The Past

In the realm of real estate, there have always been buyer's agents, but most buyers were never made aware of this. When they wanted to buy a home, buyers went to a real estate agent for help in finding the best home for them, not knowing that a real estate agent is actually legally bound to represent the seller. This fact created quite a bit of confusion, and led to a general distrust between agents and buyers.

The FTC eventually pressured the real estate industry to provide consumers with a written disclosure showing who they represented during the buying/selling process. In the 1990's, this pressure spread to most states. In 1993, the National Association of Realtors finally admitted the importance of the buyer agency and forced real estate agents to finally be honest about their true roles.

Roles Defined

There are four types of real estate agencies, each with a definite distinction:

Traditional Seller's Agency: Agents working for a seller's agency signs an agreement with sellers to try to get them the highest price. Many companies also serve buyers, but not as clients but customers.


Dual Agency: This Company attempts to work on both sides of the fence, both as a representative for buyers and sellers. If one agent is working as a buyer's agent and another as a seller's agent, this can create a large conflict of interest.


Buyers Agency: A company whose only interest is maintaining the services of the buyer by trying to get the lowest price and best terms available for buyers.


Single Agency: They represent both buyers and sellers, as long as two agents don't work on opposite sides of the same sale.

Avoid a Conflict of Interest

Whether consumers choose a dual agent or a buyer's agent (also called an exclusive buyer's agent) comes down to the importance they place on the business relationship. If they don't mind sharing attention with the seller, they'll be fine with a dual agency. But those who prefer one on one attention from their agent will want to choose a buyer's agent. The thing to remember is that dual agents rarely introduce themselves as such, leaving consumers to determine for themselves just where an agency stands. This usually means reading the fine print on the buyer agency agreement or checking the paper for listings placed by the agency; an agency with a lot of real estate listings represent sellers as well as buyers. If they haven't properly shared that information with their customers, it's best to walk away.

A conflict of interest is easy to avoid, as long as consumers see it coming. A home buyer who wants to buy a home that is listed with their buyer agent's company will be faced with a conflict of interest. For the real estate agency, this representation of both buyer and seller is referred to as an in-house sale. In this position, the agency receives double commission on the sale if it proceeds. While this is beneficial to the agent and his company, it is rarely fair to the buyer. Most wise buyers are aware of the implications of working with a dual agency and as a result, choose to work with an exclusive buyer's agent. Such reputable sources as Business Week, Money Magazine, Kiplinger's Personal Finance Magazine and U.S. News and World Report also support the use of a buyer's agent over a dual agent.

Need help?

If you are interested in finding the perfect home or investment property and saving money, email us. Or, contact us at (212) 590-0540.

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Glossary:

• Client: The buyer or seller who works under the guidance of an agent.
• Customer: A person who purchases goods or services from another.
• Agency: A company that has in its ranks a number of employees who represent a buyer or seller in a transaction.