Will buyer’s agents become obsolete?

Buyer agent and clients viewing a home - Will buyer's agents become obsoleteReal estate is always shifting, and now that is more true than ever. Will buyer’s agents become obsolete with the cataclysmic transitions we’re facing? Today we’ll touch on:

  1. The role of expertise in real estate transactions
  2. What do buyer’s agents do?
  3. The impact of the recent NAR settlement and industry changes coming

Do consumers value expertise? If so, don’t expect that buyer’s agents become obsolete.

After all, a lot of data is online. The thinking goes, travel agents are mostly gone and journalists are being replaced by bloggers.  It’s possible that this will be the case for buyer’s agents in the future, as there is a trend in thinking that there are no real experts if everyone has access to information.

A few years back, I heard about a book that takes on this concept regarding expertise and it really resonated with me. The title is “The Death of Expertise: The Campaign against Established Knowledge and Why it Matters“. Confession: I have not yet read it, but want to do so. I did hear it discussed on KGO Radio by Pat Thurston, who was one of the radio personalities there, and her take on it was that it presents the concept that everyone’s opinion is as good as everyone else’s opinion.

That certainly does happen in real estate, along with the persistent idea among some consumers that buyer’s agents don’t really add any value other than unlocking doors. (I wrote about this idea that “it’s all on the web” so buyer’s agents aren’t perceived to be needed back in 2013.) Even this morning I had someone email to ask me if I would split my commission if they bought a home with me and would “do all the research”.  The answer, by the way, is no.

You can have a 20 or 30 year veteran Realtor with oodles of transactions, but a home buyer armed with a real estate app may not always know what he or she doesn’t know. And that’s dangerous. Information does not equal knowledge or skill.

Will buyer’s agents become obsolete? Before thinking that they will, learn what they do and what they know and why their clients appreciate them.

What do buyer’s agents do that consumers don’t do as well for themselves?

A good buyer’s agent will be able to help with these items (and many more, depending): (more…)

What is implied agency in real estate?

Implied agency word cloudWhat is implied agency? Unless you are a real estate licensee, it’s likely that you never heard that term before.  If you are in the realty business, you need to understand this concept.  What is it?

Implied agency and agency relationships

Before explaining implied agency, it’s best to start with what an agency relationship is or means. If you hire a real estate licensee or Realtor to assist  you in buying or selling a home, normally you and he or she create an agency relationship.

In California, a licensed real estate professional can be a buyer’s agent, a seller’s agent, or, if disclosed, a dual agent – representing both parties, both buyer and seller. The agent, by the way, references both the individual real estate licensee as well as the broker. If the same broker of record represents both the home buyer and seller, it’s a dual agency situation, even if there are different Realtors involved.

Here, we use a disclosure form (see link at bottom of article for the full text of it) which spells out the agency relationship and duties – it is statutory, meaning that the state dictates the words to be used on the form, whether it’s published by the California Association of Realtors, the Peninsula Real Estate Date Services or any other entity. An agency relationship means several things, but above all, it means that the real estate professional has fiduciary obligations to the seller or buyer being represented, including those of  of “utmost care, integrity, honesty, and loyalty” to that client.

Most of the time, when an agency relationship has been created, there’s a meeting of the minds between consumer and real estate professional that they will be working together.   The relationship is not accidental, but intended and explicit.

Sometimes, though, in the course of casual conversation, it may be possible to accidentally create an agency relationship.  If this happens, it is referred to as “implied agency“. How can this be?  This may occur when the real estate professional casually provides the type of guidance and advice that would be reserved for clients, but that consumer relies upon that advice. (more…)

Do you have an agent or USE an agent?

Meeting with home buyers to review disclosures and purchase offer documentsWords can be so revealing.

Recently at an open house, a home buyer said that he and his wife don’t have a buyer’s agent. Later, though, he volunteered that recently they’d written an offer on a property and had “used an agent“.

What does that tell you?

Most Silicon Valley real estate professionals would like to have established professional working relationships with home buyers and sellers.  They want clients, not customers. Realtors put in a lot of time reviewing disclosures, pulling comps, analyzing the realty market, looking for red flags at the property and in the paperwork. The real estate salespeople or brokers want to go “all in” to help their home buying clients to buy their next home with the best price and terms possible.

But do home buyers want the same thing that their Realtors do? I’d say usually yes – but not always. Often you can tell how committed a home buyer is by the way he or she speaks, but sometimes only in the way that person behaves. For those of us working in the industry, it’s very important to understand the client’s motivation and loyalty; spend too much time with buyers who aren’t committed to working with you and you will be in the hole financially.

