I read an interesting article on msn.com “Do You Need a Buyer’s Agent” (http://realestate.msn.com/do-you-need-a-buyers-agent) recently. It brought up some valid points regarding the necessity of a buyer’s agent for representation.
As written in The Consumer Information Statement on New Jersey Real Estate Relationships:
“A buyer’s agent WORKS ONLY FOR THE BUYER. A buyer’s agent has fiduciary responsibilities to the buyer include reasonable care, undivided loyalty, confidentiality, and full disclosure. ...
A buyer wishing to be represented by a buyer’s agent is advised to enter into a separate, written buyer agency contract with the brokerage firm which is to work as their agent.”
Simply said, a buyer is truly represented by a buyer’s agent, and memorialized by a signed buyer's agency agreement. However. it is not that simple when the buyer goes directly to the listing agent, or agency known as the seller’s agent, to sell them a particular home. This situation is known as dual agency in which the agent (single agent dual agency) or agency represents both sides of a real estate transaction from showing to offer to negotiating price, terms, inspection issues, final walk-thru issues to closing.
Why I bring this up is that many buyers today are going straight to the listing agent to sell them a home. A common misnomer is that a buyer may feel that the listing agent can give the buyer a better deal either by cutting their commission to make it work, by divulging some confidential information about the seller, or by indicating to the buyer the lowest price the seller accept.
Needless to say this is the farthest from the truth. The seller, not the agent, determines what price to accept, now the agent may “cut” the commission to make the deal, however, is not obligated to as they are in contract for a specific amount. Plus, if the agent is good at what they do, they will be able to negotiate up the price to make up for the commission they were to give up. Putting the buyer at the short end of the transaction. And telling the buyer the lowest price the seller will accept or confidential information is not only a disservice to the seller as well as giving the seller a disadvantage in the process, it is also unlawful and a Realtor Code of Ethics violation.
The seller's risk to having their agent or agency represent the buyer also is just as great. A simple scenario is when an agent lists a home in which they have been given confidential information not to be told to the buyer, comes back into the office to tell everyone about their new listing while also giving out the confidential information such as what the seller will take, or that they are getting a divorce and desperate, or ... , or ... , or ... , without explaining to those very colleagues that the information is confidential. Those agents that now have that information also have the right to tell their buyers. Conversely, if a buyer is in the listing agent’s office, discussing an offer with an agent in the office other than the listing agent of the same company, and the listing agent overhears a conversation between the buyer and the buyer’s agent, they also have the right to let their seller know what was said.
It all boils down to representation. There are buyer’s agents and seller’s agents. Those agents have a fiduciary responsibility to their clients, meaning they keep what is confidential in confidence from the adversarial party. Can an agent or agency represent both parties? Sure. As a matter of fact, several real estate companies in our area will have the office manager step in to represent one of the parties, still developing a dual agency situation, but in many cases the manager is not there for the entire transaction. Is it the best scenario? Not really. If a buyer uses the listing agent or agency, there is a possibility that the confidential information may, and I stress, may, be at risk for both sides. When an agent or agency, practices dual agency, the risk involved is far greater for clients (and real estate agent and company) than if each party is represented individually. That’s the simple fact. 75-80 percent of lawsuits against realtors are those of misrepresentation (whether real or perceived) and many of them because of dual agency.
Confidential information is to remain that way, and although a real estate agent, in most cases, will act accordingly to the law, there is always a chance that confidential information will get to the other party, most cases not purposely, but accidents do happen, people talk.
The safest scenario, and one that is used in many other states by law, mind you, is for a buyer to hire a buyer’s agent (usually in writing, as seller’s do with the seller's agent) from another company. Representation makes it clear cut, negotiating makes it clear cut. No one really has an advantage, other than what the market conditions have set. A buyer (just like a seller) should choose a realtor that they feel comfortable with. Interview more than one. When you find the one, sign a buyer agency agreement for true representation. Good luck. If you have any questions or comments, never hesitate to contact me directly.