Buyer's Agency     
 

 
What is an EXCLUSIVE BUYER’S AGENT?
 
The real estate industry has dramatically changed since the concept of Buyer’s Agency set new standards for transactions in residential real estate.  At Geary & Associates, we're changing the way real estate transactions are conducted in Tampa, one Buyer at a time!

The discussion below explains some of the ideas and history of the Exclusive Buyer's Agent (EBAs) movement in real estate.

These new standards assure that Buyers are represented by a true agent: in a nutshell, an Agent walks in the shoes of the Client. The Client’s best interests must, by the Common Law of Agency, come before the interests of the Agent.
 
Exclusive Buyers Agents have taken a chance by aligning themselves against the powerhouses of the residential real estate industry -- the mega brokers and the national and state associations of Realtors have worked diligently to muddy the waters for consumers, but even the Oklahoma Supreme Court affirms that EBAs save buyers money!

For example, an attorney can not represent two or more parties.  That’s why a law firm must do a "conflict check" before learning the reason why you are visiting that law firm.  By the Code of Ethics, an attorney can not even give the appearance of a conflict of interest.

Now, let’s take that concept into the real estate industry.  A Buyer's Agent and an Exclusive Buyer's Agent are not necessarily the same!  It is essential that you know the Brokerage is the Agent.  The associate of the firm that you call "my real estate agent" is not an agent in legal terms.

 
Exclusive Buyer's Agents: Consumer Protection!
At a minimum, a Buyer’s Agent must:
  • be licensed with the regulatory department of the State in which the licensee practices;
  • establish the relationship between the Buyer and the Brokerage through a written agreement between them;
  • give the Buyer 100% loyalty and 100% confidentiality.

In the 1980s, a small group of licensed real estate professionals established the principles and practices of representing only buyers in the purchase of real property.  They called themselves Exclusive Buyer’s Agents. They take no listings; therefore they have no conflict of interests.

Exclusive Buyer’s Agents do not work for the Seller and are not paid by the listing brokerage, because that would cause a conflict of interest.

This concept of Exclusive Buyer’s Agents became a threat to the traditional brokerages that always controlled the listing and the disbursement of commissions in the past.

As the concept of "Exclusive" Buyer’s Agents gained popularity and recognition with Buyers, demand for exclusive services for Buyers increased.  In response, traditional brokerages began to muddy the waters.  They feared the loss of the double dip ... collecting commissions from both the Seller and the Buyer in a single transaction.  Then, some traditional brokerages began to offer their associates a bonus for selling an in-house listing. (You see traditional brokerages are in the business of selling products, er, houses.)

What happened then?  The traditional firm's associate learned the secret motivations of the Seller and listed the property in the firm’s own database.   Then the property was listed in the Multiple Listing Service.  (MLS is a membership of brokerages who agree to "co-operate" in selling properties.)  But a complication arose with real estate professionals representing the Buyers in transactions when the brokerage that brought the Buyer was party to that agreement and terms of compensation.

Why was this a problem?  Because the Listing Contract between the Seller and the selling (listing) brokerage is a private contract.  All commission money goes to the selling (listing) brokerage.

The complication arose because the Agent is the firm, whether it is a law firm or a real estate brokerage.

As traditional real estate brokerage firms realized the legal implications of the term "Agent" and their responsibilities within that legally binding relationship, many have since chosen to use other words to describe or not describe their product(s).   You now see Acme Properties Inc. and Acme Residential Real Estate Co, Inc. as well as other variants.  It seems only consumers referred to "my real estate agent" or agency.

As traditional brokerages lost "double-dip" commissions, they regrouped and focused their marketing efforts on the uneducated Seller and uneducated Buyer.  They appealed to the emotional and financial needs of the Seller and the Buyer by telling each: "You can trust me."  They did not mention the incentive and motivation of the brokerage and individual associate to collect commissions from both sides in a single transaction.
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New Real Estate Terminology Is Born
Thus came new terminology in the real estate industry.  Traditional brokerages, with their "deep pocket" funding, began to change the Common Law of Agency through the state’s legislative process, utilizing trade associations and their own marketing activities.

Wordsmithing of various and new real estate relationships went on the fast track.  But wordsmithing alone doesn't change the legal implications of agency relationships.
Single Agent: Represents a Seller OR a Buyer, but never both

Client + Licensee = Agent Relationship by Law

An "Exclusive" Buyer’s Agent is a Single Agent.

An Exclusive Buyer’s Agent gives full 100% loyalty and 100% confidentiality to the Buyer and the Buyer alone, thus putting the best interests of the Buyer before the Agent.

Some of the hallmarks of an Exclusive Buyer’s Agent's services:

  • Can give "advice & counsel"
  • Does not list properties; has no conflict of interest in a real estate transaction.
  • Uses several resources to locate properties on behalf of the Buyer, including MLS, For Sale By Owner and Bank Owned properties.

The National Association of Realtors is a trade association for real estate professionals.  By sheer numbers, traditional real estate firms dominate this association.  It follows that the NAR describes relationships with Buyers and Sellers much differently -- an attempt to legitimize this practice of a majority of members -- collecting "double-dip" commissions.

This is where wordsmithing comes in:

Dual Agent: Some states have realized that no Agent can represent two disinterested parties, both Seller and Buyer in a transaction.  Thus a dual agent plays a double role.

To facilitate traditional firms in attempts to serve two masters, a new definition emerged:

Buyer’s Agent: A licensee in a traditional firm may represent a Buyer, but not in a transaction involving that firm’s listing Seller.

