Prior to the 1990’s, real estate purchase contracts were only two pages and were written to protect the “seller”. All real estate professionals pretty much represented the “seller”, not the buyer in any transaction. Today, real estate purchase contracts are eleven pages with several pages of addendums and are written to protect the “buyer”. In the earlier days of real estate, the agent, hired by the buyer was working for the seller. This meant that everything the buyer discussed with the agent was disclosed to the seller.
The real estate agent had never met the seller of a particular home but the law stated that the real estate professional was an agent for the seller. This is almost unheard of now, but some companies and or their agents still use this practice.
The real estate laws have changed but in the best interests of the buyer or seller, whomever the agent represents. Real Estate professionals now use a form called an “Agency Disclosure”. This form should be signed by the party to the transaction PRIOR to writing an offer on a home. This will assure the buyer the agent negotiates an offer in the buyer’s best interests.
Over the years I’ve known several buyers who actually think they will save money by dealing directly with the agent who is the listing agent on a property. This listing agent then writes an offer on behalf of the buyer but the agent’s fiduciary duty is to get the highest price for the seller, not the lowest price for the buyer. This strategy can actually cost the buyer thousands of dollars more when the negotiations start.
Buyer representation is vitally important and should not be taken lightly by the buyer. One example might be this; the listing agent or the agent who represents the seller, shows the buyer a home. The buyer absolutely loves the home and wants to make an offer. The buyer makes an offer that is lower than the sales price but in conversation, mentions to the listing agent they would be willing to go higher on their offer. The listing agent has a fiduciary duty to disclose to their seller that you, the buyer, are willing to go higher on your offer price.
Probably the biggest misunderstanding or misconception of representation is with brand new model home communities. Ever seen the sign in a new home sales office that says “Buyer must be accompanied by their real estate agent on their first visit”? That sign is there for a reason. If you are not escorted by a real estate agent on your first visit then the builder will not allow you to be represented. The salesperson works for and represents the builder/seller and will try to get the builder/seller the highest price possible for their homes.
If the buyer goes to a new home community by themselves and falls in love with one of their models, then they call their agent to meet them there can be disastrous. Most builders will not allow this even if the buyer did not register with the new home subdivision on their first visit. Once you cross that threshold in a new home community, the builder will not allow you to be represented by an agent.
Buyer’s agents use a real estate form in their business called a “Buyer Broker Exclusive Employment Agreement”. Many buyers tend to shy away from signing this disclosure form upfront, but it really protects the buyer and buyer only. It’s not an agreement that forces the buyer to purchase a home but rather an agreement in writing that the agent agrees to “exclusively” represent (look out for their best interests and work for the buyer making sure they get the best possible price for the home) the buyer when they do decide to purchase.
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