Buyer representation really started to gain acceptance in the real estate community in the early 1990’s. For those of you who might remember, we as real estate agents would put buyers in our cars, drive them around and show them homes, possibly take them to lunch then out the next day and show them more homes and so on.
During this whole time the agent was representing the seller. The agent had never met the sellers of the homes they were showing these buyers, but yet those were the laws. The buyers had no idea and assumed that the agent represented their best interests.
Now the rules have changed. Buyers and sellers now sign a real estate form that says who the agent represents. It by no means is a commitment from the buyer or seller to work directly with that agent; it is only a means of “disclosure” to the buyer and seller.
Commission to a closed transaction is paid by the seller. Some so called savvy buyers think by dealing directly with the agent for the seller no other agent needs to be involved and therefore the buyer has a better opportunity in negotiations of a contract and commissions are more likely to be reduced by the listing agent. Since the listing agent represents the seller, then the listing agent has a fiduciary duty to the seller. What this means is the listing agent will try to get the best “deal” for the seller not the buyer. If the agent represents both sides to a transaction there cannot be any discussions on price, opinion of value or any recommendations to the buyer as to what price to offer on a home.
Buyer representation is vitally important and should not be taken lightly by the buyer. One example might be this; the listing agent or the agent who represents the seller, shows the buyer a home. The buyer absolutely loves the home and wants to make an offer. The buyer makes an offer that is lower than the sales price but in conversation, mentions to the listing agent they would be willing to go higher on their offer. The listing agent has a fiduciary duty to disclose to their seller that you, the buyer, are willing to go higher on your offer price.
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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