So how do Realtors work again? I just want to buy a house
If you've ever talked with a Realtor for a length of time about purchasing a home, you have probably had the Realtor bring up the issue of agency disclosure. In Wisconsin, there's buyer agency, seller agency, sub-agency, dual agency, designated agency, and pre-agency. Depending on your situation, one may be better than the other. As a potential buyer in the real estate market you have the choice to decide how you want to be represented during the transaction. Disclosure: I am not a real estate attorney and I am not giving any legal advice in this blog post.
Last week I spoke with a good friend (past client) that sent me a referral for someone looking to buy a condo on the west side of Madison. I thanked her very much for the opportunity to meet this other person about helping to buy a condo. For the purpose of this posting, let's call her Laura (that's not her real name).
I called Laura right away to introduce myself. We discussed our mutual friend and then the conversation led to these condos that she was considering. She has been looking at these particular condos for over a year, but only recently decided that now would be a good time to write up an offer to purchase.
She started to tell me her story. "I've seen them before and I was going to purchase this other one but my Realtor at the time didn't call me back soon enough. By the time we had scheduled the showing, the property already had an offer on it. That's why this person is not my Realtor anymore, and I haven't signed anything with anybody since then."
Okay, I thought to myself, that seems reasonable. I thought I might be able to help. One of the things that I'm required to ask, is if she has a buyer agency contract in place with another Realtor. If she does, that could present some problems.
When you work with a buyer's agent, then you are the agents client. The agent is representing only the buyer and can negotiate strongly for the buyer, offer negative opinions about the property, suggest an offering price, and further research a property's history to give the home buyer the best advice possible. In my opinion, this is the most natural working relationship when working with a real estate agent to purchase a home. Also, that's the reason why almost 90% of the time I work with buyers under a buyer agency agreement.
When I spoke with Laura, she did not have another buyer's agent and wanted me to help her with the purchase. However, there was a slight problem. She had already seen the property recently with another agent. There can sometimes be a problem if she wants to use me as her Realtor this late in the game.
Laura was like a number of home buyers and just out there looking to buy a condo (or house). She clicked a few things here and there on the internet and scheduled a showing with the listing agent of the property. When Laura contacted the listing agent for this property, that agent was a seller's agent. As a seller's agent one negotiates for the seller and can't say or do anything that would put that seller at an extreme disadvantage.
One thing that Laura was very cautious of, is getting stuck working with a buyer's agent that didn't perform to her expectations. She had already lost out on a condo last year and was hesitant to sign any agreement with any Realtor. That is the reason that she just did her own searching online and then scheduled showings with the listing agents.
Part of the problem with this scenario is that she's not working with one particular agent to negotiate strongly for her. If she wants exclusive representation of someone working in her corner then it makes sense to have a buyer's agent. If Laura chooses not to have a buyer's agent represent her best interests, then she should understand that an agent that she contacts about a certain property is somewhat limited during the transaction.
One area that is especially confusing, especially in today's challenging market, is pricing. If Laura chooses to have representation with a buyer's agent then her agent can fully advise her on pricing and negotiation strategies. If Laura chooses to have representation with a buyer's agent then she will also have someone that can assist with negotiations of properties within the same company, properties for sale at other real estate companies, new home development properties, for-sale-by-owner properties, and expired listings.
I understand Laura's reason for not wanting to sign anything too soon. But at some point she had to choose how she wanted to be represented during the real estate transaction. If you want someone negotiating strongly for your best interests, then I would suggest a buyer's agent. If you are cautious about the agent, then make sure there's a performance clause that allows a way out if the agent fails to perform to your expectations.
Contact me if you you are still confused, have further questions, or are looking for a buyers agent in the Madison area. Coming up next time...listing agents explained.