Agency Relationships Between the Buyer and Seller

By Jeffrey Austin on October 15, 2009

Buyer representation really started to gain acceptance in the real estate community in the early 1990′s. For those of you who might remember, we as real estate agents would put buyers in our cars, drive them around and show them homes, possibly take them to lunch then out the next day and show them more homes and so on.

Could you imagine telling your agent personal information about your situations, finances, etc. and then they would relay this information to the listing agent of the home you made an offer on? It was assumed by the buyer, the agent was looking out for their best interests.

Now that the rules have changed, real estate agents are now required to discuss in detail an “Agency Disclosure” form which is one part of the purchase contract. This disclosure form explicitly states who the agent represents. This form should be signed by the party that the agent is representing and is by no means a commitment from the buyer. It is only a disclosure and should be signed PRIOR to the writing of a purchase contract.

Over the years I’ve known several buyers who actually think they will save money by dealing directly with the agent who is the listing agent on a property. This listing agent then writes an offer on behalf of the buyer but the agent’s fiduciary duty is to get the highest price for the seller, not the lowest price for the buyer. This strategy can actually cost the buyer thousands of dollars more when the negotiations start.

As a buyer you want to know who’s working for you and looking out for your best interests. Do not take “representation” lightly as it could cost you thousands of dollars. Let’s say you hire an agent who works for ABC Company. This agent shows you a home that is listed by ABC Company but by another agent in the office. Guess what? The same rules apply as above. Even though there are two agents involved in the transaction, both agents work for the same company and therefore represent the seller. Agency can be somewhat complex and there are exceptions to these laws but this is the easiest way to explain it. One way to understand this is to remember that no matter what agent you hire to represent you, whether you’re a buyer or seller, you are actually hiring the “company” that the agent works for.

Another example is the buyer who walks in a new home subdivision. The sales agent discusses their models, floor plans, etc but is actually looking out for the best interests of the builder/seller.

If the buyer goes to a new home community by themselves and falls in love with one of their models, then they call their agent to meet them there can be disastrous. Most builders will not allow this even if the buyer did not register with the new home subdivision on their first visit. Once you cross that threshold in a new home community, the builder will not allow you to be represented by an agent.

Although the “Buyer Broker Exclusive Employment Agreement” is not standard practice, they should be. This is an agreement between the buyer and the real estate agent which discloses responsibilities and fiduciary duties between both parties. As a buyer, don’t you want to know your agent is representing you “exclusively” and the agent will due their due diligence in offering you the best service possible? The agreement by no means forces a buyer to purchase a home, but rather an agreement that discloses loyalty between the buyer and their agent.

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