Lawyers Provide Better Representation – Part 1 of 4
Craig on 08 10, 2009
How’s THAT for a title, huh? Oughta generate a little interest…
Before I get to the point of the post, I must address two initial matters. First, I use the term “representation” to refer to the obligation of an agent and a lawyer to protect and advance their clients’ interests. Because this obligation arises in the context of the sale of real property, “representation” includes legal skills and knowledge. Moreover, “representation” by definition occurs where the agent or lawyer is acting on behalf of or in conjunction with the client in dealing with a third party. It does not include insight that may be provided to the client about the property at issue. Nobody believes that a home inspector “represents” the client, right? Rather, the home inspector provides the client with information about the property. The representation occurs when the client approaches the other party to the transaction about the results of that inspection.
Second, please note that this post addresses a distinction between lawyers and agents generally. There are, of course, many specific examples of agents who provide great representation.
That said, lets get down to brass tacks: Lawyers provide better representation because, as a matter of law, they are required to do so. How so? By law, the duties owed by real estate agents to their clients are limited. These limited duties allow agents significant leeway in regards to their obligations to any particular client. For example, an agent can represent both the buyer and the seller in the same transaction, even though the interests of the buyer differ from those of the seller (the buyer wants the lowest price possible, while the seller wants the highest). This “dual agency” can easily put the seller in a compromised position. Moreover, an agent is not prohibited from “self-dealing.” In other words, an agent can both represent the seller and be the buyer of the property. This also puts the seller in a compromised position.
In contrast, lawyers have clear and unequivocal duties to their clients. These duties cannot be compromised by the attorney’s obligation to another client or even by the attorney’s own self interest. In a typical arms-length transaction, an attorney cannot represent both the buyer and the seller. Similarly, if an attorney has been hired by a seller to assist with the sale, the attorney cannot buy the property. The clients’ interests must be paramount, without any question or doubt.
Why does this matter? If you want “representation” in a transaction, you should know that your representative is truly and completely looking out for your interests only. Anything less and you are not getting the best representation possible.
Stay tuned for Parts 2 (Compensation), 3 (Legal Counsel) and 4 (my favorite as an old social studies teacher, History and Culture).
About the Author: Craig Blackmon
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Hi Craig,
This is a topic I’ve been thinking about for some time. As a prospective buyer (not for some time of course as I’m still bearish on the seattle market in my price range), I still don’t really get the whole “buyer’s” agent thing. In fact, the realtor I’m acquintainted with always makes the point that she’s trying to “sell” me a house. The listing agent/selling agent distinction seems to be more clear and transparent. One agent is listing, the other is selling, or bringing in the potential buyers. Both salespeople, both with a bias toward getting the deal done. Both with lots of brokers, inspectors etc that they “prefer” to work with. Once, when I suggested I would shop for my own mortgage, one of the agents I was interviewing told me she would frown upon that, as she needed to have someone she could trust to come through with the financing.
So as I go into making the potential largest financial decision of my life, I’m wondering, who is looking out for my interests, without bias of the deal being made. I tend to be a details person. (As well as slightly cynical). I’d like to know when I put out an offer, that I have language protecting myself to the fullest degree – on such things as the earnest money, contingencies, inspections etc. And this is not to say there are not some excellent buyers agents. However, it would seem like a much more transparent transaction to have the real estate salespeople “selling” and have someone on my side helping protect my side of the transaction. This is similar to any other contract, such as having a lawyer review a employment contract etc.
Thus, the whole “buyer” agent label really doesn’t impress me too much. Maybe some of the other contributors can enlighten me how the change to buyer’s agent from selling agent has helped protect the buyer.
Hi Craig,
So you posted on my favorite topic, real estate agency relationships.
Not sure how things work up north in Seattle, but in California you have four choices, Sellers Agent, Buyer’s Agent, Dual Agent, or Non-Agency.
In my opinion – single agency is the only way to go to represent a Client. So I agree that an Attorney has a bit of an edge over the majority of practicing real estate agents. I am with you 100% and never practice dual agency in my Company.
