For some reason, many consumers believe that when salespeople start explaining to them the benefits of the services they offer, such as negotiating skills, representation, etc., it’s just a sales pitch to get the consumer to sign on the bottom line. Then I receive e-mails and calls from buyers and sellers upset by the way their transactions went, although they acted against the advice of a professional.
Consider this scenario:
Buyer A says when he submitted a contract, the listing agent said she would not divulge information regarding his offer to another buyer. He contends that the sellers were intending to accept his contract but the listing agent divulged its terms to Buyer B, who then increased her offer. Buyer A says he was not given similar information regarding Buyer B’s offer and was told subsequently that a contract had been signed and he no longer could increase his offer.
Buyer A says he had an escalation clause in the contract (meaning the agent could increase his offer if another contract came in with a higher price). Although Buyer B did not have an escalation clause, he says, she was allowed to increase her price three times. (Buyer A fails to explain how he knows all the intimate details of these negotiations.)
Was something wrong done here? No. Was it unfair to Buyer A? Again, no. If Buyer A wanted to be taken care of as the seller was, he should have hired a buyer broker.
The listing agent’s job is to sell the house to the buyer willing to pay the most money with the strongest contract.
Interestingly, I hear the argument many times that it was “the agent’s fault” or “the seller’s fault that my contract was rejected.” It’s never: “Too bad I didn’t offer more” or, “I wish I had hired an agent to represent me.”
Buyer A never hired a buyer agent. Instead, he went straight to the listing agent to make an offer on the house. Keep in mind, listing agents are hired by the seller to get the best offer they can for the seller. While agency laws throughout the country require agents to treat the buyer honestly, they also require that the agent represent the fiduciary interests of the seller.
The only persons required by law to look after the fiduciary interests of the buyer are buyer agents. If the buyer doesn’t hire a buyer agent, he’s cutting himself off at the knees, negotiation-wise.
If the above agent was seeking out the best interests of her seller, then Buyer B obviously had a stronger contract. Keep in mind, however, stronger doesn’t always a mean highest price. If Buyer B had a lower price but better financing options or was asking for fewer seller subsidies, that easily could have made the offer more enticing than a higher-priced contract without such features.
Other aspects of the transaction process Buyer A overlooks are the attitudes and emotions of the seller. Even if the listing agent had done everything Buyer A had requested, the seller has the option of negotiating with whomever he wants.
Many times, buyers believe their contract is the best thing since sliced bread. (It seems they especially think this when they get beat out in a competing-contract situation.) The truth remains, however: Because Buyer A was working with the listing agent instead of a buyer agent, he didn’t have the same representation as the seller.
At the risk of sounding repetitive, let me reiterate: Buyer agents represent the buyer. Listing agents don’t. They represent the seller. Granted, they usually are very nice people, loaded with all sorts of information on financing and the house you’re visiting but they represent the seller.
While the listing agent is there to help buyers with any questions about the property, anything a buyer tells them must be reported to the seller if it’s in the seller’s best interest to have that information.
The buyer agent works the same way but for the buyer. If a seller happens to tell the buyer agent he’s selling because he’s getting a divorce, it definitely would benefit the buyer to know that. Although the seller may not want the buyer to know his personal business, the agent must divulge that to his buyer to help the buyer make a decision on his offer.
If you must share your personal financial information with a real estate agent, first sign an agency agreement with him or her. Then you know for whom the agent works.
I think the best bit of advice to buyers who are considering purchasing a house without a buyer agent comes from our Navy friends: Loose lips sink ships. They also can sink real estate deals.
M. Anthony Carr has covered the real estate industry for 11 years. Please send your inquiries and comments to 8411 Arlington Blvd., Fairfax, Va. 22033; or e-mail email@example.com.