Other definitions were born of desperate need to legitimize the "double-dip" commission:

Transactional Broker Notification: Official notice to the Seller and/or Buyer that the Broker is facilitating a transaction for a commission.   The Broker does not represent either party in this relationship, but usually collects a commission from both Seller and Buyer for the transfer of a single property.  This relationship should sound a warning to an educated Buyer or Seller: Customer + Licensee = Be Aware! You have no legally binding Agency relationship with a transactional broker.

Wordsmithing became more creative, which is understandable because these new definitions made the Exclusive Buyer’s Agent all the more desirable for Buyers.

Designated Agent: The broker of a firm is the "Agent" who designates an associate of the firm to "represent" the Seller; the broker also designates another associate of the same firm to "represent" the Buyer.

This practice has not been tested in the court system of any state.  What do you think the chances are that the designated representative of the Buyer and the designated representative of the Seller do not engage in casual conversation between associates.  Or the chances that associates do not share customer information during weekly office meetings, don't overhear telephone conversations, never see listing files or buyer’s files?  The legal complications of imputed knowledge (shared information within the firm) make impossible a relationship that is truly loyal to either Buyer or Seller.

Buyer’s Representative: Notice the word "Agent" is missing.  You have to ask yourself, are the duties of an Agent missing, too?

Transition to Transactional: The Seller and/or the Buyer gives permission to the brokerage through the licensee to change from a Single Agent relationship to the Transactional Broker Notification relationship.  This often happens when another licensee in the same brokerage finds a Buyer for a property listed by the firm.  This also can happen when the Single Agent representing a Buyer lists a Seller's property that fits the needs of the Buyer.
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Establishing a Real Estate Relationship
These relationships are established in writing between:

(1) the Brokerage and the Seller through the employment Contract/Agreement to list the property "For Sale" to get it SOLD, and;

(2) the Brokerage and the Buyer through the employment Contract/Agreement to procure the property for the Buyer to BUY.

Before any relationship is agreed to in writing, the licensee must or should give the Seller and/or the Buyer a state-required document, the Notice of Non-Representation.  It is a legal requirement that a licensee who does not represent the Seller alone or the Buyer alone cannot give advice and counsel concerning a real estate transaction.

In Florida, Notice of Non-Representation must be given before a licensee takes a listing and/or before a licensee shows a Buyer a property.  This sounds simple, but it is seldom easy for a licensee in a traditional firm.

The Exclusive Buyer’s Agent does not have a problem giving this Notice of Non-Representation because the EBA brokerage does not take any listings; there is no conflict of interest. An EBA legally can give the buyer "advice & counsel" concerning the transaction.

Be aware of a situation that may develop if a licensee in a transactional relationship does give "advice and counsel."  In this situation, the licensee has acted as an "Agent."  The law does not permit a licensee to give "advice and counsel" except in a Single Agent relationship.

Be an informed party in a real estate transaction -- ASK for the written Notice of Representation before you talk to any real estate licensee!

The Florida Notice is shown below:
 

Notice of Non-Representation

Florida law requires that real estate licensees provide this notice at first contact to all potential sellers and buyers of real estate.

You are hereby notified that

(name of brokerage)

and (name of licensee)

DO NOT REPRESENT YOU IN ANY CAPACITY.

You should not assume that any real estate broker or sales person represents you unless you agree to engage a real estate licensee in an authorized brokerage relationship, either as a single licensee or as a transactional broker. You are advised not to disclose any information you want to be held in confidence until you make a decision on representation.

Your signature below acknowledges receipt of this form and does not establish a brokerage relationship.

______________________________________
Date/Signature (Optional)
 
Note: Only one signature is requested and that is "Optional".  Most Sellers and Buyers are husband and wife.
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Cautions for Buyers of Florida Properties
What happens if you do not get this form and do not establish a relationship in writing in Florida: You are considered "NON-REPRESENTED" in the real estate transaction.

Non-Represented: Listing brokerages do offer compensation for licensees to bring Buyers to buy their listings -- yet that Buyer’s licensee does not represent the buyer!

Property Ads: Look to see what they are NOT telling you in the description of the property.  If it is a nice house with a low price; where is it located?  Does the lister call him/herself an Exclusive Seller’s AGENT? (I don’t think so!)  Does the lister call him/herself a Buyer’s AGENT?   Probably!

You must remember this: If you call about a listed property, the licensee has not established a written relationship with you.  By law, you become a "Customer" of that licensee’s brokerage.  Do not give any personal information, but try to collect information for YOUR benefit.

Be Aware: When a licensee says that they can be your Buyer’s Agent, and by having you call about a listed property, the licensee has used a "bait ‘n switch" tactic.  Would you want "Your Agent" to do that to you? Think about it!

Would you hire the same attorney as your adversary?

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Protect Your Interests!
If you are a Buyer, you ask the questions of the licensee.  Real Estate is BIG business!
  • Protect your transaction - Give NO information until you have established your relationship, in writing, with a Single Agent - either an Exclusive Buyer’s Agent or Buyer’s Agent who will NOT show any in-house listings.
  • Collect factual information only about a property.
  • Do NOT give your name, address, phone number, or email address when calling a brokerage on an ad or lawn sign.
  • Get an anonymous email address!  Many companies track your confidential information through your email address, thus making you their "Customer."  Your confidential information may be given to other service providers, including mortgage and title insurance companies; moving companies; and home warranty companies.  Most often those other providers are owned by the same company that owns the real estate brokerage or are given a referral fee for your business.
  • Interview Exclusive Buyer’s Agents and select the one whose judgment you trust and with whom you feel most comfortable. They know the marketplace; they know the ways of the other members of their Multiple Listing Service and members of their local Board of Realtors.

This is not to be considered legal advice.  Consult with an attorney in your area for legal advice and counsel.

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