May

18

The fiancee and I headed to Atlanta a few weeks ago on our first house-hunting trip. In preparation, I decided to look into finding a real estate agent to help us better get our bearings on the local area where we are considering buying, as well as to help us negotiate and close once we find a house we like.

Doing some agent research, I came across the term “buyer’s agent.” Remember, I’ve never bought a piece of real estate in my life, so while this concept might be well known to many people, it wasn’t to me. And in case there are others out there who don’t know what a buyer’s agent is (or why they’re valuable), let me explain…

In a typical real estate transaction, there is generally at least one — and often two — real estate agents involved. There is the agent that represents the seller (the listing agent); this is the person who lists the house on the MLS, markets it, shows it to potential buyers, etc. And there is often an agent that helps the buyer; this is the person who pulls listings from the MLS, takes the buyer around to various houses, and — in theory — represents the buyer’s interest when it comes to negotiating and making a deal. Unfortunately, that’s not always the way it works in the real world.

While the listing agent is certainly obligated to represent the seller, the buyer’s agent isn’t necessarily obligated to represent the buyer. Depending on the type of agent, who he works for, the laws of the state, and relationship between the buyers and agent, the agent helping the buyer may actually be representing the seller of the property instead of the buyer. In fact, in many cases, the agent helping the buyer is legally obligated to help the seller get the best price for the house, even if it means getting a worse deal for the buyer he is “representing.” For example, the agent helping the buyer may be legally obligated to tell the seller information about the buyer (for example, telling the seller the highest price the buyer is willing to pay), while at the same time be legally obligated to keep seller information confidential (for example, not telling his buyer how low the seller is willing to go, even if the agent is in possession of that information).

Wow, this was news to me!

So, how do you avoid working with an agent who may not represent your interests or who may have a conflict of interest? You use a “buyer’s agent.”

A buyer’s agent is a real estate agent who contractually represents the buyer, providing the following benefits:

So, what are the downsides of a buyer’s agent, you may ask? Based on my research, I’ve only come across two, both of which can be mitigated if handled appropriately:

As for us, it was an easy decision to use a buyer’s agent for our first house purchase, and luckily, based on a recommendation from a close friend in Atlanta, we found someone who seems perfect to work with us…


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2 Comments On This Thread

  1. Doug Quance on May 19, 2008 8:38 am

    While in principle, I agree with you - I must disagree with the aversion from Exclusive Buyer Agency.

    Most seasoned and experienced agents will not agree to a non-exclusive arrangement - thus your advice will leave the buyer with a less-experienced agent who will agree to such an arrangement. And if the agent will put themselves in such a bad agreement - just think of what kind of an agreement that they’ll put a buyer into.

    Most states have provisions in their contracts that allow the buyer to terminate the agreement, should the buyer desire to do so.

  2. J Scott on May 19, 2008 5:43 pm

    Thanks for the feedback, Doug!

    Can you explain why you think a non-exclusive arrangement is so bad for agents? It doesn’t seem unreasonable that a buyer would want to use multiple avenues to find a house (agent, FSBO, Internet, friends/family, etc), and by entering into an exclusive agreement with a buyer’s agent, the buyer is automatically potentially cutting off certain channels to find properties.

    I certainly agree that buyer’s should act in good faith towards the agent (not try to cut him out of commission if he does good work), but even when acting in good faith, sometimes buyers will find properties in ways other than through their agent.