However, negotiating a contract and representing a Clients interest is only a small part of what a good real estate agent does.
To be truly represented you need to have someone that fully understands local real estate markets, knows the inventory and sold inventory, and has relationships with active agents in the area.
In 20 years of practicing real estate each time an attorney arrives it’s likely the transaction will blow up. Of course that is a broad statement – but then again so is yours.
This should make a good topic. I’ve wondered about the same thing myself. JG
Jim — The transition from “selling agent” (a term still in use, by the way) to “buyer’s agent” is absolutely a step in the right direction. However, the post recognizes the “buyer’s agent” as the current model, and notwithstanding this change agents still do not provide representation equivalent to that provided by a lawyer. As noted in the post, one reason is because the law simply requires more — much more — from an agent. Other reasons will be addressed in subsequent posts.
Jeffrey — Historically lawyers have caused deals to “blow up” in part because lawyers typically were unfamiliar with residential deals. Rather, they often times were “doing a favor” for a client, and they brought their adversarial perspective to the deal. These days, more lawyers are hoping to compete with agents on a large scale. I strongly suspect that these attorneys will be more understanding of the dynamics and culture of a residential deal. That said, they will continue to be concerned with the interests of their clients. If the deal is not in their clients’ interests, expect it to be “blown up.”
As for “market knowledge,” I agree that an understanding of the market is helpful in providing representation. However, again I’m not talking about services outside of representation. Regardless, an attorney who handles these transactions on a regular basis also has an understanding of the market. Besides, the “right” price is the one that is acceptable to the client. After all, market opinions are just that — opinions that may or may not be accurate.
Finally, in terms of “relationships with active agents” — well you lost me. That sounds an awful lot like the ol’ “salesperson” model of agency. Ultimately, the value and condition of the asset — and its desirability to the buyer — should drive the transaction. Any “schmoozing” among agents very likely will lead one agent or the other to sacrifice the best interests of their client to some extent.
Coming from New York, I’m actually used to using a lawyer to handle the paperwork for a real estate transaction (my last two transactions were FSBO’s as well, so there were no real estate agents involved). I tend to do my own research and when I go to buy, it is unlikely that a buyer’s agent will really have done much for me aside from perhaps unlock a home I want to view.
Ideally, I’d like to do the research myself, and hire a real estate professional on an hourly basis rather than on commission basis. I understand an agent’s time and knowledge is valuable, but I would rather pay for the services I use fairly. (I do know about RedFin and Realty500, which seems the best bet for someone like me aside from what I describe).
Thoughts?
Gene
Gene — I’d say you are the ideal candidate for hiring a lawyer rather than an agent. You may even be able to find one who works for a flat fee rather than hourly so that you don’t have any unpleasant surprises. RedFin and 500Realty certainly take you in the right direction, as they encourage clients to take some ownership and responsibility (which is very healthy, I believe — the client is buying/selling the asset worth hundreds of thousands of dollars, not the broker/agent). However, you are still left with representation that falls short of what is provided by a lawyer (you’ll be interested in Part 3 of the post, “Legal Counsel.”
Craig,
Please let me explain my last statement – and it’s not about the good old boy network, so thank you for pointing that out.
Many times when working with Clients, particularly those in luxury markets nothing suitable can be found in the multiple listing system (MLS) Having a working relationship with Agents that might have a past Client wanting to sell, or thinking of selling soon is invaluable. Again, as long as both agents have Fiduciary duty to each Client, the buyer’s needs have been better served with this relationship and the perfect property may be found.
Buyer’s choose to pay what they will, but advising them of past sales and having the knowledge of those sales will give them a negotiation edge if the property is priced to high for a given market.
And yes, if an Attorney has a working idea of how our standard contracts work and what is customary they will do a much better job of legal interpretation. As a licensed real estate broker, I am not an Attorney and can only fill out standard forms – but these contracts have stood the test of time and are mostly balanced, and in California favor buyers.
My past experience has been with out of state Attorney’s trying to understand our forms. Many times we end up spending a great deal of time educating them – this is clearly not your situation.
