest price for the buyer. This strategy can actually cost the buyer thousands of dollars more when the negotiations start.

As a buyer you want to know who’s working for you and looking out for your best interests. Do not take “representation” lightly as it could cost you thousands of dollars. Let’s say you hire an agent who works for ABC Company. This agent shows you a home that is listed by ABC Company but by another agent in the office. Guess what? The same rules apply as above. Even though there are two agents involved in the transaction, both agents work for the same company and therefore represent the seller. Agency can be somewhat complex and there are exceptions to these laws but this is the easiest way to explain it. One way to understand this is to remember that no matter what agent you hire to represent you, whether you’re a buyer or seller, you are actually hiring the “company” that the agent works for.

Probably the biggest misunderstanding or misconception of representation is with brand new model home communities. Ever seen the sign in a new home sales office that says “Buyer must be accompanied by their real estate agent on their first visit”? That sign is there for a reason. If you are not escorted by a real estate agent on your first visit then the builder will not allow you to be represented. The salesperson works for and represents the builder/seller and will try to get the builder/seller the highest price possible for their homes.

As a buyer, always consider hiring a real estate professional that will exclusively represent you and have the agent take you to the model homes on your first visit. Model home sales offices will not allow an agent to represent the buyer if the agent does not escort them on their first visit.

Another disclosure to the purchase contract on a real estate transaction is called the “Buyer Broker Exclusive Employment Agreement”. There are probably less than 5% of real estate professionals that use this form, however it only protects the buyer. Many agents who are inexperienced have a difficult time explaining the purpose and meaning of this disclosure and therefore have a challenging time in getting the buyer to sign this form. If explained correctly, buyers appreciate what this form means and feel very comfortable with the agent’s expertise and knowledge. As buyer’s agents, we want to go above and beyond to protect the buyer and look out for their best interests.

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