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A buyer's agent is your secret weapon

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 buyer.

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."

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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 off.

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 agents.

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 Listing Services?

  • 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 my goals?

  • 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

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