Understanding Agency and Agency Disclosure
In Massachusetts, homebuyers can choose to work with a buyer's agent or a seller's agent. Either way, your agent is a specially-trained professional, licensed by the state of Massachusetts, obligated by law to treat all parties to a real estate transaction fairly.
Seller's Agents or Subagents
If you work with a selling agent or subagent, there is no contract between you and the agent, and you are not the agent's client, but instead you are the agent's customer. You will receive a Mandatory Agency Disclosure form that clearly defines the relationships between you and the agent and the seller and the agent; lists the fair treatment duties owed to you and indicates that the seller's agent or subagent works for the seller and as such, the agent's primary fiduciary responsibility is not to you, but to the seller. This doesn't mean a seller's agent or subagent can treat you unfairly, lie to you, not disclose information about property of which they are aware and so on. But, make no mistake, that agent's first concern is getting the best result (price) for the seller.
If you work with a buyer's agent, you are that agent's client. That agent works for you, not the seller. You and the buyer's agent sign a Buyer's Agency Contract that includes the Agency Disclosure described above. The Agency Disclosure summarizes the fiduciary and other fair and ethical treatment responsibilities of the agent to all parties and the agent's fiduciary responsibilities to you as the client, and clearly indicates that the buyer's agent is the agent of the buyer. The buyer's agent placing the interests of the homebuyer first, but also must work with listing agents as well. A buyer's agent may do any of the following:
- Offer an opinion or critique of a seller's property.
- Recommend/suggest an offer price or give you an opinion about whether a particular house is priced too high or too low.
- Structure offers and draft offer provisions with the buyer's best interests in mind.
- Assist the buyer with negotiating strategies for getting the best price and terms.
- Disclose all information; research a property's history and liens to help a buyer make an informed decision.
- Give advice that is within the scope of the agent's professional knowledge base.
Some Facts About Buyer Brokerage:
- In 2003, 63% of buyers who bought a home through an agent used a buyer representative.
- First-time buyers and repeat buyers were equally likely to use a buyer representative.
- Repeat buyers were more inclined than first-time buyers to use a written agreement.
- Buyers in the Northeast were the most likely to use a buyer representative: buyers in the Midwest were least likely to use a buyer representative.
- Buyers who used their own buyer representative were slightly more than likely to pay the agent themselves than were buyers who used the seller's agent.
Source: 2003 National Association of REALTORS® Profile of Home Buyers and Sellers
Who Works Harder: the Buyer's Agent or Seller's Agent?
By Blanche Evans
Buyer's agency has broadened the definition of REALTORs® in terms of what they do and for whom. Because the seller pays the commission for both the buyer's agent and the selling agent, both agents actually are working for the seller with the fiduciary responsibility to get the highest price possible for the seller. But the new consumerism has changed that paradigm - buyers want representation, too. That has spawned an entire sub-specialty for agents - those who choose to work exclusively with buyers.
No longer concerned with farming a territory for listings, buyer's agents focus instead on referrals and relocating buyers. They farm corporations, relocation firms and advertise with a wider net to catch not only the in-town buyer, but the transferee as well. Then they are challenged to keep the buyer either by contract or by providing such service that the buyer remains loyal.
Most agents continue to concentrate on listing homes - working with sellers to prepare and present their homes to an ever-changing marketplace. Also working by referral, these agents tend to develop specialties such as a neighborhood, type of home (historic, vacation home,) and price range - luxury, starter, or move-up. With more competition, the seller's agent must work harder to establish an expertise and reputation in their chosen specialties.
Seller's agents also encounter buyers who call from or yard signs, run across the home on the Internet, or attend an open house. Seller's agents are often asked to represent both sides in a dual agency transaction, or if the seller's home fails to suit, they are able to take the buyer and show them other homes, thus becoming the buyer's agent.
Whether an agent is working for the buyer or seller, both sides work hard to make the real estate transaction happen. The seller's agent works to put the home in the most favorable position to sell quickly and at the highest price possible. The buyer's agent works to find the buyer the best home in the market that will fit their needs and at the lowest price. The skill at negotiating the contract separates the professionals from the part-timers, for it is negotiation that keeps the deal from falling through.
But each side has its pitfalls that can prevent the deal from closing. Unreasonable sellers, buyers who buy from other agents, stonewalled negotiations, sellers and buyers who don't tell the truth, the emotional and financial sides of the transaction, and much more can all add up to deal-breakers - some preventable, some negotiable, some not. So who works harder at making the deal - the buyer's agent or the seller's? What is the most difficult aspect of representing the buyer or seller - marketing yourself, farming for business, building a business, working the deal, handling the emotions of the buyer or seller, negotiating or closing? Where do you put the most effort in a transaction? Where do you feel you really earn your commission?
Published: August 24, 1998
Blanche Evans is the publisher of Agent News and the associate editor of Realty Times, the Internet's largest independent real estate news service. She is the author of two best-selling real estate books: The Hottest e-Careers In Real Estate, Real Estate Education Company, an Internet marketing primer for real estate professionals, and homesurfing.net: The Insider's Guide To Buying And Selling Your Home Using The Internet, Dearborn, a consumer homebuying and selling guide. In 2000, she was recognized by the editors of REALTOR(r) Magazines as one of the "25 Most Influential People In Real Estate," and in 2003 when the "Most Influential" list was updated, she was recognized as one of nine "Notables." She has been a frequent contributor to "Your Money" on CNNfn.