 Buying a
new home or an investment property is a huge investment for many people,
yet very few home buyers work with a professional that represents their
interests. In Massachusetts, home buyers to make this enormous
investment with the aid of a professional who is working for sellers and
whose main aim is to sell any home for the highest possible price.
See if this scenario sounds familiar:
Our buyer, let's call her Jane, browses the papers and scans the web
looking for homes that sound like a good match for what she thinks she
wants. When Jane find a likely property, she circles it in case she
wants to call on it later. When Jane has been through the entire list of
homes being advertised, she goes back through the circled homes and
selects the best ones to call on and find out some more information.
Jane places a call to the first broker. The agent that answered the
phone didn't really seem to know the property; he put Jane on hold and
came back a minute later and began to describe the property. After 15
seconds Jane knew it wasn't suitable but she let the agent ramble on out
of courtesy. When he finished Jane told him it wasn't what she was
looking for and hung up.
The second call goes roughly the same way except the agent was a
little more pushy.
On the third property the Agent seems to know exactly which property
Jane is inquiring about. He asks Jane for her name and number and begins
to describe the property. It sounds like a good match so Jane asks for
the address so she can drive by. The Agent seems reluctant to give out
the address and suggests Jane come into the office to go over the
details first and perhaps look at other similar properties they
currently have for sale. Jane is starting to feel jaded and suggests
that she would just like to drive by.
The fourth call goes somewhat like the third except the property
sounds exactly like what she is looking for. Jane asks if it would be
possible to see it and the Agent agrees to show it immediately. Jane
will meet the agent at the property in 20 minutes.
When Jane gets to the property she immediately notices the water
tower in the back yard that the agent had neglected to mention. She was
about to drive away when the agent arrived and she felt she should at
least see inside.
After singing some paperwork that the agent said her office manager
asked her to get signed before she showed the home, Jane was shown
around the home. It wasn't clear to Jane if the agent had ever been in
the property; it seemed to Jane that the agent was exploring. As the
wandered through the home Jane found the agent to be pleasant and
helpful. When they were done, Jane advised the agent that it wasn't
suitable. However, she agreed to meet the agent at the office to review
some other properties with her.
And so began Jane's relationship with "her" agent. They
have since been out to look at plenty of homes together since that first
day and Jane feels she has built quite a rapport with Margie, her agent.
Many home-buyers go through a variation on the above scenario as they
start out looking at homes. Like Jane in our example, many buyers
believe that the agent they are using to help them find a home is
actually working for them; however the agent is more likely to be
working for the seller. What this means is that, regardless of which
home the buyer is being shown, the Agent has a fiduciary responsibility
to each seller to tell them as much about the buyer (Jane) as possible
so as to put the seller at an advantage in any negotiations for an
offer.
Remember that piece of paper Jane was asked to sign before being
shown the first home; that was a mandatory Agency Disclosure. This is a
form required by Massachusetts law to be provided to all buyers before
being shown any property for the first time. This form states the type
of relationship the agent has to the buyer; whenever the agent has
checked the box indicating "seller" agency, they represent the
seller, no matter how much they seem to be your friend.
By contrast, a Realtor acting in the capacity of buyer agent works
for you, the buyer. The agent become your trusted professional, there to
advise and guide you and even to negotiate any deals on your behalf so
as to obtain the best price and terms for you, the buyer. The buyer
agent has a fiduciary responsibility to tell you everything they can to
help you get the best deal; sometimes that might include advising you
not to buy a particular home because it wouldn't make a good investment.
What's more, a buyer agent need not cost you, the buyer, any more
money that you would pay using a seller's agent (i.e. you don't pay
anything, their fees are paid out of the money set aside by the seller
for agency compensation).