BTW, are you a licensed real estate broker?
Thanks for posting my comment and taking the time to answer.
Jeffrey — my partner, Marc Holmes, is a licensed broker. We’ll be putting that license to work in the near future. These posts are, in fact, a little preview of some of our marketing materials. Stay tuned…
How many times do you visit the property for the people you are representing?
Well, that depends if the buyer wants to pay us to accompany him to the prospective property. We offer that service on an hourly basis.
Regardless, I have a lot more confidence than you (and agents in general) in grown-ups and their ability to analyze their own propspective purchase of a half million dollar asset. We certainly counsel our clients to complete their due diligence, which by definition includes a determination that the price for the house is fair and an analysis of the condition of the house. As for the latter, that’s a task better suited to an inspector anyway. As for the former, we can provide general guidance subject to adjustment up or down based on the client’s assessment of the house, its condition, its suitability, etc.
How can you represent them in the terms of the property if you don’t see it?
We rely on the clients to complete their own due diligence. Look, I can see where a client would want the hand-holding of a full service agent. For example, if the buyer is unusually young or unsophisticated, or perhaps where the buyer wants someone else to do “everything.” But assuming the buyer is a reasonably educated and intelligent adult, I don’t think its essential for an agent, or lawyer, to physically inspect the property in order to protect the buyer’s interests.
An agent inspection of the property based on a reasonable, competent and diligent visual inspection of the accessible areas of the property is required by law in California.
Jeffrey — That’s intesting. Can you provide me with a cite to the statute (or case)? I’d like to read it (plus, full disclosure, I’m a little skeptical of your statement).
Craig, always the lawyer, questioning everything LOL. Found this, hope that it helps. I would think that Washington must have some similar requirements.
“California Civil Code Section 2079 imposes special duties upon brokers involved in the sale of residential real property. All such brokers are required personally to visually inspect such properties and to disclose to prospective buyers any defects which such an inspection should have disclosed. This duty does not apply to commercial properties, and it does not apply to properties with more than four units of residential property.
The duty is to personally conduct a reasonably competent and diligent visual inspection of the property. They duty does not extend to inspecting title or the public records of permits. They duty applies to both the buyer’s broker and the seller’s broker; the information must be disclosed to the prospective buyer.
Please note that this statutory duty is in addition to the other broker duties, discussed above. As a practical matter, Civil Code Section 2079 does not add much to the duties of the buyer’s broker, who already has a fiduciary duty of investigation to his or her own client. The primary change made by Civil Code Section 2079 is to require the seller’s agent to personally inspect the house and to disclose what he or she finds to the buyer.”
Source: http://www.calrealtylaw.com/broker-liability.html
JimN asks: “Thus, the whole “buyer” agent label really doesn’t impress me too much. Maybe some of the other contributors can enlighten me how the change to buyer’s agent from selling agent has helped protect the buyer.”
As Craig points out, internally our mls system still uses “selling agent”. That’s a topic that makes me want to cry a river. But let’s look at some of the positives. Regardless of whether you use an agent or an attorney, or even none of the above, the advent of buyer agency brought changes that benefit you as a buyer. Prior to buyer agency all preprinted forms favored the seller. After buyer agency, the standard contracts were brought into balance, and in many cases the default positions clearly favor the buyer more than the seller. The home inspection contingency is but one example. So even if you do not use a Buyer’s Agent, the fact that such a “title” exists in the standard contracts, benefits you indirectly throughout the contract.
On the other hand, here in WA there are some HUGE inadequacies with regard to buyer protections that do exist in most other parts of the Country. The glaring example is the lack of a rate cap in the Finance Contingency. I’m told that for some reason that was removed from WA contracts, and frankly had WA not removed it, many buyers would not have been forced into sub-prime loans without recourse. So I see a heavier hand in favor of the seller here than in many other places, and that is one of the reasons I am disappointed to see attorneys using the same forms that agents do. I think Craig would have a stronger case for attorney representation being better than agent representation, if the attorney community would draft a contract that was of better and true benefit to a buyer, rather than simply “buying” the right to use the same contract used by an agent.
