Traditionally real estate agents have always represented the seller in real estate transactions. By law the listing agent owes fiduciary duties to his client, the seller, and has to get the best price and terms for his client. This often comes at a price for the buyer, namely that the listing agent may reveal anything about the buyer to the seller, including the maximum price a buyer is willing to pay. Revealing such information to the seller reduces the buyer's negotiating power. The buyer is treated as a customer, not a client.
So what is a buyer to do? A buyer should always seek representation by his own buyer agent. By entering into an agreement with a buyer agent the buyer becomes the client of the agent, who then owes the client fiduciary duties. These are:
· Undivided loyalty • Confidentiality • Lawful Obedience • Due Diligence • Protection • Counsel • Negotiation in the buyer's best interest
The buyer agent will keep the buyer's information and financial situation confidential, and will share all information he or she has about the seller with the buyer. This is the exact opposite of what the listing agent will do. By protecting the buyer's bargaining power the buyer agent is able to truly negotiate in the buyer's best interest.
While a listing agent has to point out any material facts about the property, the buyer agent will go one step further and point out things that, while not material, might influence the buyer's decision to purchase or not to purchase. These may be: traffic patterns, noise and parking shortage in the area, lack of sunlight or excessive fog, or anything else that the buyer might consider an obstacle to the purchase of the particular property.
A buyer agent will be the advocate of the buyer. But how about going one step further and hiring an Exclusive Buyer Agent?
An Exclusive Buyer Agent works for a brokerage which does not list properties and never represents sellers. Using an Exclusive Buyer Agent has the added advantage that the agent will never steer the buyer towards in-house listings, thus eliminating potential conflicts of interest. Buyer agents often require the buyer to sign an exclusive right to represent agreement. It establishes the duties of the agent as well as the compensation structure.
So will it cost more if you use an Exclusive Buyer Agent? No. In 95% of all cases the buyer agent still gets compensated by the seller through a commission sharing agreement established by the Multiple Listing Service. The only time where the buyer might owe a commission to the buyer agent is when dealing with a For-Sale-by-Owner property, where the seller is unwilling to pay a commission. However, lately many sellers who sell their property without a listing agent have recognized the importance of offering a commission to a buyer agent. The instances in which the buyer needs to pay a commission to a buyer agent therefore have become rarer.
If you want to find out more about Exclusive Buyer Agents and their Code of Ethics, please visit: www.naeba.org
I am currently the only San Francisco member of NAEBA.
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