Because there is so much confusion surrounding this concept, we're
offering the following examples to illustrate the differences between a
Buyer's Consultant working in the capacity of a Buyer Agent, whose
client is the Buyer, and an Agent working for the Seller as the client.
| Buyer Scenario/Question |
Buyer's Consultant |
Seller's Agent |
| Is this property worth the asking
price? |
Gives opinion of price value range on
the property and prepares a market analysis of similar homes
that sold recently when the buyer is ready to place an offer. |
Has a duty to the seller to justify
the asking price and sell it at that price or higher. |
| We love this property. They are
asking $400,000. We want to put in a lower offer of $380,000 but
we are willing to go to $400,000. |
Will negotiate the price and terms on
behalf of the buyers, attempting to satisfy the buyer's needs in
the best way possible. Will not advise Seller's Agent that the
buyers are willing to pay more. |
Will advise the buyers that they will
present the offer to the seller but also advises the buyers that
the seller may not accept their initial offer. Advises the
seller that the buyers will pay $400,000 and not to accept the
initial offer. |
| How old is the roof? (Note: Seller
claims the roof is new) |
Will probably verify with the
building department that appropriate permits were pulled and
that the roof was installed professionally in the last twelve
months. |
Will advise that according to the
seller, to the best of their knowledge, the roof is new. |
| Can you help us find an investment
property for remodeling? |
Will work with the buyers to identify
needs and to preview homes and show homes that meet their
requirements. Will advise buyers of potential defects and make
suggestions as to value after remodeling . Discloses all defects
noted by seller and seller's agent. |
May work with the buyers to identify
needs and to preview homes and show homes that meet their
requirements. Cannot offer opinions on the property. Must
disclose obvious defects and any defects disclosed by the
Seller. |
| Over time
we want to build a good working relationship with our Realtor®.
We want to be able to disclose details of our needs and our
financial situation without worrying if our Agent will use this
information against us when we want to make an offer on a home. |
The Buyer's Agent has a Fiduciary Responsibility to the Buyer.
They have a duty of confidentiality and trust to their client,
the Buyer. They should disclose to the buyer anything about the
seller's circumstances that may assist the buyer in buying the
home on the best terms for the Buyer. |
The Seller's Agent has a Fiduciary Responsibility to the Seller.
They have a duty of confidentiality and trust to their client,
the Seller. They should disclose to the seller anything the
buyer says that may assist the buyer in selling their home for
the best terms for the Seller. |
| I have already been working with a
Realtor who has been showing me homes. We have a good
relationship and I feel they know what I want. Are they
representing me even though we have not signed a Buyer Agency
agreement. |
If they Realtor has identified
themselves as a Buyer's Agent to other Brokers when setting up
showing appointments, and they have discussed signing an
agreement with you but you have not yet put pen to paper, the
Realtor can be said to be representing you but you should have
the Realtor sign an Agreement to that effect. |
Most commonly, the Realtor will be
acting in the capacity of a Seller's Agent. (In Massachusetts, a
licensed Agent or Broker must disclose to you in writing,
that they are either a Buyer's Agent or a Seller's Agent BEFORE
discussing in person a specific property with you or showing you
a property). If your Realtor is a Seller's Agent, they have a
duty to tell the seller anything about you that could be used to
help the seller obtain the best terms for their property. |
| Who is the Realtor's client and what
difference does it make? |
When a buyer engages the services of
a broker, then that buyer becomes the broker's client. This
means the broker represents the buyer. The broker owes the buyer
undivided loyalty, utmost care, disclosure, obedience to lawful
instruction, confidentiality and accountability. The broker must
put the buyer's interests first and negotiate for the best price
and terms for their client, the buyer. |
When a seller engages the services of
a broker, then that seller becomes the broker's client. This
means the broker, and its 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 interests first and
negotiate for the best price and terms for their client, the
seller. |
| How does the Agent get paid? |
Typically the buyer's agent will be
paid out of the commissions set aside for cooperating brokers by
the Seller's broker. The money received from the buyer to
purchase the home is used by the seller to pay the Broker that