All agents representing sellers existed for 80 to 85 years (not all parts of the Country acted in unison in adopting buyer agency), so we simply do not have enough history for “buyer agent” to be in practice what it purports to be in title. The primary culprit and reason for that is the “follow the money” approach of most brokerages. New agents look to their brokers and brokerages for direction and training, and the broker and brokerages love of “closed deals” is largely responsible for the lack of proper training in the area of buyer agency. Even the courses that produce the lovely acronym ABR (Accredited Buyer Representative) does more to tell you how to snag a buyer and pin him to the ground, than it trains an agent to represent a buyer “well”.
I think there is really only one way to “flush out” before you hire an agent, whether they truly view you as a client to be represented, or someone to sell a house to. Talk to them about the Buyer Agent Commission and pay very close attention to their attitude and responses in that conversation. If they tell you it is free or you don’t have to worry about that because it is paid by the seller, that is a fairly good indication that they are viewing you as a means to collect a fee from the seller for “procuring you” as the buyer of that seller’s house. The minute you feel they are offput by your wanting to have that conversation, you have a breach of a good relationship. What else might they not want to talk with you about? If you get the remotest impression that they are uncomfortable or that they feel it is none of your business…well, that’s a big clue. If what they are paid to represent you is “none of your business” then what else might be none of your business?
In defense of the two steps forward one step back, a strong seller’s market for 7 to 9 years hindered the progress of the buyer agency movement. Just when the movement was getting into full swing, the market shifting to more buyers than sellers made it virtually impossible to make any headway. When you are one of 6 or more buyers who want the same house, getting the house became the win vs any true representation beyond getting the house. There really wasn’t much an agent could do about that, so brokers training agents to better assist buyers would have been of no immediate value. Market conditions prevailed.
But now we are once again in a position to forge a bit forward with regard to elevating “Buyer Agent” to a step above mere favorable title. Buyer’s using Buyer’s Agents and expecting and seeking out better representation…well, frankly JimN, that may not help you who doesn’t need one so much. But if people like you, who understand the concept and need for the industry to improve would demand it, you would help improve the industry for the benefit of those who simply do not understand it as well as you do.
If savvy buyers circumvent the system and attorneys cajole others to circumvent the system and the majority of “smart people” don’t utilize the system and force it to be better, it leaves the people who need it most without good forces to bear on the system to make it better. Kindof sounds like some public schools systems. When people who can afford to leave the system, when people who are smart gain access to other means, it leaves those who need it most, without the proper forces to bear on the improvements needed for most people.
Buyer Agents would be better in this weaker market where they can be better, only if every buyer who understands that, insists on it. Then your Buyer Agent will not only be better for you…but for all the you’s that follow behind you.
Apologies for the lengthy comment, but the sad truth is that buyer agents aren’t by and large as good as they can and should be, primarily because buyers don’t demand it. The buyer is the employer, and when an employer is happy if the workers do little more than line their pockets, I’m not sure how much you can blame the worker for that. Personally I don’t see much hope for improvement.
Until the majority of buyers stop calling an agent “to see a house”, and select an agent the way sellers do, buyers will be left with what they most often ask for…a door opener.
Two thoughts, Ardell. First, re: your third paragraph, don’t forget that an attorney can competently modify the form contract to suit the specific needs or requests of a buyer. An agent’s authority and ability to do so is much more of an open question.
Re: your 8th paragraph, the market will change when market forces are brought to bear. That’s pretty simple economics. I like to think that by offering a lower priced and better alternative to a typical “selling agent,” my partner and I are helping to change the system. Eventually, agents will at a minimum need to substantially decrease their commissions, so at least people won’t be grossly overpaying for “selling agent” services.
Once an attorney “modifies” a Purchase and Sale Agreement it could be construed as being a contract, in my opinion. The party, in my opinion, on the other side of the transaction would then need legal counselor, or sign a waiver stating they were advised to get legal counsel. Either way it’s pretty much a dead deal from the agents perspective, in my opinion.
