No Dual Agency. To my knowledge, we are the only real estate brokerage in the Charlottesville area stating definitively and publicly “No Dual Agency.”

Interestingly, thanks to the above comment, several local brokerages mentioned that they too have policies against dual agency. We just happened to be the only ones publicly discussing it and advocating for consumers against it.

The bill has unanimously passed the Committee and the House of Representatives.

Discussing the perils of single agent dual agency has long been my windmill; while not perfect, this bill clearly is a step towards representation.

As a consumer, would you agree to not having representation?

1. That following the commencement of dual standard agency, the licensee will be unable to advise either party as to the terms, offers or counteroffers; however, under the limited circumstances specified in subsection C, the licensee may have previously discussed such terms with one party prior to the commencement of dual standard agency;

2. That the licensee cannot advise a buyer client as to the suitability of the property, its condition (other than to make any disclosures as required by law of any licensee representing a seller), and cannot advise either party as to repairs of the property to make or request;

3. That the licensee cannot advise either party in any dispute that might later arise relating to the transaction;

4. That the licensee will be acting without knowledge of the client’s needs, client’s experience in the market, or client’s experience in handling real estate transactions unless he has gained that information from earlier contact with the client under the limited circumstances specified in subsection C; and

5. That either party may engage another licensee if he requires additional representation.

I wrote about HB 1907 for the Virginia Association of Realtors’ blog, VARBuzz. It may be a bit of “inside baseball” for some, but for you real estate voyeurs, I think it’s a good primer on some of the changes.

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“How much is the commission on that house?” That question is one of the many reasons that I choose to use Buyer Broker agreements with my buyer clients. (and why ending cooperative compensation would be a boon to the real estate world).

1 – The Seller and the Sellers’ Realtor are going to do whatever they can (legally and ethically) to induce a buyer to look at the house … and hopefully buy it.

2 – The Buyer’s Agent is going to earn a fee …

3 – Somebody is going to pay that fee. I like to think that the Buyer is paying the Buyer-Broker fee … they’re the ones choosing and hiring their representation, anyway.

And then there’s this -

… this highlights the conflict of interest inherent in the “seller paying” the Buyer-Broker commission.

As a buyer – when do you negotiate the fee you are paying your buyer’s agent? I do so very early on the process.

I’ve heard the arguments time and time again:

- “It’s FREE to use a Buyer’s Agent! The fee is paid by the seller!” (this argument becomes much harder when the seller has no or negative equity)

- “It’s none of the Buyer’s business how much I’m being paid!” (as argued by the Buyer’s Agent who ostensibly is seeking to “represent” said buyer)

Look, I’m not begrudging Realtors earning livings what I do encourage is for buyers to be aware of what may be going on behind the scenes.

** Disclaimer: The above represents the opinion of Jim Duncan, Charlottesville Realtor and author of RealCentralVA.com, and are not necessarily shared by my partners or agents at Nest Realty in Charlottesville or by the Charlottesville Realtors’ Board of Directors (of which I am currently a member) nor perhaps the majority of members of the Charlottesville Area Association of Realtors.

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Transcription:

Hey, Jim Duncan with RealCentralVA.com and Nest Realty Group here in Charlottesville, Virgina.

It is the first week of December, 2009 and that means one thing to me at least. It means that people are starting to think about buying and/or selling homes in the Spring. Now is the time when people really start to talk about these things in earnest, so here is the thing: if you’re thinking about buying a house, it’s a great time to buy! Just kidding. It could be depending on what your goals are.

It could be a really smart time to buy a house or two if you’re an investor. I do think that this is one of the best times to buy a house or houses that we may ever see from an investment point of view.

But if you’re thinking about buying in the Spring:

- now is the time to start researching.

- Drive through neighborhoods, see how they’re decorated if that interests you or if it disinterests you. It’s good to know what you might be getting yourself into.

- Start scouting things out, ask questions, search for homes and find a realtor (I am one) and start looking for vacant houses so you have a feel for what you’re going to see come Spring when houses come on the market.

