Question the Illusion - Part II

A Homebuyer's Guide to Understanding Real Estate

By Donald J. Welsh, Ed.D.
Illustrations by John Bennetts

That evening Tony and his wife are discussing a vacation they have been planning.

Illusions illustrated in the prior scenes may appear to demonstrate that agents are mistreating buyers. Yes, buyers are being mistreated. However, remember that most agents are sales people and they are doing what they are trained to do. Their service-oriented approach can be so impressive that buyers are lulled into trusting that the agent is actually working for them. Disclosure laws will not have a great impact in the real estate market until the buyers learn to question agents as to who represents the seller. The following scenes will demonstrate what happens when buyers find the home they want.

Mary and Tom have found a home they want and have joined the agent at his office. This home is listed at $125,950. Mary has already made it known how much she wants the home and Tom is set to negotiate a good buy.

The agent delivers the offer to the listing agent and as required by his duty to the seller disclosed all the information he knows about the buyers. That evening the following scenario unfolds as the listing agent is presenting the offer to the seller. Tom and Mary accept the counter offer at $121,950. They failed to understand the implication of a clause in the written disclosure statement that they had signed. The statement, Information given to the agent by the buyer may be disclosed to the seller, should have been a warning to the buyers. The agent carried out his disclosure requirement leaving the illusion that he was doing his best to serve the buyers. While the clause stated the information might be given to the seller, it is the agent's fiduciary responsibility to give all the information to the seller that will enable the seller to get maximum price for the home.

Discovering the Illusion

Judy and Jack have completed their search for a home working with the agent they met at an open house. Unable to sell them a home at their maximum loan ability of $185,000, the agent has drafted a $165,000 offer on a home.

Jack reads the disclosure form and asks…

If Judy and Jack want to buy the home they were going to make an offer on they can secure an agent that will represent them as a buyer agent. Working with a buyer agent, they will have the confidentiality of the financial ability protected.

Agents who are associated with a broker that lists homes may not be able to carry out buyer agency representation for the home the buyer desires. In the following scenario, Doris, a first-time homebuyer has signed an agreement to have her agent represent her as a buyer agent. After looking at many listings, Doris wants to make an offer on a home listed by her agent's broker.

Avoid Illusions, Work with a Buyer Broker

Removing the need to sell you a product will also remove the illusions that are so prevalent in the real estate industry. In selling a home, find a broker who knows how to market a home. Likewise, when buying a home secure a broker who specializes in helping people buy homes. The broker should be an exclusive buyer broker, a real estate firm that does not list homes.

An agent associated with a buyer broker that serves as a buyer agent must have a written agreement with their buyers. The written agreements will specify the period of time, conditions of the representations and how the agent is to be paid for the service. Most buyer agents will work only under exclusive agency agreements. In the agreements the buyers are committing to use
only the service of this agent for the period of the agreement. The benefits of working with an exclusive
agreement are:

1. The need for the agent to be a sales person is removed because the agreement eliminates the possibility of the buyer working with other agents. Therefore, no illusions.
2. The agent can function as a consultant to the buyer for the home buying process.
3. The agent can minimize your time and effort by thorough planning and eliminating the duplication that is always present when a buyer attempts to use two or more agents.

If the buyer has had discussions with an agent that represents sellers it is quite likely that the agent will
have many reasons why the buyer should not work with a buyer broker. Some of these are:

1. "Many brokers won't allow buyer agents to show their listings."
2. "Buyer brokers don't have access to all the listings."
3. "Small companies can't provide the type of service large companies can."
4. "Buyer agents charge fees for their service."

These statements are myths!

Brokers must allow buyer agents to show all the properties unless there is a specific situation where a seller does not want to deal with a buyer agent. Most sellers want their property shown by all agents. Buyer brokers are members of multiple listing services and therefore have the same inventory of homes to show as the large brokers do. In addition, the buyer agents will work with for-sale-by-owner and other unlisted properties. Most buyer brokers do not charge a fee for their service. The reason these statements are made is agents would like to eliminate competition and creating myths does just that!

Continue reading in Part III >>>