Buyers - Who Represents You?

An important topic in the world of real estate is the issue of agency. Some people might have you believe that it really doesn't affect you, the buyer, and that nothing much has changed. But here are some issues to consider.

The topic of agency is important to buyers because it answers the most fundamental question that can be asked of any real estate professional: Who do you represent in this transaction?

Until that question is answered, you may be left with the impression that all agents who work with buyers actually represent those buyers, and that you have somebody representing your interests in a transaction. Well, the issue of agency is important, because without it you can never be sure who represents you in the real estate transaction. 

Here's a scenario:

At an open house, you meet a great real estate agent. Even though the house the agent shows you is not right, the agent tells you there are others that fit your needs exactly. You spend an hour or so with the agent  looking at a half dozen homes and talking about your needs and your wants. During the course of the conversation, you volunteer some information including your financial position and the maximum amount you are willing to pay for a home. Then you find the perfect house. You make an offer for less than the full asking price for the home.  During negotiations, the seller asks the agent directly how much cash you have and how high will you go. What does the agent say?

Here's the answer: Unless you have signed a "Buyer Agency Agreement" with the agent making them your buyer agent, they are most likely acting as a subagent to the listing agent who represents the seller. If that is the case, the agent  has a fiduciary obligation to the seller to disclose to him any information that might "promote or protect his interest" in the transaction. Guess what? The agent has that information.

The seller, having talked to the agent now has knowledge of your financial position, counters with the full asking price. The seller knows you can afford it and that this price falls within your desired range. The seller also knows that you have seen a number of other homes and that this is the one you want.

Regardless of what eventually happens in this scenario, it can hardly be called an even playing field. So, how can you protect yourself from a possible disclosure required of a seller's agent?

  1. Know the relationship with the agent. In New Jersey, real estate agents have an obligation to disclose how they intend to work with buyers and sellers in a real estate transaction.  When meeting with a real estate agent they will provide you with the "Consumer Information Statement Real Estate Relationship in New Jersey" or CIS, which will help you understand the type of business relationship you have when working together.
  2. Never disclose anything you wouldn’t want the seller to hear.  When attending an Open House assume that you are talking to a Seller's Agent, and never divulge anything confidential unless you are willing to have that information repeated to the seller.  Unless you have agreed to work with a Buyer's Agent be discreet in disclosing any personal information.
  3. Consider hiring a Buyer's Agent. Make sure that the agent you are working with has agreed, in writing, to represent you as a "Buyer's Agent."  The buyers agency agreement will outline the terms and conditions by which you both agree to work together.  The buyer's agent will have a fudiciary responsibility to protect your interests during your home search.