Will the REAL Exclusive Buyer’s Agent Please Rise?

The November 2007 issue of Real Estate In-Depth, the monthly newspaper for Realtor members of the Westchester-Putnam County Board of Realtors, Inc., included an article written by the board’s legal counsel.  The article is entitled ‘New York State High Court to Define Disclosure Duties Of Buyer’s Agents’.   The article refers to a lawsuit filed by a buyer represented as a client in a buyer agency relationship from within a traditional listing company.  The buyer filed the lawsuit after learning that the home he was bidding on was purchased by another buyer who was also represented by a buyer’s agent from within the same company. 

The point of this post is not to discuss the actual case, but to describe the writer’s use of  ’exclusive buyer agents’ from Century 21.   His useage of ‘exclusive buyer agents’, referring to agents from a traditional listing company, is erroneous and very misleading.   Is the writer aware of the true definition of Exclusive Buyer’s Agent, as NAR defined it in the early 90’s?  Without a doubt.  

An Exclusive Buyer’s Agent is an agent from a company called an Exclusive Buyer’s Agency.  This is a company which pledges never to list property for sale, and therefore never represents sellers as clients in an agency relationship.  Sellers are always considered ‘customers’.  Dual agency and conflict of interest with ‘limited loyalty’ are not encountered in a company which practices true agency (ie.: Exclusive Buyer’s Agency, or an Exclusive Seller’s Agency).

The correct way to describe buyer agents from a seller’s listing company is to refer to them as ’non-exclusive buyer agents’.  The article encourages mainstream Realtors acting as buyer agents to use a written contract, known as an Exclusive Right to Represent Agreement, which is available from the Westchester-Putnam Multiple Listing Service.  This agreement, when used by non-exclusive buyer agents, serves mainly to protect the real estate company’s financial and business interests.  The buyer agrees to work only with that agent and company in the purchase of any property.  This obligates the buyer to that agency if he/she becomes interested in a property listed by that agent’s own company, as well as any property listed elsewhere.  The agent’s loyalty and advocacy to that buyer is compromised with dual agency on an in-house sale.  The issue of dual agency (conflicted agency) and the resulting diminution of loyalty, representation, and advocacy to the buyer are not discussed.  The buyer may be obligated to pay a higher fee to the agent for this type of non-exclusive buyer agency representation.

This is unfortunate for the home buyer, as the meaning and intent of  true ‘agency’, as a relationship between an agent and the agent’s principal (client) holds that the agent must place the goals and interests of the client above those of the agent and anyone else in the transaction at all times.  Non-exclusive buyer agents, utilizing an Exclusive Right to Represent Agreement, are contradicting the very meaning and essence of ‘agency’ for financial gain and control.    

Use of this contract by listing companies offering buyer agency is self-serving, as it allows the goals and interests of the real estate agency to be superior to the goals and interests of their respective ’clients’, for transaction control and maximum profit.  Use of this form enables the real estate company to retain the buyer as a captive client, regardless of the level of representation and loyalty the agent can provide.  

When a real estate agent from a listing company claims he or she can be your ‘exclusive buyer’s agent’, and insists that you sign an Exclusive Right To Represent Agreement, one should question that agent’s loyalty, their knowledge of duties owed to you, and ethics. 

The use of an Exclusive Right To Represent Agreement Form DOES NOT magically transform a non-exclusive buyer’s agent from a seller’s listing company into a legitimate Exclusive Buyer’s Agent!!

Be wary of signing an Exclusive Right to Represent Agreement with a non-exclusive buyer’s agent.

What common errors do home buyers routinely make?

Buying a home is one of the most stressful activities in the average person’s lifetime, on par with going through a divorce, paying taxes, or going to the dentist- but it doesn’t have to be!  Because buying a home is done so infrequently, most home buyers do not feel experienced or comfortable enough to ‘do it alone.’ 

Buying a home involves a myriad of mortgage products, inspectors, and engineers, to dealing with termites, radon, buried oil tanks, assessments, zoning issues, certificates of occupancy, appraisers, attorneys, title companies, insurance, and other services and concerns.  Home buyers rely on real estate agents to ‘help them through the process.’   The challenge is, most real estate agents represent the interests of sellers by law, and may not provide you with the best services and providers to protect your interests.

There is more far information available to consumers when buying a kitchen appliance, a television, or even an automobile, than buying a home.   Buying guides, such as Consumer Reports, offer a lot of information for a wide variety of products and services.  Because these items are generally purchased more frequently, and the monetary obligation is less daunting and far-reaching than buying a home, buyers feel more comfortable and experienced acting ‘on their own’ when buying products and services other than a home.  

So, after all that, here are some of the routine mistakes that buyers frequently make… 

1- Calling the listing agent or listing company for a property they have interest in seeing.   Why?  Because that agent and the agent’s company directly represent the best interests of the home seller.  Their job is to find the best buyer offering the highest price at the best terms for their client, the seller.   Most real estate agents by law represent the best interests of the seller, not the buyer.  An ordinary seller’s agent may offer to be your ‘buyer’s agent’, but that introduces the possibility of dual agency, which means you are essentially on your own, or no representation at all, which again means you are on your own.   They cannot provide you with information or counsel which would help you, while lessening the seller’s chance of selling at the maximum possible price and best terms.   Their job is to sell you a house, not help you buy one with your best interests in mind.  Seeing a home through a particular agent may obligate you to work with that agent in buying that home if you have already presented an offer for it, depending on the situation, and if certain protocol was properly exercised by the agent.

2- Visiting an open house, and buying the home through the listing agent at the open house- for the above-stated reasons. 

3- Using mortgage companies, home inspectors, attorneys, and other providers referred to them by an ordinary seller’s agent.  Because that agent represents the seller, and is obligated to do his or her best to bring that buyer to the closing table, quite often the providers referred are ‘rubber-stampers’, who will do the job, but not necessarily with your best interests in mind.  They depend on real estate agent referrals for work.  If a referred home inspector finds ‘too many problems’ with a house, that inspector risks losing future referral business from that agent and company.  A referred mortgage provider may not offer the most competitive rates, terms, and fees, and may be referred because they can get the deal closed, or because there is an affiliation with the real estate company. 

4- Asking a seller’s agent how much to offer, what a property is worth, what the drawbacks are of a certain home, neighborhood, school, or town, etc.  Seller’s agents cannot provide this type of information to unrepresented home buyers (customers).  Only an exclusive buyer’s agent from an exclusive buyer’s agency (a company which does not list property for sale) will provide this type of information, and much more, to home buyers, on any property.

5-  Providing the listing agent or a seller’s agent with personal and financial information, including your income, motivation to buy, mortgage potential, and other sensitive information.  They are required to disclose this info to any seller whose property you are interested in buying.  The result is you may end up paying more to buy this property than necessary.

What’s a homebuyer to do?  Smart homebuyers shop for a dedicated buyer’s agent before they start looking at homes. 

Only an exclusive buyer’s agency can guarantee 100% loyalty, representation, protection, advocacy, confidentiality, and disclosure to home buyers on any home 100% of the time.  A ‘part-time’ buyer’s agent from a company which lists homes for sale by law simply cannot provide this guarantee or level of service to home buyers.