KNOWING WHO WE REPRESENT.
NOTE: An agency with a buyer and seller does not have to be in writing. It can be created by implication by your actions or the buyer's or seller's assumptions. It is your duty to let them know who you represent.
Most agents assume the person paying the commission is their client. This is not necessarily true. An agent may be a buyers broker while the seller pays the commission. Agency is not tied to the commission.
As an agent have you ever:
Encouraged a seller to accept an offer when you knew the buyer would go up in price or terms?
Felt a buyer would increase the price or enhance terms but did not say such to a seller?
Knew a buyer had to buy within a certain period of time and did not disclose such to the seller?
Had a seller say, "We'll pay $110,000, but let's offer $105,000 and see what happens.", and not disclose such to the seller or listing agent?
Had a feeling that a buyer would increase their price or terms and did not disclose such to the seller? Told a buyer another broker's home was overpriced? (Remember you are the subagent of the seller.) Counseled a friend or relative in the purchase of a home through you.
In working with a buyer, referred to yourself as a "real estate counselor". (You may only counsel your Client.)
If so you may have acted as the buyer's agent. Since you are also the seller's agent you probable have created an undisclosed dual agency.
The reason the National Association of Realtors agency task force was formed in early 1985 as stated in their executive summary was, "..because of a perceived increase in lawsuits against real estate brokers seeking rescission of sales contracts based upon allegations that real estate brokers were breaching their fiduciary duties by acting as "undisclosed dual agents."
Realtors obligations:
As the seller's agent to work for the best interest of the seller only. A buyer and seller are adversaries. We cannot ethically work to achieve the best "deal" for both parties.
Your non-disclosure to buyers that you represent the seller only, and thus, allowing buyers to assume you are working as their agent can create an undisclosed dual agency. Since the buyer assumes you are working as their agent can create an undisclosed dual agency. Since the buyer assumes you are working as his agent an agency can be created. To avoid this situation such an agency should be expressly denied. This should be done with all buyers regardless of the disclosure laws in your state.
Why real estate professionals should consider representing buyers as their agents.
There is a growing demand for buyer representation because buyers are being made aware that most real estate agents represent the seller's interest.
We are in the people business. Not in the seller representation business. We need to get out of the business of representing sellers only and get in the business of representing people whether they are buyers or sellers.
How to work as the buyer's agent.
Enter into a formal written representation agreement.
Deny your subagency with cooperating brokers by informing them prior to showing their properties that your are the buyers agent.
Disclose you are the buyer's broker on the purchase agreement.
In showing your own listings as the buyers's broker you may legally work as a dual agent with full disclosure and consent from both the buyer and the seller. Or you may choose not to work as the buyer's broker on your own listings.
In working with buyers and sellers always ask yourself:
Who do I represent? Does the buyer and seller know who I represent?
Am I always acting in my client's best interest?
PRACTICAL TIPS
How do we determine whom the Realtor represents.
By company policy first and foremost. It is a decision the broker and not the salesperson must first make. If it is not your company's policy to work as a buyer's agent you cannot do so.
If we have a tendency towards helping the buyer we should create an agency relationship with the buyer.
CREATING A CLIENT RELATIONSHIP WITH A BUYER.
The disclosure of agency relationships between buyers and sellers can be the lead-in to creating and agency relationship with the buyer. Here is some sample dialogue: "Has any one explained to you how a real estate agent works?" or "Has anyone explained to you the difference between being a client as opposed to a customer?" and continue with, "Are you aware that the traditional agent represents the seller and not the buyer?" "Did you know that if I worked with you in the traditional sense and felt you would pay more for a property I would be legally bound to communicate that to the seller?" This line of questioning will open up your discussion with a buyer regarding agency relationships. A good closing line might be, "How would you feel about working with me, as your agent, to help you purchase your home?"
Do you know who most real estate people represent........buyers or sellers? A far majority of the public believe that the agent that shows a home to a potential buyer represents them and the agent who has placed the home on the market represents the seller.
Did you know that if you were to work with nearly any agent in town, that agent, most probably, would be working for the seller? Our firm has introduced a unique program wherein I can represent you.
"Let me explain the advantages of having me represent you as opposed to the seller." The traditional agent is legally bound to represent the best interest of the seller. As your agent, I would be legally bound to represent your best interests. Purchasing a home is a major decision. Do you want the agent you are working with looking out for the seller's interest or yours?
The traditional agent will emphasize the attractive features of a particular property. As your agent, I will point out negative features and how this may effect the price and future marketability.
Although any agent must point out material facts, the seller's agent will let you decide how these facts will relate to value and future marketability. I will be able to discuss with you how they will relate so you are better informed to make a decision.
The traditional agent must disclose to the sellers any information that may enhance their bargaining position such as....the seller's agent has a responsibility to disclose any information about you that would enhance the seller's bargaining position. Since I would be your agent, I work for your best interest and may not disclose such information to the seller.
The traditional agent writes the purchase agreement in the sellers favor. As your agent I will write the agreement in your favor. Obviously there may be some compromise. But I am looking out for your interests. Is that what you want?
The traditional agent must negotiate for the best interest of the seller. As your agent I will negotiate in your best interest.
If the seller decides your price and terms are not acceptable, the seller's agent would negotiate with you to enhance your price and/or terms. As your agent, I will do my best to see that the seller accepts your price and terms and I will negotiate on your behalf. That is what you want, isn't it?
