Buying Real Estate? Most buyers generally look to real estate brokers for advice and information. However, buyers should remember that most agents are bound by law to promote the interest of sellers. In the traditional real estate system, the listing broker and the cooperating brokers (called seller subagents) all represent the seller. This leaves the buyer unrepresented by his own real estate agent. Consumer advocates point out that this seller-biased system no longer makes sense because real estate transactions have become very complicated and buyers need protection as much as sellers. As buyers learn about these issues, they too are questioning the logic of taking advice from a seller's agent. Fortunately, the market place is responding to this need. In recent years, buyer brokerage firms have been expanding in every state. INFORMATION AND PROTECTION Information and protection Informational services include such things as property data, zoning/assessing information, community statistics and sources of financing. Protective services include negotiating assistance, property value studies, analysis, advice, advocacy and confidentiality. Buyers have in the past obtained information from seller agents, but they have not been entitled to protective services. Seller agents owe those protective services to their clients, the sellers. Who protects buyers? The best way for buyers to protect themselves is by hiring a buyer's agent and an attorney. The buyer's agent provides real estate advice, advocacy and information-from the buyer's viewpoint. The buyer's agent cannot replace the attorney in respect to legal opinions; only an attorney can give legal advice. Confidentiality is a major protective service most buyers need. In the traditional real estate system, seller agents are legally responsible for telling the seller anything about the buyer which might affect the seller's decision making. For example, when the offer is presented, most sellers want to know how high will the buyer go and how badly does the buyer want the property. The seller's agent must disclose everything she/he knows at this point. In contrast, a buyer's agent maintains the buyer's confidentiality and will disclose only those facts authorized by the buyer. It would be illegal for a buyer's agent to violate the confidentiality of the buyer. AGENTS VERSUS NON-AGENTS In terms of services and legal responsibilities, non-agents are essentially facilitators. They provide informational services to both sides, but they represent no one. They must disclose known property defects and provide honest information, but they are not authorized nor obligated to protect, advise nor negotiate for either side of the transaction. Keep in mind that the word agent has a very specific meaning in the legal sense. Agent equals fiduciary. A fiduciary's primary duty is to put the interest of his/her client first. (Doctors, lawyers and accountants are examples of fiduciaries.) The courts have ruled that when real estate licensees act on behalf of others and represent them, they are accountable as fiduciaries. So what is the purpose of non-agency? Certain segments of the real estate industry feel that real estate licensees should not be held accountable as fiduciaries. Therefore, they support legislation which creates non-agency categories. The Agency vs. Non-Agency debate now exists in nearly every state. (Under current Massachusetts regulations, brokers are generally considered to be fiduciary agents.) In most states, real estate licensees are required to tell buyers if they will be assisting them as seller agents, buyer agents or some form of non-agent. This is called "agency disclosure." You should require every real estate licensee to explain his role to you upon first meeting to discuss your real estate needs. Below you will find a brief definitions of the different types of real estate relationships and services available in the market place today (summarized in the chart on Page One of this article). Buyer Agency Agent represents buyer (the client). Buyer agents must use their skills to protect the buyer's interest, including negotiating in the buyer's favor. Seller Agency Agent represents seller (the client) but can assist buyer (the customer) with information. By law, seller agents must use their skills to protect the seller's interest, including negotiating in the seller's favor. Seller agents include listing agents and their cooperating subagents. Disclosed Dual Agency (Non-Agency) Agent seeks permission to offer limited representational services to both buyer and seller on the same transaction. A disclosed dual agent ceases to be an advocate and cannot negotiate in favor of the buyer nor the seller. Other Types of Non-Agency Non-agents are facilitators who assist buyers and sellers but do not represent either side. Non-agents are not liable as fiduciaries under the law. They are authorized to provide informational services but have no obligation to protect, advise, advocate, nor negotiate for either side. QUESTIONS BUYERS SHOULD ASK REAL ESTATE BROKERS As a buyer, decide what type of services you need from an agent. If you want the agent's full range of protective services, you can obtain them only from an agent who represents buyers. In most states, you must make a specific agreement with an agent if you want his/her representation services. If you decide that you need only information from a real estate broker, then you may find it acceptable to work with non-agents or seller agents. Remember when working with seller agents and non-agents to withhold any confidential information which you do not want conveyed to the seller. These agents have no obligation to protect your confidential information because they do not represent you. GETTING YOUR MONEY'S WORTH Steven Brobeck, the President of the Consumer Federation of America, issued a report in 1994 about real estate fees and services. He advised buyers that the services of buyer agents are more valuable than those of non-agents/disclosed dual agents. Agents who specialize in representing buyers usually have very few if any listings. By not listing properties (representing sellers), these agents would always be able to put the buyer's interest first. Consumer advocates advise buyers that the safe way to buy real estate is by engaging the services of a buyer's agent who will pledge in writing to represent only the buyer throughout the entire transaction. If you engage the services of buyer agents, they will very likely have a representation agreement which spells out their obligations to you. Make sure your Buyer Representation Agreement not only defines the buyer agent's services but also the amount and method of payment of his/her fee. Using a buyer's agent should not add extra fees to the transaction. The buyer agent's fee is usually structured into the transaction in lieu of the cooperating subagent's fee. In most cases, the buyer agent's fee is disbursed like all real estate fees-from the purchase price agreed upon by buyer and seller. A competent buyer's agent should be able to save you money in terms of time, advice and negotiating leverage. SUMMARY |
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