|
A Buyer’s Agent,
frequently called a Buyer Broker or Buyer Representative, is a Realtor who
represents only the interests of their buyer-client in a real estate
transaction. Just as a Seller’s Agent represents only the interests of their
seller-client.
Duties owed to Buyer Clients:
-
Loyalty
- The Agent must put the Client’s interests above their own;
-
Obedience
- The Agent must follow lawful instructions of their client;
-
Reasonable
Skill & Care
- The Agent must negotiate the best deal for their Client;
-
Disclosure
- The Agent must disclose all information to their Client;
-
Confidentiality
- Conversations and information between the Client and Agent must be kept
confidential, even after the transaction has been completed.
It is a common
misconception that just because a Realtor is showing you properties that he
or she is automatically working for you. This most definitely is not the
case.
As a result of confusion
about who a Realtor was representing, Connecticut passed a law mandating
Buyer Agency. See details below.
In the 1980's the Federal Trade Commission conducted a study and found that
72% of all buyers believed that the Realtor they worked with was
representing their interests. They were not. This report fueled a nationwide
concern about Agency. In response to these concerns, many states enacted
legislation requiring disclosure, but Connecticut, to its credit, went
further. Connecticut is one of the few states that requires Buyer Agency.
For complete details, see the
Connecticut Real Estate Commission’s Policy on Agency.
Under Connecticut Law:
-
a buyer must sign a
Buyer Representation Agreement to be represented;
-
a Realtor cannot show
a Buyer another firm’s listing without a signed Buyer Representation
Agreement;
-
a Realtor can show a
buyer-customer properties listed by their firm (in-house listings) without
a signed Buyer Representation Agreement. However, the buyer must first
have their rights explained and be given the
option to be represented.
To learn more about
Connecticut Buyer Agency download and read the article we wrote,
What
you Should Know About Agency. Another good source of information is
the Connecticut Association of Realtors
Pamphlet on
Agency.
To really understand Buyer
Agency you need to know a few definitions.
Agent
An agent is the person
who acts for and represents their client. An agent owes the utmost loyalty
to their client and must provide their client with any information the agent
knows which might influence the client’s decision to buy.
Seller Agency
All Realtors at a real
estate brokerage firm represent sellers who have listed their property with
that firm. They are all agents of and owe their allegiance to that seller.
Sub-Agency
Sub-agency is legal in
Connecticut, but is not practiced in Greenwich. Under sub-agency, a Realtor
showing a property not listed by their firm, represents the seller as
sub-agent of the seller’s agent. It is that sub-agent’s duty to protect the
seller’s interests at all times. Before Connecticut enacted Buyer Agency law
in 1996, all Realtors showing properties to buyers were sub-agents and
represented only the interests of the seller. Sub-agency is still the
standard for most of the USA.
Client
A client is the
principal in the transaction. The Agent works for their client. A seller
becomes a client by signing a listing agreement. A buyer becomes a client by
signing a buyer agency agreement.
Customer /
Unrepresented Buyer
A customer is a buyer
who is not represented in the transaction. A customer is traditionally a
buyer who is buying a product from a salesperson. You should expect the
salesperson to provide honest information, but you would not expect the
salesperson to negotiate the best price for you. Realtors are obligated by
law to treat customers honestly and fairly and to disclose material facts
about a property, but are not allowed by law or ethics to provide a customer
with advice in the transaction or to keep the customer’s conversations
confidential.
• A Realtor cannot
provide advice or counsel to an unrepresented person.
• An unrepresented
person has the responsibility to protect his or her own interests.
• The only obligation a
Realtor has to an unrepresented person is to be honest and disclose material
facts.
Any Realtor can sell you
a home, but a Buyer’s Agent can research a property for you and offer
unbiased, professional advice on every aspect of your purchase, including
details about realistic pricing and negotiation strategies.
Example 1: You see a
house advertised in the newspaper, a home magazine, or the Internet. You
contact the Listing Agent (this is who will be advertising the home) and
make an appointment to see the house. The Agent is friendly, informative,
and tells you what you believe to be everything about the house. But this is
not in your best interests. The Agent represents the seller, not you. You
should first find a Realtor you like and trust, sign an Agency Agreement
with them and then when you see an advertisement call your Buyer-Agent to
discuss it.
Example 2: You are
working with a Realtor, who shows you 25 different homes over 3 weekends.
The Realtor buys you lunch twice, knows all 4 of your children by name as
well as all of your personal likes and dislikes, but does not offer Buyer
Agency. You feel comfortable with the Realtor, revealing important personal
information. Without Buyer Agency, "your"
Realtor is the Agent of
and represents the Seller. He or she owes loyalty to, each and every one of
those 25 sellers--not you. Any information you reveal to the Agent must be
relayed to the sellers.
Example 3: You have
decided to bid on a home listed by the Realtor you have gone out with. He or
she tells you it is a good price. Should you place an offer for it at that
price? If your Realtor is not your Buyer-Agent you have no way to know. They
are not obligated to help you make that price decision or negotiate better
terms. If your Realtor is your Buyer-Agent, they will tell you when a home
is over or under valued, negotiate to get you the best deal and do a
Comparative Market Analysis to help you with difficult decisions.
