Agents
Work For You
You wouldn't -- for a lot of good reasons
-- go into a contested divorce proceeding without an attorney, or worse, take
the advice of your spouse's attorney. Why, then, would you buy a home -- an
adversarial process regardless of how friendly everyone involved in the
transaction seems -- without someone on your side?
Oh, you think home buyers have always had
representation? Well, think again.
As a buyer, you are not represented unless
you've told the real estate agent who is showing you homes that you want that
agent to represent you as your "buyer agent." If you haven't, "your agent" could
be representing the seller.
Recently, more home buyers have been
asking, "Who represents whom?" As a result, many are opting to be represented by
a buyer's agent to take them through the process, from house hunting to closing.
The greatest thing about this is it doesn't cost the buyer anything and often
saves them thousands.
The way we were
Until a few years ago, real estate was sold the way it always had been -- the
listing agent obtained the listing from the seller and represented that seller.
A second agent, the "selling agent," brought the buyer to the table, but was
acting as a sub (an agent of the listing agent) often unbeknownst to the buyer.
In this situation, even though the selling agent may have never met the seller,
he or she still had a legal obligation to report to the seller any information
the buyer revealed, or any information the agent found out about the buyer's
situation that would help the seller's negotiating position. That makes the
agents sound evil, but in fact, if they had not communicated the information to
the seller, they would have been breaking the law. Both agents had a fiduciary
obligation -- a legal and moral obligation to work toward the best interests of
the beneficiary. The seller was the client for whom agents were working. The
buyer was merely the customer.
The revolution begins
In 1983, however, a classic study started a revolution in real estate sales. The
Federal Trade Commission found that 72 percent of all buyers believed the agent
they worked with was representing their interests. That meant that three out of
four buyers were "spilling their guts to agents who weren't representing them,"
as one buyer agent wrote. The report fueled a nationwide legislative agenda that
forced the real estate industry to disclose whom the broker or licensee
represents in every situation. By 1988, most states had disclosure laws in
place.
REBAC, a wholly owned subsidiary of the
National Association of Realtors, trains real estate licensees how to serve the
buyer and grants the respected Accredited Buyer Representative designation to
agents for reaching certain education and experience standards.
Telling it like it is
In some states you can still work under the old sub-agent system, or you can
choose buyer representation. Many states and the NAR Realtor Code of Ethics,
however, now require "disclosure of agency" by which any agent is required to
disclose his or her legal relationship with a buyer or seller "at first
substantive contact." That is, if you, as a prospective buyer or seller, start
telling an agent information that would compromise your bargaining position in
any way, the agent should immediately explain "agency" and give you a choice in
how you want to move forward. Unfortunately, some don't, so it's up to you to
protect yourself.
Any licensed real estate
agent in the United States can legally act as a "buyer's agent," although not
all have experience doing so. You can also engage what's called an "exclusive
buyer's agent." This is the purest form of buyer representation, but
unfortunately, few firms are able to make a go of representing only buyers,
since listings are the lifeblood of real estate, and listings are what make the
phone ring.
Mortgage Glossary4
