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20 QUESTIONS TO ASK REAL ESTATE AGENTS
BEFORE YOU BUY A HOME
© 2000-2004 Thomas Wemett, Rochester, NY
INTRODUCTION The information in this pamphlet should give
you an upper hand when interviewing real estate agents to find one to
help you buy a home. Homebuying can be a daunting process. Using the
services of the right agent can make all the difference between an
enjoyable adventure or a dream turned into a nightmare. This information
should help you choose the right agent who will help you find and close
on a home just right for you. Why is using the services of the “right”
agent that important? Given that buying or building a home is probably
the single largest purchase you will ever make in your lifetime, you
need to give yourself every advantage possible! That’s why. Homebuyers
can work with agents who represent the seller (listing agents), agents
who represent the buyer or agents who try to represent both the seller
and the buyer (dual or designated agents, transaction brokers or
facilitators are several names used to describe this type of service).
Agents who represent the seller, by law, must look out for the seller’s
best interest and work to get the highest price and best terms for the
seller. Agents who attempt to work for both buyer and seller must remain
neutral. They can’t give you any information which could be detrimental
to the seller or hurt the seller’s negotiation position. Doesn’t sound
like either of these work well for buyers, does it? Seek out and use the
services of a true “buyer agent”, someone devoted to protecting your
interests fully throughout the entire process. But, beware the buyer
agent who takes listings and/or works for a large real estate company.
They may already represent all the sellers who have their homes listed
for sale with that company. If you are interested in purchasing one of
the homes the company has listed, the agent you are working with and to
whom you may have given confidential information, may no longer be able
to fully represent your best interests. They may now “renege” to a
position of providing less protection and perhaps no protection for you
if you continue to work with that person on a purchase of that
particular home. If you are going to work with such a buyer agent, work
with one who is with a small real estate company to reduce the potential
of your wanting a home listed with that company. The good news is, there
are homebuying specialists available throughout the country who are
solely devoted to looking out for the best interests of homebuyers,
only. They are called “exclusive buyer agents”. A “true” exclusive buyer
agent doesn’t take listings, never represents sellers and does not work
for a company that does. A “true” exclusive buyer agent should be your
first choice. They tend to be more attuned to homebuyers needs and
better trained and more experienced in protecting buyers best interests
and in saving homebuyers money, time and aggravation. Seek out the
services of a true exclusive buyer agent and you are already half way
home. 20 QUESTIONS TO ASK REAL ESTATE AGENTS
BEFORE
YOU BUY A HOME (With explanations for your reference)
1) Do you, or the Company you are with, take listings?
(The answer you “want” to hear is No! If an agent, or the company that
agent is with, takes listings, there is a chance that you may end up
interested in one of their “in-house” listings. Do you really expect
that they can fully represent you and fully represent the seller at the
same time? Your position will be greatly
compromised if you decide to continue a purchase of such a listing
through that agent. Not only is there the possibility that the agent
will be compromising their fiduciary duties to you, but the agent and
company are now in a position of conflict “with” you. The agent and
company stand to make more money, a double
dip, because they are on both sides of the transaction. How do you think
that will affect their thinking and judgment? On the other hand, if you
are using the services of an agent who doesn’t take listings and who is
with a company that doesn’t take listings, no such conflict will arise
and they can fully represent you on any property you might be interested
in. Look for agents and companies who provide 100 % Loyalty to
Homebuyers - 100 % of the time!) 2) Will you try to
sell me one of your listed properties before you show me listings from
other Real Estate Companies?
(The majority of agents will try to sell you one of their listed
properties first, as the majority of agents either take listings
themselves or are with a company that takes listings and represents
sellers. Agents who take listings are required by law to attempt to sell
their listings first and their company listings next before showing
other properties, those listed by other agents and companies or for sale
by owner. Be prepared for this practice and make sure that the agent you
decide to work with shows you ALL properties available that meet your
criteria right from the very beginning, including properties for sale by
owner. If an agent
is unwilling to do this, find another agent. If you start working with
an agent who primarily shows you properties that they or other agents in
their company have listed and very few other properties, find another
agent.)
3) What information do you have about FiSBOS (For Sale By Owner)
properties that are available?
(You must work with an agent who has access to information on properties
that are not listed, primarily, for sale by owner properties. In the
very tight real estate markets that are being experienced in most parts
of the country, many sellers are trying to sell their homes on their own
without an agent. Many will try it for a few weeks and then if not
successful, list the home with an agent. While it is for sale by owner,
not many buyers will know that it is available, and thus you may have an
advantage by getting in to see it before it gets listed. There are for
sale by owner web-sites and for sale by owner information services that
agents can
subscribe to in order to be on top of the fisbo market. Make sure your
agent has those contacts and more importantly, is willing to and has
experience working with for sale by owners in putting together purchases
on behalf of buyers.) 4) Do you represent Buyers as a
Buyer’s Agent?