Q. How is a Buyer Agent
compensated?
A. Our Buyer Agents are
always compensated by the Seller. Commissions on properties listed on the
MLS (Multiple Listing Service) are paid by the Selling Agency. For
properties listed directly by owners, we ask the owner to pay our
commission.
Q. Can I get a better
deal by calling the firm advertising a listing?
A. Many people see an
advertisement in the paper and call the listing company. This may seem like
the best way to see a property, but it is precisely the wrong thing to do.
The Realtor you are calling is the agent of the Seller. Their goal is to
sell this property at the best price they can get for the Seller. Because
many of the large real estate chains give their Realtors an extra commission
if they sell the company’s listings, the Realtor you contact may have a
special interest in selling you the house. In any event, they do not
represent you or your interests.
Q. What training is
required to be a Buyer’s Agent?
A. No training other
than a real estate license. In Connecticut, because the state is a
buyer-broker state, most Realtors get buyer representation training as part
of their continuing education. In addition, they obviously get buyer
representation experience every time they work with a buyer. REBAC (Real
Estate Buyers Agent Council), a wholly owned subsidiary of the National
Association of Realtors, also trains Realtors to be Buyer Agents and awards
the
ABR (Accredited Buyer’s Representative) designation to those who meet
their educational and experience requirements.
Q. Do Buyer Agents
collect compensation from both parties?
A. No. An agent for the
Buyer cannot accept compensation from any other party to a transaction
without the full knowledge and approval of the buyer.
Q. Don’t Buyer Agents
make less money if they negotiate a lower price?
A. Realtors depend on
“repeat business”. They do not get repeat business if the Buyer does not
feel the Realtor did a good job. The difference in commission earned is
extremely small in comparison to the good will of a client for a job well
done.
Q. Would I have a better
chance of finding my home if I use several Realtors?
A. No. In fact the
opposite is true. Every Realtor has access to the same base of homes. When
you work with more than one Realtor, the amount of time any one Realtor
would be willing to devote to meeting your needs would be small.
Q. Why do I need to sign
an agreement?
A. Connecticut Law
requires Buyers to sign a Buyer Representation Agreement to see homes not
listed by that Realtor’s firm. If the Realtor you are with does not explain
this to you or ask you to sign a representation agreement, you should be
worried.
Q. If I sign a Buyer
Representation Agreement, how long should I sign for?
A. In all likelihood,
the Realtor you contact will be willing to sign a Buyer Representation
Agreement for a day or a short time such as a week. This way both of you can
decide if you are right for each other. At the end of this short period, you
should decide to sign an agreement for several months or move on to someone
you feel more comfortable with.
Q. What happens if I
sign two Buyer Representation Agreements?
A. When you first meet a
Realtor, they should ask if you have signed a valid Buyer Representation
Agreement with someone else and if it is still in force. If you have, it is
unethical for them to work with you until you have cancelled that agreement.
In the unlikely event that you end up signing two representation agreements,
you should tell both Realtors and ask to cancel one of them. If you end up
buying a home, both could ask for a commission. It is unlikely you would end
up having to pay, but why run up legal bills.
Q. Do I need a Buyer
Agent to look at homes for sale by owner?
A. No, but you should. It is
amazing how often Buyers think they are getting a deal, only to discover
when they want to sell that they overpaid. Your Buyer Agent will ask the
owner to pay their commission and almost universally owners agree to do so.
Q. What is Dual
Representation, Dual Agency and Designated Agency?
A. If one or more Realtors in
a firm have signed an agency agreement with a Seller (Listing agreement) and
an agency agreement with a Buyer (Buyer Representation Agreement) and if
that Buyer wishes to negotiate for the purchase of that Seller’s property,
then the firm is in the position of representing both parties. This is
called Dual Representation. Dual Representation can take the form of either
Dual Agency or Designated Agency.
Under Dual
Agency, usually one Realtor represents both the Buyer and the Seller. If
that Realtor is trusted by both parties, this can often work out to both
parties benefit. Both the Buyer and the Seller must sign a Dual Agency
consent agreement.
Under Designated Agency, one Realtor Represents the buyer and another
Realtor in that same firm represents the Buyer. For firms which have the
required safeguards, this option allows each Realtor to completely represent
the interests of their client. Both the Buyer and the Seller must sign a
Designated Agency consent agreement.
Q. Why wouldn’t every
buyer want a Buyer’s Agent working for them?
A. We have no idea.
Click here to download
our
Policy on Buyer Representation.
Click here to download
our
Policy on Dual Representation.
Click here to download
our
Buyer Representation Agreement.
Click here to download
the CT Designated Agency Agreement.
Click here to download
our
Article on Agency in Connecticut.
Click here to download
the Connecticut Association of Realtors
Pamphlet on Dual and Designated
Agency.
For more downloadable
Forms of Interest to Buyers,
click here.
|
