Part 3 - Agency and the Home Buyer
This is the third in a series of articles describing the concept of agency, as it applies to real estate transactions in North Carolina. The purpose of these articles is to educate people who are interested in buying or selling a home in the Gaston County, NC region about the value of representation when buying or selling a home. This information should be of particular interest to first time home buyers who have not previously gone through the process of buying a home.
Part 1 - "What is Agency?" can be found here.
Part 2 - "Agency and the Home Seller" can be found here.
What most consumers do not understand about agency is how it applies to prospective home buyers. This may be because just a few years ago there was no such thing as Buyer Agency. In those times every agent was considered a sub-agent of the listing broker, and therefore also owed their loyalty (aka. fiduciary duty) to the seller. Do you understand what you just read? That's right! Prior to the creation of Buyer Agency, when you contacted an agent to show you homes that fit your needs, that agent was technically working for the home owners. They owed their allegiance to the sellers, not you! I would be willing to bet that was never explained to their "clients"!
The Buyer Agency Agreement
This is the document that sometimes brings my pleasant chat with potential home buyers to a screeching halt. Most people have never heard of this agreement before I describe it in my mandatory review of the NC Real Estate Commission's "Working with Real Estate Agents" brochure, which provides a thorough explanation of real estate agency in North Carolina. (Every NC real estate agent that you've had meaningful buying or selling discussions with has reviewed and provided you with a copy of this document, right?)
Buyer Agency was designed to protect you, the buying public! Until you enter into an agency relationship with a licensed agent, he/she is legally bound, as a sub-agent of the seller, to represent the seller's best interest in the sale of their home. If you want the agent that you are dealing with to represent your best interest, then you need a Buyer Agency agreement with that agent. This is particularly true if you call the listing agent (from the number on a sign, for example) to view a property. They are already contractually obligated to serve the seller's interest, not that of potential buyers of the home.
But wait! There's more!
While the Exclusive Buyers Agency Agreement spells out the terms for the agent's compensation - as a home buyer, it is likely that you will not be the one to pay for your agent's representation. In most cases, the buyer's agent is compensated by the listing agent from the sales commission that they negotiated with the home seller. It's true! As a home buyer you will be shelling out fees right and left, but your agent's compensation usually isn't one of them!
Many people, when shopping for a home, believe that bypassing a buyer agent will allow them to negotiate a lower sales price. Not true! The sales commission is agreed to when the listing agreement is signed by the home seller. So, the choice to not work with a buyer agent simply means that the listing agent will take home the full commission amount when the property is sold - while you will have gone through the transaction without utilizing (free) professional representation.
In Part 4 of the series, "Dual Agency", I will discuss the agency relationship when the buyer's and seller's agents work for the same brokerage.