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....

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.

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. .

How Real Estate Firms and State Associations are Confusing the General Public

If your are a potential home buyer - please be aware that agents and their companies are prostituting the term "Exclusive" - by sometimes calling themselves an "Exclusive Buyer Agent" or having you enter into an "Exclusive Buyer Agreement"

The official definition from NAR back in the 1990s is that an Exclusive Buyer Agent never lists property for sale - nor does their company - to avoid the conflicts of interest that typical "buyer agents" have. The term "Exclusive" is critical - because the meaning is just that --- exclusively representing buyers.

A traditional buyer agent - can offer you no more than Exclusive Right to Represent Agreement (which means that they are the only agent that is representing you) - which is a far cry from an "Exclusive Buyer Agency Agreement" which means that you are working with an agent that is representing you, but that they and their office never represent sellers. BIG DIFFERENCE.

When they dilute the meaning of the term "Exclusive", and confuse the general public - no one can understand the difference in the type of representation that is offered.

In fact - under an Exclusive Right to Represent Agreement-- that agent may only be temporarily "designated" to represent you. If you become interested in one of their own listings- they suddenly don't represent you anymore -- either declare dual agency on you - or shuffle you off to another agent in their office for you to work with ("Designating them") -- who you may not want to work with at all.

At that point - that agent that WAS supposed to be representing you - is not supposed to tell the seller what they know about you...but at the same time, they are legally representing the seller and working in their best interest. So - as a consumer - can you see the problem here??

I hope so.

And what you - as a home buyer - aren't told - is that every other agent in that agent's office is your adversary....and that there could be overheard phone conversations, that there are shared fax machines and file cabinets, and that your agent may have biases towards showing more in-house listings or worse - their own listing -- because perhaps they get a bigger commission split if they push an "in-house" listing on you. Agents don't disclose these 'issues" to you.

When you understand that this can happen with a traditional agent - and that you get better representation from an Exclusive Buyer Agent for no extra cost (everything is built into the transaction) - using an Exclusive Buyer Agent when you are buying becomes a "no brainer."

Unfortunately - as a home buyer - you aren't told upfront what an Exclusive Right to Represent Agreement really means. And worse yet - most buyers in Illinois sign no agreement at all. This means that agents have carte blanche ability to deceive you. Across the US (and in Illinois) there is less than a 12% disclosure rate.

If you have no contract with an agent - they are supposed to disclose that they might suddenly not be representing you at one point -- upon first contact with you (or if you sign an Exclusive Right to Represent agreement with them - within that agreement) but since most buyers don't have a contract with an agent in Illinois - most of the agents are disclosing this fact way too late -- contract signing (which isn't legal).

Consumers deserve better...

Home Buyers Aren't Properly Educated or Informed About The Different Forms of Representation in Real Estate and Their Implications

Did you Know That 77% of Buyers Pick the Listing Agent of a Home They are Interested in (many times, on the Internet) to represent them for their purchase?
This is one of the WORST things a buyer could do! The buyer is typically raked over the coals by the listing agent. The agent gathers all the information they can about the buyer and their situation to give their seller the upper hand.

Listing agents are represent THE SELLER - not the buyer. Unfortunately - "agency disclosure" (letting the buyer know how they are really being represented (or not)) is being provided less than 12% of the time by agents across the USA.

The Consumer Federation of America states that the public needs to be more informed. I couldn't agree more..

And worse yet - only a couple states - Ohio and California - let buyers know that there is another option for them -- Exclusive Buyer Agency representation. A distinctly different form of representation than "buyer agency" (where the agent and their company list property for sale.) Here is the definition of an Exclusive Buyer Agent.

Joel Stern of Silver Spring, Maryland, filed a lawsuit against Weichert Realtors, reportedly one of the largest independent brokerage firms in the country, for failing to properly disclose that they represented the seller in connection with his recent aborted home purchase. Stern believes he was induced to sign a contract to buy the house at an excessive price because the agent that Stern thought represented him as a buyer's agent was in fact functioning as an agent for the seller.

Recent data released by the National Association of Realtors indicates that real estate agents are failing to disclose whom they represent in transactions at an alarming rate, even where state laws (such as Illinois' agency disclosure law) require them to do so in writing at their first substantive meeting with a potential client.

According to the author of this article, Kenneth Harney of the Washington Post, "You as a buyer or seller need to be alert. Demand a formal disclosure of representation before beginning any substantive discussions with an agent. Do not assume that you are working with a buyer's agent whose sole loyalty is to you."

Harney further cautions, "If it's not in writing, it doesn't exist. In the absence of a signed buyer-agent agreement or other disclosure to the contrary, your agent is almost certainly working for the seller and will squeeze the highest price possible out of you on the seller's behalf."