The Ummel Verdict Is In - Buyers Need to be Careful in Choosing Their 'Buyer Agent'

The Ummel Verdict Is In - Buyers Need to be Careful in Choosing Their 'Buyer Agent'

Good article. Exclusive Buyer Agents go way beyond analyzing comps (which is a given) - to looking at recent market trends and statistics, neighborhood information, city plans, community plans, and helping the buyer do Due Diligence on other things.

Interestingly - the general public and many Real Estate agents - don't even know that Exclusive Buyer Agents exist.

Exclusive Buyer Agents are experts at collecting information on the seller's situation - while keeping their buyer client's situation confidential.

Because Exclusive Buyer Agents are specialists - they a very good at what they do.
Since they are generalists - some "buyer agents" may spend 95% of their time listing property for sale and representing sellers - or may have dual agency conflicts of interest.

The Definition of an Exclusive Buyer(s) Agent

Exclusive buyers' agent: A licenced real estate practioner who represents only buyers and neither accepts listings nor works in an brokerage which represents the interests of sellers or accepts listings.

Exclusive buyer agency

1. A real estate brokerage that employs only buyers' agents and never engages in the agency representation of sellers.
2. A real estate brokerage that exercises a fiduciary obligation to serve only buyers interests, thus being independent of all obligations and inducements owed sellers.

Exclusive Buyer Agency observes the virtue of the Common Law axiom that an agent may represent a seller or a buyer, but never both.

We believe most buyers want their interests to be represented -- but not necessarily by a "buyers' agent" that is employed by and owes allegiance to a "seller agency"

There are real differences between being the agent for a buyer, whose primary goal is to find and beneficially purchase the ideal home, and the seller agent, whose goal it is to reap the highest possible profit for the seller.

We are building a business based on the principle of providing consumers with a clearly defined choice -- representation independent of interest or obligation to any other party.

Thus, we provide our clients with the opportunity to make informed choices based on purely objective guidance - in what is usually the most expensive and important purchase of their lives.

This Realty Times Article Highlights Information That is Valuable to Home Buyers

This Realty Times Article Highlights Information That is Valuable to Home Buyers
Including a link to The National Association of Exclusive Buyer Agents

It talks about the disadvantages of "one stop shopping" (as I also mention in my my recent blog post) -- how agency disclosure is at very low levels, how the public really doesn't know the difference between a so-called buyer agent (who may list property 95% of their time - but only calling themselves a buyer agent when they are working with a buyer) - and an Exclusive Buyer Agent.

In fact - many traditional Real Estate agents haven't even heard of an Exclusive Buyer Agent - and have no clue what they are...

Check out the link - it's good reading....

CNN Money article about the benefits of using an Exclusive Buyer Agent

A new article on CNN Money talks about how people should use an Exclusive Buyer Agent.... Unfortunately - the terminology they used was "buyer agent" in this article at CNN Money

But the point is clear... use an agent that is on your side - and the only type of agent that you can be assured of that does that - is an agent that doesn't list properties - so they can give you unbiased home showing, no conflicts of interest, and always be on your side 100% of the time.

I think most people get confused - as there are so many terminologies in Real Estate that they don't understand... An agent that works at a company that lists property for sale calls themselves a "buyer agent" - that is what most people think they are getting - someone that will always be on their side 100% of the time.

It is too bad for the consumer - that that isn't the case. These agents can get into what is called "dual agency" situations where they are representing you and the seller equally. Unfortunately - there is only a 20% upfront disclosure rate by "buyer agents" about how they can get into such conflict of interest situations - even though the law says that they should always disclose that they could get into that - with the potential client (upon first meeting.)

Without "named differention" the consumer can get confused. Hmmm - buyer agent - sounds like they will be representing my interests 100% of the time...

That is what is so nice about the use of the term "Exclusive Buyer Agent" - because officially - it means that the agent and their company don't list property for sale - and so they can never get into a conflict of interest situation.

In any case - though they blew that terminology in the article -- that is what it is talking about...

And even more unfortunately - many traditional agents sometimes use the word "Exclusive Buyer Agent" - when they aren't - which confuses the public even more.
What is what? What kind of representation is someone giving me? What name can I trust? What does the name mean? etc.

Kiplinger's Personal Finance - Recommends Using an Exclusive Buyer Agent

Kiplinger's Personal Finance - Recommends Using an Exclusive Buyer Agent in this March, 2007 article. (They have written many along the same lines in previous years..) Consumer Reports, Money Magazine, CNN Money, the Wall Street Journal, Medical Economics Magazine, the Consumer Federation of America, and many others have all done the same..