Huh? David, a Purchase and Sale Agreement is a contract once it is fully signed by the parties. It need not be “construed” as being a contract — it IS a contract. This illustrates nicely part 3 of my post, “Legal Counsel.” Its a legal transaction involving a binding contract — why not get a lawyer who is far more likely to understand that, and all inherent nuances?
You’re trying to bait me.
So how many times have you been to court with a Purchase and sale Agreement?
David — what do you mean, “been to court”? Does pre-litigation resolution of the dispute count? Just filed cases? Just cases where I have actually appeared in court? Just cases that went to trial?
And what do you mean “with a Purchase and sale Agreement”? Does that mean just cases involving contracts for the purchase and sale of real property? All such cases, or just those involving one party’s failure to perform (vs. concealed defect cases, or cases where the dispute concerns the validity of the contract, or some other variation of a case involving a “purchase and sale agreement”).
Finally — bait you?? Honestly, I don’t know where that is coming from…
You have presented all the reasons a Real Estate agent is much better equiped to handle a residential Purchase and Sale Agreement. Baiting is when you try to start controversy where there is none. The purchase and sale of residential property is about people and property. The “contract” can be written on a cocktail napkin.
Craig,
I understand David’s comment. Agents are often told that they can only help a seller with a standard contract. Once one lawyer modifies or writes an entirely new one, often the result is that the other party also needs a lawyer. So in many cases one lawyer equals two, unless they (as you by and large do) use the standard form used by agents. It’s not a contract until the seller signs it, and David said it’s a dead deal “from the agent’s perspective” as the agent steps back from it. The seller can still accept it, yes. But often the agent for the seller will advise against that, or simply refuse to work with the seller on it since they can’t interpret a form, or wording introduced to that form, that they have never seen before.
I don’t agree with David that “it’s pretty much a dead deal” unless there is more than one offer. If there is another acceptable offer without modification of the standard contract, then the seller can choose to get an attorney to review the modified one…or simply accept the other.
That is why good changes need to be implemented by the system and industry as a whole, and not primarily come out of left field. Or, having come out of left field, must do so in a way that bring forces to bear in the long term toward the better way.
Ardell, not sure I understand your final paragraph. However, I agree that as long as agents are used in a transaction, it is important that the industry utilize a “form” contract. Agents cannot and should not have to deal with a unique contract drafted by an attorney, and indeed in that circumstance the agent should recommend that the seller get a lawyer.
I agree with you, though, that even in that circumstance the deal is far from “dead” — or at least it should be. Doesn’t the seller’s agent have an obligation to simply handle that offer appropriately — i.e. recommend an attorney review — rather than to simply tell the buyer to reject it? Frankly, I don’t see how that is in the seller’s interest, particularly because the agent has no knowledge or understanding of the terms of the offer, other than it is not a “form.” Frankly, this notion — that its OK for an agent to reject out of hand a non-standard offer — is just one more fact in favor of attorney representation to begin with.
No agent HAS to represent both sides of the transaction. Just because dual agency is legal doesn’t make it right.
Of course not, Jay. But the fact that an agent CAN represent both parties, while an attorney cannot, speaks volumes.
Craig, Dual agency is wrong and should be outlawed, but I doubt that will happen. It is up to the consumer to be educated and make the choice that works best for their situation.
I recently posted some thoughts on Dual Agency and the Dead Horse – some closing thoughts.
http://www.sandiegolifestyle.info/2009/07/dual-agency-dead-horse-closing-thoughts/
[...] the process and costs of marketing a home; however, my friends over at the incredibly informative Rain City Guide have published the first in a series of posts entitled: “Lawyers provide better [...]
This is all very interesting, akin to medieval philosophers debating how many angels can dance on the head of a pin.
As a buyer, I see very little difference between a buyer’s agent and a buyer’s attorney in all the back and forth written here on this subject.
When I buy, I want to deal only with the listing agent in a dual agency capacity. I want that agent to be fully familiar with the Law of Real Estate Agency, particularly with regard to the rule which requires that the agent take no action detrimental to either party’s interest. That agent and I will fully discuss that obligation. I want to ensure that the agent does not view his duty as that of a fiduciary.
