Dear Homebuyers
Hi there! I hope you have had a great summer and are looking forward to fall. I know I am. Fall is my favorite time of year. Cooler nights, October, baseball playoffs (Did you see that American League Wild Card Game last night? Go Blue Jays!), and everyone is back to their normal routines. The only thing I don’t really like is the obsession with pumpkin pie, pumpkin as a food, and pumpkin spice flavored everything. Don’t get me wrong, I like carving pumpkins…just not eating them.
Now before we go any further I would like you understand that I AM NOT A LAWYER. I don’t pretend to be. I don’t dream of being one. I currently have no plans to become one. So anything I say beyond this sentence about agency is not from a lawyer and shouldn’t be taken as such. I’m glad I disclosed that and we both understand. That was rough. No offense to any of you lawyers out there.
The video I shared recently talked about the realtionships that form during the course of a real estate transaction. I want to talk about one of those relationships. That relationship is between a buyer (you) and a buyer’s agent (ideally me), technically it is with the agent’s brokerage. There is something very important that I want to share first before I go any further. Unless you have a SIGNED buyer-broker agreement there is no relationship. Without a SIGNED buyer-broker agreement there is no fiduciary duty that agent has for you as the buyer. In fact, until you have a SIGNED buyer-broker agreement that “buyer’s agent” is often working for the seller. There is a specially relationship called limited or dual agency and we’ll talk about that another time.
Let that sink in for a minute. Unless you have a signed contract saying that a buyer’s agent is working for YOU, then they are often working for the SELLER. It doesn’t matter who the buyer’s agent is, what brokerage they are associated with, how you came in contact with them, or what house they have shown you. Until you have signed a buyer-broker agreement they are often working for the seller and not you.
Let me give you an example. You walk into an open house and an agent greets you at the door. In talking, you find out that this agent isn’t the listing agent but is associated with the same brokerage as the listing agent. You start a conversation and for some unknown reason you start to share far more information than you normally would. Information that if passed on to the seller, could hinder your negotiation power should you decide to put in an offer on the house. Even if you use someone other than the agent sitting at the open house to write an offer, that information could have been transferred. I hope you can see how that could be an issue.
It doesn’t have to be an open house that was just one of MANY scenarios.
The Utah Division of Real Estate (where I am an active licensed agent) and The National Assoication of Realtors (NAR) asks real estate agents to have someone sign a buyer-broker agreement when they show a sincere interest in purchasing property. Just after this paragraph you will see those passages from the Utah Division of Real Estate and NAR. If you come across an agent who does not ask you to sign one of those agreements, it should cause concern. What else are they willing to not do that they should be doing? Hello red flag.
Utah Division of Real Estate
R162-2f-401a. Affirmative Duties Required of All Licensed Individuals.
An individual licensee shall:
. . .
(2) for the purpose of defining the scope of the individual’s agency, execute a written agency agreement between the individual and the individual’s principal, including:
(a) seller(s) the individual represents;
(b) buyer(s) the individual represents;
(c) buyer(s) and seller(s) the individual represents as a limited agent in the same transaction pursuant to this Subsection (4);
(d) the owner of a property for which the individual will provide property management services; and
(e) a tenant whom the individual represents;
NAR Code of Ethics
Standard of Practice 1-13
When entering into buyer/tenant agreements, Realtors® must advise potential clients of:
1) the Realtor®’s company policies regarding cooperation;
2) the amount of compensation to be paid by the client;
3) the potential for additional or offsetting compensation from other
brokers, from the seller or landlord, or from other parties;
4) any potential for the buyer/tenant representative to act as a disclosed dual agent, e.g., listing broker, subagent, landlord’s agent, etc., and
5) the possibility that sellers or sellers’ representatives may not
treat the existence, terms, or conditions of offers as confidential
unless confidentiality is required by law, regulation, or by any
confidentiality agreement between the parties. (Adopted 1/93,
Renumbered 1/98, Amended 1/06)
Article 9
Realtors®, for the protection of all parties, shall assure whenever possible that all agreements related to real estate transactions including, but not limited to, listing and representation agreements, purchase contracts, and leases are in writing in clear and understandable language expressing the specific terms, conditions, obligations and commitments of the parties. A copy of each agreement shall be furnished to each party to such agreements
upon their signing or initialing. (Amended 1/04)
Am I encouraging you to sign a buyer-broker agreement at an open house with someone you just met? No. I just want you to be educated. I’m going to be honest. There are a lot of myths, half truths and misunderstanding about real estate out there. So keep your eyes open and when you find a real estate agent you feel is trustworthy, honest, and doesn’t sugar coat things, hold on to them!
I’ll be up front about buyer-broker agreements. You need to read them. They can be very one sided, just like any other contract you sign. If you have any questions, you can ask the agent (more than likely they too aren’t a lawyer) but it might be worth your time to have a lawyer look over it.
Be safe out there! Feel free to reach out to me at seth.mathers@utahhomes.com