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The vast majority of home buyers use a Real Estate Agent when they purchase
their home. Why? Simply because of the fact that without an Agent, their choices of homes will be limited to those
offered by FSBO's--For Sale By Owner. Generally, the availability of such "FSBO" houses is somewhere
in the 20% range of the total market, meaning that "self-buyers" do not have access to 80% of the available
homes in any given market. Nevertheless, there is always the possibility that by doing it on your own, you may
realize a savings, since the seller does not have to pay a commission. How much of that saved commission gets "credited"
to you depends on your skills as a negotiator and how badly the seller wants to sell the property.
If you use an Agent, however, it is vitally important to understand the notion of "Agency", which determines
who represents whom, and where an Agent's loyalties lie.
Who Represents Whom
One of the most common misconceptions that is shared by a large number
of home buyers is that when working with a Real Estate Agent, he or she will "automatically" represent
you as a buyer. As we will discuss, unless this is specifically disclosed in writing, in all probability the Agent
will be representing the seller.
The traditional relationship (probably going back to when the first thatched hut was sold by someone other than
its owner) has been that a Real Estate Agent's primary loyalty was to the seller of the property. This relationship
was in effect whether the Agent was the listing agent or working with a buyer. This situation caused many home
buyers to be confused: they assumed that the Agent that had been driving them around showing them houses for the
last 3 weeks was representing them. In reality, the Agent was representing the owners of the houses they saw, and
was bound to reveal to those owners any information he or she knew about the buyers.
Buyer's Agency, which is almost universally available now, changed all that. The buyer now has a choice in representation:
the Agent with whom they are working can continue to represent the seller in the transaction, or the Agent could
represent them as buyers. The buyer is now able to compete on a more level playing field.
Although there are state to state variations (please verify the situation in your particular locality), the following
is a basic summary of the types of Agency, and who the Agent represents.
SELLER AGENCY: The "default" situation. Unless
disclosed to the contrary, all Agents involved in a Real Estate transaction (and their Brokers--with whom a listing
agreement is actually with) represent, and owe their allegiance, to the seller.
BUYER AGENCY: When an Agent represents
the buyer, that Agent "rejects" the implicit seller agency and thus owes loyalty to the buyer. See the
Buyer Agency section for a complete discussion on this topic.
DUAL AGENCY:
This occurs when 2 Agents--or the same Agent--working for the same Broker each represent a buyer and a seller in
a transaction. This situation must be disclosed to both the buyer and the seller. Privileged information (e.g.
the price that a buyer will pay or a seller will sell at) cannot be disclosed to the other party without the express
permission of that party.
Looking for a Real Estate Agent? To find an Agent in the area in which
you are interested, click here. (You can compare a selection of top-performing Agents and remain anonymous throughout the search
process.) More information.
What it means to you
If you leave the agency question "as-is", your Agent will automatically
represent the seller in the transaction (although it is very likely that they will suggest Buyer Agency.) If the
Agent does not represent the seller, then you can opt for Buyer Agency. If the house in which you are interested
is listed by the same Broker as your Agent, then you have an automatic Dual Agency situation. To sum it up, if
you want full representation, insist on Buyer Agency.
Summary: Advantages of Buying Real Estate
On Your Own or With an Agent
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You
can try to find a "For Sale by Owner" who is willing to sell at a reduced price.