We are committed to providing first rate real estate services to home buyers. We know that the home buying process can be intimidating, especially for the first time home buyer or for someone new to the area. We also understand that many buyers don’t have a clear idea of what type of home they will end up in — or where, when or how the search process begins. Indeed, many potential home buyers aren’t sure whether or not they should be buying a home at all. It’s our job to help you work your way from confusion to clarity on these issues. Working through these issues is one of the things we most enjoy about working with home buyers.
A Systematic Approach
Access to Good Information
Buyers Agents Only
Why the Commitment to Buyer Agency
Elsewhere (see Agency Law in Real Estate), I’ve provided a detailed outline of the history of Colorado real estate agency law. For current purposes, if you are a buyer who is considering asking a real estate broker to help you find a home, the bottom line is that you have a choice of having that broker work with you either as a “buyer agent” or as a “transaction broker.” As I’ve already indicated, the difference is both simple and dramatic. A buyer agent (BA) commits to representing you and your interests. A transaction broker (TB) is prohibited by law from doing anything that might be interpreted as advancing your interests over those of the seller. A TB has no obligation to try to make you aware of all the homes on the market that meet your needs. When showing homes, a TB should not bring negative aspects of a home or neighborhood to your attention. If he/she does, it could hurt a seller’s chances of selling their home — or benefit you by discouraging your purchase. Neither result is acceptable for a broker working as a TB. And when you’re putting an offer together — or when you’re negotiating that offer or inspection issues — a TB should not provide any consultation. Almost any useful advice they might give you would violate their legally mandated neutrality. In a word, any TB who knows what they are doing will be as useless to you as they possibly can be. They’ll open doors so you can see houses. That, and transferring money and papers back and forth, is their job.
Any real estate broker in Colorado can sign a buyer agency agreement with you (see Key Documents), an agreement in which that broker commits to representing your interests in the purchase of a property. And while many brokers once resisted working with buyers under an agency contract (see Agency Law in Real Estate), most Colorado brokers today will agree to represent you even though they accept higher levels of responsibility and liability by doing so. I hope it’s obvious that any buyer who works with a broker who is not representing them under a buyer agency agreement is probably making a serious mistake. Just make sure that you understand your obligations to your broker under the agency agreement. It’s not a bad idea to have a real estate attorney review the agreement before signing (see Attorneys). I would strongly suggest including a clause that gives you the right to terminate the contract if you’re not satisfied with the work your broker is doing for you..
Why Exclusive Buyer Agency? The Technical Answer
First, the technical answer to that question: The broker in a traditional real estate office, where she and her colleagues not only work with buyers but also market properties for sellers, is constantly faced with a myriad of conflicts of interest which can create impediments to first rate representation of home buyers.
- Obligations to Sellers: Agents in traditional real estate offices have moral and legal obligations to market the specific homes that they have “listed” for their seller clients. They also have substantial financial incentives for pushing these homes, since they may double their income when the homes they’ve listed sell (see How Are Agents Paid?). This obligation is in direct conflict with the buyer’s interest in having unbiased exposure to the whole market.
- Agency Law: If you become interested a property that is listed by your “buyer agent,” he/she won’t be able to provide true buyer agency representation in showing the home or in helping you through the transaction if you decide to buy it. Remember, she’s agreed to represent the seller too. Typically, in this context, the broker will drop back into the neutral, mediating role of a transaction broker. And because of the inherent conflicts between the interests of the company, the seller, and the buyer that arise in this context, it is precisely here that the buyer most needs loyalty, fidelity and good faith — which the buyer has now lost.
- Public Image: All companies want to present a consistent image to the public, and for most traditional companies an important part of that image has to do with their ability to market homes quickly and effectively for sellers, obtaining a good price on the seller’s terms. Some would argue that this traditional image may be hard to maintain if the company’s agents are out in the market bargaining hard for home buyers and discouraging buyers from making offers on bad properties.
- Conflicts in Practice: We often mail to neighborhoods to find unlisted properties for our clients. After mailing a few hundred letters, we generally get several replies from homeowners who are preparing to put their homes on the market. Our client will have the option of buying these properties before they’re listed. But what if we worked for a traditional real estate company? Would we be tempted to try to list three or four of these properties– with the potential of making a double commission each time (see How Are Agents Paid?), rather than keeping the information confidential while our buyer client decides if he’s interested. Forget the mailing. What if we just received a call from a home owner who owns a home fitting our buyer’s needs. Might we be tempted to try to list the property for a 6% commission rather than calling our client and writing an offer where we would be paid 2.8%. By not listing properties, we avoid these conflicts.
I know that many of the brokers acting as buyer agents with traditional companies take their responsibilities in representing buyers’ interests very seriously. That’s a good thing, because offices like ours that practice exclusive buyer agency are rare. If traditional real estate offices weren’t offering the option of buyer agency representation, most buyers wouldn’t have the option. Still, it is more difficult for traditional agents to do a consistent, first rate job for buyers than it is for agents who work with EBA companies. All real estate agents have to deal with conflicts of interest everyday. That’s true for the exclusive buyer agent (EBA) as well as for the traditional agent. But the “buyer agent” working for the traditional company has to deal with a whole host of potential conflicts that simply don’t exist for the EBA..
Why Exclusive Buyer Agency? The Personal Answer
As a group, exclusive buyer agents — and those that own the companies they work for — are true believers. We do what we do NOT because it is a shortcut to the big bucks, but because we feel strongly that residential home buyers need and deserve the best representation they can get throughout the home buying process. This commitment to the EBA concept requires very real sacrifices. To operate as a true EBA office, all agents within the office must agree not to market homes for sellers, passing up a huge source of potential income in what is generally considered to be the easier and more profitable side of the real estate business. EBA’s pass up the seller side of the business not because they have anything against people who are trying to sell their homes. Even our past buyer clients, at some point, will become “sellers.” We’re happy to connect them with good agents who will market their homes and represent their interests in that process. EBA’s forgo this potential income stream on the listing side because we know that it is only by refusing to represent both buyers and sellers that we can provide the best possible service and representation to home buyers. That’s what we’re all about.
Not many agents are willing to make these financial sacrifices for the principle of true buyer representation. Even fewer are willing to risk their investment dollars to start companies that depend on finding good real estate agents that will work as EBA’s. That’s why EBA companies are so rare and why they are generally small. But those who are willing to take these risks and make these sacrifices are the kind of people who work hard to develop their real estate knowledge and who work hard to find ways to use that knowledge to provide better service to their buyer clients. That’s the kind of people we want to be working with. They are the kind of people who push us and support us every day to become better buyer agents and to do a better job representing our buyer clients. Our commitment to home buyers, buyer agency and to the concept of the EBA office are all part our commitment to help our clients get safely home.