Real estate agents: They aren’t all the same
When Bruce Hahn wanted to sell a portion of his Cedar Creek property in Virginia’s Shenandoah Valley a few years ago, he listed the parcel with a local broker who offered his services as a “dual agent.” And when the broker landed a would-be buyer, Hahn asked the broker, as any savvy seller would, just how high he thought the buyer was willing to go.
FOR THE RECORD:
Agent representation: An article in Business on Aug. 2 about real estate agents and whom they represent listed the wrong e-mail address to request a free copy of the Home Buyers Guide to Real Estate Representation. The correct address is AHF@American Homeowners.org. —
The broker’s reply startled his client: “He told me, ‘I can’t tell you that because I signed him up as a ‘buyer’s agent,’ ” Hahn recalled.
The deal went through without a hitch. But months later, Hahn’s curiosity got the better of him, so he asked his new neighbor how he came to use Hahn’s broker as his buyer’s agent. Again, the answer startled Hahn: “He said it wasn’t his idea; it was the agent’s.”
To this day, that sequence of events bothers Hahn, who is president of the nonprofit American Homeowners Foundation.
“I knew what I was getting into when I signed the listing agreement,” Hahn said. “But I still have a problem with the fact that my agent abrogated his responsibility to me when he offered to represent the other side.”
Despite laws in most states that require agents to disclose to whom they owe their allegiance, many people still don’t know if their agent is working for them or for the other side.
According to the National Assn. of Realtors’ 2008 Profile of Home Buyers and Sellers, less than one-third of all buyers are told whom their agents represent at their first meeting. One in four others are told, but not until they make an offer on a house, and the rest are told “some other time” -- if at all.
When you consider that the issue of agent representation can have a major effect on the price a buyer pays, that’s just unacceptable. Indeed, National Assn. of Realtors general counsel Laurie Janik has been quoted as saying that her members need to take their agency-disclosure requirements more seriously.
At a minimum, consumers should know what kind of agent they have and specifically whom that agent is responsible to in the transaction, according to John Sullivan, president of the agents association.
“Clear, consistent and transparent real estate agency disclosure will help consumers better understand that there are many types of real estate agents, each of whom have responsibilities to different parties,” Sullivan said. “Consumers need to have all the facts in hand in order to make informed decisions.”
Years ago, there were only two kinds of agents -- the listing (or seller’s) agent and the buyer’s agent. The listing agent worked on behalf of the seller, who paid the agent from the proceeds of the sale. But what wasn’t so obvious was that the buyer’s agent, who drove you from house to house to house, was actually a sub-agent of the listing agent. The seller’s agent split the commission with the other agent, who, therefore, owed his loyalty to the seller.
Most would-be buyers weren’t aware of that. Sometimes, lookers became so friendly with the agent who was helping them find a house that, in the course of their conversations, they disclosed important information the seller could use against them.
For example, if the would-be buyer wrote an offer for “x” but divulged that he could go as high as “y,” the agent had a duty to disclose that material fact to the seller. And knowing that the other side was willing to pay more, the seller could play hardball by sticking to his price or countering with a price he now knew the buyer would pay.
That situation gave rise to the buyer-broker movement in which some agents decided to speak on behalf of buyers rather than just sellers. Nowadays, there are all kinds of agents, including those who still represent just the seller and no one else and some who prefer not to work on behalf of either the buyer or seller but act as middlemen who bring the two sides together and then back off.
“The agent and broker may be 100% on the buyer’s side, 100% on the seller’s side, somewhere in between or a knowledgeable but largely disinterested third party,” according to the “Home Buyers Guide to Real Estate Representation,” a free guide recently released by the American Homeowners Foundation to help consumers “avoid the many traps” involved with buyer and seller representation.
With that in mind, here’s a quick rundown of the different types of agents, although what they are called may vary by geographic region:
* Listing agent. The seller hires this agent and, therefore, his fiduciary responsibility is to the seller and no one else. (Also sometimes called the seller’s agent.)
* Sub-agent. Largely gone from the scene now, this agent often brings the buyer to the table but still owes his allegiance to the seller.
* Double agent. This agent typically works both sides of the fence, acting as a seller’s agent in some deals and a buyer’s agent in others.
* Exclusive buyer’s agent. This professional works only for buyers. He never lists houses. Even though he is usually paid a share of the listing agent’s commission, he assesses the fair-market value of a property in which the buyer has an interest and helps him and only him negotiate the best price and terms.
* Dual agent. Sometimes called “disclosed dual agency” because it must be divulged at the first meeting, this agent simultaneously represents both the buyer and seller of the same home.
* Designated dual agency. In some firms, the broker designates one or more agents to represent the seller. The rest of the company’s agents are to represent potential buyers.
* Facilitator. This agent brings the two sides together and then steps aside, letting buyer and seller hash out the details.
* Discount brokers. These a la carte agents sell their services piecemeal. Need a contract drawn up? Need to meet the state’s disclosure requirements regarding inspections? No problem.
The pros and cons of each representative are outlined in the AHF guide, which includes questionnaires that buyers and sellers can use to help pick an agent who’s right for them. For a free digital copy, e-mail AHF@AmericanHomeowners.org with “Free Home Buyers Guide” in the subject line.
Distributed by United Feature Syndicate.