(The answer you want to hear is Yes! But, beware. Real estate
salespeople also know that the answer you want to hear is, Yes.
They therefore are eager to answer your question in the manner that you
want to hear, regardless of their actual experience or training or
ability to properly represent a buyer. The challenge that this presents
to you is that you need to do more probing to make sure you are working
with the very best buyer agent available to you.) 5)
What percentage of your business involves being a Buyer’s Agent?
(The answer you want to hear is 100 % as a buyer’s agent. You don’t want
to hear 50% or less. That means the agent is spending the majority of
their time “selling” houses not helping people “buy” homes. You need an
agent with the proper mind-set of helping people buy a home and not
selling a home to a buyer. You don’t want a salesperson. It is very hard
for an agent who spends the majority of their time representing sellers,
taking listings and “selling” homes to get into the proper mind-set to
truly represent buyers. If you decide to work with an agent who does
take listings or who is with a company that takes listings, make sure
that company is a small one and make sure that the agent spends the
majority of their time representing buyers. Many large real estate
companies discourage their agents from specializing in representing
buyers and many require all of their agents to concentrate
on listings and “selling” real estate.)
6) What training have you taken that specifically relates to being a
Buyer’s Agent and representing buyers?
(There are numerous courses and certification programs specifically
geared towards representing homebuyers. However, the majority of agents
don’t take advantage of these course and educational opportunities. The
fact is that very few “so-called” buyer agents have taken these courses
or obtained these certifications. It is important that you use the
services of a buyer agent who is experienced but also who is well
trained in the specialty of buyer representation.) 7)
What specific Buyer’s Agent professional designations do you have?
These are the designations available for the specialty of buyer
representation:
CEBA - Certified Exclusive Buyer Agent obtained through NAEBA - The
National Association of Exclusive Buyer Agents.
ABR - Accredited Buyer Representative obtained through REBAC - The Real
Estate Buyer Agents Council.
CBR - Certified Buyer Representative obtained through the Real Estate
Training Institute.
CBA - Certified Buyer’s Agent obtained through the Buyer Broker
Institute.
CHEC - Certified Homeowner Educator and Counselor obtained through
AHECTI - the American Homeowner Education and
Counseling Training Institute.
Look for agents who have one or more of these designations.
8) What National or State Buyer Agent Organizations do you belong to?
These would include organizations such as:
NAEBA - the National Assoc. of Exclusive Buyer Agents
REBAC - the Real Estate Buyer Agent Council 9) What
other Real Estate Professional Designations do you have?
These would include designations such as:
GRI - Graduate Realtor Institute (only 7% of Realtors nationally have
this designation)
CRS - Certified Residential Specialist (only 3% of Realtors have this
designation)
ABRM - Accredited Buyer Representative Manager
CSP - Certified New Home Sales Professional
CEA - Certified Exchange Advisor
10) What are the fiduciary, client level duties you would owe me if I
decide to work with you as my Buyer’s Agent?
(Here we need to get somewhat technical. Real Estate Agents owe
fiduciary duties, client level services to clients just as Attorneys and
CPAs do. An easy way to remember these duties is through the acronym,
“CAR LOAD”. As in, “A real estate agent owes a CAR LOAD
of duties to their Buyer Clients: Confidentiality, Accountability,
Reasonable Skill & Care, Loyalty, Obedience to Lawful Instruction,
Advocacy and Disclosure!”) Let’s review these in more detail:
Confidentiality - Prohibits the agent from disclosing confidential
information obtained from you such as: the price you are willing to
pay, the amount of mortgage you are actually qualified for, how much
cash you have to work with or the level of your motivation to buy a
particular home. Accountability - Requires the agent to properly handle
all money received, e.g. escrow deposits. Reasonable Skill and Care -
Requires the agent to protect you from foreseeable risks and to
recommend that you obtain expert advice when your needs are outside the
scope of the agent’s expertise. Undivided Loyalty - Prohibits the agent
from advancing any interests that are adverse to your own. Obedience to
Lawful Instructions - Requires the agent to act subject to your
continuous control and for the agent to obtain and follow all lawful
instructions from you. Advocacy - Requires the agent to act in your best
interest at all times and for the agent to proactively support your
position. Full Disclosure - Requires the agent to disclose all
information concerning your home purchase which might effect your best
interest; things such as the seller’s motivation for selling, the price
the seller paid for the home, deferred maintenance or defects in the
home, price comparable's for similar homes and the listing history of
the home, etc. A true buyer agent understands the above duties and will
be able to share them with you when asked. Casual buyer agents on the
other hand won’t understand them. When you experience this, find another
agent who does understand their legal obligations to you.
11) What happens if I am interested in one of your listings or a
listing by another agent in your company?
