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Why you should use a
TRUE
Exclusive Buyer's Agent.
The purchase of real estate in
one of our six Martha's Vineyard towns (Edgartown, Oak Bluffs,
Vineyard Haven, West Tisbury, Chilmark or Aquinnah) is a major
transaction with many complexities and details that should
be handled. It may very well be the largest investment transaction
in your life.
Entering into the home buying process without exclusive representation
by a buyer agent is like entering into a complicated maze
without a knowledgeable guide. There are many choices of path
and direction and you can make a lot of wrong turns wandering
around from one dead end to another.
Sellers have always been able to retain
exclusive representation for the sale of property. By signing
an Exclusive Right To Sell Agreement, with
monetary consideration, the seller became the client of
the exclusive seller’s agent, and the seller's agent
is now the fiduciary of the seller client.
Historically and up until 1987, buyers
were not represented; they were considered customers. As
a customer, the underlying implied consumer caution was
and is ‘caveat emptor’ – let the BUYER
BEWARE. In 1990 the Massachusetts Board of Registration
of Real Estate Brokers and Salespersons created the first
written agency disclosure form, and in 1993 they revised
the agency disclosure form to recognize buyer agency.
The National Association of REALTORS®
(NAR) created the Accredited Buyer Representation
(ABR®) designation to coincide with the change in Massachusetts
agency law in 2005. Simply stated the law says, if a real
estate agent doesn't represent the seller, they represent
the buyer. But it is not that cut-and-dry, as you will soon
realize. Any licensed real estate agent can earn the ABR®
designation, but many of them have not maintained their
REBAC membership and therefore have not kept apprised of
current events and education.
A title is only a title unless you walk the talk.
I am proud to have earned and sustained
the following Designations and
Certifications:
CRS®: Certified Real Estate Specialist
GRI: Graduate REALTOR® Institute
ABR®: Accredited Buyer Representative
GREEN: Green Resource Council
CBR®: Certified Buyer Representative
SRES®: Seniors Real Estate Specialist
RSPS: Resort and Second Home Property Specialist
(Charter Member #128)
e-PRO: Internet Technology Professional
SFR: Short Sales and Foreclosure Resource
LMC: Loss Mitigation Certified Specialist
In an NAR sanctioned publication titled
Agency – Choices, Challenges & Opportunities (Agent’s
Guide), the definition of an EXCLUSIVE Buyer Agency reads
as follows: “The practice of representing only buyers
and never sellers in a transaction. The company never
lists a sellers’ property and thus never has a
seller as a client.”
Think about this: Most
often, when you contact a traditional real estate company,
isn’t it to inquire about one of their listed properties
that you saw in a print ad or on the Internet? Did you know
the agent/broker you are contacting represents the Seller,
not you? To them you are a customer, not a client.
On Martha's Vineyard, you should insist upon professional assistance
finding and buying your dream home? You want buyer representation.
You contact that same traditional real estate agency, perhaps
because you like the look of their website or the name of
their company. Maybe you just flipped a coin. You are
not calling about one of their listed properties. You
ask to speak to an agent and tell him or her you want buyer
representation. The agent responds enthusiastically, ‘I’m
a buyer’s agent’. Wow! That was easy. But, are
all buyer's agents the same?
Okay, the agent gave you their schpeal
and got you to sign their buyer agency agreement.
You now feel confident thinking your best interests will
be represented. Is that really true? What if your so-called
buyer agent gets you interested in a specific
property listed by their real estate office and you want
to look at it? Will your buyer agent still represent you?
No they won't.
BUYER
BEWARE: Some agents may "bait"
you telling you they will be your Buyer's Agent, and then
"switch" you to what amounts
to a Transaction Broker Relationship as a Dual Agent, which
means they stop representing you from that point on in any
way and at any time? But don't they already know many personal
confidential facts about your financial and personal
situation? Why take a chance on being compromized when you
can hire a TRUE Exclusive Buyer Agent who never represents
sellers and takes no property listings.
Did they explain to you before you
signed the contract that they had the right to transition
to dual agency and did you consent? They should have disclosed
that to you before you signed the contract, and you should
have said "no way, no how, no thank you'.
Anyway, they will explain to you how they are now going
to act as a ‘Disclosed Dual Agent’ and work
with both you and their seller. How can they do
that and still represent YOUR best interests? They can’t.
The duties of all real estate licensees
to their clients are remembered with this acronym: OLD
CAR.