- Prices now are starting to moderate even more. We’re starting to see homes come on the market now seem to be priced more in line with what they should be and sellers are becoming more realistic. So I think that, granted we’ve been saying that for a couple of months now, if not six to nine, but it is true. So in short, if you’re thinking about buying a house in the Spring, start looking now. Start interviewing buyers agents, ask questions, because when you’re talking about interviewing buyers agents, you’re really talking about spending a lot of time with somebody who is hopefully going to be someone you like, trust, and is a professional who is experienced. In my case, the Charlottesville real estate market. So that’s it.

If you have any questions, give me a call or an e-mail.

Update 16 December 2009: If you’re just starting to search for a home in Charlottesville, please take a look at these two stories, which have proven to be excellent resources for my clients.

You’re going about it all Wrong – Or how to Search for Homes in Charlottesville (Without a Realtor)

Post with Enduring Interest – Just for Buyers

Best headline of the year? – If You Don’t Buy a House Now, You’re Stupid or Broke

Well, you may not be stupid or broke. Maybe you already have a house and you don’t want to move. Or maybe you’re a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don’t act soon, you will regret it. Here’s why: historically low interest rates.

As of today, the average 30-year fixed-rate loan with no points or fees is around 5%. That, as the graph above—which you can find on Mortgage-X.com—shows, is the lowest the rate has been in nearly 40 years.

In fact, rates are so well below historic averages that it should make all current and prospective homeowners take notice of this once-in-a-lifetime opportunity.

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From November 2007: Why Use a Realtor – decoding NAR-Speak

Inspired by these two comments on the BHB, today I’m going to respond to/pick apart the National Association of Realtors’ Why use a Realtor? page. I hope that few consumers had read the referenced page on Realtor.com. Numbers two, nine and ten in particular jump out as being particularly wrong/offensive to me.

If we eliminate Dual Agency and End Cooperative Compensation (have the buyer pay the buyer’s agent, seller pay the seller’s agent – simple, huh?) many of the problems, perils and public perception (reality) issues with Realtors will be eliminated.
1. Your Realtor can help you determine your buying power – by guiding you to the right lender for you. This is part professional recommendation and matchmaking. Choosing the right lender is crucial. Knowing his or her reputation, track record and competence is something that is almost impossible to do without direct person-to-person feedback. As of yet there are no tools online to rate lenders or check their professional histories. Local is usually better.

2. Your Realtor has many resources to assist you in your home search – sure – the MLS, Craigslist, Trulia, etc. Oh, wait – many of those are available to the buyers, too. The time when we controlled the flow of information is long gone.

3. Your Realtor can assist you in the selection process by providing objective information about each property. – yes and no. One of the key components is removing emotion from the negotiating process. However – a lot of questions buyers ask – Realtors can’t answer. Part of the foundation of a good Realtor is acknowledging the value of being the “source of the source” – and then knowing that source.

4. Your Realtor can help you negotiate. Absolutely. A good Realtor will look at all of the various factors. There is more to the equation that price. This is more and more a core component of one’s value proposition in today’s Buyers’ Market.

5. Your Realtor provides due diligence during the evaluation of the property. Absolutely. Good Realtors know what questions to ask, and to whom to address them. They also can recommend qualified and trust home inspectors.

6. Your Realtor can help you in understanding different financing options and in identifying qualified lenders. – Absolutely; but in today’s fluid lending market, I am more qualified to know who is the best lender than I am the best loan terms for you.

7. Your Realtor can guide you through the closing process and make sure everything flows together smoothly. It’s about the competence of the closing attorney/title company (we don’t do attorney review in Charlottesville) and the relationship and trust therein.

8. When selling your home, your Realtor can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. Buyers can usually do this, too – but it’s a Realtor’s job to know this information; not yours. (What’s your time worth?)

9. Your Realtor markets your property to other real estate agents and the public. Often, your Realtor can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your Realtor markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your Realtor acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc. The Realtor Code of Ethics requires Realtors to utilize these cooperative relationships when they benefit their clients.

I should hope that more than 50% of sales are done with Realtors’ involvement performed without Dual Agency. More on Exclusive Buyer Representation here (and here).

