You wouldn't -- for a lot of good
reasons -- go into a contested divorce proceeding without an attorney,
or worse, take the advice of your spouse's attorney.
Why, then, would you buy a home -- an adversarial
process regardless of how friendly everyone involved in the transaction
seems -- without someone on your side?
Oh, you think home buyers have always had representation?
Well, think again.
As a buyer, you are not represented unless you've
told the real estate agent who is showing you homes that you want
that agent to represent you as your "buyer agent." If
you haven't, "your agent" could be representing the seller.
Recently, more home buyers have been asking, "Who
represents whom?" As a result, many are opting to be represented
by a buyer's agent to take them through the process, from house
hunting to closing. The greatest thing about this is it doesn't
cost the buyer anything and often saves them thousands.
The way we were
Until a few years ago, real estate was sold the way it always had
been -- the listing agent obtained the listing from the seller and
represented that seller. A second agent, the "selling agent,"
brought the buyer to the table, but was acting as a sub (an agent
of the listing agent) often unbeknownst to the buyer. In this situation,
even though the selling agent may have never met the seller, he
or she still had a legal obligation to report to the seller any
information the buyer revealed, or any information the agent found
out about the buyer's situation that would help the seller's negotiating
position. That makes the agents sound evil, but in fact, if they
had not communicated the information to the seller, they would have
been breaking the law. Both agents had a fiduciary obligation --
a legal and moral obligation to work toward the best interests of
the beneficiary. The seller was the client for whom agents were
working. The buyer was merely the customer.
The revolution begins
In 1983, however, a classic study started a revolution in real estate
sales. The Federal Trade Commission found that 72 percent of all
buyers believed the agent they worked with was representing their
interests. That meant that three out of four buyers were "spilling
their guts to agents who weren't representing them," as one
buyer agent wrote. The report fueled a nationwide legislative agenda
that forced the real estate industry to disclose whom the broker
or licensee represents in every situation. By 1988, most states
had disclosure laws in place.
Janet Branton, executive director of the 44,000-member
Estate Buyer Agent Council, says times have changed.
"A survey conducted in 2001 found 46 percent
of home buyers used buyer representation," Branton says.
REBAC, a wholly owned subsidiary of the National
Association of Realtors, trains real estate licensees how to serve
the buyer and grants the respected Accredited Buyer Representative
designation to agents for reaching certain education and experience
"Buyer representation is not the exception anymore,
it's the norm," says Branton. "Consumers now know they
have the right to be represented."
Telling it like it is
In some states you can still work under the old
sub-agent system, or you can choose buyer representation.
Many states and the NAR Realtor Code of Ethics,
however, now require "disclosure of agency"
by which any agent is required to disclose his or
her legal relationship with a buyer or seller "at
first substantive contact." That is, if you,
as a prospective buyer or seller, start telling
an agent information that would compromise your
bargaining position in any way, the agent should
immediately explain "agency" and give
you a choice in how you want to move forward. Unfortunately,
some don't, so it's up to you to protect yourself.
Any licensed real estate agent in the United States
can legally act as a "buyer's agent," although not all
have experience doing so. You can also engage what's called an "exclusive
buyer's agent." This is the purest form of buyer representation,
but unfortunately, few firms are able to make a go of representing
only buyers, since listings are the lifeblood of real estate, and
listings are what make the phone ring.