Should You Have A Realtor Represent You When Buying Your Home?

When you’re negotiating a real estate transaction, you will be likely be working with a realtor. In that transaction you will either be a customer or a client and there is a big difference between these two which is important that you understand it.

A Client has an agreement with the real estate agent and his brokerage firm. He’s signed a contract and thereby has a commitment that the realtor will represent his best interests in the purchase or sale of his property. Anyone else who is part of the transaction is considered a customer.  The real estate agents primary fiduciary duty is to the client, since that is the person that is paying him and he is obligated by contract to represent.

In any real estate transaction, there are two methods of representation:

  1. Seller Representation: If you are selling a property and enter a brokerage agreement with a Realtor®, that Realtor® and their firm become your representative during that specific transaction. They are legally obligated to represent you and your financial interests as a seller.
  2. Buyer representation: If you are buying a property and enter a brokerage agreement with a Realtor®, that Realtor® and their firm become your representative during that specific transaction. They are legally obligated to represent you and your financial interests as a buyer.

Generally, representation is pretty straightforward if the buyer’s agent and the seller’s agent are affiliated with different brokerage firms. I.e. the Sellers agent works with Brokerage A and the buyer’s agent works with brokerage B. They are separated in their agency very clearly by their affiliation with different brokerage firms.

The lines between representation and consequently fiduciary duty become very murky when this separation isn’t as clear, for instance when both the sellers agent and the buyer’s agent work for the same firm, and even more difficult when the agent representing the buyer and the seller are the same person in the same agency.

So, for you as a buyer to better understand where you fit in this transaction, it’s important that you know the different types of Agency that a Realtor enters into.

  • Seller agency: A Realtor® from Brokerage A represents the seller in a transaction. This Realtor® looks out for the best interest of the seller in the transaction, and owes the buyer honesty and any material facts about the listed property that are needed to make an educated decision.
  • Buyer agency: A Realtor® from Brokerage B represents the buyer in a transaction. This Realtor® looks out for the best interestof the buyer in the transaction, and owes the seller honesty and any material facts that are needed to make an educated decision.
  • Dual agency: One Realtor® from Brokerage A represents both the buyer and the seller in a transaction. This Realtor® represents the buyer and seller equally and owes confidentiality to both parties. Realtors® in a dual-agency relationship facilitate the entire transaction and may not provide full advice to either party due to confidentiality.
  • Designated agency: Real estate Brokerage A represents both the buyer and seller, with one Realtor® from Brokerage A representing the seller and a separate Realtor® from Brokerage A representing the buyer. The brokerage represents the buyer and seller equally, owes confidentiality to all parties and may do nothing to the detriment of either the buyer or the seller.

What does this Agency mean to you, the buyer?

You just want to buy a house right? At first, all this agency stuff doesn’t seem important, but it will once you get into a negotiating situation.

Let’s assume that you’ve decided to call the listing agent to view a house he has listed and you decide to make an offer. Who does that agent represent?

Well, by contract he represents the seller and since the seller is paying him, he’s more likely to lean towards working hard to get the seller what the seller wants. Not to mention that he has a fiduciary duty to the seller to disclose any information he knows about you to him. This obviously weakens your position doesn’t it?

Assume for a moment that in conversation you told the Listing Realtor that you were going to offer $20,000 below asking and could go up to asking but you wanted to see if the seller will take a lower offer and where that number is. This is quite common in real estate negotiations and wise on the buyer’s part. However, the Listing Realtor knows that you will and can pay more so his incentive to work hard to get the deal at $20,000 lower is reduced. He may even in conversation allude if not outright state to the seller that you can go higher and he should counter the offer.

Now, by law, that Realtor just transgressed his agency. He should have had a document, called a Dual Agency Disclosure, signed by both you, the buyer and the seller disclosing that his fiduciary duty was only partial to both of you, but his main fiduciary duty now was to the Transaction.

Legally in this type of Agency, the Agent can no longer disclose anything that pertains to any portion of the transaction to either or any party of the transaction. In doing so, he violates his fiduciary duty and can be sued.

However, regardless, it still puts the Listing agent acting as the Buyer’s Agent in a precarious position. In this transaction, the agent represents only the sale or the transaction, which means his commission. He can no longer give the seller any insight into your situation, and vice versa any of the sellers information to you.

The best agency for you as a buyer is to have your own Realtor with a signed agreement that they will only represent you in the transaction. This means, any information he knows about the property or the seller he is obligated to disclose to you.

For instance, let’s assume that the sellers are in a divorce situation and the property is in a forced sale situation. Obviously the sellers will be more motivated to sell the house quickly rather than keep making mortgage payments and prolong their agony. As a buyer, having this information available to you will make your position much stronger. You might offer a lower price and save yourself thousands in the purchase.

An even worse scenario is if the property has been the scene of a violent crime. Having a Realtor that has your best interests at heart would mean this information would be disclosed to you, if you were to ask for it, and you always should. The value of a property is severely reduced when it has been the scene of a violent crime and as a buyer, wouldn’t you want to know this before making an offer or even considering purchasing?

There are many things you need to know about a property before you purchase or make an offer to purchase. Being properly represented by a Real Estate Agent who has ONLY your best interests at heart is the first and most important.  Even if your Realtor doesn’t offer, it would be wise for you to demand a buyer representation agreement and sign a contract with him.

If you think about it logically, who will work harder for you, someone who has no agreement with you and is under no obligation or someone who has agreed to represent you and work hard to help you find the perfect home? Who would you work harder for?

This has probably raised some questions in your mind, so please feel free to call us. There is no obligation or fee for asking questions and the answers are always free and honest.

Gerard Hagan
Best Edmonton Real Estate
(780)232-4915

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