10. Your Realtor will know when, where and how to advertise your property. There is a misconception that advertising sells real estate. The NATIONAL ASSOCIATION OF Realtors studies show that 82% of real estate sales are the result of agent contacts through previous clients, referrals, friends, family and personal contacts. When a property is marketed with the help of your Realtor, you do not have to allow strangers into your home. Your Realtor will generally prescreen and accompany qualified prospects through your property.

a – I want to see that study.
b – Allowing strangers into your home is the whole point of the MLS and lockbox system we use! (I have a great local anecdote about this coming soon)

11. Your Realtor can help you objectively evaluate every buyer’s proposal without compromising your marketing position. This initial agreement is only the beginning of a process of appraisals, inspections and financing — a lot of possible pitfalls. Your Realtor can help you write a legally binding, win-win agreement that will be more likely to make it through the process.

Absolutely.

12. Your Realtor can help close the sale of your home. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your Realtor is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).

Managing the process and transaction and knowing the pitfalls and problems that may arise is one of the key components a good Realtor brings to the transaction.

It’s getting harder to say “I’m going to market your property better than the rest,” because the distribution tools are flattening; more on this in another post.

Did I mention that if we eliminate Dual Agency and End Cooperative Compensation many of the problems go away?

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From the HooK –

At a time when local stalwarts like R.D. Wade Builder and Church Hill Homes have fallen by the wayside, Ryan’s 24 percent market share of all new residential construction in Charlottesville and its surrounding counties is by far the largest of any builder in the area.

How does Ryan do it? Economies of scale.

“They’re like Wal-Mart,” says Keith Davis, a local realtor and real estate commentator. “Since they are a big national company, building homes all over the east coast, they’re able to buy their materials in bulk.”

This lets Ryan, to use the the pitchman vernacular, pass the savings on to you. Davis says this approach, unprecedented in the Charlottesville area, has allowed Ryan to be wildly successful selling mid-range homes to first-time home buyers.

Without further ado -

I just finished reading your article about the outrageous contracts now being used by some builders and I am amazed any buyer would sign them. I thought it was great you were pointing out these areas buyers should be aware of and advised not to do.

As you know I represent and work for a local builder and never think of requiring such language in our purchase agreements.

I am hoping you may choose to give a positive spin on the value to buyer agents and their clients to working with a local builder who contributes to a community.

We give firm absolute delivery dates on all contracts.

We invite, encourage and ask buyer agents to participate in our final walk through just prior to closing.

We invite and encourage buyer agents to be present at all meetings and are always kept informed to every step involved from initial meeting to closing.

We recognize buyer agents as the “most valued clients” we have. We work hard to make sure buyer agents and their clients want to do business with us again.

We give a construction key to our purchasers at time of contract so they can access the home we are building them on a daily basis.

We allow purchasers to have multiple home inspections at the different stages of construction it they desire.

We obtain our construction financing locally, we buy all of our materials locally, we hire only local subcontractors, our buyers are encouraged to obtain the mortgage financing locally, we love working with the CAAR Realtors and value their business. We pay Realtor buyer agents commissions on the homes’ final sales price after all upgrades, selections and options are chosen and not pay on a “bogus” base price that is much lower than the final sales price, we love contributing to the Charlottesville area and market by offering a great value and quality product and we offer outstanding warranty, customer service and prompt follow-up.

Some do not bank locally, they do not buy building materials locally, they do not us local subcontractors, they require buyers to obtain financing from their out of town lender, they do not like to work with Realtors and make every effort they possibly can to sell to the public directly, they pay Realtors on a “bogus” base price that is always much lower than the final sales price, they have very strict walk through policies as you described in your blog and do not encourage or allow buyer agent participation in the final walk through and offer very very minimum warranty and customer service follow up after sales. They actually are a drain on a community like Charlottesville unlike a local builder who contribute to the community.

Jim, I truly enjoy reading what you write on Real Central Virginia. I hope someday you may give consideration to writing on the VALUE of working with quality reputable local builders who contribute to a community as opposed to being a drain on a community.

Done. In my opinion, if you do not have a buyers’ agent representing your best interests when building/buying a new home, you may be asking for trouble.

(Bear with me, I’m testing something …) To search for homes built since 2008 in Charlottesville and Albemarle:

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Market Update – I’ll refer to the market report I published in October.

My advice remains – If you do not have to sell, strongly consider not selling. If you’re looking to buy and stay for a while, you may want to strongly consider buying right now. As Mark Cuban wrote the other -

So whats the difference between being underwater on a mortgage and underwater on a stock ? Is it that “experts” will tell you to hold the stock in hopes of it going up in value and then explain that those with homes worth less than their mortgages shouldn’t feel bad about breaking their mortgages and defaulting ?

