Weekly chit-chat about new listings, sales or other insider info on the Martha’s Vineyard real estate market, by Fred Roven, Martha’s Vineyard Buyer Agents, appears each Friday in The Minute.
For the past 20 years, working as an exclusive buyer agent, I have done and said everything I can come up with to explain the law and concept of agency to buyers and the general public. Unfortunately I have failed. I am still asked “Well, who do you represent” and “Yes, …but who pays you?” In 1983, a Federal Trade Commission study revealed that more than 72 percent of home buyers in the United States mistakenly believed that the agent who was showing them homes was representing their interests. Before I get too far into this explanation (yet again) please know that state law and association guidelines requires every agent to disclose known material defects on every property to potential buyers.
The law of the land used to be, based on the law of agency: Every broker represented the seller either as their direct broker or in a cooperating relationship with another broker who brought a client to the property. All of the agents involved in a transaction owed their allegiance to the seller, and buyers were unrepresented. Without getting too deep into the history of agency law, every agent is now required to disclose in writing to a buyer at their first meeting exactly who they represent in the transaction (in MA). The fees paid to brokers regardless of their relationship is included in the price of a home and negotiated by seller and their agent. Again, not to get lost in the woods with detail, a buyer broker can be compensated by the seller and still owe fiduciary responsibility to the buyer (in MA).
The ability to represent sellers on an exclusive basis and offer compensation to cooperating brokers acting as subagents was the foundation upon which the MLS system was built and the best I can say about that is good riddance. I should mention the National Association of Realtors has not adopted the new relationships wholeheartedly and defer to state law. Sub-agency had not only protected brokers from claims of undisclosed dual-agency (see below), it had also provided Realtor associations an antitrust defense.
The types of agency representation now are:
- Seller’s Agent: A broker who represents a seller
- Buyer’s Agent: A broker who represents a buyer in an office that takes listings
- Exclusive Buyers Agent: A broker who represents a buyer in an office that does not take listings for sale and all agents represent buyers.
- (Non-Agent) Facilitator: To be honest, I am not sure they hold any allegiance so I would advise against their representation.
- Designated Seller and Buyer’s Agent: In an office that takes listings, brokers can be designated to represent either a buyer or a seller but not both at the same time
- Dual Agent: A situation where both buyer and seller agree to let both brokers represent both sides in the transaction.
At your first meeting with a broker, you will be asked to sign a disclosure form that explains the difference between a seller’s agent, who provides undivided loyalty to the seller, and a buyer’s agent, who represents the buyer’s interests. A dual agent can represent the buyer and the seller, but both parties must consent to the arrangement and acknowledge that they are giving up the benefits of exclusive representation. Buyers would have to agree to some form of dual agency in the event that they wished to buy a home which that company has listed for sale and for which it represents the seller.
My feeling about commission: Even though attorneys insist on showing the commission coming from the seller, there is no sale without the buyer’s money. Although the seller typically pays the agents’ commission, that fee comes from the purchase price of the home — in other words, out of the buyer’s pocket — so buyers who think they have no financial obligation to an agent are deluding themselves. My preference would be to show the commission coming partly from the seller and the other part coming from a negotiated commission between buyer and buyer’s agent.
In this do-it-yourself era of online real estate listings, it is easy to find out what is on the market, visit open houses and even research sales data to come up with a reasonable price to offer for a home.
The issue is, a buyer who relies on the seller’s agent to handle both sides of the deal may doesnot have a real advocate during contract negotiations. When you work with a buyer’s agent, their fiduciary responsibility is to you as a buyer. Obviously a broker representing a buyer and a seller in a transaction will always be honest, and no person can have undivided loyalty in this arrangement.
Many buyers work directly with listing agents, feeling that they have a broad enough understanding of the market and available properties that they will be able to help them find their dream home. The only problem is that listing agents are middle players. It’s one of their responsibilities to connect buyers with homes, but they’re far more invested in protecting the seller’s interest.
Whether it’s a dream vacation property or a place that you’ll want to call home forever, buying a house on Martha’s Vineyard is an exciting adventure. It’s can also be overwhelming. There are so many steps between the first time you set eyes on the property you want as your own and the day you sign on the dotted line.
What many home buyers don’t realize is that they don’t need to go through the process alone. There are real estate professionals that work for the buyer only, keeping their needs and best interests in mind while making the process of becoming a homeowner much easier. These professionals are called buyer’s agents and you should work with one when purchasing a property on Martha’s Vineyard. Every buyer’s agent pledges undivided Loyalty: Prohibited from advancing any interests adverse to the clients Interest.
Overall, is having a buyer’s agent crucial? It can be very helpful. You will may feel more comfortable about the process and potentially get a better deal in the end. When you’re ready to become part of the wonderful community on Martha’s Vineyard, we’re the buyer’s agents that will stand by your side. Contact Martha’s Vineyard Buyer Agents today to learn more.
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