Obedience – The duty to carry out
all lawful instructions of the Client.
Loyalty – The duty to act in the
best interest of the Client.
Disclosure – The duty to disclose
all information relevant to the Client.
Confidentiality – The duty to keep
the Client’s confidential information, CONFIDENTIAL!
That duty survives termination of the agency relationship;
it is forever. However, that duty does not apply to legally
required disclosures such as known physical hazardous property
conditions.
Accountability – The duty to protect,
isolate and account for all money, documents, or other personal
property provided by the Client to the agent.
Reasonable Care and Due Diligence –
The duty to act competently and be capable of performing
the duties undertaken on behalf of the Client.
As a Dual Agent they
will not have the ability to satisfy fully the duties
of Obedience to lawful instructions, Loyalty,
(full) Disclosure, and Reasonable
Care. They shall only owe the duties of Confidentiality
of material information and Accountability
for funds.
When a real estate agent takes off
the buyer agent's hat and puts on the dual agent’s
hat, they now represent neither you -- the buyer, nor their
seller. The agent assures you they will not give any advantage
to either party and they will keep all information confidential.
Did you already tell the agent the maximum amount you had
to spend for a property or any other tidbits you would not
want the seller to know about you?
Allow me to pose a question using my favorite analogy: Two
sports teams sharing the same locker room, and the same
coach. Is the coach really going to be able to keep one
team’s plays a secret from the other team? Which team
will be favored and get the advantage? What kind of game
do you think they are going to be playing? It sounds to
me like this is a job for a Facilitator, a deaf mute or
Jimmy the Greek. Perhaps your best bet would be to engage
the services of a Buyer's Agent who will represent you exclusively,
someone who is not conflicted and only coaches one team
throughout the entire game. I look at every commitment I
make to a buyer client as preparation for the Super Bowl,
and I want my team to win.
I’ve done my best to explain the
eccentricities of buyer agency, but you’re probably
still confused – most people are. And you are probably
suspicious too. That's why it’s not surprising more
and more homebuyers are hiring true Exclusive Buyer Agents
to help them find that perfect home. Without exclusive buyer
advocacy, in the time it takes you to find and buy a home,
you would have to learn and put into practice a special
set of skills an experienced full-time real estate professional
spends years honing.
To help you buy a home, your exclusive
buyer's agent must have a vast working knowledge of the
Martha’s Vineyard real estate market, including price
trends and neighborhood conditions and amenities. They need
to know the differences in each town’s zoning bylaws,
the differences in waterfront properties and water view
properties, the impact of conservation restrictions, as
well as rules and regulations concerning planned community
association membership or condominium ownership. They also
have to have an understanding of real estate law, financing,
taxes, insurance and negotiating. The best exclusive buyer's
agents are also "street smart" in the psychology
of home buying and the stresses that accompany the often-esoteric
nature of the process. When you have a question, concern
or idea as you search for your new home, your exclusive
buyer agent should be able to respond either directly or
by referring you to someone who can help and give you an
authoritative answer.
An exclusive buyer's agent is responsible
for protecting the buyer-client's best interests (and wallet)
at all times. Research by the National Association of REALTORS®
has shown that when a buyer's agent is used, the prospective
buyer found their perfect home one week faster and examined
three more properties than consumers who did not use an
agent representing the buyer exclusively. The real value
of being exclusively represented is not just when looking
for the right property or formulating a negotiation strategy,
but most importantly it is when following through with all
the due diligence that is essential between the Offer to
Purchase and the day of Closing. The devil is in the details
and that where a good buyer agent proves their worth.
An Exclusive Buyer's Agent will:
- Evaluate the specific needs and wants
of the buyer-client and locate properties that fit those
specifications.
- Assist the buyer-client in determining
the amount that they can afford (pre-qualify), and show
properties in that price range and locale.
- Assist in viewing properties -- accompany
the buyer-client on the showings, or preview the properties
on behalf of the buyer-client to insure that the identified
specifications are met and furnish the buyer-client with
descriptive information including explicit photos of the
property the buyer-client is interested in exposing the
good, the bad and the ugly details of the property and
the property location.
- Using an exclusive buyer's agent
also means that, when available, you will be shown homes
that are For Sale By Owner (FSBO) by unrepresented sellers.
- Research the selected properties
to identify any problems or issues to help the buyer-client
make an informed decision prior to making an offer to
purchase the property. An exclusive buyer's agent never
wears rose colored glasses when working with a buyer-client.
