1.1 "Don't Quit Your Day Job"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"
Reality In Realty 2001
Buyer Advice 1: EBA, EBA, and EBA!© 2001, Ray Wilson
"Incredible, But True" could have been the title here. The truth will be hard to swallow for anyone who trusts that "truth" is what they've heard from the real estate industry. You are hereby called upon to entertain the implausible, to suspend your disbelief long enough to discern the reality. The three articles preceding this were advice to sellers, and warned of pitfalls sellers might encounter. Buyers should wish pitfalls were their only danger, for buyers are a favored item on the menu of active predators lurking in the real estate jungle.
Of course, sellers aren't out of the woods because most become buyers and may already be in the clutch of the very agent who sold their home and is still digesting its buyer. Until very recently, agents worked only for sellers; and buyers were on their own. Buyers' agents appeared in the eighties and started catching on in the nineties. Suddenly, listing agents are saying "We can do that too," and their powerful lobbies have even made it legal to say that (with a straight face) in over half the states. Time for a reality check...
Reality #1: When you buy, you pay for agency whether you get it or not. If you don't have it guaranteed in a signed contract, you don't get it..
Whether it is a listed property or a For Sale By Owner (FSBO - fiz'bo ) your minimum purchase price is determined by market value -- the price at which other people will offer at least as much as you.
(FSBO sellers notoriously overrate their property values and sell on their own because they expect to put the difference in their own pockets. They may get offers lower than their inflated asking price but, by definition of "market value" they will get market value offers.)The point is that, regardless of the ultimate method of sale, a market value price inherently factors in the dollar equivalent of brokerage costs. From the money you provide in the purchase price, either:
A second hitch with putting option #5 into play is this second of seven critical realities highlighted in this three part buyer advice series
Reality #2: Paying a person to be an agent does not make him/her an agent (let alone your buyer's agent).
This reality brings us to the actual title of this piece, for that old bit of wisdom touting "location, location, and location" means nothing when your guide is chained to specific locations -- worse when the only locations of real concern are bank accounts awaiting commission deposits. The simple and unimpeachable truth is that only an "Exclusive Buyers' Agent" (EBA) can ethically and legally work for you as an agent! Now, reread that last sentence. Absurd as it seems, it is true; and here is how really absurd the truth can get:
Note: Got doubts? The inescapable truth of each of these assertions will emerge as we proceed.So, find not just a buyers' agent, but an EBA -- but there is still a hitch! There remains the small matter of making sure you've found a true EBA! The problem is that "truth In labelling" not only hasn't caught up to real estate, but deceptive labelling is becoming an art form. For example, the following is the real definition of an EBA, long established and documented at the highest and broadest levels of the real estate industry:
Exclusive Buyers' Agent (EBA):But somebody forgot to copyright or trademark the words, and some licensees in listing firms audaciously claim they are EBAs because they themselves work exclusively "with" buyers. "On" buyers is more to the point, since they are not exclusive of all the firm's promises and obligations to seller interests.
Reality #3: A real estate firm is an organization and, by definition, a network of interdependent interests which come into direct conflict when its members assume agency obligations to both buyers and sellers. How does a so-called buyer's agent explain to the seller's agent at the next desk why she cost him a commission by bringing her buyer to the listing of a competing agency?
The Common Law of Agency (something well before, above, and beyond the reach of state legislatures or courts) defines a limited form of agency called, "Dual Agency" in which one agent can be a partial agent to both sides in a specific transaction when there are essentially no opposing interests involved. It conceivably works when there are no issues of negotiation or respective confidences, which can occur, for example, in the transfer of property within a family. Because in that very narrow instance a licensee can indeed work as agent (however limited) to both buyer and seller, the phrase, "Exclusive Buyers' Agent" -- as defined -- was needed to distinguish the one type of agent who could deliver FULL agency to a buyer.
As one remedy for relentless double agent duplicity, genuine EBAs have now trademarked the term, "EBO" for an "Exclusive Buyers' Office" which never takes listings or represents sellers. So, for awhile at least, you might rely on the EBO label as non-deceptive, but your real protection lies in looking past the label to the content. Bottom line: you want a true EBA, and that means someone who works in an EBO, whether they call it that or not.
Reality #4: An "EBA" not in an EBO is not an EBA; and only an EBA is a true buyers' agent! Is that clear? Well, actually there is that one rare exception of the true single agent who necessarily works in a very small office, with very few clients at a given time, and strict affirmative procedures to eliminate conflicts. The keyword here is "rare."
It all comes down to understanding what an "agent" is. It is established by Common Law, rooted in the common sense of centuries, a natural law of human behavior no more changeable than the Law of Gravity. The concept is so simple, so basic, and so fully understood by the mainstream real estate industry for most of the 20th Century, that it is bewildering how the conscience of almost an entire industry could allow such total reversal and deception. Here it is folks, the basics:
Thus, as a buyer, you can get brokerage support from the seller's agent or subagent -- but they must use it to further their seller/client's interests.
You could at this point be thinking that one way to avoid all problems is simply to avoid all agents. However, that brings us back to the point of Reality #1 (above). You can't. What is more, you really don't want to. You want someone who can be held to the promises they make to you, especially the kind of promises involving the heavy stakes in a real estate deal. Details in the next installment: