1.1 "Don't Quit Your Day Job"
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 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.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?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.
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.
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: