A brief primer on designated and buyer agency…
Our company practices, as many do, “designated agency”… if you feel you need representation at all, which of course is optional based on your comfort level in the home buying process, then if you approach the listing agent directly AND want buyer representation, then you will be eventually referred to a different in house agent to take up your side of the transaction, the purchasing side. You still CAN insist on using the listing agent as your buyers agent too, that would be dual agency if you indeed entered into a written contract with the listing agent to represent also your buying side. Dangerous, risky. Designated agency serves to create a better arm’s length transaction which guarantees that your interest will be protected during the real estate transaction. Here is an example…for instance, you may simply use your own knowledge base as a guide in the purchase or you may hire a lawyer to look over your offer before submitting it and in both of these ways you can still bring the offer through the listing agent or any other agent for that matter WITHOUT representation from any buyer’s agent.
Alternatively and as part of this example, if you should choose representation in the form of a buyer’s agent from our (the listing agent’s) company, then you would be referred to a different in house agent appointed by our principal broker and that agent and the listing agent would work out the commission split in house along with whatever other commission may have been negotiated between that buyer agent and yourself as the client. We as a company have largely moved away from the days of dual agency where the listing or other in-house agent represents both interests in the same transaction (difficult, if not impossible to do and remain 100% evenhanded, possibility of unintended water cooler conversations being too loud and falling to competing ears etc.- these are two reasons why our company does not practice dual agency anymore if we can help it). Dual agency is the number one cause of lawsuits in RE transactions in NH (and likely nationwide) because it is very hard to split one’s loyalties evenhandedly try as one might.
So, it gets down to whether you feel you need representation from an agent or whether you are simply going to march on your own. If you march on your own and choose to use the listing agent, then they can assist in ministerial ways like dutifully typing what you tell them to on the offer, supplying you the proper forms at the right time and as well owing you you duties at the customer level, that while falling short of a client relationship, still guarantee you that you will be treated fairly and honestly. If you choose to use the listing agent as your buyer’s agent too, because you have sat down with that agent and hammered out a buyer agency contract, then that agent, now representing BOTH the buyer and the seller must fully disclose this arrangment to both you as the buyer and also to the seller. No showings can occur without written consent that both the buyer and the seller are aware of the relationships. That consent must come BEFORE the showing, not after it.
DEFINITION OF AGENCY IN REAL ESTATE
A buyer’s agent represents a consumer who is purchasing property in a real estate transaction. This agent owes full fiduciary responsibilities, duties and loyalty to the buyer. The buyer’s representative works for the buyer and has the buyer’s best interests in mind throughout the entire real estate transaction process.
The word “agent” in the legal sense means “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. Obviously, buyer’s need protection and representation as well as sellers. That is why the traditional real estate setup no longer makes sense.
The buyer’s representative is compensated through a negotiated fee, or in some states the commission is split between the buyer’s and seller’s representatives based on the selling price of the real estate property. It is important for the consumer to discuss compensation in the initial interview. In many cases, it is recommended that the consumer and buyer representative agree to the terms of compensation prior to viewing real estate properties and sign a written agreement based on these terms. This agreement should spell out the responsibilities of both parties throughout the real estate transaction. It is important to note that in some states, legislation has been enacted to protect the client to the point that absent a written agreement the agent represents the buyer throughout the real estate transaction. Consult your local REALTOR® for complete details when you first start the search for purchasing any real estate property.
Why use a Real Estate Buyer’s Representative?
As a consumer, how often do you buy real estate property? Once, twice, three times in your lifetime? Purchasing real estate is a complex and major transaction with many details to be handled. In the majority of cases the seller will be represented. Wouldn’t you want to have complete and fair representation in the real estate transaction?
The Benefits of Using a Buyer’s Representative
Using a Fiduciary representative offers the consumer many benefits.
- Evaluate the specific needs and wants of the client and locate properties that fit those specifications.
- Assist the client in determining the amount that they can afford (pre-qualify) and show properties in that price range and locale the consumer has determined.
- Assist in viewing properties and either accompany the client on the showings or preview the properties on behalf of the client to insure that the identified specifications are met.
- Research the selected properties to identify any problems or issues to help the consumer in making an informed decision prior to making an appropriate offer on the property.
- Advise the client on structuring an appropriate offer to purchase the selected property.
- Present the offer on the clients behalf.
- Negotiate on behalf of the client to help obtain the identified property. Keep in mind that the buyer representative will be doing so with their clients best interests in mind.
- Review and explain all legal documents to their client.
- Recommendations and assistance in securing appropriate financing for the selected property.
- Provide a list of potential qualified vendors e.g. movers, attorneys, carpenters if these services are needed by the consumer.
Most importantly, the consumer would know that they are fully represented throughout the real estate transaction.