A buyer's agent is your secret weapon
Cynthia E. Brodrick
When Donald Trump buys a luxury high rise, you don't
think he goes it alone, do you? He's got a gaggle of lawyers going
over contracts and advising him on these multimillion-dollar purchases,
while he's busy having lunch with models.
You deserve the same. OK, perhaps you can't afford
the models or a dream team, but it will pay off to have one agent
firmly in your corner.
Of course, we assume all real estate agents are good-hearted
folks who want to match you up with a good home at a good price.
However, some buyers are not aware of legal technicalities about
who is representing whom. Traditionally, a real estate agent might
work with the buyer, but he's not working for the
It goes like this: The seller hires an agent to list
his house. It's this agent's job to find a buyer. Of course, he'd
love to find a buyer himself and keep the whole commission. But
to save time, the agent allows other agents to show the house and
bring in buyers -- with the agreement to split the commission with
the original agent. The agent who brings in the buyer, in the end,
is a sub-agent of the person who was hired by the seller. Therefore,
no agents are really working for the buyer.
The buyer's bringing all the money to the table, yet
no one's on his side.
Who's zooming whom?
No one's saying that real estate agents lie about
their loyalties, but there certainly has been a lot of misunderstanding
over the years. In 1983, a Federal Trade Commission study revealed
that 72 percent of home buyers mistakenly believed that the agent
they contacted, who drove them around, represented them.
John Jackson saw the results of this misunderstanding
firsthand when he was an investigator with the Missouri Real Estate
Commission in the 1980s. "I investigated 50 cases a year. And 90
percent involved people filing against the Realtor because they
were under the impression their agent was their agent. A problem
would develop and the Realtor would abandon them."
After that FTC study, states passed laws requiring
real estate agents to disclose their actual client. As they learned
more, wise consumers began demanding their own representation in
real estate transactions. The buyer's agent was born.
The Real Estate Buyer's Agent Council formed in 1988,
says David Martin, managing director of REBAC in Chicago. However,
buyer's agents really caught on around 1995 after more state legislation
delineated agency differences.
So, how's a buyer's agent different from any ol' real
estate agent? Admittedly, they do look a lot alike. They get paid
the same way: splitting the commission with the listing agent or
seller's agent. And they perform a lot of the same duties, such
as checking listings for homes that match the buyer's wish list
and setting up visits to these properties.
And in this corner ...
However, from the start of a buyer's relationship
with a buyer's agent, there is a written agreement that the agent
is working directly for the buyer.
Why is this important? An agent is a fiduciary, like
a trustee or guardian with an allegiance to the person he is representing.
When the agent is a sub-agent of the seller's real estate agent, that allegiance
is to the seller. When an agent is truly working for the buyer,
his loyalty and confidentiality and disclosure obligations are owed
only to the buyer.
Paying the piper -- or the agent
A buyer's agent shares the commission with the seller's
agent, so using a buyer's agent should never cost you more money.
Some may ask for a retainer to be paid at the outset of your arrangement,
but according to Jackson, "Most buyer's agents don't do that anymore.
Generally there's no up-front fee."
On the flip side, the buyer's agent won't save you
money either. Generally, the commission deal is the same as if you
had a traditional agent.
But you could save money on the home purchase, since
the agent can advise on costly problems, undervalued assets and
the negotiation process. The telecommunication company, Sprint,
discovered that when a large group of their employees relocated
to the Kansas City area, those who used a buyer's agent saved an
average of 5 percent on the price of their homes. But don't go in
expecting the buyer's agent to be a shark.
"My job is not to steal someone a house," Jackson
says. "Most good homes are going to go for market value, but we
can get you that house and guide you." Where the buyer's agent can
really save you money is by making sure you aren't getting ripped
Even if the buyer's agent doesn't save you one red
cent, they can save you a lot of headache and hassle just by helping
you through a maze of paperwork the likes of which, you won't see
again ... until you buy another house.
The nitty gritty
The best way to find a buyer's agent is to ask friends
and colleagues for a recommendation. Or you can try REBAC's Web
site, which has a searchable directory of the 30,000 member buyer's
There are two breeds of buyer's agent. One also works
as a selling agent -- ideally in separate deals. The other works
as an exclusive buyer's agent, doing nothing but representing
buyers, avoiding all potential conflicts of interest. Some folks
prefer the latter, a "purer" buyer's agent, but as long as all relationships
are made clear, you can do well with either one.
When you are ready to interview a buyer's agent, here
are some questions to ask.
Do you hold an active real
estate license in good standing?
Do you belong to any Multiple
Are you willing to show all
properties -- even For Sale By Owner?
Are you familiar with this
area of town?
Who do you represent -- the
buyer or seller? The agent should be able to clearly explain
the agency definitions of your state.
How will you help me accomplish
How are you paid?
If I'm not happy with your
performance, is there a way to get out of the contract?
-- Posted: Oct. 7, 1999