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If you were being sued, would you hire the attorney or law firm suing you to defend you? Silly question? Sure, most people wouldn’t because of the obvious conflict of interest. Yet, in real estate, this goes on all the time! Many prospective home buyers call the seller’s listing company- who may also offer to be your “buyer’s agent”- to view properties listed by that company.
Big mistake.
Why? That company directly represents the best interests of the home seller by law, with legal obligations to negotiate for the highest possible price at the best terms for the seller. They are required to tell the seller everything they know about you, including your level of motivation to buy, contemplated higher offers, your income, employment, assets, mortgage borrowing potential, etc. They cannot, however, tell you anything they know about the seller that would reduce their ability to sell at the highest possible price and terms.
For hundreds of years, the concept of Agency under Common Law meant ’an agent can represent only one master in a transaction’. That is, until recently in real estate, when the concept of Dual Agency- representing both the buyer and the seller as clients simultaneously by the listing company in the same transaction- became a viable and accepted ‘business model’ in residential real estate practice.
In order to make dual agency legal, “full disclosure” by the agent of the limitations of dual agency is required, with the ”informed consent” of both the buyer and seller needed to continue. The agent is asking each respective client to permit the agent to forfeit their fiduciary duty of ‘undivided loyalty’, which means that the agent is now partially loyal to the buyer and partially loyal to the seller. Being partially loyal is like being a little bit pregnant- impossible! Dual agents cannot be considered true agents, but merely opportunists.
If the buyer refuses to give consent to dual agency, that buyer can be referred to a different company to represent his/her interests in that transaction.
Dual agency permits a conflict of interest to occur, by requesting the buyer and seller to each give up their right to the agent’s undivided loyalty. Whose interest does the dual agent now represent? Dual agency is self-serving and mainly benefits the interests of the real estate company by allowing it to collect a full commission- double the money, while maintaining control of the transaction.
Dual agents (aka ‘double agents’) cannot fully represent or advocate for you when they also represent the seller on an in-house listing. Prior to the late 1990’s, dual agency was considered by attorneys and consumer advocates as a legal and ethical grey area. Dual agency was considered an inappropriate practice and strongly discouraged by the National Association of Realtors (NAR). Dual agency only benefits the listing company financially, since they pocket both sides (listing and selling) of the commission- double the money for half the work. Buyers and sellers are on their own to negotiate price and terms, and to uncover any drawbacks about the property or the transaction on their own. A dual agent cannot offer advice or counsel to one party that would benefit or harm the other party in the same transaction.
New York is a ‘buyer beware’ state in real estate purchases. Before home buyers choose a particular home to buy, they would be much better served by selecting the right agent (company) before starting their home search. In this way, their best interests are protected every step of the way, while often saving significant amounts of time and money.
The best agent for any home buyer is an exclusive buyer’s agent from an exclusive buyer’s agency. An exclusive buyer’s agency is a real estate company which does not list property for sale (more on this in a later post). This practice of not listing property ensures 100% representation from the firm on any property 100% of the time, dual agency or non-agency are never an option.
Many homebuyers (and homesellers) often use the above terms interchangeably, without any real understanding of the key differences. These differences are significant, and can be harmful to consumers if not understood.
A REALTOR (pronounced real-tor, not real-i-tor) is a member of the National Association of Realtors, as well as a member of the local Board of Realtors. Only a Realtor member has access to the Multiple Listing Service (MLS). Only real estate brokers & salespersons who are Realtor members have MLS access for listings or sales data. Non-member real estate brokers & salespeople do not have access to MLS listed property.
A Real Estate Broker (principal broker) is usually the owner or manager of a real estate company, and is responsible for the actions of his/her salespersons working under that broker’s direction and license.
The Broker is actually the ‘Agent’ hired by a seller when listing a home for sale, or is the ’Agent’ for a buyer in a buyer agency relationship. All other agents in the broker’s company are considered ’subagents’ to the Client with the same legal duties owed.
A ‘Client’ is a buyer or seller who has agency representation and protection. An Agent works for clients.
A ‘Customer’ is a buyer or seller who does not have agency representation and protection. A Salesperson works with customers. A buyer customer should not tell a salesperson anything he/she doesn’t want the seller to know.
An ‘Agent’ represents the best interests and goals of the Client (known also as a ‘principal’) and owes the Client fiduciary duties of undivided loyalty, full disclosure, confidentiality, reasonable care & due diligence, accounting/accountability, and lawful obedience.
‘Agency’ describes the legal relationship and duties owed between the real estate company as ‘Agent’, and the buyer or seller as ‘Client’, and should be in writing.
Seller’s agents have legal duties to procure the best buyer and negotiate for the highest possible price at the best possible terms for their Client, the Seller.
Buyer’s agents have legal duties to procure the best property and negotiate for the lowest possible price at the best possible terms for their Client, the Buyer.
We are often asked ’When is it a good time to buy a new home?’, so I’d like to respond: ”The best time to buy a new home is when the benefits of moving to a new home outweigh the benefits of where you currently live, provided that you can afford to do so.”
There are many factors to consider in buying a home, including communities of interest, price range, schools, type of home (single family, condo, co-op, multi-family), dwelling size, number of bedrooms and bathrooms needed, commuting distance to work, distance to shopping and other supporting amenities, and many other questions to explore and discuss.
Of importance is the amount of a mortgage you may be preapproved for, and how much the monthly payments- mortgage principal and interest, taxes, and insurance, also known as PITI- equate to. Are these payments reasonable and affordable compared to monthly income, without notably altering your lifestyle? Decide how much cash you have for a down payment, and factor in additional funds for closing costs (approximately 3% to 5% of the loan amount), as well as reserves for repairs and improvements. We recommend after the down payment and closing costs, moving expenses, repairs, improvements, etc., buyers should have a minimum of 3 months, and preferably 6 months or more of equivalent PITI as a cash reserve available for emergencies or other expenses after completing the purchase.
Many real estate agents from ordinary listing companies do not ask nearly enough questions to understand the kind of home, location, your lifestyle considerations and interests, or even what monthly payments are most comfortable for you.
Part of our job is to ask key questions to understand our client’s needs and lifestyle. This approach takes more time, but it means that we are able to focus on helping our clients find and buy the best homes which they truly love and can afford.
We are very pleased and excited to offer our first of an ongoing series of discussions about homebuying in Westchester County, NY. You will see helpful information and advice on this site that will not be offered by ordinary seller’s real estate companies. This includes information on the different types of real estate agents and agency relationships, homebuying pointers, negotiating, home inspections, attorneys, appraisals, financing, environmental issues, title insurance, and much more. From time to time we will have other professionals writing about topics of interest in their own area of expertise, including professional engineers, attorneys, and mortgage officers. If there is anything you would like discussed, please let us know!
Buyer’s Edge Realty is an exclusive buyer’s agency. Over 99.75% of all real estate companies in Westchester County, NY are seller’s agents which list property for sale and by law represent the interests of the homeseller. Buyer’s Edge Realty pledges never to list property for sale, which means we do not represent the interests of any seller. As Realtors we have the same access to visit any MLS property, just like any Realtor. Not listing homes for sale is the only way to provide our clients with 100% company representation and loyalty 100% of the time on any property. As a result, our clients purchase the best homes in any price range with less time, money, and stress.
Please visit our main company website www.buyersedgerealty.com for further information including FAQ’s, MLS listing search, school and mortgage information, and much more. We look forward to receiving your comments and questions. Thanks for visiting!
