By John Adams
One of the hot topics facing the world of real estate right now is the issue of
agency. Some would have you believe that it really doesn't affect you, the buyer,
and that nothing much has changed. But they are wrong.
The topic of agency is important to you because it answers the most basic and
fundamental question that can be asked of any real estate professional: Who do
you represent in this transaction?
Until that question is answered, you may be left with the impression that all
agents who work with buyers actually represent those buyers, and that you have
somebody going to bat for you in this transaction. Well, the issue of agency is
important because without it, we can never be sure who represents who.
Here's the scenario:
You meet a really nice agent at an open house named Bonnie. Even though
Bonnie's house is not right for you, she tells you she has others to show you that
fit your needs exactly. You spend an hour or so with Bonnie looking at a half
dozen homes and talking about your needs and your wants. During the course of
the conversation, you volunteer that you have $100,000 cash to spend and that
you will not go over $100,000 purchase price no matter what. Then you find the
perfect house. Asking price is $100,000 but you decide to offer $92,500 based on
recent sales in the area. During negotiations, the seller asks Bonnie directly how
much cash you have and how high will you go? What does Bonnie say?
Here's the answer: Unless you have signed a "Buyer Agency Agreement" with
Bonnie making her your buyer agent, she is most likely acting as a sub-agent to
the listing broker who represents the seller. If that is the case, she has a fiduciary
obligation to the seller to disclose to him any information she has that might
"promote or protect his interest" in the transaction. Guess what? Bonnie has that
information.
The Seller, now having knowledge of your financial position, counters at a full
$100,000. He knows you can afford it and that this price falls within your desired
range. He also knows that you have seen a number of other homes and that his
is the one you want.
Regardless of what eventually happens in this scenario, it can hardly be called
an even playing field. So, how can you protect yourself from a possible
disclosure required of a seller's agent?
1. Make sure that the agent you are working with has agreed, in writing, to
represent you as a "Buyer's Agent." This will mean signing a buyer brokerage
agreement in which you promise to work only with that particular agent for a
specific period of time, often 90 days. It also means that you promise not to buy
from anybody else, even FSBOs, without involving your buyer's agent. In almost
every case, the commission will still come from the seller, but your agent must
present the offer.
2. Never say anything to anybody unless you would be willing to have that
information repeated into a seller's ear. Assume that everybody, and I mean
everybody, is working for a seller unless you have specifically hired them to work
for you. And even then, be discreet. During the second world war, the military
promoted a phrase designed to stop idle gossip: Loose lips sink ships! You would
do well to adopt that philosophy in your home-buying as well.
