| What
is a Buyer's Agent?
Agency is all the buzz these days on Martha's Vineyard.
For years, the consumer has been lead to believe "My Realtor
is my best friend". I feel this statement has been rather
misleading. For one thing the term REALTOR® applies
to a designation given to a real estate professional who
agrees to adhere to adhere to a strict Code of Ethics. Many
a time consumers have purchased property on Martha's Vineyard
only to learn after the fact that they did not get the best
deal. This is because prior to mandatory disclosure the
agent working with the buyer was the seller's fiduciary,
not the buyer's.
The National Association of Realtors (NAR) and the Massachusetts
Board of Registration of Real Estate Brokers and Salespersons
set out in the mid-80's to correct this misconception and
in 1990 implemented the Mandatory Agency Disclosure -
Agency Relationship Form-705 as a way to ensure that there
is no misunderstanding. The agent you select when you want
to explore purchasing a property is required by law to inform
you that he / she is either a Seller's Agent or a Buyer's
Agent, or could work as a Disclosed Dual Agent. What does
all this mean to the buyer of Martha's Vineyard real estate?
Let us break it down:
| SELLER'S AGENT:
When a seller engages the services of a listing agent,
the seller becomes the agent's client. This means the
agent, and his/her subagents represent the seller. They
owe the seller undivided loyalty, utmost care, disclosure,
obedience to lawful instruction, confidentiality and
accountability. They must put the seller's interest
first and negotiate for the best price for their client,
the seller. (The seller may also authorize subagents
to represent him/her in marketing the property to the
buyers.) |
Don't you want the same kind of representation as a Martha's
Vineyard real estate buyer? Well, you can have it --- or can
you?
| BUYER'S AGENT:
When a buyer engages the services of a real estate agent,
in theory, the buyer becomes that agent's client. This
means that agent represents the buyer. The agent owes
the buyer undivided loyalty, utmost care, disclosure,
obedience to lawful instruction, confidentiality and
accountability. The agent must put the buyer's interest
first and negotiate for the best price and terms for
his/her client, the buyer. (The buyer may authorize
subagents to represent him/her in locating property.)
However, unless there is
a written contractual agreement between the buyer and
the real estate agent the way there is between a seller
and their listing agent, how sincere can this relationship
be? Remember, the Mandatory Agency Disclosure is not
a contract. |
Now we come to what I consider a curious form of representation
and one that implies no representation at all and minimal
assistance --- not a good idea in a complicated and diverse
market like Martha's Vineyard.
| DISCLOSED DUAL AGENT:
A real estate agent can work for both the buyer and
the seller on the same property provided such agent
obtains the informed consent of both parties. The agent
is then considered a disclosed dual agent. The agent
owes the seller and the buyer a duty to deal with them
fairly and honestly. In this type of agency relationship
the real estate agent does not represent either the
seller or buyer and they cannot expect the agent's undivided
loyalty. Also, undisclosed dual agency is illegal. |
The agent may know personal information
about both the buyer and the seller, but as a disclosed
dual agent is bound not to reveal that information to either
party. I think that's a difficult line to follow and creates
a serious conflict of interest. The dual agent cannot provide
undivided loyalty to both clients. The duty of confidentiality
to one compromises the duty of full disclosure to the other.
It is very important that you to have a good understanding
of the (Disclosed) Dual Agency relationship, so I suggest
you read a little more to learn about Avoiding
Dual Agency.
If you're not totally confused by now, let's see how you
feel about Designated Agency:
| DESIGNATED AGENCY:
This is a brokerage practice used when the brokerage
is representing both the buyer and the seller. NAR has
recommended designated representation since 1992 as
an alternative to dual agency. Designated representation,
sometimes called "designated agency" or "appointed agency,"
enables a managing broker to designate, or appoint,
a buyer's representative and a seller's representative
within the same company to work on the same transaction.
The managing broker is like the line coach who holds
the playbooks for both teams --- they can control the
game. The broker has the responsibility of supervising
both licensees, but the designated agents are expected
to give their respective clients full representation.
The hope and purpose for this type of agency is that
it would avoid the problems of Dual Agency. (Are there
problems with dual agency? Hmmm.) However, the idea
that a brokerage can transfer the agency relationships
created by the contractual representation agreements
it has with consumers to licensees, who are agents of
the brokerage and not the consumer, just doesn't make
sense to me, and I don't think it will hold up in court.
Some critics say designated agency tries to reduce the
agent's liability by reducing service to the consumer,
but designated representation doesn't alter a managing
broker's responsibility for the licensees or the transaction.
I think that Designated agency is merely a disguise
for undisclosed dual agency. It is a deceptive practice
very similar to the conflicts of interest and self-dealing
recently exposed in the investment-banking and insurance-brokerage
sectors. I don't know of one Martha's Vineyard real
estate agency that practices designated agency, because
they realize how prickly this kind of representation
can be. The only hope for this practice to be successful
is in a really big real estate agency with dozens of
agents. |
So, if Designated Agency is too prickly,
why then are brokers willing to practice dual agency? We've
already said they're pretty much the same thing. The answer
is because they have no choice under today's new agency
law. Under all the confusing labels, what has really changed?
The only real change is that we now have 100% Exclusive
Buyer Representation, and you are also starting to see 100%
Exclusive Seller Representation. Now, that makes real sense
because each team will have their own locker room and coach.
In a recent independent survey conducted by Harris Interactive,
fifty-two percent of the nation wide respondents said that
a dual agent, who is an agent that represents both the buyer
and seller in the same real estate transaction, "cannot
effectively represent (the) financial interests of buyers
and sellers." A Dual Agent, as one person, cannot act
in the best interests of both Buyer and Seller in a transaction
because Buyers and Sellers inherently have conflicting interests:
One obvious conflict arrises because Buyers hope to pay
as little as possible for a property, while Sellers expect
to receive as much money as possible for the sale of their
property.
| TRANSACTION AGENT: You
now know the difference between Disclosed Dual Agents
and Designated Agents, and you know that only Exclusive
Buyer Agents can provide 100% fiduciary representation
to Buyers. But yes, there is another form of Agency
which is really non-agency. A Transaction Agent represents
neither the Buyer nor the Seller. Transaction Agents
are ‘Facilitators’ who do not serve in any
fiduciary capacity to either Buyer or Seller in a transaction;
they simply work to facilitate the transaction. They
shuffle papers. They have no contractual obligation
to represent anyone, except themselves. If you as a
Buyer do not have a written Representation Agreement
with a real estate licensee, do not fool yourself into
thinking you have a fiduciary relationship with that
licensee – you don’t! |
Even though the consumer should now
have a clear understanding as to the different types of
agency, and is able to request and get representation from
the agent they select, do all buyer's agents offer the same
level of service? The answer is, "No they cannot".
Only with an EXCLUSIVE Buyer's Agent can you be assured
that your relationship will remain intact throughout the
Martha's Vineyard real estate buying process.
Is
an EXCLUSIVE Buyer's Agent different than a Buyer's
Agent (Read here)?
|
