Terry and Jan decided it was time to be first time home buyers
They were ready to buy their first home. It was time to finally get a nice big yard for the kids, and a cozy kitchen and bedroom they could call their own. Not only would they stop throwing away $1,000/month in rent, but they knew they could get a tax deduction on the interest part of the mortgage, so they were fired up to start looking for a home.
First, they jumped onto the internet and found some great possibilities on Realtor.com. They then called the listing agent, who said he would take them out that very afternoon to go look at the house. He then showed them 5 other houses, and they liked two of them.
Terry an Jan didn't realize until they were in the car with the agent that he had just gotten his license 3 months ago, and that he was "assigned" to them because he was on floor that day and got their phone call. Terry & Lucy thought he was a nice enough guy, but they soon realized he didn't know very much about the area as he had just moved there from out of state.
Then the agent took them to look at properties listed by his own firm, because he said he was familiar with the insides of the houses and knew of a few that would be perfect for them. Terry noticed these houses were rather above their preferred price range and not really in the school district they preferred. As the day went on, they noticed he seemed to be showing a lot of his own firm's listings.
Of course Jan realized she had only chatted with him for a few minutes before getting in the car with him to go look at homes. Maybe that was why he didn't really understand their priorities of wanting to stay in a lower price range, or that they really preferred to be in another school district. He showed them one home they absolutely loved and he let them know that it was a brand new listing and if they didn't act quickly, they may lose this one. The agent was silently thinking that if they chose this particular property, his company would make a "double-dip" commission. While he might be a "dedicated agent" for the buyer and earn 3%, his friend in the company who had the listing could get the other side of the comission, another 3%.
They went home that night feeling excited but confused. They were feeling a bit conflicted because he had taken so much time to show them around and they felt a bit obligated to him. Yet they were not sure he had the experience they were expecting, nor the full understanding of their needs. So they resolved to look on their own the very next day.
On Saturday morning they got the local paper and saw that there were half a dozen open houses in their preferred neighborhood. So they went to each one of them and signed in at the front door. They mentioned to the agent at the open house that they really didn't have an agent, because they'd never signed anything with the young floor person guy & weren't so sure they wanted him to be their agent anyway. The agent at the open house said he'd be happy to be their agent and that he might even be able to get them a discount on that particular open-house home because it was his own listing. Or, he could ask his co-worker to be their designated agent.
Terry and Jan were weary when they got home that night. They relaxed after dinner by going on to the internet and stumbled into the concept of "exclusive buyer agents", who specialize in just helping buyers. Terry had just accepted a job offer and they were eager to put a bid on one of the three houses they had seen.
Terry found the National Association of Exclusive Buyer Agents under a search for "buyer agents". He also found many other websites offering to help him locate a buyer agent, but he felt this organization, with their published standards of practice, code of ethics, and public registration as a not-for-profit trade association and informative website was a good choice.
He didn't feel like filling out the form, so he called the toll-free number. After chatting with the staff however, he was dismayed to learn that it was likely NO buyer agent could assist them at this time on the three homes he and Jan were interested in!
Why not?
The staff explained to him that because he had seen the first two houses he liked with the listing agent, that any buyer agent would be reluctant to get involved at that point . Terry and Jan had allowed the seller's agent to act as their agent by physically showing them the houses. They remembered signing some sort of paper in the car, but they couldn't recall quite what it was.
The staff explained that a buyer's agent would probably be unable to get involved at this point because the traditional real estate system would likely make it impossible for him to earn the buyer's side commission on that particular transaction. The staff said they would still be happy to give them a list of buyer agent members and that they could still call & discuss their situation. However, at this point they should be prepared to perhaps hire an attorney to protect their interests if they put in a bid on either of those two houses with the seller's agent or the designated agent at the listing company.
Terry and Jan told the staff that they really liked the open house property the best, so maybe an association buyer agent help them wit that one? Well, no...
Why not?
The seller's agent at the house had showed them the house and given them his card. They signed in at the door. The open house agent said his company practiced designated agency, and could help them. However, they felt uneasy about putting a bid in on that open house with someone from the same company that represented the seller. How could this company negotiate them getting the lowest price and best terms while at the same time they already had a contract with the seller to get the highest price & best terms?
Terry and Jan hung up the phone, discouraged, and decided to hold off buying until the economy improved.
Two months later, interest rates went down and they called the association again. They had seen foreclosure house in the neighborhood where they wanted to buy and it had a great price but looked like it might need repairs. After after interviewing the most senior person they could find in 2 companies, they engaged the services of an exclusive buyers agent* who had fifteen years of negotiation experience and had personally helped people buy homes in that neighborhood for the past 10 years.
Their chosen agent, Connie, worked in a company with no listings. Terry and Jan felt this particular agent was 100% in their court, and dedicated to serving only them. She provided a free consultation session prior to asking them to sign a written agreement with her. She stated that with a written agreement they would know exactly what she was willing to do for the commission she earned, and under what terms they could exit or extend the agreement.
Connie then helped them figure out the right price to offer. Their offer took into consideration the prices of recently sold homes in the neighborhood, and many other considerations they hadn't even thought of. They bought the house and are confident today that they got the right home for them at a great price.
* An exclusive buyers agent is an agent wh works in a company where the broker/owner and all agents in the office only work with buyers and their company takes no listings. The only verifiable EBA offices are those who belong to the National Association of Exclusive Buyer Agents.
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