…

“Buy and Hold” for your house is a mantra you should always live by. The difference ?

You can live in your house. You get utility from your house. You may get a deduction for interest paid on your tax bill. You can develop a positive emotional attachment to a house.

Can you get a loan in Charlottesville? Absolutely.

In an attempt to dispel some of the (justified) negativity surrounding the Charlottesville real estate market, I thought I’d ask some of the lenders with whom I regularly work for their insight. Part of my job is knowing stuff, another is knowing whom to ask. With that preface, I asked Matt Hodges with Compass Home Loans, Carl Heimlich with C & F Mortgage and a third person who was not permitted to comment on the record. (that’s what you get for asking permission). *

Assessments versus market value versus appraisals – I was going to link to a few of the stories I’ve written about these, but there are quite a few stories over the past several years. Please go to the Archives page and search for the stories with “assessments” in the titles. But – start here – Assessments, property taxes and shifting market values in Albemarle County

The new bailout/foreclosure prevention bill – start here to educate yourselves -

Calculated Risk

This is intended to help “thousands” (a drop in the bucket unless it is several hundred thousand), and seems to encourage homeowners to stop making payments until they are 90 days late.

and

Rain City Guide

This is the beginning of massive government intervention to try and slow foreclosures. On a positive side, Fannie and Freddie could provide a template for servicers to follow which may help homeowners receive a “yes” or “no” answer faster. On the down side, this may also slow the recover of the housing market, prolonging the decline of home prices. Currently 40% of loan modifications re-default. This may also further erode investor confidence in residential mortgage backed securities, the impact being even tighter underwriting guidelines than what we’re now experiencing.

Building permits in Albemarle are very, very low – and this is a good thing. (I was on the radio before I saw that story ) Look at the 3rd Quarter 2008 Building Permit Report here (pdf). Also check out Brian Wheeler’s analysis from the First Quarter of 2008.

Next time I’ll try to mention my drive to get rid of Dual Agency.

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Choosing the Right Buyer’s Agent

Proof that Gas Prices are affecting buyers in Charlottesville area

A Cautionary Tale – Yet another Due Diligence Question for Buyers, Sellers and Realtors

You’re Buying Your Monday Mornings

Online Buyers’ Habits Changing

Why take a Buyer’s Agent to New Construction?

Top 5 Questions Home Buyers Ask … and what your Realtor can’t answer them.

Rolling the Dice with Buyers & Being Selective- why jumping in the car with anybody who wants to see a house is neither the most efficient nor most professional use of a Realtor’s time. Also – Steering Buyers’ Agents -

The Value of Transparent Blogging

Out of area lenders – the answer to why one should work with a local lender; in short – accountability.

Questions to ask your agent in Charlottesville – hiring representation should not be taken lightly

Default Position – one of many posts written on the perils of Dual Agency – for the frequently unsuspecting Buyers but for the Realtor profession as well.

“Exclusively marketed by” (related post) – when you see the signs on developments that say “Exclusively marketed by,” it may not mean what you think it means.

Check your school district before you buy

Ten Mistakes Buyers Make

Market Statistics Category- some of the best information here comes from the commenters who gratefully contribute.

After writing for nearly three and a half years about the Charlottesville/Central Virginia real estate market, sometimes it’s useful to pull out a few of the more important and useful posts for reference at a later date.

Lest I forget, there’s one more – Contact Jim Duncan.

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Choose the right representation. Choose the right buyer’s agent. Choose someone whom you trust and get along with and like – not just because you met them at an open house, or because they have a blog, or because they are your sister’s husband’s friend who is just getting started and needs a break. Choosing the wrong representation is not just not worth it.

A good (great) buyer’s agent is someone who will advocate 100% on your behalf – simple. Contrary to public opinion, a good buyer’s agent is focused on the client’s needs more than their own. If you feel that “your” Realtor is focused more on the “sale” than your best interests – tell him.

Going waaay back in the archives to 2005, citing a WSJ article -

“Finding a real estate agent is kind of like dating. You have a small window to make an impression and then you’re with that person for a long time.”

Here is my business philosophy when I work with buyers – I want to sell their house when they move. Every buyer client represents a minimum of three transactions -

1) The house they are buying right now.