THE BROKER EMPLOYMENT AGREEMENT
This agreement creates an agency relationship with the buyer.
Commission options. The manner in which you are going to be paid should be spelled out in the exclusive retainer agreement and on the purchase agreement.
The seller pays the commission. Seller's consent should be given on the purchase agreement. You could receive the normal fee split.
Subject to your state laws, you may credit back a surplus of commission to the buyer, ie., the split is $2,500 but you have contracted with the buyer to receive only a fee of $2,000. Either the sales price could be lowered by $500 or you may credit $500 to the buyers closing costs.
NOTE: Article 7 and 22 of the Realtor Code of Ethics states that,"...a broker should cooperate with all other brokers in the best interest of the client." Any broker refusing to split of trying to retain more commission as a result of working with you as a buyers broker should take note.
Practical steps in representing the buyer
An agent may work with the buyer as an agent on an exclusive or non-exclusive basis.
Give several business cards to your client if you have an exclusive agreement with them. Instruct them give your cards to agents who solicit them. The back of the card could be printed, "The holder of this card has entered into an exclusive retainer agreement with our firm."
Go into a thorough qualifying sequence.
Select properties for showing. An agent cannot be denied MLS information if you are a member of MLS, even though you are acting as a buyers broker. Agents should be careful not to place confidential information within MLS listings.
An agent should seek permission to show or preview any home, even if it is on lock box. Disclose agency status and disclaim any subagency at the initial contact with a seller or cooperating broker prior to showing a property.
Discuss commission arrangement of fee split with the cooperating broker.
Send a follow-up disclosure letter.
Disclosure of agency with the buyer should be make a part of your purchase agreement.
EXAMPLES:
Situation: Broker wishes to act as buyer's broker except for properties listed with broker and those in which broker holds a personal interest in.
"If the Buyer should decide to purchase any real property that Broker or any Broker's agents hold an interest in or any real property in which Broker has an agency agreement with an owner for the sale or lease of a particular property, then, in such instance, Broker will not be the buyer's agent but will work with the buyer as a customer."
Situation: Broker, working as the agent of the buyer, wishes to terminate such agency with the buyer to show broker's listed property.
"The undersigned Buyer and Seller acknowledge that broker has been working with Buyer to acquire real property. The agency relationship between the Buyer and broker is hereby terminated with regards to the Seller's property only. The Seller hereby acknowledges receipt of the Buyer's agency agreement with Broker. Furthermore the Seller understands both the prior relationship between the Buyer and Broker and the current one as it relates to the Seller's property."
Situation: Broker is to be paid by buyer but may participate in seller paid fee.
"Broker may share in the commission that the Seller pays his agent provided that any amount so paid shall be credited against the commission owed to Broker by the Buyer under this agreement. Should the amount be higher than the commission owed to the Broker under this agreement such difference shall be given or credited to the Buyer."
Situation: Broker wishes to work as a dual agent and wishes to disclose such to both buyer and seller and get their consent to such. The following clause would be included in a consent letter signed by both parties.
"Both the Buyer and Seller understand and agree that Broker represents both Buyer and Seller as a dual agent and will assist both parties in reaching a mutually agreed upon transaction. In doing so Broker will not inform the Seller of the highest price the Buyer will pay not inform the Buyer of the lowest price the Seller will accept, nor will disclose any confidential information to either party that may enhance either party's bargaining position. Both Buyer and Seller understand they can seek independent counsel to answer any questions and discuss any legal issues."
Situation: As the Seller's agent.
"Both the Buyer and the Seller understand and agree that Broker form the beginning represents the Seller in this transaction and not the Buyer."
Situation: As the Buyer's agent receiving a typical MLS commission split.
"Both the Buyer and the Seller understand and agree that Broker from the beginning represents the Buyer in this transaction and not the Seller, but will receive % of the sales price payable to and by the Listing Agent."
Situation: Buyer to pay Broker directly and fee paid to Listing Broker to be reduced by amount specified in MLS agreement payable to the Selling Broker.
"Both the Buyer and the Seller understand and agree that Broker from the beginning represents the Buyer and not the Seller and shall be compensated by the Buyer through escrow pursuant to a separate agreement. The Listing Broker shall be paid pursuant to the MLS listing agreement less the amount specified in such agreement to be paid to the Selling Broker.
Situation: Broker negotiates purchase of a "By Owner" who pays Broker's fee.
"Both Buyer and Seller understand and agree that Broker is from the beginning the agent of the Buyer and not the Seller, but Broker shall be paid % of the sales price by the Seller. Such fee paid by Seller to Broker is solely for introducing the Buyer to the Seller and is Brokers sole compensation in this transaction. Seller is not relying on any advice or council from Broker regarding the sale of Seller's property and Seller understands that Seller can seek independent counsel."
Situation: Broker wishes to have the Buyer and Seller acknowledge that the payment of the commission by the Seller and the property's listing in MLS does not constitute an agency or subagency with the Seller or Listing Broker.
"Both the Buyer and the Seller understand and agree that Broker is the agent of the Buyer and not the Seller, and the payment of a commission to Broker by the Seller and the listing of the Seller's property in the Multiple Listing Service by Listing Broker does not create an agency or subagency relationship between Broker and the Seller or Listing Broker."