In an ideal world, every party in a transaction would be fairly represented. When it comes to real estate, however, this may not be the case. The seller and buyer, depending upon the type of agreement with the Real Estate Professional, may not be represented equally.
Many people believe that the agent they are working with automatically represents them and their interests. Yet, without specific disclosures this is not true. Unless otherwise stated, the agent represents the seller in transactions for the sale of a home. This agent, as part of his or her fiduciary duty, must ensure his loyalty protects the seller’s position throughout the entire process.
This is true of the “listing agent” who puts the home up for sale, and the agent who finds the buyer. The agent – who helps the buyer find the right home – works for the seller as a “subagent” of the listing agent. With this system, all agents are legally bound to represent the seller. The buyer has no representation.
Example 1: You respond to a home advertised in a newspaper, a home magazine, or the Internet. The agent is friendly and informative. He or she tells you what you believe to be everything about the house. However, the agent represents the seller, not you.
Example 2: You are working with an agent who shows you 10 homes in a weekend. As you begin to feel comfortable with this person, you begin to offer personal information. However, without Buyer Agency, this Real Estate Professional is really representing the 10 sellers. Any information you reveal to the agent must be relayed to the sellers.
As this Real Estate Professional represents the seller, he or she cannot reveal certain things to you, as the buyer:
- The reason for selling (unless the seller specifically authorizes it)
- Any concessions, in price or otherwise, that the seller may be willing to give up.
- Any conversations between the agent and the seller
- Any information that could be detrimental to the seller, or give you, the buyer, an advantage. This would include a CMA (Comparable Market Analysis) that could put the seller at a disadvantage.
Buyer’s agency ensures you get the best deal
In recent years changes to the real estate industry have been made to allow for a more equitable arrangement. Buyers are not alone. In fact, with a Real Estate Professional working on behalf of a buyer, as a buyer’s agent, a buyer receives a full range of professional services. A buyer’s agent commits to a home buyer and provides undivided, confidential representation. This real estate professional has the tools, knowledge, industry connections, negotiating skills and seasoned experience to work for you. Many people lack these essential skills to ensure you do not pay too much for a home.
How does a buyer’s agent help you?
A buyer’s agent must work in a professional, ethical manner, ensuring the purchaser is treated with care, confidentiality, full disclosure and accurate accounting. A buyer’s agent will also show the buyer available homes, point out the property’s features, provide financing information and submit the offer to purchase. If a Buyer’s Agency agreement is struck between you and the Agent, it is you, rather than the seller, who has the representation from the Agent with whom you are working. Working under the agreements of Buyer Agency, you get the following benefits:
The real estate agent must act in the best interest of the buyer.
The agent must act in accordance with the lawful instructions of the principle (buyer)
Disclosure of all material factors such as:
- Seller’s financial condition
- Properties true worth
- Strengths and weaknesses of the property
- Commissions split with other brokers
- Legal effects of important contract provisions
- Information about property value trends that may influence your decision about a certain area
- CMA information. A buyer’s agent can develop a Comparable Market Analysis, revealing at what price similar properties in the area have listed for and sold for.
- Existence of other offers
- Relationship between agent and other parties
Reasonable care and skill
- Determining and advising the buyer of a reasonable purchase price
- Discovering any facts that would affect the purchase of the home, and advising the buyer
- Ensuring all details and facts of the sale are correct
- Ensuring all money handled between parties is accounted for
Most importantly, you can ask a buyer’s agent for advice and assistance in setting your offer price and structuring other terms of your offer. What’s more, you’ll have peace of mind knowing an advocate is working on your behalf to help you buy at the best possible terms.
The important thing is to understand your options, so that you don’t unintentionally accept less representation than you want. When you are looking to make the biggest investment of your life, it is not hard to understand why it is important to be represented exclusively.