2) That house when they move (everybody moves, even if “this is the last house I am going to buy”)

3) At least one of their friends or family when my clients proselytize for me

I work with Buyer-Broker agreements with my buyers for a variety of reasons – first and foremost because we negotiate my fee upfront, and I am free from the perception that I am not showing unrepresented sellers’ (FSBO) houses or those houses that are offering lower commissions in the MLS than many Realtors are used to. And – it formalizes the contractual relationship that I have to my clients and that my clients have to me.

You can find a sample (although a bit dated) Buyer-Broker Agreement here.

Updated – this is a current sample Buyer-Broker Agreement. Note that it takes two sections to warn/educate about Dual Agency.

My advice is this – do your due diligence. If you have questions about the process, what questions to ask (or if you have an experience you would like to share) please contact me anytime.

——–

And the coup de grâce with regards to what blogs have over print – here are a bunch of very relevant links to help you get started in your research:

Here are some questions to ask when hiring a Realtor, courtesy of Redfin.

Do you like/do Dual Agency? One of my favorite posts I have written about Dual Agency is this – Dual Agency – Who Benefits? —- The Realtor.

Representation isn’t free

How to Choose a Realtor

Great Questions for a Seller to Ask

Questions to ask your (potential) agent in Charlottesville

Steering Buyer’s Agents

Why Use a Realtor – Decoding NAR-Speak

Rolling the Dice with Buyers

Being Selective

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A sampling:

As a listing agent, how can I promise to do the best job possible for the seller, who hired me to protect his interest and sell his home for the best price and terms, then turn around under dual agency where I cannot give him any advice that would harm the buyer? It takes away the ability to negotiate on either party’s behalf. As the seller’s agent, if I think that the buyer is in love with the house and would come up $20,000 to avoid losing it, I am in a much stronger position to negotiate. As a dual agent, my hands are tied and I become a mediocre agent for both parties and truly feel I have been stripped of all my skills and have to keep tape over my mouth. I have to walk a fine line that serves no one except filling the agent and brokers pockets.
…
Sellers see right through greed and self serving agents.

Technorati Tags: dual agency, real-estate, realtor

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Technorati Tags: agency, dual agency, realtor

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Buyers – educate yourselves about Buyer Agency and Dual Agency. Ask yourself – do you want someone looking out solely for your interests, someone looking out for the builder’s or somebody purportedly “representing” both sides?

(Thanks to the person in Las Vegas who came to my site searching for this answer)

I mentioned this a few weeks ago as well.

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Another Realtor was showing buyers a development in Charlottesville and an agent was onsite holding an open house. As the buyers looked around, the Buyer’s Agent (BA) and the sellers’ agent (SA) got to talking.

BA: This road in front of the development:  It goes into a neighborhood, correct?
SA: Yes, but you don’t want to take them that way.  It looks much better the way you came in.
BA: I understand, but I want them to see what’s around this property, going both ways.
SA: If you go back the way you came, you can show them how close the grocery store is.
BA: Thanks, but I can do both.
SA: You should really go out this way – it’s much better.

When the Buyers and the Buyers’ Agent got in the car – the wife asked, “Which way are we leaving?” To which the Buyer’s Agent replied – “this way – I want to make sure that you see what’s around the house.  Then, I’ll show you how close this is to grocery store, restaurant, etc.”  Turns out, the wife had heard the Realtors’ conversation.

1 – Your Buyer Agent is supposed to look out for your best interests.
2 – Had this been a Dual Agency situation, do you think the buyers would have been more or less likely to see the “other” areas?
3 – Realtors don’t have an obligation to assess an area’s safety level, but they do have an obligation to be the “source of the source” – provide references by which the clients can determine for themselves.
4 – Recognize two things – not all Realtors are focused solely on “making the sale”; but some are.

Technorati Tags: buyer’s agent, real-estate, realtor

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“Dual agency practiced by one agent is always a conflict of interest for the agent even if legal dislcosure is made.

In a designated agent situation, the principal broker is by law acting as a dual agent and is in a conflict of interest position even if legal disclosure is made.

Virginia law requires disclosure of dual agency but our Code of Ethics requires “informed dislcosure”. Though this phrase is not defined it does appear to place a further obligation on an agent to make some type of explanation of the consequences to seller or buyer accepting dual agency. It doesn’t go far enough in my opinion.