listed their home and this Broker will often agree to pay the
Buyer Broker's fees. Sometimes the Buyer's broker will write an
offer stating that their fees will be taken out of the proceeds
of the transaction. |
A seller's sub-agent will typically
be paid out of the commissions set aside for sub-agents by the
seller's broker. The money received from the buyer to purchase
the home is used by the seller to pay the Broker that listed
their home and this Broker will typically agree to pay their
sub-agents a percentage (commonly 50%) of the originally agreed
upon commissions. |
| I want to consider homes
"for-sale-by-owner"; how does this work? |
Your buyer's agent can show you these
homes and will probably want to discuss compensation with the
seller before showing the property. Be aware that you will
probably have agreed to compensate the broker even if the seller
refuses. (Remember, it's your money so you can dictate the terms
of your offer and how it is used to pay your agent's fees). |
Because the Agent is working for the
seller, they typically need to put in place a "listing
agreement" with the seller even if it's only good for 24
hours and specific to you as a buyer. The Realtor will still be
representing the home owner as their Agent. |
| Other Common Questions
About Buyer Agents/Consultants |
| I am working with a Realtor that is
not the listing Agent for the properties I am seeing. Doesn't
this mean the Realtor is working for me as a Buyer? |
No; Agents typically work
as "sub-agents" for the seller's broker. In other
words, they are acting as seller's agents and owe a fiduciary
duty to the seller. If you have signed a Buyer Agency agreement
with the Realtor, then your Realtor is working exclusively for
you and not the seller. |
| My Agent says they can represent both
the buyer and the seller. Is this true? |
As a Disclosed Dual
Agent, the Broker (and therefore all the Broker's Agents)
discloses to both parties that they neither represent the Buyer
or the Seller exclusively. They owe both parties a duty to deal
with them fairly and honestly. Neither the seller nor the buyer
can expect the Broker's (and their Agent's) undivided loyalty.
(Undisclosed Dual Agency is illegal in Massachusetts). |
| I have already been working with a
Seller's Agent to help find homes. Can I now work with a Buyer's
Agent? |
Yes; you can even ask the
agent you have been working with to work with you as your
Buyer's Agent (some brokers do not allow their agents to work as
buyer agents). |
| If I use a Buyer's Agent, do I have
to pay for their services out of my own money? |
Yes and no; it is your
money that is being used to purchase the home, so no matter who
is being compensated out of the purchase, you are paying for it.
Typically your buyer agent's fees will be taken out of the
proceeds from the purchase of the home at the closing. This is
quite frequently already set aside in the listing agreement the
seller has with their broker, where the seller's broker agrees
to compensate buyer agents out of the money set aside for
payment to their sub-agents. |
| Does the listing broker determine the
amount of money a Buyer's Agent receives? |
No; the Buyer's Broker
agrees with the buyer a fee to be paid at the time the Buyer
Agency agreement is signed. This fee is not set by the listing
broker or the seller. |
| Can a Seller's Broker refuse to offer
compensation to a Buyer's Agent? |
Yes; in this scenario the
buyer may elect to not make an offer; or to withdraw their offer
and purchase an alternative home; or to compensate their agent
directly and place a lower offer on the home; or to place an
offer subject to the buyer agent's fees being taken from the
proceeds. (There other many other options that can be
considered). |
| If I like a home and contact the
Seller's Agent directly, I was told I can negotiate a better
price since the Agent does not have to pay another Agent or
Buyer Agent. Is this true? |
We don't believe it is
and here's why: The selling agent must present all offers
received to the Seller (and the buyer agent can insist on
presenting the offer in person unless the seller has provided a
written they should not). If the selling agent were to not
present an offer to the seller they risk both losing the sale
and their real estate license. (Some people suggest that if two
identical offers were received at the same time the Selling
agent would favor the one without a payment to another agent;
possibly so, nut no two offers are ever identical because no two
buyers are identical. An Agent favoring a weaker offer risks
losing the sale and getting paid nothing so they will always
present both offers and recommend the stronger offer with
respect to price and terms (or risk losing their client). |
To learn more about our Buyer Services, call us or email us, or
simply Register yourself for BAHMS and
in your registration make a note you would like to discuss our buyer
services.
|
