November 28, 2016
How Do You Find a True Buyer’s Agent?
The general answer is to find a real estate licensee…
- …who is familiar with the local area;
- …who has several years of experience;
- …who perhaps has some industry specific designations such as GRI, CRS, ABR, CBR or SRS; or
- …who is referred by friends, relatives or work associates.
However, the problem with these approaches is that everyone knows someone who is “in the real estate business”. I bet you know at least one person who is licensed and in real estate. So do your friends, relatives or work associates. How do you know that the real estate licensee they recommend or the one that you know is the “right” agent for you or is in fact a true agent at all? Sure, they may be licensed. Sure, they call themselves a real estate “agent”. Sure, you or your relatives, friends and work associates refer to them as agents. But that doesn’t mean that they actually can or will legally represent you as a true fiduciary agent. Yes, I agree that experience, familiarity with the area and industry specific training and certifications are important. But in my opinion, these aren’t the most important criteria to use to find someone to actually represent, protect and advocate for you throughout the entire homebuying process. It takes someone who is willing to and able to take on the legal role as your true agent.
The Right Type of “Agent”
As mentioned in the “What is a True Buyer’s Agent” blog on this website, home buyers need to find a “true” buyer’s agent to work with who understands and is willing to provide true legal fiduciary services to the buyer. Homebuyers can work with real estate licensees who represent the seller (listing agents), licensees who represent the buyer (buyer agents) or licensees who try to represent both the seller and the buyer (dual or designated agents, transaction brokers or facilitators are several names used to describe this type of service).
- Real estate licensees who represent the seller, by law, must look out for the seller’s best interest and work to get the highest price and best terms for the seller. You certainly don’t want to buy your home using one of this type of agent. It is tempting. You see a home in an open house and the real estate licensee is encouraging you to make an offer. DO NOT DO IT! You should have already found and hired the right agent to handle the purchase offer for you and in your best interest.
- Real estate licensees who attempt to work for both a buyer and a seller must compromise their relationship with you and are no longer in a position to provide true full fiduciary duties and services to you. In general this type of agent can’t give you information which could be detrimental to the seller or hurt the seller’s negotiation position. This type of agent also isn’t suited for a home buyer who wants the scales tipped in their favor. They may seem nice and appear to have your interest at heart, but legally, they can’t represent you as they also represent the seller. They have a huge conflict of interest that will work against you.
- Real estate licensees who represent the buyer, by law, must look out for the buyer’s best interest and work to get the lowest price and best terms for the buyer. As a home buyer this is the type of agent you want to seek out, an agent who is devoted to protecting your interests fully throughout the entire home buying process.
However, beware of the “so-called” buyer agent who takes listings and/or works for a real estate company that does. They already represent all the sellers who have their homes listed for sale with that company. If you are interested in purchasing one of the homes the company has listed, the agent you are working with will no longer be able to fully represent your best interests.
The law probably will require them to change the status of their relationship with you to one that provides less protection and perhaps no protection for you if you continue to work with that person on a purchase of that particular home.
They will more than likely renege to a position of dual or designated agency.
- If you find yourself in such a situation, then fire the agent and the company and go find a buyer agent with another company to fully represent you.
- Don’t sign any buyer agency contract or other disclosure that “automatically” converts you to a dual or designated agency position.
- Make sure the agent knows that you will fire them and find another agent in the event you are interested in an in-house listing.
- Make sure any buyer agency contract you sign allows you to cancel without further legal or financial liability to them in the event you are interested in an in-house listing and that they won’t go after the compensation that any new real estate company and agent you hire to represent you earns helping you with the actual purchase.
If you are going to work with a buyer agent who also takes listings and/or works for a traditional real estate company, work with one who is with a smaller real estate company that doesn’t have a high percentage of the listings in the area you are considering buying in to reduce the potential of your wanting a home listed with that company.
Also, most agents who work both sides of the fence, that is they represent both sellers and buyers, tend to be “casual” buyer agents. In other words, their primary training is how to sell and market homes and represent sellers. That is what they are best at. They don’t understand the nuances of true buyer representation. So don’t just look for the title, “buyer agent”. You need to determine what type of “buyer agent” they are. In other words, you need to dig deeper.
What is a “True Buyer Agent”?
It seems like today, all real estate licensees call themselves and advertise themselves as buyer agents. After all, it is what you want to hear. Twenty years ago real estate “agents” actually represented sellers and buyers. They provided true legal binding fiduciary services and duties. Now, with the big real estate companies wanting the double-dip commission, in-house deal, they find that they can’t legally provide these same fiduciary duties. So they have gotten laws passed that allow them to sell you an in-house listing but make it look like and sound like you are being represented. You aren’t! They legally can’t! There is a legal concept whereby a true, legal agent can’t, “represent two masters”. Hence, today the word “agent” does not mean legal agent but rather merely that they are a real estate licensee.
You could find a true buyer agent in a real estate company that lists homes for sale, but they can’t represent you legally as a true fiduciary agent if someone else in their company or they themselves have the home listed that you are interested in buying. Also, their company may not allow real estate licensees affiliated with the company to actually provide true buyer agent, fiduciary duties as this increases the risks and liabilities for both the real estate licensee and the real estate company. A true agent owes you fiduciary duties. If they violate these duties you have excellent grounds to sue the licensee and the real estate company who employs them should some issue lead to a financial loss.
There are real estate licensees who guarantee to look out for your best interest no matter which home you want to buy. These agents are called “Exclusive Buyer Agents” or “EBA’s”. The true professional ones belong to and adhere to the strict “Code of Ethics” and “Standards of Practice” of the National Association of Exclusive Buyer Agents (NAEBA.org).
An exclusive buyer agent will guarantee to work in a buyer’s best interest at all times and in every situation. They will never revert to a dual or designated agency or non-agency position which would compromise their legal ability to represent you.
An exclusive buyer agent always represents buyers only and never represents sellers, nor lists or markets property for sale and they are with a real estate company that represents buyers only as well.
An “exclusive buyer agent” should be your first choice. They are more attuned to home buyers needs, better trained, more experienced, experts in protecting buyers best interests and in saving home buyers time, aggravation and money.
HUD Recommends Exclusive Buyer Agents
The US Department of Housing and Urban Development (HUD) recommends that home buyers use the services of an “exclusive buyer agent”.
From HUD’s Shopping For a Home Loan, “Settlement Cost Booklet”: “It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you.”
By the way, using an exclusive buyer agent shouldn’t cost you any more money. Real estate commissions are built into real estate deals. Your exclusive buyer agent will simply make arrangements to be paid out of the proceeds that you bring to the closing. Discuss compensation with the agent before signing an agreement to work with them. Understand your legal obligations.
We have been Protecting & Advocating for Homebuyers Only since 1992. Give Tom Wemett a call at 800-383-8322 to discuss your homebuying situation.