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 buyers 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 the lowest the seller will take as a selling price 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, are 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 (their other client if dual agency) 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 as well as unethical.
The sellers 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 info is confidential. Those agents that now have that information and 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. 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.
Confidential information is to remain that way, the person that each side has the information which may be used to the benefit of making the deal rather than doing what is best for the client. And although a real estate agent, in most cases, will act accordingly to the law, there always a chance that that confidential information will get to the other party 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) from another company. Representation makes it clear cut, negotiating makes it clear cut. No one really has an advantage over the other, 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.
Coccia Realty, one of the fastest growing independent real estate companies in Northern New Jersey, offers buyer representation in the truest form. Please contact their offices at firstname.lastname@example.org or 973.377.4400. You are also invited to visit their website at www.cocciarealty.com.