An Exclusive Buyer Agent is an agent that never lists company for sale - nor does their company. They never represent sellers - ever. On the other hand a "buyer's agent" works for a company that lists property for sale - and they themselves usually list property for sale. Whether they are practicing designated agency or dual agency - those are not good things for the buyer...

I like the fact that the article points out that "Agents are paid a cut of the selling price, so the higher the price, the better for them -- but not for their clients." As Exclusive Buyer Agents - we ensure that "the higher the price - the worse for us" - which puts us in alignment with out buyer client's interests.

The definition of insanity is hiring someone with financial interests that are in opposition with yours. When you purchase a used car - the used car saleman's interests are just that.

Like a dog - we "work hard for our scraps" - and we believe that everyone does in this world... So when consumers hire a so-called buyer agent that makes more when their price goes up - they are really doing themselves a dis-service....

When I bought a home when coming in for a position at Motorola in the 90's - the "company referred agent" (read relo company) I had - kept trying to work me over to come up in price - and it really teed me off. She was acting like she was representing the seller and not me. She also referred an awful home inspector - who glossed over many things that should have been found. Many agents refer inspectors that "won't blow the deal" which is really a disservice to the buyer.

I realized then that home buyers needed much better protection than what they were getting - which is why I started this company.... to provide the best possible protection and representation to home buyers... I feel great about what I do for a living - becuase it has the most integrity to buyers in the Real Estate industry....

As a Buyer - Why Take the Risk of Hiring a "Buyer Agent" (Dual Agency Possibility) When You Can Have an Exclusive Buyer Agent (No Dual Agency)?

The answer is - you shouldn't take the risk... It's a no-brainer. When you use an Exclusive Buyer Agent (they and their company never list property for sale) - and you are assured of 100% representation - 100% of the time.

Unfortunately - Dual Agency is legal in Illinois because traditional firms lobbied for it - in order to preserve the ability for their agents to obtain "double dip" commission. Never mind that it isn't good for the consumer...

How can a Realtor, in all honesty, work for two Clients on opposing sides of a transaction? How can you place your Client's interest first, when there are two of them, one trying to get the highest price possible and the other trying to get the lowest price possible? You can't.

Unfortunately when consumers meet with a so-called "Buyer Agent" the first time - and there is no contract - over 80% of consumers in Illinois aren't told by their agent that they can get into a "Dual Agency" situation until it happens.... when their buyer client wants to write a contract on their own listing (that they happened to "sell" to their client.) The law says they were supposed to disclose that they could - upon first contact - but it rarely happens. Thus - the home buyer is left in the dark - and doesn't realize the conflicts that can crop up. (Would have never happened - had they used an Exclusive Buyer Agent.)

An Agency relationship creates a fiduciary between the Agent and Principal. Take away the fiduciary and there is no Agency. When entering into Dual Agency relationship, this fiduciary must be modified, to the point of no longer existing, in order to assist both clients equally. A fiduciary is NOT equal. Here lies the problem. Dual Agency, by it's very nature, is not an Agency relationship. Below are some excellent links that delve into the problems with Dual Agency a little further.

http://www.realestatelawyers.com/Dual-agency.cfm

http://www.realestatejournal.com/columnists/housetalk/20031010-barta.html

http://realtytimes.com/rtapages/20050208_dualagency.htm

This is why I've chosen to sacrifice half of my potential income - to only be one "one side of the fence" - that of the buyer. If it was about the money - I'd be like every other agent - working both sides. It is about the ethics to me..

The National Association of Exclusive Buyer Agents (NAEBA)

There is an association for Exclusive Buyer Agents - called The National Association of Exclusive Buyer Agents (NAEBA)

Not all Exclusive Buyer Agents are members however. NAEBA has certain ethical guidelines that it enforces within it's ranks - so that the public can be assured that they are dealing with a true Exclusive Buyer Agent (versus the "fake" variety....someone naming themselves that - when they really aren't....for example - having had a few listings..)

You can read more about the benefits of Exclusive Buyer Agency representation on that web site.

The Difference Between an Exclusive Buyer Agent and a "Buyer Agent"

Unfortunately - most of the general public isn't aware of the distinction...

In the 1990's NAR defined the difference in one of their brochures - but that is the last we've heard from them in terms of the definition. Only two states proactively let the public know that Exclusive Buyer Agency is a choice that they can have when they are purchasing Real Estate -- Ohio and California.



An Exclusive Buyer Agency is a real estate agency employing only agents working with buyers - and never engaging in agency for sellers. They have a fiduciary obligation and service to buyers, independent of all obligations and inducements to adverse interests (example - sellers, other agents, service providers).

