You wouldn’t -- for a lot of good reasons -- go into a contested divorce proceeding without an attorney, or worse, take the advice of your spouse’s attorney.
Why, then, would you buy a home -- an adversarial process regardless of how friendly everyone involved in the transaction seems -- without someone on your side?
Oh, you think home buyers have always had representation? Well, think again.
As a buyer, you are not represented unless you’ve told the real estate agent who is showing you homes that you want that agent to represent you as your “buyer agent.” If you haven’t, “your agent” could be representing the seller.
Recently, more home buyers have been asking, “Who represents whom?” As a result, many are opting to be represented by a buyer’s agent to take them through the process, from house hunting to closing.
The greatest thing about buyer representation is it doesn’t cost the purchaser anything and often saves them thousands from the purchase price.
The Way We Were
Until 1995 in Toronto, real estate was sold the way it always had been -- the listing agent obtained the listing from the seller and represented that seller. A second agent, the “selling agent,” brought the buyer to the table, but was acting as a sub-agent (an agent of the listing agent) often unbeknownst to the buyer.
In this situation, even though the selling agent may have never met the seller, he or she still had a legal obligation to report to the seller any information the buyer revealed, or any information the agent found out about the buyer’s situation that would help the seller’s negotiating position.
That makes the agents sound evil, but in fact, if they had not communicated the information to the seller, they would have been breaking the law.
Both agents had a fiduciary obligation -- a legal and moral obligation to work toward the best interests of the beneficiary. The seller was the client for whom agents were working. The buyer was merely the customer.
The Revolution Begins
In 1983, however, a classic study started a revolution in real estate sales. The Federal Trade Commission in the USA found that 72 percent of all buyers believed the agent they worked with was representing their interests.
That meant that three out of four buyers were “spilling their guts to agents who weren’t representing them,” as one buyer agent wrote. The report fueled a nationwide legislative agenda that forced the real estate industry to disclose whom the broker or licensee represents in every situation. By 1988, most US states had disclosure laws in place.
The executive director of the 60,000 + member Real Estate Buyer Agent Council (REBAC), says times have changed.
A survey conducted in 2003 found almost 60 percent of home buyers used buyer representation and that number is over 95% today.
REBAC trains Realtors how to serve the buyer and grants the respected Accredited Buyer Representative (ABR) designation to agents for reaching certain education and experience standards.
Buyer representation is not the exception anymore, it’s the norm. Consumers now know they have the right to be represented.
Telling It Like It Is
In some provinces, you can still work under the old sub-agent system, or you can choose to have buyer representation. Many provinces (including the Province of Ontario) and the Canadian Real Estate Association Realtor Code of Ethics, however, now require “Disclosure of agency” by which any agent is required to disclose his or her legal relationship with a buyer or seller “at first substantive contact”.
If you, as a prospective buyer or seller, start telling an agent information that would compromise your bargaining position in any way, the agent should immediately explain “agency” and give you a choice in how you want to move forward. Unfortunately, some agents don’t, so it’s up to you to protect yourself.
Any licensed real estate agent in Ontario can legally act as a “buyer’s agent,” although not all have experience doing so.
You will be asked to sign a Buyer Representation Agreement (BRA) which states that the agent is representing YOUR interests in the complete transaction—finding out the back-story on the property, researching the actual market value of the home and negotiating the transaction—ALL on YOUR behalf!
Members of Toronto’s Real Estate Team are certified buyer agents and have taken the courses necessary to obtain their ABR (Accredited Buyer Representative) designation. Buyer agent team members act as exclusive buyer agents for our house or condo purchasers.
Why Choose A Buyer’s Agent?
While any agent will arrange property showings, suggest sources of financing, provide accurate information, explain the forms and agreements, and monitor the entire process, a buyer’s agent should perform services for you that many the seller’s agents can’t, such as show you reasons not to buy a property and negotiate the best price and terms for you.
A good buyer agent will include conditions in the contract that protect you, rather than the seller as in most standard contracts; and keep confidential any information that could hurt your bargaining position.
Other Types Of Agency Representation
What if the house you want is listed by the same agent or firm that’s representing you as buyer’s agent? In that case, you can agree to:
Disclosed Dual Agency, in which the agent represents both you and the seller. This is absolutely NOT recommended because the listing agent’s first loyalty, by agency law, is to the seller, not to you as the buyer.
Designated agency, in which your agent continues to represent you while another agent in the same firm represents the seller. This is not uncommon and, if you’re happy with the integrity of your buyer agent, you can rely on them to NOT pass any confidential information about you over to the seller’s agent.
You Get What You Pay For
One thing hasn’t changed: In many cases, the seller is going to pay an average of 5 percent of the sales price to a real estate firm. Almost all sellers agree to allow the listing agent to split the commission with the buyer’s agent, which means the seller is paying the buyer’s agent to represent the buyer against the seller.
While many people think that whoever is paying the lawyer or agent is the one getting the best representation, courts have made clear that paying an agent does not automatically mean the payor is the client.
Why would a seller agree to allow half of the commission to go to a buyer’s agent who is representing a buyer against the seller? Simple -- the seller wants to sell. And as some real estate agents note, the transaction really funds the commission.
The whole idea here is fairness: If the buyer is bringing the money to the table to buy the house, shouldn’t that buyer get representation? Finally, after nearly a century, the answer is yes.
The struggle is over. Buyer agency is here. We still need to educate the consumer, but buyer agency has come of age.
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- Download a free copy of my Ultimate Home Buyer’s Guide book
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- Set up a step-by-step plan with the best ways to get to your home buying goal
Our first-time and move-up buyers have told us that being able to meet with us on a casual basis as early in the process as possible, even if their purchase date was 6-12 months away, really worked the best for them.
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- Join us for a Market Experience Tour - pick your favourite neighbourhoods and price range
The Market Experience Tour is a great way for you to figure out which neighbourhoods and condo buildings are right for you, and you’ll also get a good sense of what’s available in your price range.
Pick the date and time you like to go on your Tour.
- Don’t start your home buying experience on the wrong foot - Meet for a Buyer Consultation first!!
Don’t make the same mistake. Let’s set a time to meet and go over how the complete home buying process works, find out what your likes and dislikes are and what pitfalls you’ll want to avoid, before you seriously start looking for a house or condominium.
This is the best 90 minutes of time you’ll ever spend - set up your private Buyer Consultation.