1. Selecting And Hiring a REALTOR or Agent,
- Why should I hire a REALTOR or Agent? And what's the difference?
Most of us don't know what we don't know! Buying a home may very well be the largest investment or purchase you make in your lifetime. Buying a home is a combination of several long-term commitments, a commitment to make and maintain a home, a commitment to live and hopefully thrive in a neighborhood, and a commitment to the bank. Once made, these commitments are not easy to back out of, at least without creating several negative consequences.
Hiring a professional to help and guide you will enable you to make wise choices, negotiate the best terms, and avoid the myriad of pitfalls and dilemmas that go along with buying a home!
REALTOR or Agent? REALTORS subscribe and adhere to a specific Code of Ethics that distinctively set them apart from all other licensees. According to Utah state law, all people who sell real estate, with the exception of for sale by owners, are required to be licensed. REALTORS are state licensed professionals. REALTORS differ in the fact that they belong to the National Association of REALTORS, the Utah Association of REALTORS and their respective local board such as the Salt Lake Board of REALTORS or Park City Board of REALTORS. In addition, they also subscribe to at least one Multiple Listing Service such as the Wasatch Front Regional Multiple Listing Service or WFRMLS. In order to subscribe to the MLS, it is required that you be a REALTOR. The National Association of REALTORS is the largest trade organization in the US.
- What is a Buyer Broker Agreement and Why should I Sign It? (read the exclusive buyer broker agreement)
The best part about having a REALTOR represent you is, you get professional representation exclusively for you, and you don’t have to pay for it!
State law requires real estate sales agents to have a written agreement to represent a buyer in a real estate transaction. That agreement is known as the Exclusive Buyer Broker Agreement. The terms of this agreement are negotiable, and it specifies how and how much an agent will be paid.
When a buyer signs this agreement, they have committed an exclusive agent to represent them. That representation includes specific duties and actions known as Fiduciary duties which include;
(a) loyalty, which obligates the agent to place the best interests of the principal above all other interests, including the agent's own;
(b) obedience, which obligates the agent to obey all lawful instructions from the principal;
(c) full disclosure, which obligates the agent to inform the principal of any material fact the agent learns about:
(i) the other party; or
(ii) the transaction;
(d) confidentiality, which prohibits the agent from disclosing, without permission, any information given to the agent by the principal that would likely weaken the principal's bargaining position if it were known, but excepting any known material fact concerning:
(i) a defect in the property; or
(ii) the client's ability to perform on the contract;
(e) reasonable care and diligence;
(f) holding safe and accounting for all money or property entrusted to the agent; and
(g) any additional duties created by the agency agreement. (see R162-2f-401a. Affirmative Duties Required of All Licensed Individuals.)
The term of the Buyer Broker Agreement is negotiable. It may last for 1 hour or several months. It may also be specific to just 1 property or cover several counties.
The Buyer Broker Agreement specifies what the agent will be paid AND who can or will pay it. A percentage of the sales price or a flat fee can be negotiated for payment.
Payment can come directly from the buyer or from the listing brokerage. In Utah, it is customary for all Buyer Brokers/Agents to be paid at closing by the listing brokerage.
When a property is listed on the multiple listing service, the listing brokerage makes an offer of cooperation to all other member REALTORS and agrees to share a portion of their commission with the selling agent or Buyers Agent. That payment is posted on the MLS as BAC, the Buyers Agency Commission.
The Buyer Broker agreement states that this commission satisfies the buyers’ obligation to pay, unless otherwise negotiated. According to state law, compensation is never made directly to the agent. All commissions are payable to and paid by the respective agents' broker.
- How Do I Select a REALTOR or Agent?
A good recommendation from a trusted source is usually a good way to hire almost anybody. Look for experience and knowledge. You want someone who knows the market and the transaction. Who is patient and will take time to explain things without “talking down to you”. Buying a home is a process, and can take a little while. It’s always nice to work with someone who has a sense of humor.
And as I said before, experience and knowledge are important.
To choose neighborhood
To select a lender of their choice
To acceptable financing, closing costs, insurance, and interest rate
To Exclusive Representation, to use the REALTOR of their choice
To choose their escrow company or closing attorney
To choose their home inspector
To inspect the property, to perform due diligence to their satisfaction
To request repairs or corrections, to resolve objections
To cancel sale based on Due-Diligence, Financing, or Appraisal
To final walk-thru inspection
To take possession of the property with certain expectations per contract
If you were getting a divorce, would you use the same attorney your spouse is using? Sometimes a buyer thinks they can negotiate a better price if they go directly to the listing agent. They are hoping the listing agent will reduce the commission because they are “getting both sides”. Since the listing agent already has a signed agreement with the seller, they are not under obligation to reduce that fee.
When an agent represents both sides in a transaction, that creates a situation called dual or limited agency. Keep in mind the listing agent already has those previously mentioned fiduciary duties to the seller, and now he must provide those to the buyer as well? Limited agency puts a burden on the listing agent to be fair to both parties. The listing agent can do nothing that would put either the buyer or seller at an unfair advantage or disadvantage. Because of the precarious position all parties are in under limited agency, it must be disclosed in advance, before it happens, and must have the written consent of both buyer and seller. State law says the buyer must be informed that they have the right to seek their own representation if they choose. State law says;
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;
(3) in order to represent both principals in a transaction as a limited agent, obtain informed consent by:
(a) clearly explaining in writing to both parties:
(i) that each is entitled to be represented by a separate agent;
(ii) the type(s) of information that will be held confidential;
(iii) the type(s) of information that will be disclosed; and
(iv) the circumstances under which the withholding of information would constitute a material misrepresentation regarding the property or regarding the abilities of the parties to fulfill their obligations;
(b) obtaining a written acknowledgment from each party affirming that the party waives the right to:
(i) undivided loyalty;
(ii) absolute confidentiality; and
(iii) full disclosure from the licensee; and
(c) obtaining a written acknowledgment from each party affirming that the party understands that the licensee will act in a neutral capacity to advance the interests of each party;
(4) when acting under a limited agency agreement:
(a) act as a neutral third party; and
(b) uphold the following fiduciary duties to both parties:
(i) obedience, which obligates the limited agent to obey all lawful instructions from the parties, consistent with the agent's duty of neutrality;
(ii) reasonable care and diligence;
(iii) holding safe all money or property entrusted to the limited agent; and
(iv) any additional duties created by the agency agreement.