I know that the most likely agent to find a buyer for the property is the listing agent. By working with the listing agent as a dual agent, I greatly increase the odds that I will be successful in buying the property because that agent can work with no one but me, once I sign an offer. I can effectively reduce much of my competition for the property.
If another offer is made on the property, I will also be aware of it and be able to better compete, if necessary.
I also want to provide incentive to that agent to get the deal done for me. By allowing that agent both sides of the commission, that agent is more likely to push for my offer over any competing offer, and his relationship with the seller is to my advantage in the negotiations.
In addition, whatever commission adjustments that agent may make with the seller are to my advantage.
Working with a separate buyer agent or attorney gives me none of the above advantages.
It sounds to me, Thorn, like you are very comfortable representing yourself in a transaction. Good for you. Depending on your experience and sophistication, I might even agree that self-representation is appropriate for you.
As for the benefits you get in using the listing agent as your agent, some make sense (agent likely to influence seller in favor of your offer due to double commission incentive) and some do not (not clear on why this “reduces your competition” for the property). These benefits come at a cost, of course — minimal representation, which may not be of much importance to you but should be very concerning to most.
Finally, in this buyer’s market, I am unclear on why you need these advantages anyway. In any event, you’ve balanced your particular need for representation against the benefits gained by you in using a dual agent. As long as you accurately weigh those considerations, then you — and any other buyer — are on the right track.
To Jay and Jeffrey,
You really can’t have a discussion regarding Dual Agency without a buyer in the room. Truth is the rhetoric around the web regarding Dual Agency is not much more than a plea for more business for buyer agents. When given the choice of getting the house for 3% less or taking the 3% to go buy a buyer’s agent, most buyers will pick the lower priced house vs. representation. One thing we have learned over these many years is that buyer representation is not honed to a better skill set, because buyers really don’t seek out better representation vs. lower cost.
The issue that JimN raises is much more important than Dual Agency issues, given most buyer agents tend to side with the seller regarding getting the buyer to close vs. walk. Having two or more buyers looking for the same kind of house in the same place in the same price range is largely more conflict than Dual Agency.
Craig doesn’t have to worry about that, not because he is an attorney, but because his model strips out a large portion of what we do. If I only had to be a “contract to close girl”…with very little or no attention to the value of the property specific OR how that property stacks up against other options not on the table, I probably could run that operation without ever having to be “in the room”.
Not needing advices to be “property specific” would be a HUGE load off. Even in negotiating a home inspection report, if I didn’t need to factor in the potential for unseen problems, caused by the seen ones in the report…well, my life would clearly get a whole lot easier.
Ardell,
Single agency works both for Seller and Buyer. It’s not about money, it is about representation with a single minded goal – one to sell the property for the highest and best price – two to represent the buyer’s interest – one agent cannot do both.
I can negociate the difference anytime – more than a Seller is going to give up having the Listing Agent represent both sides – which by the way does not really fully protect the Seller nor the Buyer.
Anyway I am not going to convince anyone in this forum differently, my point is everyone should know the differences and have the option of making the choice that works best for them, single agency, dual agency, buyer or seller non-agency. Downplaying the importance is what keeps us at the status quo.
Most important is to choose an ethical agent, otherwise agency is a joke.
Thorn,
Your every listing agents dream.
Craig,
I absolutely agree and support those lower cost alternatives. But basically that’s admitting that the things a buyer often needs, do not exist as to the majority and lowest common denominator, so let’s just dumb down the expectations to meet the low performance standard…and price it accordingly.
I also absolutely agree that will become the future of real estate.
What we really need is to become like dentists and not fill a cavity when the guy needs a root canal. We also need to stop charging for a root canal, when the guy needs a filling. Everyone getting fillings might be cheaper, but not so good for the poor guy who needed a root canal.
Thorn:
I don’t know why you think this is true: “I greatly increase the odds that I will be successful in buying the property because that agent can work with no one but me, once I sign an offer.” but it is not.