Unfortunately, the laws in our state regarding dual agency (including designated agency) do not require an agent to specifically disclose to either seller or buyer the number of ways in which his “representation” of them will change once dual agency is invoked by him or his broker.

A. Upon having a substantive discussion about a specific property or properties with an actual or prospective buyer or seller who is not the client of the licensee and who is not represented by another licensee, a licensee shall disclose any broker relationship the licensee has with another party to the transaction. Further, except as provided in § 54.1-2139, such disclosure shall be made in writing at the earliest practical time, but in no event later than the time when specific real estate assistance is first provided. Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with this disclosure requirement:

Specific examples should be given such as “I can no longer advise you on value or offering price”. They won’t be hearing information such as “I can no longer inform you about the wild and loud parties that go on every weekend at the house next door”.

When signing most listing agreements sellers agree in advance to go along with the a potential dual agency without this vital information. The agent is already free on the seller side to work as a dual agent as long as his buyer client agrees.

Because of such dual representation, Owner understands that Owner and purchaser have the responsibility of making their own decisions as to what terms are to be included in any purchase agreement. Owner should be aware of the implications of the Broker’s dual representation including the limitation on Broker’s ability to represent Owner or the purchaser fully and exclusively. (see a sample Exclusive Authorization to Sell here – PDF)

I wonder how many well informed sellers or buyers would agree to go along with it when offered if they knew that “their agent” could no longer be their advocate but would merely be providing ministerial services?

I wonder how many times the request to agree to dual agency is presented to a seller as the agent is holding an offer in hand.

I wonder how many times the act of bringing in a second agent to “represent” one side in a designated agency situation is accomplished at the last minute with little knowledge of the new client by the new agent and without actually being familiar with the property or showing it to him.

Our Code of Ethics requires Realtors to ALWAYS place the best interests of our clients ahead of our own. It could, in my opinion, do a better job of helping us accomplish this as could our state regulations.

And last but not least, most good lawyers would never let themselves get involved in a similar situation with two clients.

What does that tell you?”

*Links and quotes were added by me.

Technorati Tags: agency, NAR, real-estate, realtor

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From the Virginia code:

“Designated agent” or “designated representative” means a licensee who has been assigned by a principal or supervising broker to represent a client when a different client is also represented by such principal or broker in the same transaction.

“Dual agent” or “dual representative” means a licensee who has a brokerage relationship with both seller and buyer, or both landlord and tenant, in the same real estate transaction.

Clarifying opposition should make arguing for Single Agent Dual Agency more palatable to some.

Technorati Tags: dual agency, politics

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1) Are typically further along in the process of hiring an agent (whether buyer’s or seller’s representation)
2) Have vetted me, at least a little bit, by reading what I have written over the past 34 months, which makes the process more efficient for both of us.
3) Frequently are more aware of the current market and some of the factors impacting the market.
4) They’re not “leads” per se, they’re typically conversations about whether we might work well together.
4) I would never have gotten this question from a blind internet lead:

(b) We’d obviously prefer to avoid dual agency if at all possible.  If an appropriate listing comes up through your C21 office, though, what safeguards are in place to protect both sides?

I love that this question is asked up front! Fortunately, I have an opinion on dual agency – get rid of it.

All in all, the hours spent reading and writing every day are worth it for my own knowledge and ability to represent my clients. That business opportunities come from my efforts is almost a bonus.

Technorati Tags: dual agency

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We can write about it til our fingers bleed. We can talk about it until we are blue in the face. Not much will change until we get the relevant laws changed. For that, we need the help of the NAR. As a profession, we need to rid ourselves of Cooperative Compensation and the practice of the listing broker paying the Buyer’s Agent.

Cooperation between Brokers need not go away. In fact, without cooperative compensation, the practice of real estate representation will be enhanced, as the perceived collusion between Realtors will be mitigated significantly. What needs to disappear is the inherent conflict of interest that comes from the Listing Broker paying the Buyer’s Agent. That is always a fun conversation with first-time homebuyers as well as more-savvy ones.

