Is this your Story?
Anne’s listing agent did a wonderful job selling Anne’s home. In the process, Anne and the agent became friends, meeting occasionally for lunch or a game of tennis.
Two years later, when Anne was in the market to buy a home, the first person she thought to call was her friend, the listing agent. After a few weeks of house hunting, the two found the house of Anne’s dreams.
“I’ll offer $200,000, but I’ll go up to $250,000, if necessary,” Anne confided to the agent.
Little did she know the agent was required by law to pass along her top price to the seller. Because her agent, the friend Anne thought was working on her behalf, was legally bound to represent the interests of the seller, not the buyer.
Anne’s misunderstanding of the situation is typical of many potential buyers. A 1983 study by the Federal Trade Commission found that 82 percent of buyers surveyed believed their conversation with an agent was confidential. That same survey found that 57 percent of buyers responding thought the agent represented them.
The fact is, buyers are never represented in typical transactions.
The Buyer Broker Option
Fortunately, buyers do have a choice. They can elect to work with a “buyer broker,” an agent who will exclusively represent the buyer’s interest and is legally bound to negotiate the lowest price and most favorable terms for the buyer.
The concept of buyer brokerage isn’t new, but its time has come. Starting in California and spreading nationwide, the idea is gaining acceptance among ‘90s-era buyers looking to maximize their dollar during lean economic times.
As disclosure laws become the rule rather than the exception, the ‘90s have signaled fundamental changes in the way we buy and sell real estate. Many real estate experts believe the future of their profession lies in separate representation for buyers and sellers, just as both parties are represented in a court of law.
Buyer’s Agent Versus Seller’s Agent
The issue of equal representation is more involved than who represents whom. It’s a matter of loyalty and money.
Consider Anne in the example. Had she been working with a buyer broker, her top price would have been kept confidential. Her broker would have been required to point out all the defects in the property, and he or she would not have been bound to a particular company’s listings, giving Anne a wider selection of homes to consider. While buyer brokers have access to multiple listing services (MLS), most don’t take property listings themselves, eliminating any possible conflict of interest.
A buyer broker would not even have been required to disclose Anne’s identity to the seller. Anonymity can be a decided advantage for some buyers, especially corporations or high-profile individuals regarded as “moneybags.” A buyer broker would have sought to get Anne the best deal possible, by negotiating the lowest price, the lowest interest rate, the best terms and possibly, no closing costs.
Traditional agents, on the other hand, must tell the seller if they know the buyer’s top price and they must disclose the buyer’s identity. The must show the property in a favorable light, although they are required to disclose known major defects.
For those and other reasons, many people choose buyer brokers.
An Idea Whose Time Has Come
Sooner or later, the future of the real estate industry lies in equal representation for buyers and sellers. Until then, the industry will not be a true profession. Many real estate professionals, who feel uneasy about the conflicts of interest they believe they’ve been obligated to work under, are welcoming the change.
Ultimately, it is the buyer who will determine when the time has come for buyer brokerage. If the first part of the decade is any indication, the time for buyer brokers is now.