(First of all you shouldn’t be working with an agent who takes listings
or who is with a company that does. However, in the event
that you do, and you are interested in one of the agent’s or company’s
listings, the agent has two basic choices. One, they could refer you to
an agent with another company. That would allow you to receive full
representation. Or Two, they could try to keep the transaction
“in-house” where the real estate company, and perhaps the agent, can
make more money by being involved in both sides of the transaction.
Don’t expect a referral to an agent with another company. Generally, the
only agents who will do that are referred to as “Single Agents”, that is
they represent sellers and buyers but never both in the same
transaction. They refer out one side of the transaction as part of their
office policy. Unfortunately, that will leave you with option two. You
will probably be asked to consent to a form of compromised
representation or non-representation. These services go by such names as
dual agency, designated agency, transaction brokerage and facilitator,
to name a few. As will be discussed below, none of these services are
equivalent to full representation. We often hear, generally from
traditional agents, that buyers want to buy and sellers want to sell, so
what is the big deal. Well, the big deal is that you could end up buying
the wrong home, paying too high a price or not
dong proper inspections or having them done by the right professionals
resulting in unexpected repairs later on. If you know what to look for,
you can protect yourself from such disasters.) 12)
Will you want me to “consent” to you being a “dual agent”?
(The most common position taken by agents and real estate companies when
dealing with the in-house transaction is dual agency. If you are using
the services of an exclusive buyer agent, such a situation will never
arise. However, when using the services of a buyer agent who takes
listings or is with a company that takes listings, dual agency will
probably be their default position of choice for in-house transactions.
You need to know this up front before deciding to work with a particular
agent. Many times the agent will have you sign a disclosure form or
buyer agency contract which, in advance, gives them the right to renege
to the default position of dual agency for in-house listings. As will be
discussed below, this is not in a homebuyer’s best interest.
13) What are the fiduciary, client level duties I give up if I
consent to you being a dual agent?
(Again, we need to get technical for a minute. A dual agent no longer
owes you the duties of “Undivided Loyalty” and “Full Disclosure”. These
are pretty important duties. The dual agent can’t be an advocate for
you, can’t negotiate for you, can’t suggest an offering price, and can’t
point out potential defects or problems. The dual agent can’t provide
you with information about the seller such as motivation
for selling, price they paid or how long or how many times the property
has been on the market. If they do, they are breaking the law. In
general, a dual agent can’t give you any information which could be
detrimental to the seller’s position. Go back and read the descriptions
of these duties again that were discussed in a prior section. You should
be very concerned with regard to giving up what are
probably the two most important duties an agent owes to a buyer client.
By the way, if you can’t expect the agent to be loyal to you or to
provide you with “full” disclosure of all facts and information about a
property and a seller, what is the reason to have an agent at all?)
14) Is it really in “my” best interests to continue to use your
services as a dual agent?
(Absolutely not! Can you imagine if you were sued by someone and decided
to be represented by the same law firm? How confident would you feel
about your case being handled properly? In fact, you would probably have
a very difficult time getting the same law firm to represent you.
Attorneys know better and rarely represent both of two opposing parties.
Yet, home buyers and sellers get themselves into this situation all the
time. Buyers and Sellers have conflicting needs and deserve true, full
and independent representation at all times.
Of course the better decision is to never get yourself into a dual
situation in the first place. Seek out and use the services of a true
exclusive buyer’s agent right from the very beginning and dual agency
never becomes an issue.) 15) Will you want me to
consent to some other relationship besides dual agency if I’m interested
in an in-house listing?
(There are numerous other relationships authorized by law which will
vary state by state. Some of the names that these other relationships go
by are designated agency, transaction brokerage, facilitator, or
non-agent. The definitions of these relationships, even those called the
same, will also vary state by state. You will need to become familiar
with the real estate agency choices available in your
state. Most states have real estate agency disclosure laws which will
provide some form of descriptions of the various relationships. Ask to
see these forms and descriptions. Unfortunately, some states have better
information then others. In some states, no agency disclosure is
required and buyers are on their own to discover their choices,
sometimes too late. “Caveat Emptor” - “Buyer Beware”!)
16) Do you use a written buyer agency contract? Can I have a copy for
my review?
(The answer you want to hear is Yes! In essence, this is an employment
agreement, much like a listing agreement between a seller and a seller’s
agent. It puts in writing what is expected of the Buyer and the Buyer’s
Agent, what services are being provided and the cost of those services.
