November 28, 2016
What is a “True” Buyer’s Agent?
As a home buyer you should seek out the services of a true buyer agent. True agents, such as attorneys or CPAs, owe fiduciary duties, client level services to their clients. That is what makes them “an agent”. You should seek out and use the services of a real estate licensee who understands these principles and is willing an able to provide them to you. The legal principals involved in real estate agency come from “Trust Law”, that is the duties of a trustee or custodian to their principal. The one providing these duties is the agent and the one receiving these duties is the client or principal. Unfortunately, the term agent in real estate no longer takes on the legal definition of agent. Rather, it takes on the definition of “real estate licensee” and not really someone who represents and protects you.
Buyers and sellers have opposing interests. You, as the home buyer, want the lowest price and best terms for you. The seller, on the other hand, wants the highest price and best terms for them. As a buyer you should seek out the services of a true agent who will guarantee to give you, the buyer, these full legal fiduciary duties no matter which property you are interested in buying. In other words, seek out a true home buying agent and ideally an exclusive buyer agent or exclusive buyer broker.
Exclusive buyer agents are agents who represent home buyers only and are with companies which represent home buyers only and never represent sellers or write listings or market homes for sale. By representing home buyers only they have eliminated the conflict of interest which arises when a real estate company attempts to represent both a buyer and a seller in the same transaction.
The legal fiduciary duties a true buyer agent owes to you, their buyer client, include:
Reasonable Skill and Care
Obedience to Lawful Instruction
An easy way to remember these duties is through the acronym, “CAR LOAD”. As in, “A true real estate buyer agent owes a CAR LOAD of duties to their Buyer Clients: Confidentiality, Accountability, Reasonable Skill & Care, Loyalty, Obedience to Lawful Instruction, Advocacy and Disclosure!”
Confidentiality – Prohibits the agent from disclosing confidential information obtained from you such as: the price you are willing to pay, the amount of mortgage you are actually qualified for, how much cash you have to work with or the level of your motivation to buy a particular home.
Accountability – Requires the agent to properly handle all money received, e.g. escrow deposits, and keep an accounting of same for you.
Reasonable Skill and Care – Requires the agent to protect you from foreseeable risks and to recommend that you obtain expert advice when your needs are outside the scope of the agent’s expertise. This would include home inspections, mortgage companies, real estate attorneys, etc.
(Undivided) Loyalty – Prohibits the agent from advancing any interests that are adverse to your own. This loyalty is “undivided”. They cannot advance the interests of the seller or themselves or their real estate company above yours. This is an extremely hard fiduciary duty for agents to provide if they or their company also represents sellers or practices dual or designated agency.
Obedience to Lawful Instructions – Requires the agent to act subject to your continuous control and for the agent to obtain and follow all “lawful” instructions from you.
Advocacy – Requires the agent to act in your best interest at all times and for the agent to proactively support your position. In other words the agent “must” step into your shoes and consciously and constantly be thinking, “What would I do if faced with the same situation?”
(Full) Disclosure – Requires the agent to disclose “all” information, available or reasonably available to your agent, concerning your home purchase which might affect your best interest; things such as the seller’s motivation for selling, the price the seller paid for the home, deferred maintenance or defects in the home, price comparable’s for similar homes and the listing history of the home.
A true agent who represents the buyer provides all of the above duties exclusively to the buyer. A true buyer agent understands the above duties and will be able to share them with you when asked. Casual buyer agents or traditional real estate licensees on the other hand won’t understand them. When you experience this, find another real estate licensee who does understand their legal obligations to you and who is willing to provide you with true buyer agent legal fiduciary duties and services.
A true buyer’s agent acts like a consultant to you and never tries to “sell” you a home. If your real estate licensee is using “sales” jargon or is acting like a salesperson, for example pushing you toward a particular home or toward homes that he or she or someone else in his or her company has listed, run, don’t walk, away from that licensee as quickly as possible.
You want to use an agent and real estate company that are “conflict-free”. That means they don’t attempt to represent buyers and sellers in the same transaction and they have an office policy that discloses other potential conflicts and lists how the conflicts will be handled. Check out our “conflict-free” buyer services discussion.
We have been Protecting & Advocating for Homebuyers Only since 1992. Give Tom Wemett a call at 800-383-8322 to discuss your homebuying situation.