Several years ago, well 1988 to be exact buyers were allowed to have their own agent represent them in a real estate transaction. It seems amazing, a little like women being given the vote, or equal rights for all! But before this buyers were not represented, all agents in the transaction represented the seller. Regardless of what broker they worked for they were a sub-agent for the seller. So, even if you thought you were being represented you were not. Sort of like having one lawyer represent both parties in a divorce.
Today, many buyers want to remain un-represented as long as they can. They ignore all the benefits that a buyer agent can give them.
- Confidentiality of their motivations and finances,
- using their buyer agents local knowledge of home styles, neighborhoods, negotiation skills,
- customer service,
- lists of contractors, dentists and doctors, playgroups,
- educating buyers on the buying process in this particular area,
- relationships with other agents and how that will facilitate a transaction for a start.
This may be because many agents find it hard to differentiate themselves from each other. The buyer is unsure of where the loyalties of the buyer agent lie. It most often comes about because agents do not follow the law in sharing the Consumer Notice with buyers at a first meeting where any substantial discussion about real estate is talked about, and many agents do not ask buyers to sign a buyer agency contract. If they are willing to flout the law this early, how will they perform later in the transaction.
So the buyer sees little difference between them and allows multiple agents to know some if not all of their business. This weakens their negotiating position. Buyers allow listing agents to see their buyers playbook without even signing any paperwork that would restrict what this agent can tell the seller.
The buyers agent must work or act in the best interest of the buyer. That is logical, many buyers don't realize by dealing with the listing agent without representation the listing agent is working in the best interest of the seller.
The buyer agent must make an on-going and continuous effort in good faith to find the buyer a home. Just because they find you one they think is right does not mean they stop offering you homes, even when you write an agreement on a home they should be making you aware of any homes that might be of interest. Although you might be subject to an existing contract a good agent will keep you informed just in case something crops up with this property under contract that causes the deal to fall apart. The listing agent for a property that interests you has no interest in telling you about other properties and only wants you in this deal.
A buyers agent must keep all your information confidential. If you are unrepresented and use the listing agent, anything you disclose to the listing agent can and should be revealed by them to their seller if it helps the sellers position.
So how has buyer agency changed real estate?
Today, it does not matter which broker lists a home for sale, because all brokers put their listings in the Multiple Listing Service(MLS) advertising to buyer agents what compensation they are offering. So regardless of how big or small the brokerage is, your home will be seen and marketed to buyers by all buyer agents in every company because they are working for the best interests of their buyers.
Because of this, every listing agent wants every buyers agent to know about their listings. It does not matter who sells the property because the buyer's agent has responsibility to their buyer not to the listing agent's seller. Buyer's agents inform their buyers of every new listing coming on the market, good agents both listing and buyer agents develop relationships with other agents in other brokerages so they know what listings are about to come to market so their clients can gain any advantage by this information and do a little research as well.
Also the big brokerages don't want agents in other companies, whom they do not supervise to be acting as a sub-agent to the seller. Why not? Because they can held liable for any errors made by the sub-agent. How is buyer agency going to keep changing.
As mentioned above today, sellers are still compensating the buyer agent out of the transaction. Whilst it is funded by the buyer, many feel that buyers should be paying their own representative. Would you want your attorney to be paid by the other side, it might just make you consider where their loyalties lie? So a natural progression, will be the payment of buyer agency commissions by the buyer rather than the seller, this can still be incorporated into the mortgage once banks accept this new paradigm but it may still be some years away for now.