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Buyer Representation
Protect your interests by being
sure you are being fully represented by your agent and receiving the
services you desire.
Protecting Your
Interests
Working with more than One
Agent?
Questions and Answers
Back to Buyers Information Page
More and more buyers of real estate are becoming aware of the true
value of being represented by an agent under contract when buying real
property. Many
buyers have erroneously thought that when they sign a contract between
themselves and the agent they want to have find them a home, that they
would have to pay commission to a "buyer's agent", over and above the
price paid for their new home. This is incorrect since in California commissions
are paid through escrow from the seller's proceeds as they have
traditionally been paid.
There is also the common belief that they are binding themselves with
an agent in a contract they could not revoke if they were unhappy with the
agent's services. This is also incorrect.
Buyers Agency contracts are revocable if you are not satisfied with the
service you are receiving.
Protecting
Your Interests
Until fairly recently, very few buyers were
taking action towards protecting their best interests, and in fact many
unknowingly even put their best interests at risk by talking with a
listing agent, or new home selling agent about personal aspects of their
purchasing ability. This is usually being motivated by thinking that
perhaps the listing agent would reduce the amount of commission charged to
the seller, and the home could be bought for less.
In some instances that may be true, but (a) did the reduction in
commission make up for the extra you may have paid for the home for
whatever reason or? (b) did you find the listing agent did not reduce the
commission anyway citing that he/she had double, if not more than double,
the work to do (which incidentally is the case)!
You, as a buyer can have immediate representation when you sign a Buyer
Representation contract with your agent of choice. The agent has a
fiduciary duty
to
obtain the best price and terms that can be negotiated
and may disclose all known information including personal or private
information that the agent may have obtained from the seller or seller's
agent. It is to your advantage to sign before you go and look at homes or
tell an agent any personal or financial information about yourself other
than what is skeletal to self qualifying.
An agent may represent the
seller of a home until the agent discloses otherwise.
Traditionally a seller's agent has a fiduciary responsibility to the
seller with whom a listing contract has been signed. The agent is
contractually obligated to, and legally bound to, obtain the best price
and terms that can be negotiated, for the seller. He/she may inform
the seller of any information that he/she has that will enable that seller
to obtain the best price and terms. He/she is in fact NOT permitted
to disclose personal and financial information about the seller's motives
or willingness to negotiate, to you the buyer.
In other words, if you have no contract with
the listing agent and speak to that listing agent, telling him/her of all
your financial where-withal, how much down payment you have, how much you
might really be willing to pay for the property even though you are going
to make a much lower offer to begin with etc., the listing agent may tell
these details to his client. It is the agent's fiduciary duty.
You, as the unrepresented buyer of real property, are at a significant
disadvantage at this point in time. The only way you can protect
yourself, is not to talk about what you can and cannot, or are willing or
not willing to do.....not a very satisfactory situation when you want to
buy a home and need counsel, you must agree.
You can
avoid this by
signing a buyer's representation agreement with an agent. With the
signing of the contract, you have representation at at
fiduciary level. As your agent, the agent cannot and must not divulge
your personal buying capability information, your negotiating strategy, or other such
details to the seller or the seller's agent.
If you are a buyer and making an offer with the same agent as the
sellers agent,
the agent then must disclose to all partied involved that
he/she is acting as a dual agent. All parties must agree to this, including
the seller, who has up till now had an agent who solely represents
him/her. The seller may not agree.
As a dual agent,
(if the seller agrees and you agree) the agent now has a fiduciary duty to
you as well. As a dual agent, the agent
cannot and must not disclose personal and private information affecting
the sale to either
party but still has a duty of due diligence for other disclosures in the transaction.
To view a printable copy of the Buyer's Representation contract please click
here. You will need Acrobat to read the file. You can download
Acrobat by clicking on the logo.
Working with More that One Agent?
It could be said that it is in your best interests to be
represented by one
agent before you even go looking at homes. If you sign with different
agents, please remember that it creates great difficulties for you and for the agents
involved if you see the same house with different agents under contract
and write an offer on that home with one agent and not the other.
If
you are unhappy with the services of one agent, cancel the Buyers'
Representation contract with that agent before proceeding with another
agent.
If you do NOT want to sign a Buyer's Representation
agreement, you may be putting yourself at a distinct disadvantage, but
you have the right not to sign. There is no
law that says you must sign a buyers contract with any agent.
But you should be aware as to how you stand in terms of representation.
You may be missing out on the counsel and expertise of a professional in
the process.
If you do sign a Buyer's Representation contract, you will know that
you have an agent working for you on a fiduciary level, with you best
interests in play. The agent is contractually obligated to be
diligent in obtaining the best price and terms that can be negotiated on
your behalf.
The following is reproduced from the California Association of Realtors
web site www.car.org
Copyright © 1999 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).
Permission is granted to C.A.R. members only to reprint and use this
material for non-commercial purposes provided credit is given to the C.A.R.
Legal Department. Other reproduction or use is strictly prohibited without
the express written permission of the C.A.R. Legal Department. All rights
reserved.
Q. What is the Buyer Representation
form (BR-11) and what does it do?
A. The BR-11 (Buyer Representation Agreement) is an agreement
between a potential buyer of real property and a real estate broker. The
agreement has three key features.
First, it defines the scope of the tasks and
duties to be performed by buyer and broker. Second,
it provides a written consent to a dual agency if one develops.
