Some Real Estate Agents Shift to Representing Only Buyers : Property Sales: Companies seek to avoid possible conflicts of interest by working exclusively for house-hunters.
Is your real estate agent really working for you?
If you’re a home buyer, the answer may be no. The real estate agent who is representing you as a potential buyer is also officially acting as an agent of the seller--thus creating possible conflicts of interest. Traditional real estate agents argue that their code of ethics and state laws guarantee that both buyer and seller are fairly represented. But, a few real estate brokers are concentrating on serving buyers only.
“We’re testing the waters right now,” said J. Duncan DeMoss, marketing manager at Buyers Advantage Realty, a 3-month-old real estate brokerage in Westlake Village. The company is representing only about six buyers now, but DeMoss expects the numbers to grow now that the company has eight agents. With so many aspects of a sales contract that can be negotiated, it’s important for buyers and sellers to each have their own dedicated representatives, DeMoss argued, to avoid any conflict of interest.
David R. Feigin is so confident about the future of buyer brokerages that he left his job at Exclusive Realtors in North Hollywood and in November started his own firm, Buyer’s Agent Home Buyer’s Specialist in Ojai. He has become one of the 96 franchises of Memphis, Tenn.-based franchisee Buyer’s Agent.
“I always had questions about the ethics of dual agency relationships. Even when I was working for the buyer, I was also working for the seller,” Feigin said. That’s because, officially, even buyer agents are working for a seller in traditional real estate contracts. “The industry is lagging behind what the consumers are asking for,” he said. “There’s never been a company to just help the buyer. It seems almost silly.”
Feigin takes a retainer fee from the buyer of about $100 to $250 to start his search. Buyers must also be pre-qualified by a lender up to a certain maximum bid for any purchase, and they must sign an agreement that states that Feigin will be the buyer’s exclusive representative in a home purchase for a certain period of time. If Feigin finds the buyer a home, he will generally just split the sales commission with the seller’s agent. Feigin reports that he has a handful of clients right now--but they are all serious buyers, he said.
The agreements generally last about 90 days and the fees vary. Some buyer brokers ask for a retainer up front of several hundred dollars; others don’t. Industry analysts estimate that about 30,000 buyer brokers are operating nationwide--about 4% of the 750,000 members of the National Assn. of Realtors.
However, there is one potential pitfall in this new, buyer-only agent system.
In a conventional residential property sale, the seller pays roughly a 6% commission on the sales price. Half that commission goes to the brokerage that listed the home for sale (and is then divvied up with the specific agent who listed the property), the other 3% goes to the brokerage firm that found the buyer (again splitting the fee with a particular agent).
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In the buyer-only agent system, in exchange for finding a house the buyer wants to buy, that agent may be paid 3% of the purchase price, a flat fee or a fee based on the number of hours spent helping the buyer. The catch is this: Usually, the buyer broker fee is paid by the seller. But if the seller refuses to pay the commission, the buyer is contractually obligated to pay up that 3%, or so, of the commission. On a $300,000 home, that could mean an extra $9,000 bill for the buyer.
George Rosenberg is a Ventura real estate broker who specializes in representing buyers, but he remains skeptical about a widespread future for real estate brokers who concentrate exclusively on representing buyers. “I tried buyer-only representation about five years ago,” Rosenberg recalled. “My income plummeted.” Rosenberg now represents both buyers and sellers--but never in the same transaction, he said.
There is a growing demand for real estate brokers who will exclusively represent a buyer, Rosenberg said, but there aren’t many qualified brokers who are willing to concentrate just on buyers. There is a somewhat larger pool of agents, he said, committed to so-called single agency--where the agent represents only one side of a transaction and turns down representing certain buyers or sellers that might be in conflict with each other.
Rosenberg publishes the Buyer’s Broker Registry, which lists about 350 buyer brokers in 25 states. He reported that he gets an average of nine calls a day from would-be buyers looking for exclusive representation. In exchange for 15% of an agent’s commission, Rosenberg refers these callers to people listed on his directory. The registry, Rosenberg conceded, is not limited to buyer brokers exclusively but to agents and brokers committed to the principles of single agency. Only a small number of real estate agents and brokers are really ready to limit themselves to even single agency transactions, Rosenberg said.
“This will never happen on a wide basis and it will never happen with the larger companies. There’s no way they’ll let go of the dual agency system.”
“Traditionally, both agents in a transaction have (officially) worked for the seller but buyers have still gotten a fair deal,” said Mary Lou Williams, assistant executive vice president of the San Fernando Valley Assn. of Realtors. “I don’t really see conflicts of interest now. The agents do a really good job of representing the buyers.”
Williams doesn’t see buyer brokerage expanding in the San Fernando Valley. “I have not heard of any increase in this happening,” she said. “It’s a very small percentage of our total membership.” The association does sell a buyer-broker service agreement, Williams reported. “But it’s a slow seller.”
