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 that the rules have changed, real estate agents are now required to discuss in detail an “Agency Disclosure” form which is one part of the purchase contract. This disclosure form explicitly states who the agent represents. This form should be signed by the party that the agent is representing and is by no means a commitment from the buyer. It is only a disclosure and should be signed PRIOR to the writing of a purchase contract.

Several buyers actually think they can save money by dealing directly with the listing agent, since the buyer and seller will only be working with one agent. Does that buyer realize the agent has a fiduciary duty to the seller and will not negotiate a deal in the best interests of the buyer? Nor can the agent discuss price or provide any recommendations, opinions or anything relevant to market value to the buyer.

Being represented “exclusively” by your agent is crucial in a real estate transaction. Here’s a good example; you call the listing agent off a sign you see in a front yard and ask them to show you the property. You preview the home, love it and ask to make an offer. When you discuss offer price, you tell the listing agent you would be willing to go higher but you want to start at a lower price. When the listing agent presents the offer to the seller, they can tell their seller you are willing to go higher. So the seller immediately counters your offer with a higher 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.

If the buyer goes to a new home community by themselves and falls in love with one of their models, then they call their agent to meet them there can be disastrous. Most builders will not allow this even if the buyer did not register with the new home subdivision on their first visit. Once you cross that threshold in a new home community, the builder will not allow you to be represented by an agent.

Although the “Buyer Broker Exclusive Employment Agreement” is not standard practice, they should be. This is an agreement between the buyer and the real estate agent which discloses responsibilities and fiduciary duties between both parties. As a buyer, don’t you want to know your agent is representing you “exclusively” and the agent will due their due diligence in offering you the best service possible? The agreement by no means forces a buyer to purchase a home, but rather an agreement that discloses loyalty between the buyer and their agent.

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This entry was posted on Friday, May 28th, 2010 at 11:49 am and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.