Third, it places a limit on the time within
which a legal action can be brought against the broker. This form is
non-exclusive and may be revoked at any time by either buyer or broker.
Please click here to view and
print a sample copy.
Q. What is the Non-Exclusive Authorization to
Acquire Real Property form (NAP-11) and what does it do?
A. The NAP-11 (Non-Exclusive Authorization to Acquire Real
Property) is an agreement between a potential buyer of real property and a
real estate broker. It has all of the features of the Buyer Representation
Form except it provides for the broker to be compensated for services
rendered on behalf of the buyer, it is also non-exclusive but, unlike the
BR-11, it is non-revocable.
Q. What is the Exclusive Authorization to
Acquire Real Property form (AAP-11) and what does it do?
A. The AAP-11 (Exclusive Authorization to Acquire Real Property)
is very similar to the other two agreements with a few important
distinctions. Like the NAAP-11, it provides for compensation and is non
revocable. However, it is an exclusive agreement, meaning the buyer will
be obligated to pay a commission, even if the buyer finds the property him
or herself or uses another broker.
Q. How will buyers benefit from
using any of the above forms?
A. Surveys have shown that one of the biggest sources
of problems is lack of communication between the agent and his or her
client. By putting the duties and obligations in writing, buyers will be
more informed about the broker's responsibilities early in the
transaction. The forms also identify tasks and services the broker will do
as well as what type of services in a transaction may be performed by
others. With this knowledge, buyers will be able to discuss or negotiate
the terms of the relationship. Also, by having the opportunity to discuss
and consent to potential dual agency early in the relationship, buyers can
consider this question and avoid an awkward surprise about this issue
later in the relationship. By bringing more clarity and certainty to the
relationship between buyer and broker, neither becomes dependent upon the
other's memory for establishing its terms.
Q. Does
signing any of the above forms commit the buyer to using only one broker?
A. The BR-11 does not as
it is non-exclusive and revocable. The buyer may
switch brokers at any time. While this form does not commit the
buyer to one broker, using two different brokers on the same piece of
property is very confusing to all parties and may not help the buyer at
all in negotiating with the seller. A better practice by a buyer would be
to revoke one agreement before entering into another with a different
broker. The NAP-11 does commit the buyer to paying
the broker (irrevocable) in certain circumstances, but it is
non-exclusive which means that the buyer may use more than one broker. The
broker only gets paid if the broker introduces the specific property to
the buyer or otherwise acts on the buyer's behalf. It would be permissible
to use this contract with two different brokers on two different
properties without paying both. The AAP-11 commits
the buyer to a single broker for the transaction. It is exclusive
and irrevocable. Even if a buyer enters into another agreement with
another broker, or uses another broker without the benefit of an
agreement, if the buyer acquires the property identified in the agreement
the buyer may still owe the broker compensation.
Q. Must a buyer sign one of these forms
before working with a particular broker or real estate salesperson?
A. While written agreements of this type are not
required by law, in any professional relationship for services, it is good
to have a written document so all parties have the same expectations. Some
real estate offices may require one of these agreements, but that will be
up to the brokerage firm. In the past, most brokers did not use these
types of agreements because either the agreements were not available or
those that were available did not meet the brokers and client's mutual
needs.
Q. Why do the forms have a two-year
limitation on the time to bring legal action against the broker?
A. Many agreements that individuals enter into have limitations
of one sort or another. The drafters of these standard forms, the
California Association of REALTORS®, believed that the two-year limitation
is reasonable for a number of reasons. First, two years gives a buyer
adequate time to make a decision about such important matters. Second, the
California legislature has already statutorily recognized the two-year
time frame as a reasonable period of time for a buyer to bring legal
action against a real estate licensee. These contracts provide some
consistency with that state law. Of course, the limitation would not apply
to actual and intentional fraud.
Many terms are used to describe various relationships that may occur in
a real estate transaction. The following questions and answers are
designed to help clarify several of these terms.
Q. What is
agency?
A. Agency is a legal relationship that is established between a
principal (buyer or seller) and an agent (real estate broker) where the
agent represents the principal in dealings with third parties. The
relationship requires the mutual consent of both principal and agent.
Q. What is the difference between single
agency and dual agency?
A. In single agency, the broker represents only one of the
principals (buyer or seller). In dual agency, the broker represents both
buyer and seller in the same transaction. In the real estate industry,
even if one salesperson in an office is working with a buyer and another
salesperson in the same office is working with the seller, the broker of
the real estate firm is considered a dual agent.
Q. What is an exclusive buyer's agent?
A. The term, "exclusive buyer's agent," is often used in the
real estate industry to describe a real estate licensee who never
represents sellers. Real estate brokers who use this term typically do not
take listings of property
Q. What is a buyer's broker?
A. The term "buyer's broker" is often use to describe a broker
working with a buyer under a written contract that provides compensation.
Two of the three C.A.R. agreements discussed above provide for
compensation to the broker (NAP-11 and AAP-11).
The information contained herein is believed accurate as of April 9,
1999. It is intended to provide general answers to general questions and
is not intended as a substitute for individual legal advice. Advice in
specific situations may differ depending upon a wide variety of factors.
Therefore, readers with specific legal questions should seek the advice of
an attorney.
Please call me 661.645.5556 or
MailTo:Pia@PiaSoper.com if you have any questions about this topic or
any other real estate topic.
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