Your making an offer does not take the property off the market as to other offers being presented by that agent or any other agent.
It is most likely that the listing agent will receive the sign and ad calls on the property. When I sign an offer with that listing agent, as a dual agent, he cannot solicit or write offers on behalf of other buyers.
Competitively, I’m in a better position with an agent that controls access to the seller as well as one than has a double monetary interest in getting my deal to fly.
While it is true that my offer does not take the property off the market, it effectively does so with the agent most likely to write offers — the listing agent. RCW 18.86.060 (2) (a) compels the dual agent “to take no action that is adverse or detrimental to either party’s interest in a transaction.”
Having participated as a dual agent in writing my offer precludes him from soliciting or writing another offer during the term of my agency. That would be detrimental to my interest. I’m not concerned whether that would be detrimental to the seller’s interest.
Again, competitively, my dual agent is now in a position to suggest other agents considering writing offers on the property to look elsewhere. After all, the double commission he gets from my purchase provides a powerful incentive.
Of course, that agent could send a new prospective buyer to another selling agent — but I’m betting that he will try instead to keep the prospective buyer and move him on to another property.
That’s why it is important to have a meeting of the minds with an agent in advance regarding his dual agency responsibility to me, and to avoid such agency anomalies as husband/wife teams and such, unless they are both in on the dual agency.
Thorn,
That is not true in California, the listing agent can continue to write offers and present them on behalf of other buyers. In fact it is common practice in California to use a consent for dual agency which gives the Buyer’s agent the right to represent competing buyers on the same property – go figure.
While you seek out dual agency with Fiduciary Agency due to both Seller and Buyer, you have no concern for the Seller’s interest. Do you really think your on the same page as the Dual Agent?
Also commission rates are not fixed by law and are negotiable. Many times a weaker listing agent will pre-agree to a reduction in their commission should they represent both sides – so your premise that you will always save 3% is not accurate.
You sound very sophisticated and your process has been thought out. In my mind, it is all about consumer choice – I just want that to be an informed choice.
Just remember, homes are bought on emotion, then justified later with logic. Make sure you have trust in the real estate agent standing next to you.
Thorn — The vast majority of buyers should be less concerned with being “competitive” and more concerned with insuring that their interests are adequately protected. Again, there is far less “competition” for any one property on the market than in the past.
Besides, you make my point: “Of course, that agent could send a new prospective buyer to another selling agent — but I’m betting that he will try instead to keep the prospective buyer and move him on to another property.” In other words, you’re betting that the agent will put his interests before those of the customer/client. You’re just trying to use this systemic shortcoming to your advantage. While that may work in any one particular case, it obviously cannot work for everyone. Once again, my post is focused on the system GENERALLY, not how it may work in one particular case. You continue to focus on one particular case — yours.
Jefffrey — nicely played. You got last word on the thread. I’ve been outmaneuvered…
Anyway, that legal obligation you cite extends only to seller’s agents so that the agent can inform the buyer of any defects. I query whether this requirement really confers any benefit — I’m willing to bet that the “inspection” by the agent is more cursory than what any prudent and reasonable buyer would do himself, let alone the inspection by a paid inspector. Regardless, the thread above was discussing the obligation — whether legal, ethical, or other — of a BUYER’s agent to inspect the property prior to the offer. Does CA require as much by law?
BTW, WA does not have such a requirement. In fact, the agents are specifically relieved of an obligation to inspect the property.
Craig,
Thanks Craig, I appreciate the comment, although one could hardly expect you to know California Real Estate law.
You are correct that most agents do a very poor job of a visual inspection, and more often than not they just write in “buyer to satisfy themselves prior to close of escrow” – I can’t tell you how wrong that is on so many levels.
A good, experienced, agent may be able to recognize some “red flags” and alert the buyer to have the item(s) properly inspected. While not an end all to the Buyer’s due diligence, it is another pair of eyes looking for problem areas. The law assumes that we would be more qualified than the average consumer to recognize “red flags.” These would include musty smells (often downplayed by listing agents), structural defects like a sagging roof line, or evidence of cracks along a foundation side that is visible.
