Home Buyers Seek Brokers Who Will Represent Them
Agency disclosure laws propel the trend to `buyer reps'
DIAN COPADO has bought five houses in the last nine years. Each time, she has used a buyer representative - a real estate agent who exclusively represents the buyer.
``I would always go with a buyer [representative] just because they are more up front,'' says Ms. Copado, a human resources manager at United Parcel Service in Londonderry, N.H.
Today, more and more people rely on buyer representatives or ``buyer brokers'' to help them make a more-informed decision on what is typically the biggest purchase of their life.
Traditionally, agents who list and show property represent the seller. Because of an agent's fiduciary responsibility to the seller, the agent legally can't provide a buyer with any information about the property - other than material facts such as price and a description of the house - that could in any way jeopardize the seller's position. The agent, for example, can't tell a buyer he or she thinks the asking price is too high.
``It's almost like going into court where one party is represented by an attorney and the other party is trying to represent himself. It just doesn't work,'' says Charlie Dahlheimer, president of North American Consulting Group in St. Louis, which is the parent company of the Real Estate Buyer's Agency Council, a network of 3,000 real estate professionals who have an interest in buyer representation.
The trend toward using buyer reps is being propelled by disclosure laws. Agency disclosure requires a real estate agent to disclose to a client which party he or she represents, the buyer or the seller, before entering into business discussions. In some states, an agent must also inform a client of his or her options. Mr. Dahlheimer calls it ``mirandizing'' the buyer and seller, or reading clients their rights. Since 1985, all but seven states have passed agency disclosure laws.
``In the past, most realtors tried to walk a thin line down the middle and be fair to both parties, but the way that agency law is evolving in our country, it's becoming apparent that that's very difficult to do,'' says David Liniger, co-founder and chairman of RE/MAX International, a real estate agency based in Englewood, Colo. RE/MAX, which has 39,000 sales associates worldwide, has been at the forefront of buyer representation in the real estate industry. Mr. Liniger says he anticipates that within five years, about 30 percent of real estate transactions in the residential field will involve buyer brokers.
Analysts say using a buyer representative offers potential home buyers several advantages, including:
* Selection. An agent working for a buyer can save that person time by not showing properties that are probably unsuitable - in terms of location or design - for the buyer. (An agent representing a seller is obligated by law to show the buyer any property listing within the buyer's price range, regardless of what the agent knows about the property.)
* Information. Once a property is selected, a buyer's agent can help analyze the price, condition of the property, and potential resale value. The agent can also recommend inspections, such as for radon or lead paint. He or she can provide information about the seller that may give the potential buyer more bargaining power, such as how fast the seller wants to sell the house.
* Negotiation. A buyer's agent can help the buyer determine what price and terms to offer the seller. And the buyer's agent can help the buyer find financing.
When Copado moved to New England recently from Ohio, she says, ``I didn't know the first thing about oil heat, oil tanks, or septic tanks. [Her buyer's agent] also pointed out different inspections that I should have prior to buying the house that I wouldn't have thought of because I wasn't raised in this area,'' she adds.
``This is a far more honest relationship that we are going to have with the buyers,'' says Lee Lewandowski, branch manager for Norwood Realty Inc. in Londonderry, N.H., and vice chairwoman of the Realtors' Education Committee for the National Association of Realtors. The buyer representative trend started in Hawaii and California about five years ago, Ms. Lewandowski says. Today, about 95 percent of residential transactions in those states involve buyer brokers, she says. The trend has only now made its way to New England, where agents have been somewhat more reluctant to change the way they do business.
Lewandowski says buyer representation is beneficial to both parties, not just to the buyer. The buyer's agent is normally paid by getting a share of the seller's listing commission fee. It is up to real estate agencies whether or not their agents will represent buyers, but with so many buyers demanding representation, and to avoid losing business, more and more agencies now have agents that represent both buyers and sellers.
``Eventually, we will see a real estate community where sellers are represented by their agents, and buyers are represented by their agents,'' Dahlheimer says.