Buyer's Agent, Seller's Agent, Dual Agent - Real Estate Essay - Real Estate in Rehoboth Beach and Lewes Delaware

This is now a Buyers Market and Most Realtors are Seller's Agents, by law. The SELLER'S agent must be honest, to a large degree, but he need not be fair. Do YOU still want to deal with a Seller's Agent - or would you rather have your own agent, a Buyer's Agent - who looks out for YOU in opposition to the seller and seller's agents? Read On, to the end, this is important stuff!

There is a relatively new and not always well understood practice in Real Estate sales; it is called Buyer Agency or Buyer's Agent.

The Real Estate Market has dramatically changed in the late spring of 2006. Most sellers are still trying to get far, far, more money than the market will support and most properties are not even being shown, not at all. As a Buyer, you know there are some good buys out there. However, there are nearly 8,000 properties on the market now (Aug 29, 2006) and last year about this time there were about 3,000 properties on the market. The only properties that are selling are the very best priced properties of any given description, and they are selling fast. There are more buyers than ever, they are more savvy and they are looking for bargains. I suspect you are one of those savvy buyers, seeking a bargain!

Savvy Buyers are seeking out ONLY the very best values in the particular kind of property they want and ONLY those properties are getting any looks at all. Savvy Buyers also know that Realtors usually represent ONLY THE SELLER. By law, a Seller's Realtor must represent only the seller and thus that agent is your opponent, no matter how friendly they seem to be. If they look out for your interests, for real, they can loose their license. They may pretend very well and they may be very, very nice to you! They do this in order to get the most money for their seller. There is a better way for you, the Buyer.

Until recently Realtors and agents usually represented the seller, in opposition to the buyer, during the real estate transaction. Even the real estate agent who drove you from home to home was not legally, ethically or truly working on your behalf. By law, the agent was required to work on the seller's side in order to get the highest price and the best terms for the seller -- Period! Some, perhaps most, agents still work this way.

In the last few years, first the law and now the practice of representation has changed. You and I have an entirely different set of options and agreements when we are buying real estate. These options were previously only available and utilized by large companies or wealthy individuals or experienced and knowledgeable Real Estate Agents buying for themselves.

In the past, the buyer would get a buyer's representative by paying a fee up front and usually by the hour, plus expenses, as well as hefty performance bonuses when the transaction was complete. Years ago half or more of my work was done this way for professional and wealthy sellers and buyers.

Twenty five years ago, as a personal agent for wealthy clients and companies, I charged and worked an average of 20 hours a week or more, at $30 per hour, plus expenses, plus 10% of the transaction (or when I was the buyer's agent, a $2,000 retainer fee to start with and then $30 per hour and 10% of the amount below the listed price that I was able to obtain for my buyer. If there was financing involved I also was paid to find and obtain the best financing). This work was in addition to my work as a Broker/Agent in my office here in Lewes, Delaware.

Currently things are much easier for the buyer; As a buyer's agent, a signature on a buyer's agent contract from my prospective buyer begins the transaction. Usually the same original commission fee that would have been paid by the seller is split and half goes to pay the buyer's agent.

In some cases the selling agent does not set up any fee to the buyers agent, or a very reduced fee, such as those agencies that advertise 2% or 3% or 4% commissions to the sellers, etc. The agents who do this do not pay the other agents much, sometimes nothing at all.

In that case the Buyer just picks up the missing commission and at settlement another 1%, 2%, 3%, or 4% or 5% comes out of the transaction and goes to us as Buyer's Agent. We set that up in the initial Buyer's Agency Contract, so there are no surprises. Whatever amount the seller's agent has set aside for the buyers agent is subtracted from the amount the buyer pays us. Our fee is usually only 4% on residential and 7% to 11% on commercial and raw land; that is negotiable. For raw land development our fee is usually more and there can be fees paid us during the time (usually several years) we are getting the land approved for development.

