During this peak season when more houses and condos sellthan during any other time of this year, prospective home buyers (especiallyfirst-timers) often wonder how to go about purchasing their first homes.
As I have often suggested, the first step is to getpre-approved in writing by a mortgage lender so buyers will know the maximummortgage for which they can qualify. With a mortgage lender’s pre-approvalletter or certificate (not just a worthless pre-qualification letter where thebuyer’s loan application hasn’t been verified), the second step is to startlooking at local houses and homes available for sale.
Purchase Bob Bruss reports online.
Most buyers begin their quest on the Internet, usually at
Many prospective home buyers contact the home’s listingagent, either by e-mail or by phone. Although the listing agent is likely to beextremely helpful, few buyers realize that listing agent primarily representsthe home seller, not the buyer.
Or another scenario might develop as prospective home buyersscan the weekend newspaper homes-for-sale ads, especially the advertised openhouses. No matter how helpful and charming the open house host agent might be,most prospective buyers don’t understand that agent legally represents the homeseller, not the buyer.
PROS AND CONS OF “DUAL AGENCY.” Inmost states, a home’s listing agent can also represent the home buyer. Whenboth buyer and seller fully understand the agent represents both parties, thisis called a disclosed “dual agency.”
Some states have statutes allowing the listing agent torepresent the home seller while another agent working for the same brokerage,called a “transaction agent,” represents the home buyer. Depending onstate law, there are several other possibilities.
But home buyers should be certain they fully understand whorepresents whom. In a dual-agency situation, the one agent theoreticallyrepresents both buyer and seller. Such an agent owes a fiduciary duty ofhonesty, truthfulness, and full disclosure (with notable exceptions) to theother party.
However, this is an inherent conflict of interest situationfor the dual agent.
To prevent misunderstandings, most states now require realestate agents to provide written agency disclosures to home buyers and sellerswho they represent in the sale. At this point, smart home buyers ask, “Whoreally represents me?”
DO HOME BUYERS NEED THEIR OWN BUYER’S AGENTS? Theanswer in most situations is probably “yes.” The reason is a buyer’sagent, who is truly looking out for the buyer’s best interests and using thebest efforts to find a house or condo meeting the buyer’s needs, will emphasizeto the buyer the pros and cons of each residence inspected.
But a “dual agent” representing both home sellerand buyer can hardly be expected to do so, especially pointing out thedrawbacks of a listed home under consideration by the prospective buyer.
Any licensed real estate sales agent or broker can be abuyer’s agent representing the home buyer in the transaction. A typical buyer’sagent can represent any home buyer, but also take listings of local homes forsale.
However, when a buyer’s agent shows homes listed for sale bythat agent, or another agent working for the same brokerage, then the dualagency issue occurs.
WHO PAYS THE SALE COMMISSION DOES NOT DETERMINE AGENCY. In mostbuyers’ agent situations, the buyer’s agent receives half of the salescommission paid to the listing agent. This commission split is usually statedin writing in the local Multiple Listing Service (MLS) disclosure between MLSmember agents.
Just because the home seller pays the listing commission,which is then split with the buyer’s agent, doesn’t mean the buyer’s agentworks for the home seller.
However, when a buyer’s agent shows a prospective buyer a”for sale by owner” house or condo where there is no listing agent,if the seller refuses to pay the buyer’s agent any sales commission, then itbecomes the obligation of the buyer to pay their buyer’s agent a commission.For this reason, many buyers’ agents require their buyers to sign a writtenbuyer’s agency contract, typically for 30 to 60 days.
HOW HOME BUYERS CAN FIND A GOOD BUYER’S AGENT. Any realestate agent can be a buyer’s agent to help locate your home purchase. Inaddition, there are a few exclusive buyers’ agents who represent only homebuyers, never accepting listings from home sellers.
The best way to locate a successful buyer’s agent is toask friends and business associates who have recently purchased a house orcondo for their buyer’s agent recommendations. Because the drawbacks of nothaving a buyer’s agent can be costly, especially when the same agent representsthe home seller, home buyers should spend considerable effort to locate aneffective buyer’s agent.
If a buyer’s agent requires a written buyer’s agencycontract exceeding 60 days, buyers should be aware they will be “tiedup” with that buyer’s agent even if they find a home to purchase on theirown. For this reason, unless you have received a superb recommendation to abuyer’s agent from a recent home buyer, it is best not to sign a long-termbuyer’s agency contract.
CONCLUSION: Home buyers need their ownbuyers’ agents, just as most home sellers hire listing agents to representtheir best interests. Likewise, home buyers need a separate buyer’s agentlooking out for their best interests. Representation by a “dualagent” who represents both seller and buyer creates an inherent conflictfor the home buyer. For more details, please consult a local real estateattorney.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News