Ray Wilson

Ray Wilson, author of Bought, Not Sold, brings academic discipline and field experience to expose consumers to the reality of the realty industry.



Reality in
Realty (1999)

1. "When An 'Agent' is not an Agent"
2. "Is You Is, Or Is You ain't, My Agent?"
3. "The Dating Game"
4. "States of Confusion"

Reality in
Realty 2001
1. Career Advice
1.1 "Don't Quit Your Day Job"

2. Seller Advice
2.1 "Appraiser, Yes! CMA, No!"
2.2 "Listing Purpose & Pitfalls #1, 2, & 3"
2.3 "Listing Pitfalls #4 & 5"

3. Buyer Advice
3.1 "EBA, EBA, EBA"
3.2 "Promises, Promises, Promises..."
3.3 "You! You! You!"

4. NAR
3.1 "The 'Big Grab' versus the Big Dope"
3.2 "If not revolution, then evolution""

Reality in
Realty 2006
1. "Making Magic in Chicago"
2. "No Sign of Reform in NAR Leaders"
3. "The Wrong in the Percentage Commission"

Reality In Realty 2001

Buyer Advice 2: Promises, Promises, Promises...

© 2001, Ray Wilson

The first three Reality In Realty 2001 articles gave advice to sellers .("CMA, No!" and "Listing Pitfalls 1-3 and 4-5"). This is the second in a series of buyer advice articles:

  • Buyer Advice 1: EBA, EBA, and EBA! reveals why "Location, location, and location" are no longer the first three considerations in smart buying.
  • Buyer Advice 2: Promises, Promises, Promises... gets to the heart of what makes agency "agency."
  • Buyer Advice 3: You! You! You! exposes the struggle between the intended beneficiary of buyer agency and the "Me! Me! ME!" of self-serving licensees.

The first article in this buyer advice series listed four critical realities for real estate buyers:

Reality #1 When you buy, you pay for agency whether you get it or not.

Reality #2: Paying a person to be an agent does not make him/her an agent.

Reality #3: A real estate firm is an organization and, by definition, a network of interdependent interests which come into direct conflict when its members assume agency obligations to both buyers and sellers.

Reality #4: An "EBA" not in an EBO is not an EBA; and only an EBA is a true buyers' agent!
(Rare exception: very small office true single agent)

There also, the distinction was made between a broker and agent. A "broker" is a yentel, a matchmaker, one who brokers a deal, ie., brings the parts together, usually for a fee or a piece of the action. However, the broker can be acting totally on his/her own behalf, negotiating, maneuvering, manipulating all for his/her own profit with or without concern for the well being of any other party. A broker can be an agent (one who acts on behalf of another), but a broker does not have to be an agent.

Nor does an agent have to be a broker. On the contrary, sometimes a real estate agent is called upon to be a breaker -- to actual break a deal in the making when it becomes apparent that the deal is not in the client's interests. This function of breaker is extremely important to you as a buyer who may otherwise be led into buying the wrong house. Sellers have no corresponding fear of getting the "wrong money" as long as it is real and in the right amount.

NOTE: Not suggesting the breaking of proper agreements but avoiding and voiding bad agreements.

Without question, it is the buyer who is at the greatest risk when not represented by a capable and willing breaker! There are occasionally remote reasons why a seller might be protected by an agent killing a deal, but issues from pollution to structural weakness to title flaws to crime risk to substandard schools to overpricing are frequent reasons for fast exit by a buyer.

RIDDLE! Here's a question, clue, and answer about the above paragraph. The clue and answer are in white letters - UNSEEN against the white background. To see them, use your mouse to select the letters, thus changing the colors..

Question: As a buyer, which of all the elements in the subject paragraph is the most crucial? Specifically, what WORD is most important?

Clue: ==> The most important word is not in the paragraph's last sentence.

Answer: ==> "willing"

That word and what it means is the key to whether you will have any protection at all from the catastrophic consequences of the wrong purchase, the full extent which goes beyond those listed in that paragraph.

Think about who is motivated to be a deal breaker and who must be a broker at all costs.

  • It doesn't cost the listing agent everything if you don't buy his/her listing because the property is still under contract. It will likely sell to another buyer sooner or later. But breaking by a seller's agent can occur only because it is in the seller's interest. It would violate the agent's bound duty to the seller to break the deal on your behalf. Also, the listing agent won't get your money unless the deal is made ("bird in the bush" is still the ruling wisdom).
  • Subagents of the seller (cooperating listing licensees in the MLS pool) are legally bound to seek and/or reveal deal-breaking factors on behalf of the seller only! They face severe sanctions for violating that duty. Moreover, they will not be paid at all unless the deal is "brokered" and not "broken." If you decide against the house in this licensee's deal, there is no binding assurance that he/she will be the agent when you do buy.
  • A buyer's agent is ethically and legally free to help you. Better still, "your" buyer's agent would even be bound to help you, but why in the world would they be "your" agent? That is, why bind themselves with agency promises to you if you don't promise back that, after saving you from the wrong houses, they will be the agent when you finally buy the right one?

Reality #5: Only a contracted agent -- buyer's or seller's -- is free to be a breaker as well as a broker for the client. Uncontracted agents do not get paid if the subject transaction is not successfully brokered. Contracted buyers agents get to go on with the client to the next deal.

