Agency relationships or what we define as Buyer representation has progressed dramatically since the early 90’s. Remember the days when the agent that drove you around looking at homes and they actually represented the seller of any home that you previewed?
The real estate agent had never met the seller of a particular home but the law stated that the real estate professional was an agent for the seller. This is almost unheard of now, but some companies and or their agents still use this practice.
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.
Another example is the buyer who walks in a new home subdivision. The sales agent discusses their models, floor plans, etc but is actually looking out for the best interests of the builder/seller.
Many buyers believe if they go into a new home community on their own they can save the money or get a discount on their home less the commission that is being paid by the builder to the agent. This is not true. Not being represented by a real estate agent will most likely make you feel like a goldfish in a sea of sharks.
Buyer’s agents use a real estate form in their business called a “Buyer Broker Exclusive Employment Agreement”. Many buyers tend to shy away from signing this disclosure form upfront, but it really protects the buyer and buyer only. It’s not an agreement that forces the buyer to purchase a home but rather an agreement in writing that the agent agrees to “exclusively” represent (look out for their best interests and work for the buyer making sure they get the best possible price for the home) the buyer when they do decide to purchase.
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