An Exclusive Buyer Broker would be the managing broker of such an agency.

An Exclusive Buyer Agent is an agent who represents only buyers and neither accepts listings nor works in an agency which represents sellers or accepts listings. They work for the broker of the Exclusive Buyer Agency. They can never get in a dual-agency conflict of interest situation with their client.

A "Buyer Agent" works for a company who lists property for sale - and they list property for sale themselves. They can get into dual-agency conflict of interest situations with their buyer client - and unfortunately for the consumer - typically disclose that they can when the contract is written - rather than up-front with the consumer - as is typically required by most state laws.

An Exclusive Right to Represent Agreement does not give the right for a Buyer Agent to call themselves an Exclusive Buyer Agent. It only means that their buyer is working exclusively with them - and no other agent. They can still get in dual agency situations for example.

Don't Visit New Construction / Builders Without Representation!

As a consumer - did you know that when you sign into a new construction community by yourself - that you lose your ability to be represented at a later date on that same property (without any cash out of your pocket)? It is a dirty little secret that the builders never tell you about. Of course - they don't. If you sign in on their sign-in sheet without an agent - they get to save 3-4% (what they would have paid out to the agent's brokerage.)

When you sign in to new construction - the builder has you by the yin yang. If you visit again later - with your preferred Real Estate representative - they won't get paid if you purchase in that community. If you have a buyer agency agreement with that rep - you'll have to pay your agent out of pocket - because the builder isn't paying out.

On the other hand - lets say you had a buyer agency agreement for 3% with your agent - and the builder pays out 4%. Guess who gets the extra 1% when you sign in as being represented by that agent? You do - the buyer! That is one great advantage of having a buyer agency agreement. (The other advantage is that it spells out your agent's responsibilities to you in writing. You know if dual agency is possible or not for example.)

Builders LOVE IT when buyers come in unrepresented. That means that they can charge their normal rate for the property - plus save paying out a 3-4% commission for example. They don't discount the property by that - to the unrepresented buyer. So - as a buyer - it is lose/lose proposition.

You also lose out on:

--knowing about extra incentives that you may not have known about - that could have been offered that the agent has seen offered in the past.

-- an agent ensuring that you are getting the best possible price vs. other properties in the community, and analyzing the re-sales there and in nearby areas - to make sure you don't over-pay.

-- an agent helping you through the home inspection phase (there should be at least two inspections for new construction... one before the drywall goes up, and one at the end.)

-- an agent helping you with the many other details that will ensure you get to closing smoothly.

-- If your agent helps you "loan shop" (not many of them do unfortunately) - that is another thing you miss....saving tens of thousands over the life of the loan - and perhaps having lower lender fees.

More About Dual Agency Conflicts of Interest (What You Get if You Hire a Buyer Agent)

A "Buyer Agent" is an agent that is supposed to be representing the buyer - but can get into Dual Agency conflict of interest situations because they and their company list property for sale. Most of the public is clueless about this fact - and the implications when their "Buyer Agent" turns into a dual agent. (And most don't receive full-disclosure up-front)

An Exclusive Buyer Agent does not list property for sale - nor does their company - ensuring that they are always looking out for their buyer's best interests.

One person e-mailed me today:

I just found this "dual agency" guide on the Internet. Questions You May Want to Ask a So-called "Buyer Agent" Before You Hire Them I'm sorry I didn't know about this guide three years ago. Being a completely uninformed consumer (like the great majority of the public) back then, I became an easy mark for two incompetent, unethical agents who failed to explain or disclose crucial material facts about Company X's (name deleted) representation policy. Now I'm a lot wiser.

The most disturbing aspect is the fact that Company X's is using the absence of a separate written contract with my so-called buyer's agent Ms. X (which she never offered to me, by the way) to argue that she NEVER had a fiduciary duty toward me--although she showed me 8-10 houses over a three-month period, called me several times a week to announce new listings, encouraged me to attend open houses at them, drove me in her car to three of them, and gave me advice on what to bid on my house of choice.

In other words, the Company X management seems to believe that Ms X's statutory violations--failure to provide the mandatory written disclosure form when showing me Company X's properties, to function as a dual agent, or to assign me an intra-company agent if she refused this role---can be grounds for claiming that she was not my buyer's agent at all, even though she openly functioned as such and testified to this effect in two depositions!

Even one of the members of her real estate team wrote in a document that she thought Ms. X was serving as a buyer's agent in the negotiating process, and even the seller of the house of choice believed she was representing me!

The concept of dual agency obviously serves the interest of real estate companies by encouraging the practice of double dipping. It is inherently deceitful and unfair. .