- Advise the buyer-client on structuring
an appropriate offer to purchase the selected property.
- Present the offer to the seller's
agent and/or the seller on behalf of the buyer-client.
- Negotiate on behalf of the buyer-client
to help obtain the identified property -- keeping the
buyer-client's best interests in mind.
- Assist in securing appropriate financing
for the selected property.
- Provide a list of potential qualified
vendors (e.g. movers, attorneys, carpenters and contractors,
environmental specialists, etc.) if these services are
needed.
- Most importantly, SplitRock Real
Estate will represent their buyer-client 100% throughout
the real estate transaction and beyond.
It might seem as though engaging an
exclusive buyer's agent on Martha’s Vineyard Island
means you are going to pay more -- but that is not the case.
In most situations, an exclusive buyer's agent will accept
the co-fee offered by the seller's listing agent. When no
compensation is offered by the seller, your exclusive buyer
agent will build the fee into the Offer to Purchase contract
as a condition of sale, and disclose to the seller the net
Offer amount. Personally, I think the transaction would
be a lot cleaner if the seller and buyer fees were negotiated
separately. If you think about it, all fees come out of
the same bag of money and it’s the buyer that brings
that bag of money to the game.
While there is still some argument that
receiving compensation from the proceeds of the transaction
paid by the seller opens the possibility of conflict of
interest or leaves the incentive for a higher sales price,
true exclusive buyer's agents counter by pointing out that
a $10,000 savings for the buyer only amounts to a $150 difference
in commission for the exclusive buyer's agent. They feel
that the future business they will derive as a result of
your satisfaction with a job well done is priceless and
certainly worth the loss of a few hundred dollars. Besides,
when you are an exclusive buyer's agent, your responsibility
is to get the best terms at the best price and put the buyer's
interest above your own --- THAT IS THE JOB!
SplitRock Real Estate is an TRUE Exclusive Buyer's Agency for
Martha’s Vineyard real estate. As I have illustrated
above, any real estate company can offer buyer agency. However,
if you are considering using a non-exclusive buyer's agent,
be on the lookout for:
Neglecting Agency Disclosure:
By law, in Massachusetts all real estate licensees must
present a potential buyer with the Massachusetts Mandatory
Licensee Consumer Relationship Disclosure at the first
personal meeting to discuss a specific property. Any responsible
agent will present you with that form disclosing the agent’s
relationship. There are three options: 1) The agent is representing
the seller; 2) Offering buyer representation; 3) To be a
Facilitator. This means the agent represents neither the
buyer nor the seller. As a consumer, you can decline signing
the disclosure form; however, signing does not imply a legal
agency relationship. The agency disclosure form is confusing
and is generally misunderstood and misrepresented by many
real estate agents. This is not a contract and does not
establish a legal fiduciary responsibility. I repeat, this
is not a legally binding contract. Only by entering
into a buyer agency agreement (read: contract) does the
agent have a legally binding fiduciary responsibility to
the client. Otherwise, you are just a customer. It is expected
that you will be treated fairly, but the agent’s obligations
to a customer are limited to Honesty, Agency Disclosure,
Material Fact Disclosures and Accounting of Funds. “The
buyer should be aware that wrongful action by the real estate
agent or sub-agents may subject the buyer to legal liability
for those wrongful actions.” That’s a direct
quote taken from the Massachusetts Mandatory Licensee
Consumer Relationship Disclosure.
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Avoiding Dual Agency:
More and more, buyers are hiring an EXCLUSIVE Buyer's Agent
to avoid "Dual Agency". In a recent on-line survey
conducted by Zoomerang who gathered information from 2,100
home owners between the ages of 18 and 55, thirty-seven
percent (37%) were unaware that in some cases real estate
agents can represent both the buyer and seller in the same
transaction by what is called "Dual Agency”.
Put simply that means the agent (or agents) are working
on both sides of the fence. For example, an agent with ABC
Realty may represent the seller, while another agent (or
the same agent) also with ABC Realty represents the buyer.
The word representation is used, but what they really mean
is ‘limited’ representation – very limited.