Buyer: So, how do you get paid?
Buyer’s Agent: Well, the Seller pays me.
B: What do you mean?
BA: Well, not really, you are paying for the house, and you are getting the mortgage, but the Seller has agreed to compensate my company for my services.
B: What do you mean?
BA: It’s complicated.
B: Well, am I bringing the check to closing?
BA: Yes.
B: Then how and why is the Seller paying you?
BA: Because that’s the way it’s always been, and the laws have not changed sufficiently to allow for buyers to finance their representations’ commissions into the mortgage, Realtors have not adapted to the new realities and they are stuck in the mindset from when all agents represented the Sellers.
B: But why is the Seller paying you?

It’s easier for the Buyer’s Agent to just take whatever the Seller is offering – there is no negotiation with the Buyer about the Realtor’s compensation, so much so that often times the answer to the “How much is your fee” question is “It’s free to you – the Seller pays me!”

I went around and around with some of my clients for several hours one time, agreeing with them the entire time how convoluted, antiquated and archaic the Buyer’s Agent’s compensation arrangement is, but there was nothing we could do to change it. It needs to be simple. If Realtors want to equate themselves with other professionals, we need to be paid that way, heck we could lead the charge towards transparency in fees.

Attorneys are paid by their clients, except when they lose, and do we really want to equate ourselves with that side of the legal profession? Who knows how doctors get paid? More often than not, they can’t even tell you how much a simple test costs because they don’t even know.

Greg Swann has written an enormous volume on this issue, but we need more. Educating the consumers is but one part of the equation. Educating Realtors is another. Effecting change at the legislative level is an even greater challenge. Making the argument for “divorcing the commissions” is relatively easy. Changing laws is not.

Here’s what we do.

At our local Realtor Associations, meet with the Government Affairs Committees and ultimately the local Boards of Directors. Then our state lobbyists. Then our state legislators. It won’t be easy, but we can get it done. Matter of fact, it will be time-consuming and mostly unrewarding, in light of the expected attack from those who are content with the “way things have always been.”  It’s going to take more than blogging.

I was seeking advice from an “old-timer” in the business a few weeks ago on how we could get rid of Dual Agency. His response:

What it would take to get rid of dual agency is for the General Assembly to pass a law that would change that. The reason that it exists today is that it is a carryover from the past when an agent, representing the seller, worked with a buyer and appeared to represent(and in many cases did) the buyer. Old habits die hard! You are in a position with VAR to have the General Assembly change that.

It’s not often that one has the opportunity to effect change like this. The time may be right, and beneficial to everybody – consumers, Realtors, regulators – to change how we do business to a more transparent, ethical and professional way of working and compensating.

Maybe we can rid ourselves of Dual Agency while we’re at it. And referral fees. Transparency is a good thing.

Am I wrong? Off base? What are the arguments for keeping things the way they are?

Technorati Tags: NAR, real estate, realtor, realtor.com

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Often times as agents representing the seller, we receive calls or emails on our listings from potential buyers who are not working with an agent and who want to see our listing, or perhaps even write an offer.  As agents working for the seller, how can we do that and still represent the buyer?  It’s called Dual Agency, and it’s dangerous – like running with scissors.  So don’t do it.

Greg notes some of the ways to avoid potential lawsuits when selling your home:

Your Realtor should help prepare you properly to make sure you are not exposed to risk of lawsuit, but here are a few things to keep in mind.

Finally, Daniel writes a very succinct post about pricing one’s home and what to do with that first offer (hint: you may do well to take it) Normally I don’t quote such lengthy parts of posts, but Daniel gave permission and it is very worthwhile:

You are selling your house. Your agent has it listed for $300,000. The home has been on the market for 45 days, not bad for the area, and it is receiving fairly regular showings. Finally, an offer comes in from some interested buyers. The offer comes in at $275,000. The terms are fairly standard, and the house should close in 30 days. You are able to negotiate back and forth and come to an impasse at $290,000. That is $10,000 below your asking price. You aren’t thrilled with the idea of having to take $10,000 less than your asking price, so what do you do?

Remember, more is better sooner. In this case, you have the option of $290,000 today, or NOTHING tomorrow. I know what you are going to say, “but the house is getting showings, and someone could come and make an offer for full price in a week.” Sure, or the house could sit on the market for another 45 days, by which point you will probably have to reduce your price. Remember, in a market such as our current one, there is no shortage of inventory. Buyers have options.

