007: Licensed to Sell: When a home buyer needs a ‘buyer’s agent’

Friday, April 07, 2000 By Robert J. Bruss
Tribune Media Services

A few weeks ago on a flight to Chicago, after going through the usual “what business are you in” pleasantries with my seatmate, she told me her tale of woe about the problems she and her husband are having finding a home for purchase. She said they have been searching, off and on, for at least six months.

During this period, they made several offers that, for one reason or another, never resulted in a home purchase. To put it mildly, she had nothing good to say about the real estate agents she and her husband encountered.

That’s when I asked her, “Do you have a buyer’s agent?”

“What’s that?” she replied.

Surprisingly, although home sellers have listing agents, most buyers are not aware they can, and usually should, have a buyer’s real estate agent, who will look out for the buyer’s best interests.

During the past few years, many real estate agents have switched from primarily representing sellers to working exclusively for buyers. The National Association of Realtors now even has professional training courses and designations for buyer’s agents.

The two types of buyer’s agents

One type of buyer’s agent works in a brokerage that only represents home buyers. These firms do not accept listings of homes for sale. Most of these exclusively buyer’s agents ask prospective buyers to sign 30-day or longer buyer agency contracts, obligating the buyers to purchase a home only through that agent.

The second type of buyer’s agent works in a brokerage that also accepts listings of homes for sale. Buyer’s agents in these offices often show prospects homes listed by the firm. These agents are not true buyer’s agents since the brokerage already represents the listing sellers. In most states, this is called a “dual agency.”

For example, when I was recently in Sarasota, Fla., I met buyer’s broker Robert Dowie. Although he is affiliated with Prudential Cascade Realty, which lists homes for sale, Dowie specializes in working only as a buyer’s agent. He reports enjoying the satisfaction of being able to show buyers homes listed for sale by his and other local brokerages, as well as “for sale by owner” (called “fizzbo,” or FSBO) homes.

Depending on state law, one agent in a brokerage might represent the seller while another agent with the same firm represents the buyer. Such agents are often called “designated agents” or “transaction agents.” But in other states, such an arrangement is called a “dual agency,” where both agents represent both buyer and seller. Although state laws vary, to avoid misunderstandings about which agent represents whom, agents should disclose their agency relationships in writing to clients.

Any licensed realty agent can be a buyer’s agent

To further confuse the buyer agency issue, unless a realty agent works in a brokerage that just represents home buyers, in some transactions the agent could represent the listing seller only and in other transactions the same agent could work as a buyer’s agent only. Or the agent could be a “dual agent.”

If this sounds confusing, it is. Even realty agents get confused as to whom they or another agent within the same brokerage represents.

To illustrate, I am familiar with a lawsuit in which a local brokerage had a listing for a home in a competitive market. Two agents with the same firm had buyers for that house. The bidding got hot and heavy. One of the buyers eventually bought the house. But the disappointed buyer who didn’t get the house is now suing the brokerage for misrepresentation. To put it mildly, it’s an agency legal mess.

Was it a dual agency? Since the broker already represented the seller as a listing agent, how could different sales agents within that firm truly represent buyers since all the agents work for the same broker? Was there a conflict of interest? We’ll have to wait until the court sorts out the competing agency relationships.

Conclusion

Most home buyers need a buyer’s agent to represent the buyer’s best interests. However, buyers should be aware that there is a potential for conflict of interest if the same firm represents the home seller. To prevent confusion, most states now require realty agents to provide clients with a written disclosure of whom they represent.

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