Representation
Most people just do not appreciate the job of a realtor. Yes, while minimal training goes into being a realtor, it is none the less training that society at large has come to appreciate. An old law exists that underpins a primary purpose for realtors- statute of frauds. It is the adoption by nearly every state regarding this old law from England that governs real estate transactions and that it- if it is not in writing it does not exist. There are many paragraphs contained in a standard Real Estate Purchase Contract that each state has adopted peculiar to how common misdeeds and oversights have posed problems in that past. Certain situations that require addressing these things or additional items to a contract to be written up separately on an addendum underscore the importance for some training and expertise, so that people do not get exploited.
Now, many a transaction has taken place without realtors, that have gone just fine, which transactions are commonly called “for sale by owner”. But it is those that don’t go fine that sometimes lethal consequences can happen for the unrepresented and all instances do not involve the statute of frauds.
Usually, the largest body of investment of money within a person’s lifetime takes place during a real estate transaction. They can and do go wrong. Just ask all the people who bought way to high without the help of a realtor who could have warned them about the home being above market value, who are now in foreclosure and they will tell you, yes, most certainly, I should have had a realtor. Conversely, many more “for sale by owners” do not know that they have just “given their home away” for less than what is was worth. By the way, many know or have not cared and are less greedy than the rest of us, praise be to them. On a personal note as a realtor, it strikes me as how amazingly common it is, as I even myself was raised with a ‘garage-sale’ like mentality, that we expect not just a good deal when we are buying, but also when we are selling, and somehow call ourselves ethical and “All-American”. What about the the poor guy on the other side who didn’t get the good deal… how considerate have we been to them? Yet, we appear to have clear consciences all the way to singing ‘Dixie’.
The current problems we are having involving the sub-prime market and with bad lending practices came about because the institution built their projections on untried models. They are now re-mapping how they do that. Real estate bases its practice off of comparables, and on-the-ground information about supply and demand, not off models.
It is precisely because of such circumstances, both preserving an otherwise exploited public, to market value transactions and the statute of frauds, that the value of a realtor’s profession is honorary and civic in nature and not just about capitalistic salesmanship. It is like having insurance, we don’t like the co-op expense, but it protects those who need it. Only in this case, all benefit in some way.
Buyer Representation
In most areas the Multiple Listing Service (MLS) is ran by your Local County Board of Realtors that gives listing access to participating brokerages and most brokerages, if not all, participate. You’ll need to check your local area to see if this is the case. Rules governing listings in the MLS, typically specify in the listing, or have as there norm, a percentage of commission that will be split in some fashion between a buyers agent and a sellers agent. Therefore, if the existing rules that govern, have gone through considerable trouble to get the seller to “put up” enough commissions in the asking price to cover both the sellers agent AND the buyers agent, you may want to use the system because it has made your representation free.
Now given the current system, that while the seller pays both ends when selling and as a buyer they pay nothing, there is another way to look at how cost is transferred across the table. If the seller uses a realtor to sell and then uses a realtor to buy it could have been arranged that given an equal sell of home to an equal purchase price, with a total of 6% being incurred, that a 3% charge is levied for selling and 3% for buying. Only in our current system, you pay it all when selling.
This can tend to underscore the importance as a buyer, to be sure to defer to your own realtor, if you see other realtor signs or other opportunities for things you need information on. This is in the case you plan on using the free representation of a buyers agent provided you on participating realtor sold homes. That’s right free, because the Seller has already agreed to “foot” the bill for your side of representation, already represented in the asking price.
Many people will sometimes call the sign in the yard, and as the buyer may end up choosing to have the Sellers realtor represent them, in states where it is legal. Do people understand fully that, that Sellers Agent will get both commission sides, those held out for representing his seller and now those for representing you, the buyer? So, you may want to be careful when “choosing” to “go the sign in the yard” route. If you are calling for information, you may want to introduce first that you have an agent, but that you have some questions. Don’t expect the Sellers agent to direct you toward any other representation, but what he or she will gain by wooing you with the enticements you now possibly feel for a showing of that property, which if in showing it to you, you may now tend to a felt sense of obligation toward that agent. Still, only at the very end of that trail in having the Sellers agent help you, if in making an offer, will you find in bold letters, the disclosure of such Limited Agency situation, which you now find yourself in… that ‘you do not have to go that route, but are now consenting to it’ (yes, but fine, after you’ve inadvertently made that agent do all the work and he/she is holding a pen for you to sign it).
If the Seller represents both sides, this is commonly referred to as Limited Agency. Limited Agency is when the agent that represents the Seller is also going to be representing the Buyer. Limited Agency has the following possible disadvantages:
The listing or LIMITED realtor may not be inclined to:
- Go after information that can be used to leverage your position as a buyer and there are all kinds of questions a buyers realtor can ask the listing realtor if they are astute to the art of negotiations that appreciates that knowledge is power.
- Share with you any reasons why not to buy “this” property.
- Negotiate the best price and terms for you, because that would hurt the interests of his Seller.
- Include contingencies in the contract that protect YOU rather than the seller, including standard clauses.
- Keep confidential any information that could hurt your bargaining position. This is where your bottom-line on price or something else that is confidential, un-be-knownst to you, may have been shared with the Seller.
- Remain neutral, when taking sides is an option. For example; a parent would never confess to admitting to having a favorite child, even if his/her siblings know who the favorite is.
Where Limited Agency is legal there is a possible advantage:
It is possible that you may have less trouble melding terms you know the Seller will accept when his/her agent is also present to help you with yours; typically when you thing you can make your case stronger than the other agent. Although it may not always happen ideally, the Limited Agent can try to depict an objective picture of value, when it comes to helping you negotiate an asking price. However, fiduciary (or ethical) duties keep the ‘Limited’ Agent from giving away the Sellers motivations, bottom line, etc. In other words, the agent is bound by fiduciary duty to become less involved in sharing or ‘going after’ otherwise tedious (research driven) or privy information. Thus, the Limited Agent acts as neutral as possible.
Remember that in most cases, having an agent, can really help you, both in your search process and in being represented well. Now may be the time, to become knowledgeable and comfortable with the choice of an agent and thereby in finding your dream home to be purchased.
