History of
Buyer Agency
What is Real Estate Agency?
Buyer's Agent Services
Types of Buyer Agency
Brokerage Fees
Selecting a Buyer's Agent
Do you need a Buyer's
Agent?
Choose a Buyer's
Agent
Buyer's Agent Duties
REBAC (Real Estate
Buyer's Agent Council)
CONTACT A BUYER'S AGENT
HISTORY
OF BUYER AGENCY
For many years investors and
corporations have engaged Buyer's Agents to represent their
interest in locating property, as well as for their relocating
employees. Hiring a Buyer's Agent is crucial in negotiating the
sale of property because an agent has the fiduciary responsibility
to keep all information about the client confidential.
When looking for a house, most
buyers generally look to real estate brokers for advice and
information. However,
until recently traditional real estate brokers were bound by law to
promote the interest of sellers. National
surveys have indicated that most buyer's of real estate thought
that the sales agent represented them in the transaction. Agents who listed property and
their brokers were obligated only to the seller, not the buyer. Traditionally,
the agent has always represented the seller's best interest of
getting the highest price and best terms.
Times are changing. Residential
residential buyers have become aware that they also require
confidentiality and loyalty in their home purchases. Therefore,
buyer representation become a growing trend in residential real
estate.
There are four reasons that
buyer/client representation has become common:
- The increasing complexity of
real estate transactions.
- The rise of consumer
protection laws and the decline of caveat emptor.
- Buyers are more educated about
the effects of customer or client representation.
- The rising tide of litigation
REAL ESTATE
AGENCY
The word "agent" in the
legal sense means a "fiduciary". A fiduciary's primary
duty is to put the interest of his/her client first. (Doctors,
lawyers and accountants are examples of fiduciaries.) The courts
have ruled that when real estate licensees act on behalf of others
and represent them, they are accountable as fiduciaries.
Obviously, buyers need protection and representation as well as
sellers. That is why the traditional real estate setup no longer
makes sense. This idea has led to the emergence of "Buyer
Agency".
SERVICES
PROVIDED BY BUYERS' AGENTS
Services provided the buyers' agent
consist of the following:
Providing information such as
property data, zoning information, community statistics, financing
sources,
- offering property value
reports
- negotiating assistance
- advocacy
- confidentiality.
Buyers can protect themselves to an
extent by hiring buyer's agents and/or attorneys. They cannot, of
course, give legal advice. The main service that buyers typically
are looking for is confidentiality. Sellers' Agents are legally
responsible for disclosing to sellers any information about about
the buyer which might affect the seller's decision making. For
example, if the Sellers' Agent knows how high the buyer will go on
a piece of property, he/she must disclose that information to the
seller. A Buyers' Agent, on the other hand, maintains the buyer's
confidentiality and will disclose only those facts which a buyer
wants disclosed. It is illegal for a Buyers' Agent to violate the
confidentiality of the buyer.
Agency
Disclosure
In most states, real estate licensees are required to provide
buyers with an "agency disclosure", the purpose of which
is to disclose to buyers whether they will be assisting them as
seller agents, buyer agents or some form of dual agent. You
should require every real estate licensee to provide you with an
agency disclosure and explain his role to you upon first meeting
to discuss your real estate needs.
TYPES OF BUYER
AGENCY
It is important to remember that
there are essentially 2 types of "Buyer Agency".
Limited
Representation Dual Agency
Most firms today offer something known as "Dual Agency",
"Disclosed Dual Agency", "Transaction
Brokerage", "Limited Representation Dual Agency" or
something similar which involves representing both the buyer and
the seller. Generally, an agent of the company will work with
buyers as a "Buyers' Agent" unless the buyers happen to
be interested in a property owned by a "Seller Client"
of the same firm. Then, the broker is forced to enter into dual
representation, in which case neither party gets full protection
and representation. Although certain items, such as property
defects, must be disclosed to the buyer by law, by and large the
parties are on their own. Many buyers and sellers don't seem to
mind the setup as long as they can come to terms. However, there
are many who are concerned about the potential conflict of
interest.
Exclusive
Buyer Agency
An "Exclusive Buyers' Agent" is employed by a company
that represents only buyers, never sellers. As such, they have no
listings of their own and are able to work in the buyers' best
interest on any piece of property. There a are a relatively small
number of "Exclusive Buyers' Brokers" around the
country, since most traditional Real Estate brokerages do not want
to give up the practice of listing properties. Nonetheless, the
concept is gaining popularity because of the obvious advantages to
the buyers.
BROKERAGE FEES
Traditional
Co-op Fee
This is, by far, the most common fee structure today. Buyers'
Brokers generally don't charge the buyer for services. Their fee
is paid by the Listing Brokers in the way of a co-operating fee.
The Listing Broker's fee which is negotiated at the time of
listing is paid at from sellers' settlement funds. Thus, the fee
is handled like all the other fees pertaining to the transaction.
However, since the buyers are the ones actually paying for the
property, it is a air assumption that both buyers and sellers are
sharing the brokerage expense.
Other Fee
Structures
There are several other fee structures used by brokers, most of
which are designed, in theory, to ultimately save buyers money
and/or offer better representation. Sometimes the buyer agrees to
pay a fixed fee or an hourly fee for the agent's services. Of
course, the co-op fee which is normally paid to the Buyers' Agent
at closing should then be turned over to or shared with the buyers
at closing. Another fee structure involves the buyer paying the
agent a commission based of the purchase price. Once again, the
normal co-op fee should be paid to the buyer. The possibilities
for compensation are numerous. Quite often, in such arrangements,
buyers are required to enter into an exclusive agreement with the
Buyers' Agents.