I know over my career I have spotted some serious items that either discouraged my Clients from making an offer, or had them have a qualified expert determine the scope of the issue.
Buyer’s agents (selling agents) have the same visual obligation but at a higher standard than the listing agent.
Really surprised that Washington State has no such requirement. California tends to be on the cutting front of consumer protection.
Anyway, sorry for getting off the primary subject matter of your post – but always enjoy a good debate with an intelligent Attorney.
Craig and Jeffrey,
Craig – the Seller Disclosure Statement in CA does have (or did last I saw) a place where the agents participate in the disclosure form.
Jeffrey – WA does not.
Jeffrey is correct that sometimes the problem to be discovered is not part of a regular and ordinary home inspection. Often the agent knows this when no one else does. Most often, if not in all cases, the buyer signs off on all the things the inspector does not do, before the home inspection begins. There are other means by which an agent can compel a course of action, based on red flags, beyond the scope of the customary and common practice flow of events in a real estate transaction.
Does the law “require” them to do that? I doubt it. Still, having an agent that does do that is of value, whether the law requires them to do that or not. Can the word “fiduciary” in and of itself require the agent to do that? Probably. So Jeffrey would be correct that CA imposing fiduciary vs. WA imposing “statutory duties” might be the distinction.
Still don’t know why WA removed fiduciary…not many states have. Only 2 that I know of.
Ardell — I don’t know enough about CA law to weigh in on the “CA vs WA” issue. However, two thoughts: 1) You’re right, there are great agents out there who are superbly competent and who bring real, tangible value to the transaction above and beyond that which is legally or even ethically required. 2) WA eliminated “fiduciary duty” (note: a point that actually is a little unsettled, notwithstanding the great “battle royales” of yesteryear involving Russ Cofano) because such a duty is inconsistent with, at a minimum, a) dual agency, and to a lesser extent b) payment of the buyer’s agent by the adverse party to the transaction (using the term “adverse” broadly and not limiting it to the litigation context).
Craig,
I am the first to advise Clients to contact a real estate Attorney if appropriate for legal advice or complicated transactions.
I have seen many Attorney’s become real estate agents, and they usually don’t succeed. Attorneys are so trained to be on guard and so prone to over think all the “what if this happens?” of the transaction that the whole transaction gets bogged down and those involved give up. Should the process be turned over to the legal profession the entire Company would collapse or we would be paying 33 1/3%.
Residential real estate is about emotion, it is about buying a HOME.
Real estate sales is about being an advisor, an advocate, and a guide through the process. Good agents live and breath the business like Ardell, and bring so much to the table for Clients. While Agency is important, as stated above having an experienced real estate agent more than makes up the few dollars that might be saved using an Attorney. There is so much more than just the contract.
Fee for service real estate has been tried many times. The consumer has mostly rejected it because they like to be driven around and shown all the homes in their price range without cost or risk. Of course it is again about options – some people are inclined to look for a savings and shoot themselves in the foot, while others do very well at it. That is why we have Redfin, full service brokers, fee service broker, Help-U-Sell, and I’ll give you my commission back if you buy from me.
I often laugh as a overpriced home is usually shown and sold by an out of the area agent – not knowing the local market, desirability of a particular area over another, or history of the property does not service the Client. Experience in the real world of real estate makes the difference.
Choose your real estate agent (or attorney wisely) before they choose you…
http://www.sandiegolifestyle.info/2009/06/pick-your-real-estate-agent-before-they-pick-you/
Ardell,
Well said, I couldn’t agree with you more.
David — you got the last word on the thread above. Nice work.
You’re right, the “contract” (not sure why you used quotation marks) can be written on a cocktail napkin. However, to be enforceable as a contract for the sale of real property, it must include certain specific terms. If those terms are omitted, it is not a legally enforceable contract. Do you know the terms that must be included to create an enforceable contract?
I do, but I don’t want to be accused of practicing law, LOL.