| Buyer's
Agent or Traditional Seller's Agent?
For the past twenty five years or so home buyers have had two kinds
of agents they could use to buy a home: buyers agents or sellers
agents. The problem was that very few home buyers knew that buyers
agents were available. Traditional real estate agents were taught
to make the best of this confusion and as a result most home buyers
thought the agent showing them homes represented them. In fact,
the agents were legally obligated to represent the sellers unless
there was a written agreement with the home buyer to represent them.
This confusion about the roles of the real estate agents is one
of the major reasons the public has such a low opinion of the real
estate industry. The Federal Trade Commission (FTC) did a study
of the real estate brokerage industry in 1983 and determined that
the vast majority of home buyers thought that the real estate agent
showing them homes was working in their best interest. The vast
majority were wrong! The FTC then started putting pressure on the
states to have real estate agents disclose in writing to consumers
who's side they were representing.
In the early nineties, most states adopted agency disclosure laws
requiring real estate agents to finally tell consumers the truth
about who they were working for. The National Association of REALTORS
(NAR) had long been against buyer representation in the market place,
but with the requirement that real estate agents now tell consumers
the truth, the handwriting was on the wall. Few buyers would knowingly
want to work with agents that are working for the seller's best
interests.
The NAR did a reversal and endorsed buyer agency as an alternative
in 1993. In 1994 Michigan's agency disclosure law prompted the general
manager of the area's largest real estate company to say "It's
the single most important change in real estate law in all my 19
years in real estate" It is a sad statement about the real
estate industry that a law requiring agents to tell the truth can
by itself be a tremendous change.
Now in Michigan most home buyers use some form of buyer's agent.
The
Real Question For a Home Buyer is:
Do I want
to use a part time buyer agent from a traditional office
and expose myself to the dual agent double cross?
OR
Do I want to use an exclusive buyer's agent and
get 100% loyalty,
100% of the time? |
More
on Agency - Who Represents Whom?
Basic definitions:
Client: One operating under the
protection of another. (There is a client relationship when a seller
works with a seller's agent or when a buyer works with a buyer's
agent.)
Customer: One who buys goods or
services. (A buyer working with a traditional real estate agent
is a customer. Just like when a car buyer goes into the showroom
to buy a car.)
Agency: In michigan real estate,
refers to the company policy of representation. Agents have no individual
agency identity, they must follow the company identity. There are
four variations:
1. The traditional seller's
agency. This firm represents only sellers. They have
signed an agreement with sellers in their office and from other
offices to try to get them the highest price and best terms. They
usually still serve buyers as customers because they can't serve
them as clients.
2. Dual agency office. This firm was a type 1 above
until they had to tell home buyers the truth. Now they want to offer
buyer agency services to buyers while still hanging on to their
listings. They promise to get sellers the highest price unless there
is an agent from their office who is acting as a buyer's agent.
In this case they represent both the buyer and the seller without
giving full service to either. This conflict of interest is bad
for both the buyer and the seller but great for the company because
they get to pocket both sides of the commission. On houses that
are not listed inside the firm they may still be dual agents if
one agent from their company is trying to sell the house as a traditional
seller's agent while another is acting as a buyer's agent.
3. Buyers only office. This
is a company that never takes listings and only works for the buyer's
best interest. This allows a higher level of service and a higher
level of loyalty. The Home Buyer's Agent of Ann Arbor is a buyers
only office.
4. Single agency office. This is a company that will
represent sellers and buyers, just never both in the same transaction.
What the Press Has to Say About Buyer's Agents Versus Seller's Agents:
"Like
it of not, the real estate agent helping you house hunt is usually
working for the seller and is legally bound to try to get the
seller the highest price. But buyers no longer have to fend
for themselves. You can hire a buyer agent to work on your behalf."
- U.S. News and World Report
"Buyer agents work only for consumers and can
save them money - and they don't cost more to hire."
- Los Angeles Times
"Unlike the traditional agent who looks out
for the seller, the buyer broker acts as your advocate, helping
you find the home you want and then negotiating the lowest possible
price." - Money Magazine |
Which "Buyer's" Agent?
The question now comes to which kind of buyer's agent to pick; a
buyer's agent from am office that takes listings (a dual agent),
or a buyer's agent from a buyer only office. (Often referred to
as an exclusive buyer's agent.)
Note: As reported on the Today show, an agent will never introduce
themselves as a dual agent. You must look at their buyer agency
agreement to see if it contains the dual agent double cross or find
out if their company lists homes for sale. In either case you are
talking to someone who acts as a dual agent. Unfortunately, even
with the agency disclosure laws, some real estate agents are still
trying to hide the truth.
What the Press Has to Say About Dual
Agents Versus Exclusive Buyer's Agents:
"Buyers
and sellers get less service in a deal with dual agents because
they no longer have someone bargaining on their behalf, but
the brokerage reaps a higher profit because it keeps the whole
commission." - Detroit Free Press
"Consumers should be aware that any buyer's agent
agreement that includes a dual agency possibility (representing
both the buyer and seller) is not acceptable."
- Alan Fields, co-author of "Your New House"
"Exclusive agencies are the best. They remove any
conflict of interest, which is the main reason for considering
a Buyer Broker in the first place." - U.S. News
and World Report
"You'll get the surest representation from a single-agency
broker or an exclusive buyer's broker." - Kiplingers
Personal Finance Magazine
"You have a choice of working with a traditional
Realtor who spends 90% of their time soliciting listings and
representing sellers. Or choosing an Exclusive Buyer's Broker,
who spends 100% of the time helping the home buyer get the best
house possible. Make sure you choose an exclusive buyer's broker.
There is a difference." - Dan Birchman, Texas
Real Estate Expert
"To protect themselves, buyers can retain their
own exclusive representative, but be aware that a buyer's agent
who also works as a seller's agent can sometimes end up on both
sides of the deal." - Business Week
"Conflicts of interest occur when home buyers want
to buy a home that is listed with their buyer agent's company.
This situation is called the in-house sale and according to
national statistics it happens to one out of every three home
buyers. Since a real estate agent cannot legally provide undivided
loyalty to both the home buyer and home seller at the same time,
the agent must ask both buyer and seller to give up their right
to undivided loyalty by signing a disclosed dual agency agreement.
The dual agency agreement supposedly facilitates the in-house
sale and means double commissions to the only real estate company
involved in the transaction. The tactic of baiting the consumer
with undivided loyalty and switching to dual agency may be illegal
according to the guidelines of the Federal Trade Commission.
These bait and switch tactics are proving to be costly to home
buyers..." - National Home Buying Institute Press
Release
"The best buyer brokers are so-called exclusive
agents - that is, they represent buyers, never sellers..."
- Money Magazine
"Only by using an exclusive buyer agent can a buyer
be sure all information is kept confidential. Only an exclusive
buyer agent can give the buyer an objective, experienced opinion
of the homes viewed to ensure the buyer gets the right home,
in the right location, at the right price." -
Mobility Magazine |
We
helped area home buyers save over one million dollars last
year. If you are interested in saving money on your next
home, send us a note. Or,
give us a call at (734) 662-6240.
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