With a Buyer's Agent Contract between you and us; there is a guarantee from us that we are working ONLY for you the buyer and in opposition to the seller and the seller's agent - in exchange you guarantee us a commission of 5% to 12% or as otherwise agreed. Our fee is usually already taken care of, or at least part of it, by pulling it from the the seller's agent's commission. Often, the seller's agent's commission pays our entire fee, not always however.

Your investment in a Buyer's Agent, especially when it is us, is well placed as we will usually save YOU several times our commission in either a better deal for our buyer or far more protection and better buying strategy on behalf of our buyer.

I can draw this division of fees out for you on paper if need be when we meet the first time. Bottom line; you don't really pay any more and you get the absolute best representation.

The buyer's agency arrangement begins with the initial interview, where by law in our first meeting, a signed contract between us must be signed by you and us. Next our relationship progresses through an initial selection of properties that we mutually investigate and view.

The purpose and intent is to eventually choose a property, write an offer, get it signed by the seller so it becomes a contract by way of contract negotiations and then in a manner and with techniques valuable to YOU, our buyer, we progress to final settlement. You will not see any mechanical difference in the contract (except some protective clauses for you) using a Buyer's Agent than you saw when you used a Seller's Agent in the past. The difference is in the INTENT and in the ALLEGIANCE - our intent is to represent you and only you and our allegiance is to you and only you, not to the seller or the seller's agent.

As the Buyer's Agency Agreement culminates with the final settlement and transfer of funds for property - we, as your representatives take every step and advise and act on ONLY your behalf and for your interests. You, as the buyer may choose to have an agent specifically committed to representing your best interests in this way and if it is us, we will give you our ALL.

The great part for the buyer is that he/she gets the benefit of our decades of experience, our professional knowledge and connections, our developed relationships and specific professional knowledge which we may gain, on your behalf for your specific property. In exchange for all of our connections and our personal, professional, reputation with those connections, YOU, as the buyer, usually pay nothing for our time, work and expenses; until the final close of the transaction.

Where else can you get the best possible professional service and pay nothing until it's complete and satisfactory. Will your doctor, lawyer, accountant, mason or carpenter do that... NO. We do, if you contract with us first. Otherwise we represent the seller at your expense! This is true of all Realtors by law. Which would you like?

Recently real estate laws and real estate contracts, in virtually every state, are being rewritten to allow and suggest that the buyer have his own specific representative. If you are the buyer and have a buyer's agent, your agent will try to get you the best deal possible, even if that is NOT in the best interest of the seller.

Legally: "Buyer's Agency" is a relationship where the real estate agent is working FOR you with fiduciary responsibility (financial and legal responsibility). The agent is then legally bound to only the buyer and owes his entire loyalty and allegiance to the buyer alone.

In the past, and even most of the time today, all real estate agents and brokers represent the seller alone; to get the highest price for the seller. In fact seller's agents MAY NOT disclose fully all that they know about a property to the buyer as they seek the highest price. Seller's Agents, may NOT try to get a good deal or a better situation for the buyer. The relationship of a broker and agent is established in writing with the seller when the property is listed for sale in the "Listing Agreement" and that relationship spells out that ALL of the intent of the Realtor is in favor of the seller at the expense of the buyer...

In Delaware we are required to give each person we work with; buyer or seller; a written explanation regarding agency status. We have professionally written brochures that explain the "seller's agency" and it's opposite "buyer's agency". This agency disclosure must be explained, in writing, at the first significant contact of the agent with the buyer or seller.

Most agents and especially ourselves; email, call, and talk with a great number of long-distance buyers before we ever meet them. We must, when we finally meet in person, disclose and determine which position we will take with the person we are speaking with. Some agents work mostly as seller's agents; some work mostly as buyer's agents and some work as a dual agent (where the agent works as full representative to both buyer and seller). Regardless of the role the agent takes -- it should be fully and completely known by all agents, buyers and sellers involved -- and it should be in writing and these agreements are by law required to be signed. We know... not everyone does it this way, but it is the law and it is the right way to do it and it is in YOUR best interest! And, regardless of the way anyone else does it; we do it the right, correct and legal way.

