The Buyer's Agent, Inc.

How the need for exclusive buyer agency developed.

Real estate brokers have been struggling with the question "Who is my client?" for over a decade. Traditional relationships are changing because of the laws enacted in most states in the 1980's that require real estate agents to disclose whom they actually represent. These laws have increased consumers' awareness of how the real estate industry operates and have paved the way for the growth of exclusive buyer brokerage. These changes in the field of real estate have caused a great deal of confusion among buyers, sellers, and brokers over their duties and legal obligations.

Traditionally, real estate brokers have been agents of the seller. In the traditional broker-client relationship, the broker and seller sign a listing agreement. Under this agreement the broker agrees to find a buyer in exchange for a commission paid by the seller. When a buyer signs the contract of sale, the broker has fulfilled his or her obligations under the agreement and is due a commission even if the sale does not actually close.

To secure buyers for their sellers, real estate agents have, over time, begun working closely with prospective buyers, offering many services to them other than simply showing them homes. Such services include providing information about financing, advising buyers about offering price, advising buyers about compensation for defects found during inspections, and submitting offers. These actions of the seller's agent on behalf of the buyer have confused many buyers and led them to believe that the agent showing them homes is representing their interests. In 1983, the Federal Trade Commission issued a report revealing that, when two agents were involved in a transaction, 74.2% of real estate buyers mistakenly believed the agent showing them homes was representing them. It also showed that 74.4% of sellers also thought the agent showing the buyer homes was representing the buyer. Gerard Butters, Bureau of Economics, Federal Trade Commission, Consumers' Experiences with Real Estate Brokers, 24 (1983). "[S]ellers and buyers generally assumed that the broker represents whomever he is working with..." Id., 25. As a result of the FTC study, most states now require disclosure of whom the agent represents.

The Multiple Listing Services (MLS) has increased the perplexity concerning the broker-client relationship. Using the MLS, brokers can cooperate in selling homes not listed with their companies. Once a broker obtains an agreement with a seller, he or she lists the home with the MLS and becomes the "listing broker." The listing then becomes an offer of "sub-agency" to all other subscribing brokers. If a broker other than the listing broker finds a buyer, then the listing broker agrees to split the commission with him or her, the "selling broker." Because of this, cooperation under the MLS creates the possibility that any participating broker in the area could become an agent of any seller. The MLS creates a situation where a there are two agents working for the seller and no one represents the buyer.

How is THE BUYER'S AGENT, INC. different from other real estate agents?

Disclosure laws, widespread use of the MLS, and growing consumer awareness have exposed the need for professional, specialized representation on behalf of the home buyer. In the 1970's, buyers' brokers began to provide professional representation, treating the buyer as a client instead of a customer.

The Buyer's Agent, Inc. was founded in 1988 by Tom Hathaway, the former chief investigator for the Missouri Real Estate Commission, and was the first company in the nation to franchise exclusive buyer representation. The mission of The Buyer's Agent is to bring to every home buyer in American the opportunity to be represented by an exclusive buyer's agent. The Buyer's Agent was founded on the principle that home buyers expect and deserve professional representation equal to that afforded to the home sellers.

As exclusive buyer agencies, its independently owned and operated franchises do not list homes for sale and only represent buyers of real estate. By not listing homes for sale, these offices can represent only buyers and provide full fiduciary duties, including loyalty, confidentiality, disclosure, accounting, and reasonable care and diligence.

Agents of The Buyer's Agentsm act as consultants to buyers rather than salespeople. They routinely enter into an agency agreement representing only the buyer, search all properties, including those "for sale by owner," bank foreclosure, & new construction for the buyer, locate and show available properties, objectively pointing out strengths and weaknesses to the buyer, counsel the buyer about the "best" property values, help determine the buyer's needs for professional property inspection and warranties, give the buyer a broker "opinion of value" for the buyer's chosen properties, provide the buyer with financial information about neighborhood properties & a detailed explanation of how this can benefit or harm the buyer, advise the buyer regarding offers on property, arrange for the buyer's necessary property inspection, consult with the buyer regarding counteroffers and negotiates on the buyer's behalf, confirm that needed corrections/repairs have been completed, supply information and estimates for any services requested, assist in choosing the closing authority, perform a loan analysis to determine the most favorable loan for the buyer, review HUD-1 settlement statement for accuracy, and keep everything about the buyer absolutely confidential.

The current movement away from fiduciary duties by other real estate agents.

In recent years, case law has developed which is adverse to the interests of traditional real estate brokers. Courts are no longer protecting the "Caveat Emptor" or "Let the Buyer Beware" arguments that have governed the real estate industry for years. A major factor contributing to the proposed legislation to do away with the common law of agency is the filing of three class action lawsuits against Edina Realty, one of the largest and oldest real estate firms in the country. Edina had relied in part on the Minnesota agency disclosure law when it began offering dual agency representation. Not wanting to scare off potential buyers or sellers, it used a vague explanation of dual agency in its "Listing Agreements" and "Offers To Purchase" forms. Several real estate buyers and sellers felt they were not fully informed about the representation they had agreed to give up, so they filed class action suits in both Federal and State court. Edina has reportedly spent millions of dollars on its defense.

The Edina case shocked the entire real estate industry. The industry decided that the real problem was not trying to serve two masters but was the common law of agency. This body of law has dictated the responsibilities professionals, including real estate agents, have to their clients for over two hundred years. Real estate agents are now attempting to relieve themselves from liability under these laws. The National Association of Realtors (NAR) has urged Realtors in every state with very specific guidelines to get legislation passed in their state which, among other things, makes all Realtors "Contract Brokers" who would be liable and responsible to the consumer only for what the broker agrees to be responsible for and legislation which abrogates the common law of agency. In real estate, the most significant protection the consumer has is the common law of agency. If it is removed, then each consumer will be forced to fend for him/herself when buying or selling real estate.

Traditional real estate agents are trying to manage dual agency by becoming contract brokers/facilitators, designated agents and/or limited agents.
· Facilitators do not represent either the buyer or the seller but merely bring the two together to work out the transaction.
· Designated agents, work for the same broker in the same office and the broker designates one to work solely for the seller and one to work solely for the buyer. This is an attempt to put up a "wall" between the agents. The legal profession has rejected such an approach. Attorneys in the same firm cannot work for opposite sides in the same case because they have access to all information about the adverse party and because doing so raises an appearance of impropriety even if there is none. Real estate brokers similarly have access to information about all clients, buyers and sellers. Even if there is no wrongdoing, firms representing both buyers and sellers may appear to be damaging the interests of their clients and customers.
· Limited agents are agents who will only have those duties that are agreed to and specifically listed in the contract. Agents acting as limited agents force the consumer back to the days of "Caveat Emptor."

This legislation is harmful to consumers and buyers' brokers tend to get very upset about it, probably because they are accustomed to looking out for the best interests of their buyers. The Buyer's Agentsm continues to offer the full representation that only exclusive buyer agents can offer to home buyers.