Home Buyers, Does Your Agent Work For You?

As a buyer, you may be looking at many properties — those listed with an agent as well as those sold privately, “by owner.” Let’s say you call a real estate agency regarding a listed property you have found in MLS (multiple listing service), the newspaper, or by driving by. Traditional agencies will offer you ‘buyer assistance’, meaning that they will show you properties, direct you to mortgage lenders, etc., all without a contract.

The agent you meet who shows you that property will be anxious to show you other properties, of course. You begin to feel that this agent is “your agent.” NOT TRUE. This agent works for the agency that listed the property, and most likely is working for the seller of the property, not you. Anything you say may be carried back to the seller at any time.

Agents may call themselves many things according to state regulations. In Massachusetts, for example, the “listing agent” is the agent who obtained the listing from the seller. The “selling agent” is the agent who actually makes the sale. In order to better understand this concept, bear in mind that a real estate agency makes the most money when one of their listed properties is sold by an agent “in house.”

Most properties are not shown or sold by the listing agent. Although the homesellers may have spent considerable time with the listing agent discussing the fine points of their home so that they will be knowledgeable when showing it, the property will most likely be shown by agents who are totally unfamiliar with their home. Remember, whether talking about a listing agent or a selling agent, unless you have signed a contract with a buyer’s agent, their allegiance is always to the seller.

As if this isn’t complicated enough. using Massachusetts regulations as an example, a broker can work for both the buyer and the seller on the same property provided the broker gets the consent of both parties and provides each with a written notice of the relationship. In this case, the broker is considered a “disclosed dual agent.” This broker owes both the seller and buyer a duty to deal with them fairly and honestly.

In this type of agency relationship, the broker does not represent either the seller or the buyer exclusively, and neither party can expect the broker’s undivided loyalty. Realistically, it’s hard to imagine that properties are not discussed over lunch or between agents sitting at the next desk. Undisclosed dual agency by a broker is illegal. The agent must present the buyer with an agency disclosure form upon first meeting to discuss a particular property.

The use of an agent becomes further complicated when the subject of seeing properties offered “by owner” is brought up. Unless the agent that is showing you properties is a buyer’s agent, the only way he/she can get paid is to get the private seller to list the property, something that is not likely to happen. You don’t need an agent to see a for sale by owner property and some sellers prefer not to negotiate with anyone but the buyer directly. If you do feel that you need representation, the one agent that has loyalty to you, the buyer, is a buyer’s agent.

A buyer’s agent (ie. buyer broker) represents you, the buyer, and never the seller. Some buyer brokers are known as “exclusive buyer brokers/agents”. Exclusive buyer brokers do not list property – period, nor are they housed in an agency that does. The buyer broker’s commission, typically 3%, is generally accommodated in the selling price of the property, paid at closing. The National Association of Exclusive Buyers Agents (NAEBA – http://www.naeba.org) is a good resource to locate buyer’s agents in your area. Buyers, remember that a buyer broker is able to show you listed properties, foreclosures, new construction, and for sale by owner properties.

A word of caution….make sure you tell the agent that you want to see ALL available properties without regard to who pays the commission. We have often heard of overly aggressive buyer’s agents who will not inform their buyers about a property unless the seller agrees up front to pay their commission. This behavior is unwarranted as the buyer has already agreed to pay any commission due.

NOTE: If you are currently working with a buyer broker and you are looking at a for sale by owner property, please let the seller know up front. Don’t wait until the negotiations are underway to bring in representation. It could easily kill the deal. Most sellers are very open to showing their property to you and your buyer broker – just don’t assume they’ll pay your agent’s fees.

Ten (10) Reasons to Work With a Commercial Buyer’s Agent

Looking to purchase commercial real estate for your business or as an investment? The following are ten (10) reasons to strongly consider using a Commercial Real Estate Agent to represent your interests.

10. Provides a manager for the buying process.

A good Commercial Real Estate Agent will keep your property closing on track. For example – What is the status of the title commitment? Are there any questions or concerns with regard to the title commitment? Has the survey been ordered and completed? When is my feasibility period over? When does my earnest money go “hard”? Is the financing in place? Is an appraisal required and has it been completed? Have any necessary inspections been ordered and are they complete? Has an attorney reviewed the purchase contract? Have all of the closing documents been reviewed?

9. Referrals for experts who can assist with the property purchase.

Commercial Agents know other real estate professionals that can provide their expertise to the property purchase process. Professionals such as attorneys that specialize in real estate, title companies, surveyors, engineers, architects, CPA’s, insurance companies, building / property inspectors, environmental consultants, contractors, appraisers, etc.

8. Assist with due diligence.

As a part of the property purchase process, an experienced Agent can assist the Buyer in making sure that the appropriate items are researched to make sure that the property works for the Buyer’s needs. Due diligence is the pre purchase effort made to discover, and analyze information about the property under contract. Agents can assist the Buyer with obtaining the necessary documents and provide a checklist of these items including information regarding zoning, jurisdictional requirements, floodplain, easements, covenants, conditions and restrictions, utilities, etc.

7. Identify and assist with evaluating property conditions.

Commercial Agents can assist Buyers with identifying the most important items to be considered as a part of the purchase and evaluation process including a look at:

* Location

* Physical condition

* Allowable uses

* Limitations on interior / exterior additions or renovations

* Adequacy of access and parking

* Opportunity for expansion or leasing excess space

6. Experience from working with other Buyers

Based upon past experience, Agents can recommend other considerations to the Buyer such as – “Consider purchasing additional square footage which provides your business room to grow and until the space is needed the extra space can be leased and provide help with paying the monthly bills”.

5. Allows you to spend time with your business.

Let a Commercial Agent spend their time finding you property which allows you to spend time conducting your business. Focus on your expertise and let an Agent assist you by focusing on theirs. Time is too precious a commodity to be spent driving around looking for property.

4. Price and term negotiation expertise.

There is not another business professional with the experience and expertise that a Commercial Agent has to assist with purchase price and contract negotiations. Issues such as – What is a reasonable and fair price for the property? Is this a good buy? What terms and conditions should be in the contract to make sure that my interests are protected? Should I get some amount of inspection and feasibility time as a part of my contract for purchase so that I can better study the property and confirm that it meets my needs?

3. The cost to the Buyer is zero, zip, nada.

The Seller pays the Buyer’s Agent’s commission through a commission agreement between the two parties. The full cost is borne by the Seller.

2. Local Market Expertise

No one is going to know the local commercial real estate market as well as a Commercial Agent. The Listing Agent isn’t going to tell you if his/her property is listed above the market rate and only an experienced Agent can advise you with regard to the location making sense for your particular type of business.

1. Buyer’s needs differ from those of the Seller and they need representation to protect their own unique interests

The Seller or Owner will be represented by a Listing Broker and this Broker’s fiduciary responsibility is to the Seller. The Texas Real Estate Commission’s (TREC) “Information about Brokerage Services” states that “the Broker who lists the property for sale or lease is the Owner’s Agent”. It further states that, “a listing broker can assist the Buyers but does not represent the Buyer and must place the interests of the Owner first”. Finally it notes that “the Buyer should not tell the Owner’s Agent anything the Buyer would not want the Owner to know because an Owner’s Agent must disclose to the owner any material information known to the Agent. This is not a good situation for a Buyer to be in. Sellers have representation from their Listing Agents, Buyers need the same from a Commercial Buyer’s Agent.