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The Buyer Agency Deception…..
Many real estate licensees (so-called agents) claim to be buyer agents yet continue to take listings and represent sellers as their primary specialty and in most cases not function as true legal agents at all. Whether selling a home or buying a home you do want to use the services of a real estate licensee who is functioning as a true fiduciary agent and not just as a real estate salesperson. It is especially important for a home buyer to make surethey are getting the best representation as possible. REALTORS (Members of the National Association of REALTORS) based their very existence on true representation and providing fiduciary duties as true agents. However, that position went away as real estate companies got bigger and bigger. This resulted in a problem for the in-house transaction whereby a buyer client wanted to buy a home for sale by a seller client. How can one truly legally represent the best interests of a buyer and a seller for the same property? The seller wants the highest price and best terms for them and the buyer wants the lowest price and best terms for them. The legal concept and really common sense here is that one can’t serve two masters. Two clients have opposing interests and if they are represented by the same real estate licensee or two different real estate licensees in the same company, a huge conflict of interest arises.
Real estate licensees are employed by and supervised by a real estate broker of record. Whether the real estate licensee is a salesperson or a broker, unless they own their own real estate company, they have their licenses under the license of a supervising real estate broker. Also, real estate relationships flow from the brokerage level, that is the company level, not from the agent level. Therefore if you are a buyer client of a real estate company, the real estate licensee who you signed up with is your legal agent as well as all other real estate licensees with that real estate company. The real estate licensee who you agreed to work with created the relationship between you and the company and all the other licensees of that company. Likewise, any seller who has a home listed with another licensee of that real estate company also has all real estate licensees associated with that company representing them. Hence, when you want to buy a home that is listed by the same licensee you are working with or another licensee with the same company they already legally represent the best interests of the seller and thus end up with a conflict of interest due to their already legally representing your best interest as well.
Laws have been passed in most states watering down true legal representation and replacing it with something that looks like it is true legal representation but isn’t. Hence the deception. You think you have a true buyer agent, but really in many situations, you don’t. It just looks that way but in a legal sense you aren’t being legally represented and are on your own, even though many times you don’t know it. The reason why this took place is the desire for the “double-dip” whereby the real estate company gets both sides of the transaction, both the listing fee and the selling fee. It is being driven by greed and the desire to make more money and not as a consumer benefit.
The consumer-friendly approach would be to refer you to another real estate company so that you could receive full fiduciary duties. However, that doesn’t happen. Legal representation has been replaced by such practices that come under various names such as dual agency, designated agency and facilitator or variations of these. How these work varies from state to state but the important factor to understand is that none of these is true representation in the legal sense of providing full fiduciary duties and services to a buyer or a seller of real estate, but rather are a way to eliminate legal liability and responsibility and to get a double-dip commission. They instead provide a limited version of legal fiduciary duties and in most cases eliminate the duty of “undivided loyalty” all together.
Undivided Loyalty is the most important factor in choosing a real estate licensee to be your buyer representative to guide you through the homebuying process. Undivided Loyalty means that the real estate licensee puts all other’s interest second to yours, including the real estate licensee’s own interest. The real estate licensee must look out for your best interest at all times and in every situation. If the relationship you have with a real estate licensee doesn’t do that, than you lose. That means that the real estate licensee is no longer looking out for you or negotiating on your behalf. At best the real estate licensee now remains neutral and won’t be able to provide guidance for you in negotiating a deal or in protecting your interests. The real estate licensee and the real estate company now are also in conflict with the buyer AND the seller as they want a quick sale and the double-dip commission and thus are in a position of compromising the best interest of either the buyer or seller or both. OUCH! Is that really what you want?
Before you decide to work with a particular real estate licensee ask them to describe their proposed relationship with you. Ask them to provide a copy of their state’s agency disclosure form, if your state has one, and to explain it to you. Ask if they will be providing true fiduciary duties including “undivided loyalty”. Ask what happens if you are interested in a home listed by them or by another real estate licensee in their company. Ask how the relationship will change and whether or not they will continue to be able to fully represent you. If they say they can and will they probably either don’t really understand the question or else they are deliberately trying to deceive you. Any real estate licensee who is with a real estate company that takes listings and represents sellers will be faced with this conflict of interest and present you with a 25% to 35% chance of really not being represented. So pay very close attention to what the real estate licensee tells you or doesn’t tell you. There is an alternative, however, where this conflict of interest is eliminated and you will not be faced with how to deal with it. It is called “exclusive buyer agency”.
What is true “exclusive buyer agency”? Exclusive buyer agency is where the agent and the company they are with represent buyers only and never represent sellers or take listings. These companies and their agents are also known as exclusive buyer brokerages, EBAs and exclusive buyer agents. They guarantee to represent you fully and to look out for your best interest at all times and in every situation regardless of which property you are interested in purchasing. Finding a true exclusive buyer agent may be difficult as you won’t find one everywhere.
BEWARE FAKE EXCLUSIVE BUYER AGENTS.
Just as most “buyer agents” really aren’t agents at all, there are real estate licensees who call themselves and advertise themselves as “exclusive buyer agents” but who also take listings or are with a company that takes listings and thus they also represent sellers and don’t represent buyers exclusively.
The easy way to determine whether or not you are talking to a true exclusive buyer agent is to ask one simple question, “Do you or anyone else with your company take listings or represent sellers?“. If the answer is, “Yes”, you are dealing with a fake exclusive buyer agent.
The author, Tom Wemett, is a nationally known homebuyer advocate, educator and exclusive buyer agent. He is a founding member of NAEBA, the National Association of Exclusive Buyer Agents, the national President of NAEBA in 2003 and currently serves on the NAEBA Board of Directors. He also is the Founder/Manager/Lic. R.E. Broker of Record for Homebuyer Advisors LLC, a real estate brokerage that represents homebuyers only in Florida, Massachusetts and New York State. Tom can be reached at (978) 633-9090 – (800) 383-8322 or firstname.lastname@example.org.