Seller's Agent: has the full and complete and sole duty to obtain the best deal for the seller. The seller's agent is ONLY allowed to give the buyer material facts about the property. It is customary for a cooperating broker and agent to be a subagent to the seller's agency established by the brokerage that has the written contract with the seller to sell the property. That is any agent that is not your contracted Buyer's Agent, is by law an agent for the seller.

Buyer's Agent: has the full, complete and sole duty to obtain the best deal for the buyer. The buyer's agent may convey any and all information obtained in any fashion, including in depth investigations about the seller or the property. The Buyer's Agent seeks information for his buyer that can be used to the advantage of the buyer and/or to protect the buyer.

Dual Agent: has to be legally and financially loyal to both parties. Dual agency occurs when a real estate agency is contracted to sell a home. That means they have the listing, and an agent from that same brokerage, working as a buyer's representative, shows that listing. Dual Agency must be disclosed and agreed to in writing by all parties. Some people feel that Dual Agency is potentially a conflict of interests. It can be unless the agent is fully honest to all parties and they are fully aware of and in agreement with that relationship. Here, the entire purpose of the dual agent is to get the best possible deal, in all it's components, for both the buyer and the seller.

There are, in general, two major personalities of buyer's agents. First is the agent who only and always represents buyers. The other is the agent who takes each transaction and each customer/client into account before making that decision. An agent who usually works as a buyer's agent, for instance, may NOT want to represent a particular buyer as that buyer's agent for one reason or another. The reason is usually one of some personality difference.

As I put it, when speaking with a buyer or seller whom I wish to represent "I will be your gladiator. I will do battle on your behalf, and at the expense of and against the interests of, the seller and the seller's agent."

The buyer's agent must still be honest, but he need not be fair. For instance, if the buyer's agent is able to find out that the seller is in big financial or personal trouble and that the seller has a small mortgage on the property or that there is some impending deadline for selling the property, then the buyer's agent will tell the buyer. If the Buyer's Agent can find any substantial problem with the property, he will use that to the Buyer's advantage. Together they will use that information to get a great deal for the buyer at the seller's expense... if that is possible.

The Buyer's Agent will research a property exhaustively and if there are any material defects or negatives that can be found; that can be used to help negotiate a better deal or that show the property to NOT be a good deal for the buyer; the Buyer's Agent uses that data to get a better deal for the buyer or advises the buyer to not buy. The Seller's Agent, knowing that same data; may NOT tell the buyer and MUST try to sell the property to the buyer at the same high price as if that negative had not been found... and they MUST not tell the buyer what they have found in most cases!!!

If I were a buyer, even here in this area where I have been a Realtor for nearly 40 years - I personally would not even consider doing a real estate transaction without a buyer's agent to act on my behalf. I suggest that you are wise to do the same.

There might, in some cases, be a very unique situation where unusual creativity is needed. If there are detailed and extensive negotiations that need to be done; such as unique and difficult terms that must be negotiated then (being the buyer) I'd ask that the buyer and the seller agree to have a trusted dual agent and for that dual agent to sit down at the table with the buyer and the seller to creatively bring about a mutually beneficial sale and settlement. Whatever your choice, it should be in writing with your agent and must be known to all parties involved.

Addendum written by Jody July and August 2006 in response to an inquiry by Roger.

Thanks for asking a question; the answer to which has never been more important than it is nowadays and in this new market. By LAW, Realtors may ONLY work with a written contract describing and limiting every part of their action, responsibility and performance. IF, a person seeks a property utilizing a Realtor, the Realtor is usually guided by the written contract from the SELLER to the listing agent and the written agreements between that Listing Agent and any sub-agents for the seller that may be bringing in a buyer. ALL of the allegiance is to the seller and that is in opposition to the buyer legally. This new market is such that most of the properties are priced above the actual market and thus there are nearly three times the properties “for sale” that there was a year ago – in every area and in every category. You may decide to purchase a property that is not priced properly, or more likely, we will fully educate you on values and what causes them for each property and assist you in getting the property at the best price, FOR YOU, that is possible. Otherwise all agents work to get the best possible price for the SELLER, by law.