In a Dual Agency situation, both the
buyer (you) and the seller must agree to the arrangement
and the disclosed dual agent has to keep the confidence
of both parties. Massachusetts law prohibits undisclosed
dual agency. As I said before, Dual Agency does not
make sense to me. How can an agent be an ‘exclusive’
agent for either the buyer or the seller if at some point
that agent will have to alter the agreement because the
agent or broker has a relationship with both parties, but
is now expected to withhold confidential information about
the buyer or the seller. The agent’s relationship
to the buyer then becomes one of no relationship: the agent
is now acting as a Transaction Broker or Facilitator. A
Transaction Broker or Facilitator is not an agent of the
buyer and the broker is not acting in a fiduciary capacity.
Furthermore, it is understood that the agent is not an advocate
for the interests of either the buyer or the seller. Unless
the buyer and seller are totally naïve, this switching
of hats surely belies a betrayal of trust. Disclosed dual
agency is legal in many states but as you can see, it comes
with an inherent conflict of interest as the agent, broker
or company attempts to fairly exercise fiduciary duty, represent
two opposing clients and collect the full commission. If
this is confusing to you, don’t you think it is also
confusing to the real estate agents? I believe that eventually
sellers are going to refuse to consent to dual agency, and
I certainly think buyers should not consent to dual agency.
After all, the time when you most need advice and guidance
is when you find that perfect property. That is not the
time for an agent to say, I can’t help you anymore
– you’re on your own.
In the case of SNIDER vs OKLAHOMA REAL ESTATE COMMISSION,
June 1, 1999, the Oklahoma Supreme Court said: "Sellers'
agents and dual agents do not and cannot by law give a buyer
the same degree of loyalty as an agent who acts on behalf
of the buyer". In order to completely remove
the potential of any conflict of interest, exclusive buyer
agencies like SplitRock Real Estate work 100% exclusively
with buyers and do not list homes for sale.
What about the Buyer Agency
Agreement? When interviewing a buyer's agent it
is important to ask two questions before you agree to sign
a Buyer Agency Agreement: 1) Do you or your firm take listings?
2) Do you practice dual agency? If the answer to these questions
is 'yes', you will not be represented by an EXCLUSIVE Buyer's
Agent. As I understand the definition of the word EXCLUSIVE,
it means single, sole, not divided or shared. Many brokers
are still misusing the term EXCLUSIVE in order to capture
a buyer. They offer an EXCLUSIVE Buyer Agency Agreement
(with consent to Dual Agency). What the heck does that mean?
That is like saying, I’ll be married to you, but if
I see someone I want to fool around with, I’ll do
it. I don’t know about you, but my wife would have
none of that and I am perfectly happy being her EXCLUSIVE
husband. I prefer to keep my life simple and be respectful
of consumer intelligence.
Buyers' Agency Clause:
I want to caution you on one potential problem with signing
a buyer's agency agreement or exclusive buyer's agency agreement
contract. There may be a blanket clause stating that the
agent gets a commission on any home purchase, no matter
what and no matter where. If you think it is likely that
you will find something without the help of the agent then
you may want to specify in the agreement that a For Sale
By Owner (FSBO) home you find on your own will not require
payment of the standard commission. You can negotiate an
adjusted commission for exceptions if your agent agrees.
You also may want to stipulate the geographical areas your
relationship covers. For example, if you buy a property
on Cape Cod, you may not want the counsel of your buyer's
agent and do not want to owe the agent a fee. SplitRock
Real Estate can refer you to a competent exclusive buyer's
agent on Cape Cod, or anywhere else in the USA.
"In-house" Listings:
Another word of caution: If you are working with a traditional
agent (or listing agent) rather than an exclusive buyer's
agent, be aware that you might get a little harder sales
pitch for their own listings, or the listings held by their
brokerage firm simply because they are obligated to make
every effort to "sell" their listings first --and
they make more money that way, too. SplitRock Real Estate
is an Exclusive Buyer Agency and our committed task is to
find the best property, with the best terms, that best suits
your needs no matter how long it takes.
Release Clause: Make sure you have a "release
clause" in your buyer's agency agreement just in case
you find out you don't get along with your agent. This
will allow you to sever ties without any future problems.
It is better to end an unhappy or uncomfortable relationship
before you get too deeply into the home buying process.
The contract may stipulate a protection period. This means,
even if your contract is no longer in effect, should you
buy one of the properties your buyer agent introduced you
to during the term of that contract, being the procuring
cause, the buyer agent gets paid. I think this is only fair.
If you would like to learn more about
Exclusive Buyer Representation please follow this link
> What
is an Exclusive Buyer's Agent?
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