Buyer Agents: What are they?
When selling their property, a seller hires an agent to represent their best interest. But, who represents the best interest of the buyer? A buyer agent does. So, what is a “buyer agent”?
A real estate agent hired by a buyer to exclusively represent their interests in either a purchase or a lease of real estate is called a “buyer agent.” In this circumstance, the agent has a legal fiduciary relationship with their client, the buyer. In other words, the buyer’s agent has a legal obligation to act solely in the best interest of the buyer.
IT’S IMPORTANT TO NOTE, that the laws of the State of Arizona regarding real estate agents and their legal relationships with buyers and sellers only provide for 3 legal agency relationships:
1. A Seller’s Agent, which is an agent who represents only the seller in a transaction;
2. A Buyer’s Agent, which is an agent who represents only the buyer in a transaction; and
3. A Dual Disclosed Agent, which is an agent who, with the expressed written permission of both the buyer and the seller, represents the interests of both the seller and the buyer in the same transaction.
IT IS ALSO IMPORTANT TO NOTE, that in a number of other states, there is a 4th category of legal real estate agent representation. And, while this additional category is know by different names in different states (e.g. in New Jersey, it’s called a Transaction Broker), it allows an agent to act as an independent facilitator and mediator for the purpose of bringing a buyer and a seller together to consummate a real estate transaction.
More importantly, since an agent acting in the capacity of a facilitator has no legal fiduciary responsibility to either the buyer or the seller, there is no misunderstanding nor any illusion as to whose best interest may be sacrificed if the parties find themselves in conflict over a specific issue; such misunderstandings are a commonly viewed as a short coming of the Dual Disclosed Agency relationship.
Now, in the State of Arizona, there are many agents call themselves a “buyer agent.” However, in reality, there are very few exclusive buyer agents in Arizona. This is because, in order for a real estate agent to be an exclusive buyer agent in Arizona, that agent must work for a real estate agency that does not represent any property owner, which is evidenced by the fact that such agencies do not list property for sale or lease. However, since most agents work for companies that do list property for sale, under the law, those agents cannot legally be exclusive buyer agents unless they do not show homes to a buyer-client that are listed with their own agency.
Sound a little confusing? Well, let me try to clear it up in this real life example.
FACT: I am licensed as an Associate Broker with WestUSA Realty. As such, I am an agent who works on behalf of WestUSARealty and their clients, therefore, I must act in compliance with all of the legal obligations of WestUSA Realty.
Consequently, because WestUSA Realty represents seller clients by listing their property for sale, I can only be an exclusive buyer agent if I do not show buyers any of the properties listed for sale (or rent) with WestUSA Realty.
However, the moment I show abuyer-client a property listed for sale with my company (WestUSA Realty), I am instantly required by law to represent the best interests of that seller. This places me in a position of legal conflict with my legal obligation to represent the buyer as the buyer’s agent, unless I have the written permission of both the buyer and the seller to represent both of them in the same transaction; this is called being a DUAL DISCLOSED AGENT, which is defined above in #3.
As you can imagine, being a DUAL DISCLOSED AGENCY (or, a “dual agent”), can become a very sticky and troublesome situation for the buyer, the seller and the agent since it’s quite common that circumstances occur when the interests of the buyer and seller are at odds.
But, not only is Dual Disclosed Agency uncomfortable for the agent, this agency relationship has a far greater potential for the agent to suffer legal liability from a claim by both the buyer and the seller for failing to live up to his/her legal fiduciary requirement. This is because, the legal requirements of Dual Disclosed Agency require a real estate agent to do something that is absolutely impossible; to serve the best interest of both the buyer and the seller at the same time.
Anyway. Now that you know the legal agency relationships between buyers and real estate agents in the State of Arizona, as the buyer, you now have to decide what type of agency relationship you want to have with your real estate agent.
As the buyer, you have the following three options:
1. Hire an exclusive buyer agent who works for a firm that does not take listings.
BENEFIT: You will have the total loyalty of the agent when a conflict with the seller arises (as they frequently do).
LIABILITY: The buyer-agent may not have a relationship with the seller you’re trying to negotiate with, thus, may not have the benefit of any advantage in the negotiating process.
2. Hire an agent who works for a firm that takes listings, and require the agent not to show you homes that are listed with the agent’s firm.
BENEFIT: Again, you will have the total loyalty of the agent when a conflict with seller arises.
LIABILITY: Again, the buyer-agent may not have a relationship with the seller you’re trying to negotiate with, thus, may not have the benefit of any advantage in the negotiating process.
3. Hire an agent who works for a firm that takes listings and agree, in writing, to allow the agent to act as a Dual Disclosed Agent if you wish to see and buy a property listed with the agent’s firm.
BENEFIT: The agent may have a relationship with the seller you’re trying to negotiate with, thus, may have the benefit of an advantage in the negotiating process.
LIABILITY: As a practical matter, the agent cannot possibly live up to the fiduciary responsibilities to both the buyer and the seller, especially when the buyer and seller are at an impasse.
REMEMBER, when acting as a Dual Disclosed Agent, the burden is on the AGENT to act in the best interest of BOTH PARTIES. Also keep in mind, that when a conflict between a buyer and seller presents itself, an experienced agent acting as a Dual Disclosed Agent will deal with it in a straight-forward and honorable manner, keeping both parties equally informed, and will work diligently to satisfy the desires of both parties.
What are your thoughts on Buyer-Agency, and on Dual Disclosed Agency?