Ironically, people often avoid contracts because they want more "flexibility." They never see that it is the agency contract that gives the agent the flexibility needed to protect the buyer, and the buyer the flexibility to escape being trapped in a bad and perhaps even catastrophic purchase contract.

To appreciate how inherent agency is in the real estate market process, consider what sellers have at stake when they list their homes. Do not think in terms of what you want, but in terms of what they want. Do not look at sellers as having what you want to buy, because only one of them has that!

All the rest want what you have -- the purchase money -- and they can only get it if they can keep you from spending it on someone else's property!

Your interest in viewing all homes from which to make your best choice is totally opposed to the interest of each and every seller! It is not a simple matter of who is on your side in the negotiations or transactions on your dream property! From the moment you set foot in the market to begin your home search, an agent who "stands in the shoes" of any seller as listing agent is standing in direct conflict with your interests!

Put yourself into those very same seller's shoes. Would you hire a selling agent at full agency prices who wouldn't get out and SELL for you? In virtually every state, the so-called "listing" contract is legally called an "Exclusive Right To SELL Agreement" with that exact phrase likely prominent in the contracts of any listing agency you will encounter. Do you think listing brokers don't imply they will actively sell for an owner when they are competing for the listing? How would they get any listings at full agency commission if they did not do that?

Reality #6: No owner lists without trusting in a promise of seller agency -- a specific promise to work for a prompt sale at the highest possible price and to "CLOSE the sale," getting the buyer's signature before he/she finds a better buy elsewhere!

This is a simple matter of unavoidable social dynamics, a reality wherever any owners give any right to sell to real estate professionals. It's the way it is no matter what label the listing pros put on themselves -- "agent," "broker," or "facilitator" -- or even if they say they are not agents. The promise is one of seller agency with inherent responsibilities and liabilities, and the firm can be held accountable for delivering what is promised. And what is promised is to work against your need, as buyer, to find the best deal for you.

Fundamentally, the Common Law of Agency is a set of expectations about human behavior in trust situations, and the "law" in the legal sense enters into it when people miscalculate and mis-express the reality. The reality is that stated or implied promises create obligations and that broken promises or mutually conflicting obligations lead to damages and court remedies. This is so even when inane legislation expresses it wrong, legalizing both false promises and conflicting obligations. "Legal" doesn't create immunity from liability, and law which doesn't reflect reality is bad law.

Ignorance of the law is no excuse -- especially on the part of those who write it. Neither is legislating while under the influence of self-interest business lobbies. Still, these are the reasons that the centuries-old consumer protections of the Common Law have become casualties of reckless legislating in just over half the states. In these states the driving metaphor is almost as perfect as the legislative action is absurd -- "transaction brokers" and "designated agents" are now licensed to drive whichever side of the road suits them!

Like I said -- bad law. Making it legal doesn't change the reality of the certain collision course, nor does it erase liability for collision damage. Common sense enables you to see that clearly in motor vehicle law; and the common sense of centuries of practice put it into the Common Law of Agency. Traffic in a single lane cannot go in both directions, and agency in a single firm cannot serve both buyers and sellers!

Reality #7:The promise of agency to the seller is made collectively by all listing firms who pool their listings in a "multiple listing service" (MLS). All are agents of their own listed sellers and subagents of all other participating sellers.

The cooperative agreement among listing agents is openly pitched to sellers as an extended sales force to motivate them to sign the listing agreement. The listing contract is an employment agreement, employing and paying the seller's agent and expressly or implicitly authorizing the agent's use of subagents to sell the property and earn a share of a clearly sales commission (percentage of price, rewarding high price).

Participating listing offices knowingly support one another in such agency promises to sellers and are obligated to those promises. What is promised for all by the listing office is effort to procure buyers in service to the sellers' interests. That effort is described as necessarily requiring two at-least implicitly distinct sets of brokerage tasks -- both in the seller's interest; i.e., as the sellers agents.

  1. Sellerside Brokerage by Seller's (Listing) Agent:
    All tasks needed to bring the property to the market, making it visible and accessible to potential buyers (eg., MLS), generally administering the overall transaction process, and supervising any subagent to insure lawful performance in the seller's interest.
  2. Buyerside Brokerage by either Seller's Agent or Subagent.
    All tasks needed to bring a buyer to the deal in service to the seller's interests. That means providing the brokerage service and support the buyer needs, but within the framework of agency duty to the seller client and compliance to the law. It is specifically called "procuring the buyer" and an agent laying claim to payment for performance of this task must prove that he/she is the "procuring cause."

As stated above, owners typically are led into the agreement with the deliberately induced impression that both sellerside and buyerside brokerage are needed to procure a buyer. That is of course true. It is what is needed to procure a buyer. Still, it is a ruse, the clever use of a truth to deceive, for procuring a buyer is not the only way the seller's goal of a profitable transaction can take place. An obvious truth has been conveniently omitted.

Reality #8: A property purchase and sale can be brought about through two distinct categories of action: (a) the efforts of a seller and/or seller's agents to procure a buyer, and (b) the efforts of a buyer and/or buyer's agents to procure a property.

As a buyer, you can hire your own broker/agent to actively procure a property and provide all the buyerside brokerage -- not one ounce of it within or subject to the seller's agency employment agreement. By every value of common sense, common law, and common decency that should be your right. We will see how much the mainstream industry.respects these values and your rights in the next installment:

Buyer Advice 3: You! You! You!