Phoenix Urban Living News. Real Estate In Phoenix Arizona

Agency Relationships Between the Buyer and Seller

Agency relationships or what we define as Buyer representation has progressed dramatically since the early 90’s. Remember the days when the agent that drove you around looking at homes and they actually represented the seller of any home that you previewed?

During this whole time the agent was representing the seller. The agent had never met the sellers of the homes they were showing these buyers, but yet those were the laws. The buyers had no idea and assumed that the agent represented their best interests.

Now the rules have changed. Buyers and sellers now sign a real estate form that says who the agent represents. It by no means is a commitment from the buyer or seller to work directly with that agent; it is only a means of “disclosure” to the buyer and seller.

Over the years I’ve known several buyers who actually think they will save money by dealing directly with the agent who is the listing agent on a property. This listing agent then writes an offer on behalf of the buyer but the agent’s fiduciary duty is to get the highest price for the seller, not the lowest price for the buyer. This strategy can actually cost the buyer thousands of dollars more when the negotiations start.

Buyer representation is vitally important and should not be taken lightly by the buyer. One example might be this; the listing agent or the agent who represents the seller, shows the buyer a home. The buyer absolutely loves the home and wants to make an offer. The buyer makes an offer that is lower than the sales price but in conversation, mentions to the listing agent they would be willing to go higher on their offer. The listing agent has a fiduciary duty to disclose to their seller that you, the buyer, are willing to go higher on your offer price.

Most buyers don’t realize this, but walking into a new home community without a real estate agent can be very costly. That’s right, the salesperson at the model homes represents the builder/seller, not you the buyer. So this salesperson has a fiduciary duty to get the builder the highest price possible for the new home.

If the buyer goes to a new home community by themselves and falls in love with one of their models, then they call their agent to meet them there can be disastrous. Most builders will not allow this even if the buyer did not register with the new home subdivision on their first visit. Once you cross that threshold in a new home community, the builder will not allow you to be represented by an agent.

Buyer’s agents use a real estate form in their business called a “Buyer Broker Exclusive Employment Agreement”. Many buyers tend to shy away from signing this disclosure form upfront, but it really protects the buyer and buyer only. It’s not an agreement that forces the buyer to purchase a home but rather an agreement in writing that the agent agrees to “exclusively” represent (look out for their best interests and work for the buyer making sure they get the best possible price for the home) the buyer when they do decide to purchase.