I was having a conversation with some buyer clients of mine recently about new construction, and builder contracts. They were surprised to learn that I could represent them as their buyer’s agent on a contract to build a new construction home. Indeed, they didn’t know, and hadn’t considered it before I mentioned it. Actually, it’s not all that different from representing them on a traditional home purchase; in addition to negotiating on their behalf, I can also help them ensure that they include options in their home that will maximize the resale value. (That’s a whole different post!)
The conversation reminded me of a post I wrote back in January 2008, Myth Busted: Buying Without a Buyer’s Agent Does NOT Lower the Price of the Home. I had every intention of rewriting that post for today, but when I re-read it, it still holds true. Don’t worry about clicking forward to the original post, here’s what I wrote then:
Now that so much information is available to potential buyers on the internet, from virtual tours to tax records, I have noticed a number of buyers purchasing homes unrepresented by a buyer’s agent. Most of the time, their reasoning behind doing this is that they hope to get a better deal on the home: thinking without bringing an agent with them, the seller won’t have to pay a commission on the buying side, and will lower the price of the house. Unfortunately…
That isn’t what happens. The buyer is not part of the listing agreement, which spells out the commission. That is between the brokerage firm and the seller. The seller is responsible for the full commission amount either way; the buyer’s agent compensation is offered to a cooperating brokerage firm for bringing a buyer and handling that side of the transaction. If the buyer isn’t represented, the listing agent has to accomplish all of the contractual work that the buyers’ agent would handle, except the BUYER DOESN’T HAVE THE BENEFIT OF BEING REPRESENTED.
Allow me to explain further: an unrepresented buyer will still need to have the listing agent help them write their offer to purchase, including all of the assorted addendums and clauses that they need and/or want to have included. This will be done without any advice as to exactly the purposes of the provisions, or how to take advantage of the many protections for the buyer that are standard in the contract to purchase, if you know how to use them properly. If the offer is countered, the buyer is on their own on how to respond to that counter, including what terms of the contract to adjust to make both sides happy and get the deal done. The listing agent will handle moving the paperwork back and forth, but will be representing the seller’s best interest (which is his/her job, and in fact legal obligation.) Once the contract has been ratified, the listing agent will be the one to make sure that all paperwork reaches all parties: seller, buyer, lender, title company; the listing agent will make sure the inspections are completed and contingencies met, addendums written and signed.
In this situation, the seller is the CLIENT of the listing agent, while the buyer is a CUSTOMER. It is the obligation of the listing agent to be fair to the customer, but their fiduciary duty is to the seller. They are representing the seller’s interest in the transaction, even though they are facilitating the paperwork for both sides. Whether or not the buyer is represented has no bearing on how much commission is being paid on the listing.
As a buyer, doesn’t it make more sense to have someone representing YOUR interests?
Now, I’d certainly love to be your buyers agent. But if you don’t use me, please use another agent! There’s no reason to go unrepresented. Questions about the buying process? Questions about the market? Click here to ask me.
(I realize that I didn’t talk about dual representation in this post ~ that’s when an agent represents both buyer and seller. I refuse to do it. I’ll explain in another post next week. Too many words in this post already!)