Agents who don’t use a written buyer agency agreement are very casual
about Buyer Agency and probably don’t have the professional experience,
skills or knowledge to properly represent you as evidenced by the fact
they don’t put their services and costs in writing. Ask to see a copy of
the buyer agency contract that you will be asked to sign. If you are
uncomfortable signing the agreement, then have it reviewed by an
attorney. Some things to watch out for are the length of time the
agreement is good for. You may want a shorter time period if you aren’t
completely sure about the agent and how you will be able to work with
them. Check out how the compensation works. What if the agent is offered
a higher commission split than average or a bonus? Will the agent keep
the “extra” or will they pass it on to you. Is there a “kick-out” clause
with regard to a specific time period following the termination of the
agreement in which you might still owe a fee to the agent if you buy a
home that you saw with them? A reasonable time frame for such a clause
might be 4 to 6 months.) 17) If I don’t want you to be
a dual agent, or if you have a conflict of interest with respect to a
property I might be interested in, will you let me out of the buyer
agency contract?
(The answer you want to hear is, Yes. Professional buyer agents only
want to work with qualified buyers who are pleased with the service they
are providing. It only makes sense that in the event of a conflict or
disagreement over the services being provided that some mechanism be a
part of the buyer agency contract to allow for early termination. On the
other hand, expect that a buyer agency
contract may also contain a clause or clauses protecting the agent from
abuse by a buyer client who is trying to cheat the agent and that
provides some compensation for the agent for time spent before the early
termination. Conflicts of interest should always be disclosed as soon as
they are known. That is common sense and state law in most cases. Some
real estate companies have an office
policy for conflicts of interest. Ask to see a copy.)
18) Are you paid a percentage of the purchase price? Isn’t that a
conflict of interest? The higher the price I pay the more you will make.
(Most buyer agents are paid on a percentage basis. Is it a conflict of
interest? Not really. Take a price difference of say, $5,000. As an
example, let’s say the commission is 3%, which equals $150.00. Would a
buyer agent attempt to get you to pay $5,000 more for a home so that
they can make an “extra” $150.00? Of course not. Why? Because they stand
to make a lot more money by saving
you money and having you refer them to other people because they did
such a good job for you. There are many different ways for buyer agents
to be paid. The buyer agent could be paid through the listing agency,
the seller on behalf of the buyer or by the buyer. For the most part a
buyer agent’s compensation is built into the transaction and paid out as
part of the closing costs and the buyer has no “additional” costs to
have their own buyer agent. On occasion it also makes sense for the
buyer to pay their buyer agent separately and outside of the
transaction. Your financial situation and the details of the transaction
are going to determine how the buyer agent’s compensation will be
handled. It is very important that you discuss this upfront with agents
so that you know how this is going to be handled. You don’t want to
learn at closing that you owe money to an agent when you thought it was
included in your offer.) 19) Will you shop for a
mortgage for me or do you have any special sources of financing where I
can save on a mortgage and get better rates or pay lower fees than what
is usually available?
(The answer you want to hear is, Yes! You want to work with a buyer
agent who is very aware of mortgage programs, interest rates
and closing costs. They should recommend the services of mortgage
brokers who will look out for your best interests and make mortgages
available to you with lower rates and lower closing costs than generally
other banks and mortgage brokers have to offer. They should be aware of
specific banks offering special programs for first-time homebuyers for
instance. They should have you
pre-qualified or pre-approved for a mortgage depending on the
requirements of the marketplace, before you start to look for homes and
they should make sure that you are provided with a good faith estimate
of your cash requirements for down payment and closing costs and that
these are in line with your resources.)
20) Specifically, summarize how you will protect my interests and why
I should work with you rather than another agent?
These are the answers you should hear or at least something close to
these:
WE ARE SPECIALISTS and HOMEBUYING EXPERTS: We only represent buyers. As
a result we have more experience in looking out for buyer’s best
interest and in negotiating on behalf of buyers for the best price and
terms. We are very good at what we do - representing homebuyers only.
WE NEVER PRACTICE DUAL AGENCY OR DILUTED REPRESENTATION:
These are forms of bait and switch. You become sold on the idea of Buyer
Representation and then you are switched to Dual agency or some other
form of diluted representation so that real estate agents and real
estate companies can make more money at your expense. Stay away from
these situations.
WE ARE PROFESSIONAL BUYER’S AGENTS:
Many traditional listing agents call themselves “Buyer’s Agents”.
Although this practice may be misleading to the consumer, it is legal.
No special training or licensing is required to call oneself a “Buyer’s
Agent. Traditional agents have little if any specialized training,
knowledge or experience to be a Buyer’s Agent. They are considered to be
“casual” Buyer’s Agents. Traditional agents are trained to
represent sellers, to market houses, and to “SELL” buyers. Professional
buyer agents spend the majority of their time, if not all their time,
representing buyers and thus never have to constantly switch back and
forth between working for buyers and working for sellers. Professional
buyer agents never try to “sell” their buyer clients a home.
Professional buyer agents always help people “Buy” a home. There is a
big difference between selling you a home and helping you buy one. Which
would you prefer?
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