Also, the rules for Agency; the laws of particulars in representing clients has become more and more refined and important based on numerous court cases over the last few years. One of the important things to come out of this is that several real estate companies will no longer accept sub-agencies and will not pay a sub-agent, nor honor any buyer brought to them via another agent; UNLESS they have a specific written contract with that agent on that property or some other written agreement. As a result any Agencies do not pay a commission to sub-agents or they pay a reduced commission to discourage such. In addition many agencies advertise a reduced commission to list a property; and pay little if anything to other agents so that they can charge the seller less and still make a living for the agent. Because of these things many Realtors can not or will not show a buyer properties where they are not allowed sub-agency or where the “buyers agent” is not being paid at all or not enough. Hence, the buyer will not be shown many properties that the buyer may want to know about.

The best solution for the buyer and the one that allows the Buyers-Agent to operate legally and get paid; is to have a written Buyers-Agency agreement that places ALL of the allegiance from the agent to the Buyer!!! And it allows the agent to be paid for the work by the buyer if the seller is not paying or is not paying enough. Kate and I are VIGOROUS in our representation of a buyer when we are under contract and vice versa when we are under contract to the seller; exactly as the law requires. The buyer will almost always save more than the commission we earn but far more importantly is that we will strongly advise our buyers in such a way as to far better protect them than a sellers agent would. In many cases we will flat out tell a person that a property is not a good one and we will show exactly why and make it understandable to our buyer. Of course, we still work for the buyer and after we have made our case and given our advice, we will still do as the buyer says. Last year we strongly advised a client to not purchase a home with problematic and failing stucco siding; we got professionals to come give quotes on fixing the stucco and advise against the purchase as well. The cost was prohibitive for remediation of the stucco failures. The buyer still wanted the property and bought it; they love it but they are very well advised and know that they have a hundred thousand dollar remediation facing them shortly. Yet, the property in all other ways is exactly what they want. There are many more such examples. Please take a look at the below article from our website if you will.

Note: no matter what someone may tell you verbally, BY LAW, if you do not have a written and signed contract with a Buyers Agent; you are working with a sellers agent or you are working with an agent who is working illegally and endangering his professional license; you may wonder what else that agent is doing that is illegal or incorrect as they show you properties… I would. When working with a Buyers Agent; you MUST by law, work with a signed contract of representation upon the first substantial meeting and before any property is shown. Otherwise, and this sometimes happens, you are being told that you are working with an agent who is working for you… but that verbal commitment has no standing and that agent is still by law working for the seller.

From our Website: If you are somewhat unfamiliar with that concept here is an article that explains the importance of such:
http://www.kate-jody.com/essays/buyersagent.html If you choose to work with us as your agents, we promise to do our utmost for you and in your favor, to give you our full allegiance and to respond promptly to you and ask the same of you in return!

You pay at settlement. Our fees are from 3.5% to 7% to the buyer when we are the agent; depending on the property and the service.

For residential buyers in this area we charge 4% or sometimes 3.5% to the buyer. Sometimes the selling agent has apportioned part of the overall commission for the agent who brings a buyer. When that happens, whatever amount the seller is willing to pay, via the sellers agent, will act to defray the cost to our buyer.

For instance if the sellers agent offers 3.5%, which was the usual amount a few years ago and still paid sometimes, then there is no additional fee to our buyer. IF, on the other hand the seller has apportioned less, for instance 2.5% to the agent who brings the buyer; then there would only be an additional 1% due at settlement, to us from our buyer, over the agreed upon contracted price of the home. Some selling agents pay very little or no commission to the agent who brings the buyer, in that case our buyer would pay our entire 3.5% at settlement without any defrayal from the sellers agent.