 

List of words that characterize the agent and home buyer relationship, such as client or customer

 

Probably 15% or so of San Jose area home buyers really don’t want a relationship with a Realtor.  They’d rather go it alone.  At another open house, someone said to me that she didn’t like “feeling obligated” to anyone, and found that if she did anything with any real estate agent, that person was expecting her ultimate business.

Yes, that is how it works.  We only get paid if a sale closes.

In many areas of the United States, it is very common for Realtors to engage with home buyers using a Buyer Broker Contract (buyer broker agreement).  Here, it’s not so common. We prefer to work on a handshake, we prefer to work for our clients with the faith that they will reciprocate our hard work with their loyalty. Silicon Valley Realtors want to guide and assist you all the way through from before, during, and after the sale.  They do want to know that you will work exclusively with them – and not just “use” them. If that’s the working, professional relationship you have with your Realtor, it will give you benefits for years to come as that buyer’s agent can be an ongoing source of advice and guidance.

Related Reading

How Does the Real Estate Agency Relationship Work in Silicon Valley?

Silicon Valley Home Buyers: Should You Use a Buyer Broker Agreement?

 

 

How Does the Real Estate Agency Relationship Work in Silicon Valley?

Books could be written about agency law in California, but in this post I will try to make the explanation concise and understandable. Please know that agency is different from state to state, so your experience of it outside of CA may be very different from it here.

An agent is essentially a person who or entity which acts on behalf of another in a transaction involving a third party.  In most residential real estate transaction in Silicon Valley, real estate agents are involved.

An agent has not just a duty of “fair and honest dealing”, but much more. The agent has a fiduciary relationship with the client. That is, the agent (or agency or licensee) must do what is in the client’s best interest (even if it is not in the agent’s best interest). It is as if the agent is an informed clone of the client, almost like a power of attorney but without signing ability.  The agent’s job is to protect the client and to negotiate for the client the best possible deal, the smallest possible risk, and so on.

To non-clients (that is, to customers), the agent still has a duty of fair and honest dealing. So the agent should not lie or mislead, but the agent doesn’t have to educate or strategize for the other size. When a Realtor has an open house at his or her listing, for instance, he or she has an affirmative obligation to try to get the client’s home sold at the best possible price. The Realtor may not tell a buyer the lowest amount a seller might take for the property unless the seller has expressly given that permission (preferably in writing).

 

fiduciary-duties

 

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Agency Question: “Do I have to buy the house from the Realtor who showed it to me?”

Graphic image of a house for sale and a Realtor who showed or previewed the house (person with briefcase)Awhile back, I got an email from someone who’d seen a Silicon Valley house she liked from a real estate agent whom she didn’t like.  She wondered, “do I have to buy the house with the Realtor who showed it to me?”

The answer, of course, is not always clear. It depends on your relationship with the agent.  It may also depend on why you choose to buy the home with someone else’s assistance, if you did so.

(1) Your relationship with the real estate agent

Did you sign a buyer broker agreement with that Realtor? If so, you may owe a commission to her if you buy the home through someone else.

Did you write an offer on that property with the agent? If so, again you may owe a commission to him if you hire someone else to help you purchase it afterwards.

In many cases, there is a verbal contract that you are working with a Silicon Valley real estate professional exclusively. This does “count” too but it may be easier to change your status if it’s a verbal agreement.

(2) Problem agents, problem consumers.  Do you want or need to break the relationship with the Realtor who showed you this or other homes?

Is your agent giving too pushy? Doesn’t seem to know what he or she is doing?  Too hard to reach?  Too busy to really assist you? Or doing something else that you perceive as a “red flag”?  Sometimes agents should be fired.

You most likely can break that agency relationship with a problem agent if it’s a verbal contract only and you haven’t written an offer on the property in question, but you must  clearly tell him or her that you are not going to continue working together and then have a gap in time between then and when you do write an offer on the home (at least a few days, if not a few weeks).  You can break the agency relationship verbally or in an email or both, but it needs to be clear so that there is no misunderstanding. A call or voice mail followed up by an email would be very clear.

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Buying Silicon Valley Real Estate? Understand That There Are Some Things Your Real Estate Agent Cannot Discuss!

Did you know that there are some things which your Realtor or real estate licensee/salesperson is prohibited from discussing with you? This is a surprise to many Silicon Valley home buyers.

Fair Housing Laws prevent real estate professionals from telling consumers certain types of information, particularly demographic information, anywhere in the United States. For instance, your agent cannot discuss with you these things:

  • where racial groups have the highest concentration
  • where people are found by religious affiliation
  • where certain languages are spoken or not spoken
  • whether or not there are halfway houses for alcoholics or other addicts nearby
  • if neighbors are mentally ill
  • whether someone died of AID or HIV (not the death, but cause of death)

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