There is also the cost of carrying the house to be considered. With the current offer, you will only have 30 more days of carrying costs. That means only one more mortgage payment, and 30 days of utilities and maintenance. If you wait, chances are you will have to make at least one additional mortgage payment, and continue to have maintenance costs. This doesn’t even take in to account the psychological and emotional value of having your home sold, as opposed to continuing the process.

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We are still seeing numerous cases involving dangerous practice of dual agency. Remember, if something goes wrong with the transaction, you are probably at fault. (italics and bolding mine)

The newsletter is here (PDF). The above is from the quarterly newsletter distributed by the RE Board. That’s a succinct summation of dual agency.If the head of the Real Estate Board finds dual agency dangerous, why do so many Realtors do it?

How long until Dual Agency is outlawed? My opinion? If your agent advocates for Dual Agency, question their motives. Dual agency should be a last resort, a reluctant decision reached only after full disclosure and explanation to all involved parties.

Much more on Dual Agency here.

Technorati Tags: dual agency, real estate, realtor

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Can we see how long a property has been on the market? Sure, but the data may be worthless.
I have been talking to an internet lender … That’s fine, but be aware of the potential problems.
Is Dual Agency good? No, no and no.
What about Zillow? Well, they could be right …

In a conversation the other day with another Realtor, we were discussing the soon-to-be-released Buyer-Broker form (to replace this one-PDF), which I sign with all of my buyer-clients.* He was wondering whether we should put a disclaimer in that says that we may not know about all of the properties that are out there, either by the limited-service firms, unrepresented sellers, etc., in light of the current wording in the Agreement that states:

Broker shall use professional real estate knowledge and skills to represent Buyer in a diligent and effective manner and to locate property which is available for purchase and suitable to Buyer.

My response to him? I’ve written a story about that, stating that there are so many different sites to search, frankly I need my buyers’ help in locating the property sometimes. I’ll say it again, my value is in representing my clients, not necessarily searching various websites.

My constant references may seem annoying at times, but the fact is that I write almost every day, and I will inevitably write about many aspects of the real estate market, transactions, agency, etc. through the course of now years of of writing.

No man has a good enough memory to be a successful liar ~Abraham Lincoln

Technorati Tags: blog, blogging, real estate, realtor

What’s the difference?

Client is anyone that you or your firm has a formal agreement to work with. It could be an agency relationship or you could be providing a non-contracted service.

Customer is a party to a real estate transaction who receives information, services or some other benefit from you, but doesn’t have a contract with you or your firm.

Source: The Code is Good Business

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There has been a lot of discussion at RCG and Bloodhound recently about Buyers’ Agency and the associated compensation. I can speak specifically about the Commonwealth of Virginia’s Buyers’ Agency and and generally about the concept of Exclusive Representation.

A few items: First, I have said many times before that the real estate industry is going to have to move more towards representation of clients’ interests and somewhat less of “selling” and marketing, for a variety of reasons. One of the most basic reasons for this switch is that marketing is becoming easier, with the proliferation of new sites’ (read: Google) entry into the real estate marketing arena.

How do both parties benefit? Allen says:

I feel it is unprofessional to be working with someone when the obligations to each party are not clearly defined in writing. If you are in a “find out if you want to work together mode” that is one thing. But once you decide to work together then there should be written agreement stating what each party is obligate to.

I don’t necessarily agree that I need a written agreement that states what I am going to do (whatever it takes) nor I feel I need anything other than a handshake to work with clients. I do, however, think that both sides need an acknowledgment that we are going to be working together. It seems that the cutthroat aspect of this business has led to distrust and a general lack of loyalty – on both sides. Having a written agreement does at least begin to define that relationship.

Right now, Greg seems to be carrying the torch for elimination of dual agency.

We need to get rid of the Dual Agency aspect of the agreement, something I do verbally with my clients.

I don’t work with everyone I might, and part of that is that if I were to spend my time chasing every potential client, then I wouldn’t have time for my good clients. I feel that this makes me more professional and better at what I do. Giving 100% to my clients is something on which I pride myself and make my career.

I wish I could trust everybody I met. I’ve done deals on handshakes before, but far fewer than my father did. You cannot legislate or obligate a trusting relationship. Putting it in writing does seem to help.

Technorati Tags: buyers, dual agency, real-estate, realtor

For your edification, here is a Sample Exclusive Right to Represent Buyer Agreement.

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