On more unique properties or for buyers who require more service, for instance previewing and photographing each property for them and sending them a written review, numerous photos and a price evaluation on each property; we charge 4% or if we are searching the entire county that could go to 5% and if we are searching, previewing and photographing properties over the entire state, that would run up to 7%. For some buyers the savings in time and cost to them of not having to come to our area several times to evaluate and visit properties on their own time is worth paying us a bit more and saving their valuable time and expenses.

Meanwhile, the buyer is getting exceedingly good and expensive and time consuming service from us, without paying anything until settlement. There are few professions in the world that charge nothing until final satisfaction of the client. There are few professions that charge nothing for time and expenses until the end of a satisfactory service; our service is a great bargain! Can you imagine not paying a doctor or lawyer or house painter or home builder, until the entire project is finished to perfection according to YOUR viewpoint???

Buyers agency fees are a good investment at a bargain for what you get; especially with Kate and me as we truly put our clients interests first and foremost and we give our all to our accepted clients. Some we don’t accept of course.

From Roger:
Hi again,

I can access properties on the internet....what more would you be doing by sending me properties....would you be telling me which ones are overpriced and what the houses should be priced at?

Also, what if I am interested, for example, in a house that you have listed yourself...are you still the buyers agent??

Thanks,

Roger

Answers:

Depending on your access to the internet; if you are using Realtor.com you are getting only a small portion of what is available and for whatever reason, some of the listings shown have been off the market for months or even years. In addition, whatever system Realtor.com uses does not pick up a LOT OF THE DATA PROVIDED BY THE AGENT!!! For instance Realtor.com has picked up a couple of UN-BUILDABLE lots we have listed and they are listed at a 75% or larger discount from what a buildable lot would be. We get lots of calls from people who find these lots on Realtor.com BUT… Realtor.com leaves out our strong comments that the lots are NOT BUILDABLE.

If you use the MLS access from our site, we pay for you to get the best PUBLIC access to the Sussex County MLS, via our site link. Although the search features are very, very, very, limited for the public – you can eventually find a lot of what is available. However, you will not be able to see any of the agents comments to other agents explaining important information. In addition, if you are not familiar with our area in a detailed way, you will not be aware of where the properties or the communities are, or what is around them.

We may NOT advise you on the value of a property unless and until you are signed with us as a Buyers Agent; until you sign with us as a Buyers Agent; we represent the sellers by law and thus our entire and total allegiance is to the seller.

Because most buyers search the internet and because we appear more often and higher in the results than most other Realtors; we have become mostly buyers agents and have evolved to the point of having fewer listings. This should change in the future as more sellers realize that newspaper ads are a waste and bring little if any results.

In the past, with older methods of doing business, I was almost exclusively a sellers agent, with at one point nearly 400 listings in Sussex County at the end of 1980. I was a Buyers Agent across America but seldom in Delaware.

Now, we work almost exclusively in Sussex County Delaware and over 95% of our time, money and expertise, is spent providing services for buyers and prospective buyers and we are seldom used as a sellers agent; except for larger, more expensive or commercial properties. Sellers of larger more expensive properties and of commercial property realize they need the internet and not the local papers to sell their property.

IF, you became interested in one of our very few listings, we would tell you immediately and offer you the option of using one of us, probably Kate, as your buyers agent or we would fully disclose and ask permission of you and the seller for us to “facilitate” a sale with mutually exclusive and fully disclosed "facilitation" to the buyer and seller in order to bring the transaction to a close. We might likely even put you and the seller, literally, at the same table with us and hold an open and full discussion and negotiation with us facilitating it all and bringing that discussion to an agreement and contract and then taking that contract to settlement for you both. Everything would be disclosed, in writing, and agreed upon by you and the seller and both Kate and I; with all signatures attached.

Again, Roger, you have asked a good, perceptive and pertinent questions. I hope I have given you understandable answers.

If you wish to have the link of this article for yourself or to send to others; from our website: http://www.kate-jody.com/essays/buyersagent.html

Let me know if you would like me and my partner Kate to represent you as your Buyers-Agents.