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Why
and How Real Estate Agency Helps and Protects You
You wouldn't plan a major vacation without first determining your
needs, looking at a budget, and then checking the marketplace. Homebuyers should follow a similar process to get the best
possible home and the most attractive financing.
Knowledge and experience are the keys to successful real estate
transactions. REALTOR.com® contains an enormous amount of valuable information, and such data -- combined with the expertise,
experience and training of a local full time REALTOR® can be the essential keys to your success.
One of the keys to
making the home buying process easier and more understandable is planning. In doing so, you'll be able to anticipate requests
from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in
the home buying process.
Who Represents You?
One of the hot topics facing the world of real estate right now
is the issue of agency. Some would have you believe that it really doesn't affect you, the buyer, and that nothing much has
changed. But they are wrong.
The topic of agency is important to you because it answers the most basic and fundamental
question that can be asked of any real estate professional: Who do you represent in this transaction?
Until that question
is answered, you may be left with the impression that all agents who work with buyers actually represent those buyers, and
that you have somebody going to bat for you in this transaction. Well, the issue of agency is important because without it,
we can never be sure who represents who.
Here's the scenario:
You meet a really nice agent at an open house
named Bonnie. Even though Bonnie's house is not right for you, she tells you she has others to show you that fit your needs
exactly. You spend an hour or so with Bonnie looking at a half dozen homes and talking about your needs and your wants. During
the course of the conversation, you volunteer that you have $200,000 cash to spend and that you will not go over $500,000
purchase price no matter what. Then you find the perfect house. Asking price is $525,000 but you decide to offer $499,500
based on recent sales in the area. During negotiations, the seller asks Bonnie directly how much cash you have and how high
will you go? What does Bonnie say?
Here's the answer:
Unless you have signed a "Buyer Agency Agreement" with
Bonnie making her your buyer agent, she is most likely acting as a sub-agent to the listing broker who represents the seller.
If that is the case, she has a fiduciary obligation to the seller to disclose to him any information she has that might "promote
or protect his interest" in the transaction. Guess what? Bonnie has that information.
The Seller, now having knowledge
of your financial position, counters at $500,000. He knows you can afford it and that this price falls within your desired
range. He also knows that you have seen a number of other homes and that his is the one you want.
Regardless of what
eventually happens in this scenario, it can hardly be called an even playing field. So, how can you protect yourself from
a possible disclosure required of a seller's agent?
1. Make sure that the agent you are working with has agreed, in
writing, to represent you as a "Buyer's Agent". This will mean signing a Buyer Brokerage Agreement in which you promise to
work only with that particular agent for a specific period of time, often 90 to 180 days. It also means that you promise not
to buy from anybody else, even FSBO’s, without involving your buyer's agent. In almost every case, the commission will still
come from the seller, but your agent must present the offer.
2. Never say anything to anybody unless you would be
willing to have that information repeated into a seller's ear. Assume that everybody, and I mean everybody, is working for
a seller unless you have specifically hired them to work for you. And even then, be discreet. During the second world war,
the military promoted a phrase designed to stop idle gossip: Loose lips sink ships! You would do well to adopt that philosophy
in your home-buying as well.
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