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Section 5 - Chapter 25
Is Your Real Estate Agent A Spy?
You may have used a buyer's real estate agent to buy your last home. They are becoming common finally, as the issues of fiduciary responsibility and payment are worked out. Should you only work with a buyers agent? Not necessarily, but you should be aware of what the difference is.
Unless your real estate agent is specifically contracted as a buyer's agent, he or she is working for the seller. You may already know this, but do you fully understand what this means? Let's suppose you make an offer on a home. You casually mention within hearing of the real estate agent that if the seller says no, you'll offer $5,000 more. The sales agent now has an obligation to tell the seller what you said. That's an expensive comment, isn't it?
Many buyers don't realize that an agent has a real legal responsibility to, and loyalty to the seller. It is referred to as a fiduciary responsibility, meaning the agent is legally obligated to look out for the best interests of the person paying the bill. An agent may spend all his time with you, showing you houses and helping you write offers, but his allegiance is legally with the seller, unless he is hired by you.
An agent, even if she is a seller's agent, can be a great help when you are buying, but remember that she is a sales-person, and you're not the boss. Be careful what you say, and be careful with anything she says.
You may want to work with a buyer's agent. Though there are different arrangements possible, and various customs in different areas, you generally don't have to pay anything up front. Usually offers are written with the contingency that the your agent gets a share of the commission, so the seller effectively pays for your agent. However, before working with a buyers agent, be sure to ask exactly how the agent gets paid, and what your obligations will be.
Few home buyers want to pay cash up front for an agent to help them, and pay whether or not a home is found. As a result, it is almost always arranged so the buyers agent gets paid at closing, out of the proceeds of the sale. This means that even though the agent is supposed to work for your best interests, his objectivity is suspect, because he will only get paid only when you buy something.
Some real estate agents work under "dual-agency" rules, meaning they're supposed to work for both the buyer's and seller's interests. Of course, they only get paid when a property is sold, so they may be more helpful to the sellers. In any case, how can someone really be on both sides of a negotiation? It is probable they'll work harder for whoever they like more. Do you want to be in a popularity contest that can cost you thousands of dollars?
An agent will often let you assume things, to get the sale closed. They'll tell you that the seller and buyer always split the closing fee, for example, or let you assume it. They'll say they can't change the commission after it has been set. They'll say you have to write a big check for a "good faith" deposit when you make an offer.
I've seen realtors reduce a commission by $4,000 just to get a sale closed at a lower price. I've seen the buyer or the seller pay the entire closing fee. Buyers sometimes put less than $1000 down as a deposit with an offer, and sometimes a dollar or nothing - agreeing to deposit something when the offer is accepted. Little is set in stone when it comes to real estate.
Don't think real estate agents are all experts. My first time making an offer on a house, the agent didn't understand when I told him that I wanted to get a 90% first mortgage and have the seller carry a second for 5%, so I could get in with only 5% down. Many years into his career, he still had only dealt with the most conventional transactions
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