Who Represents You?
By John Adams
One of the
hot topics facing the world of real estate right now is the issue of agency.
Some would have you believe that it really doesn't affect you, the buyer, and
that nothing much has changed. But they are wrong.
The topic of
agency is important to you because it answers the most basic and fundamental
question that can be asked of any real estate professional: Who do you represent
in this transaction?
Until that
question is answered, you may be left with the impression that all agents who
work with buyers actually represent those buyers, and that you have somebody
going to bat for you in this transaction. Well, the issue of agency is important
because without it, we can never be sure who represents who.
Here's the
scenario:
You meet a
really nice agent at an open house named Bonnie. Even though Bonnie's house is
not right for you, she tells you she has others to show you that fit your needs
exactly. You spend an hour or so with Bonnie looking at a half dozen homes and
talking about your needs and your wants. During the course of the conversation,
you volunteer that you have $100,000 cash to spend and that you will not go over
$100,000 purchase price no matter what. Then you find the perfect house. Asking
price is $100,000 but you decide to offer $92,500 based on recent sales in the
area. During negotiations, the seller asks Bonnie directly how much cash you
have and how high will you go? What does Bonnie say?
Here's the
answer: Unless you have signed a "Buyer Agency Agreement" with Bonnie making her
your buyer agent, she is most likely acting as a sub-agent to the listing broker
who represents the seller. If that is the case, she has a fiduciary obligation
to the seller to disclose to him any information she has that might "promote or
protect his interest" in the transaction. Guess what? Bonnie has that
information.
The Seller,
now having knowledge of your financial position, counters at a full $100,000. He
knows you can afford it and that this price falls within your desired range. He
also knows that you have seen a number of other homes and that his is the one
you want.
Regardless of
what eventually happens in this scenario, it can hardly be called an even
playing field. So, how can you protect yourself from a possible disclosure
required of a seller's agent?
- Make sure
that the agent you are working with has agreed, in writing, to represent you as
a "Buyer's Agent." This will mean signing a buyer brokerage agreement in which
you promise to work only with that particular agent for a specific period of
time, often 90 days. It also means that you promise not to buy from anybody
else, even FSBOs, without involving your buyer's agent. In almost every case,
the commission will still come from the seller, but your agent must present the
offer.
- Never say
anything to anybody unless you would be willing to have that information
repeated into a seller's ear. Assume that everybody, and I mean everybody, is
working for a seller unless you have specifically hired them to work for you.
And even then, be discreet. During the second world war, the military promoted a
phrase designed to stop idle gossip: Loose lips sink ships! You would do well to
adopt that philosophy in your home-buying as well.
Source: REALTOR.com
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