In the News... Buying A Home By Elizabeth Razzi
Exclusive buyer's brokers work only with buyers and don't take listings. They're obliged to help you find the best deals and lowest price."Unfortunately, agency standards have changed so much in the past ten years that real estate agents themselves are likely to be confused about their obligations to buyers and sellers, even though in most places they are supposed to give you a disclosure form explaining your relationship. Bottom line: You don't truly have an advocate in your corner unless you both sign a contract saying so.
Kiplinger's Personal Finance Magazine
HOUSE HUNTING? SAVE BY HIRING YOUR OWN BROKER By Carla A. Fried
If you ever doubted the value of real estate agents who work solely for home buyers (as opposed to traditional agents who report to sellers, consider this: A recent study by U.S. Sprint found that 232 relocating Sprint employees who hired buyer's brokers paid an average of 91% of a home's list price. People who use traditional agents typically pay about 96%. On a house originally priced at$150,000, that's a difference of $7,500.
Money Magazine
SMART MONEY: A PERSONAL SHOPPER FOR YOUR DREAM HOUSE
By Pam Black
A traditional real state broker is legally bound to work for the seller who pays the commission and therefore may be more intent on selling listed homes than finding your dream house. Even Realtors who don't hold the listing on a given house act as subagents to the seller. So unless a broker says that he or she is working for you -- brokers are now legally obliged to disclose who they represent -- you can assume the broker is working for the seller. Such agents must pass on information such as the buyer's income to the seller, who then has a better idea of what price to hold out for. Because these (Buyer) brokers are obliged to get buyers the best deal possible, they approach houses with a critical eye for apparent flaws. You'll still need an inspector to uncover hidden defects, however. Buyer brokers also show properties sold by the owner, which can be cheaper because the only commission is what you agree to pay your broker. Sellers' agents usually won't show these homes because they don't make commissions on them. Brokers representing buyers should also appraise the value of the house, negotiate the price, and pre-qualify you for a mortgage, sometimes at a better rate. "A well-trained, experienced buyer broker is a great asset," says Peter Miller, author of How to Sell Your Home in Any Market ($12, Harper Perennial) and other real estate guides. "You won't do any worse, and you may do a lot better. Usually, the buyer broker splits the sales commission with the seller's agent, just as a subagent who didn't have the listing would with the broker who did. So the fee still comes out of the sale price. Some people might assume that buyers' agents have an incentive to keep the price high. But again, the broker must get you the best deal. "In my experience, all of them do," says Stephen Brobeck, executive director of the Consumer Federation of America. A conflict of interest is more likely when a real estate firm that represents sellers assigns you one of its brokers as a buyer agent. That's why many people believe an "exclusive" buyer broker is preferable. If there aren't any in your area, and you have to use a listing broker, "make sure they disclose when they are showing you properties they have a financial interest in," says Brobeck.
Business Week
Real Estate Agents: Get Your Money's Worth by Maureen F. Glasheen
As the FTC noted: "many buyers may run several risks...if they identify as 'their broker' a person who is not in fact intending to act as their agent." For example:
A buyer may "reveal information he or she might otherwise wish to keep confidential" because such information would help brokers working for the seller in obtaining the highest price for a home. A buyer may believe a broker is "'scouring' the market...as a representative, when in fact, he or she is picking out those properties...which both meet the buyer's criteria and which also will bring in a large commission...." A buyer may assume that the broker will use his or her expertise to discover defects in a house, when without a contractual agency relationship, the broker may feel he or she has no duty to do so. Survey data from the study revealed that, in many transaction, sellers were informed by agents about how much buyers might be willing to spend, while most buyers expected such information would not be revealed. Such double dealing can also work against sellers, if their agent isn't protecting their interests, but seeking simply to close a deal. For example, sellers can be required to refund the buyer's money if the seller's agent (or subagent) misleads the buyer about the nature of their relationship or facts about the house. Many large firms have indulged in the lucrative practice of "in-house sales" in which only one company is involved in listing the property and producing the buyer. In other words, the same company acts as the seller's agent and buyer's agent in the same transaction to pick up the 6% or so set aside to pay two agents. Recent laws passed in Texas, Georgia, Illinois, Minnesota, and Colorado would appear to minimize broker liability for this "double dip." You should begin by asking yourself whether you need an agent at all. If you cannot take care of yourself in a business transaction then it is money well spent to have a loyal agent of your own. Nevertheless, until the industry gets used to old-fashioned rules of loyalty, you should remember that you are the boss in this market, and you set the terms of employment. When you engage a broker or attorney to act as your agent, you should look for companies that subscribe to a "single agency" policy or "exclusive buyer agency" policy. Steer clear of companies that offer disclosed dual agency as a policy. Remember, the first question you should ask your broker is: "whom will you represent?"
Consumer Reports