Community Classifieds
Week of October 21, 1998

Buyer's Brokers: Advocates for the Real Estate Shopper
Hiring an agent who works for the customer can save time, money
By Kathryn Pearson, Community Newspapers Staff

A proposed radio tower down the street, a faulty furnace, or loud traffic from an unseen highway could present future problems to unsuspecting home buyers who are preoccupied with myriad issues during a home search.

Enter the buyers broker, an unbiased person whose job it is to find and expose such flaws to the home buyer.

Representation for the buyer has become an accepted practice in the 1990s, yet it remains a touchy issue in today's hot real estate market where competition for the sales commission is fierce.

Buyers often have the wrong impression that an agent who shows them a house is working on their behalf. Worse yet, naive buyers who are not aware of the different forms of agent representation might disclose information to this agent who they believe is representing them. For instance, it is very common for a buyer to mention to the broker who just showed them a home that they are willing to offer a price of $210,000 even though they can afford to go as high as $250,000. In the end, a slip of the tongue could cost the buyer several thousand dollars.

Brokers like Ronn Huth of Hamilton and Susan Cain of Essex, who limit their services strictly to buyer representation, have found many appreciative home buyers who like having an advocate on their side. Often it is the first-time buyers who opt to hire buyer's brokers, real estate agents who devote I 00% of their attention to the home purchase for a client.

Most of the large real estate companies on the North Shore also have jumped on the buyer's broker bandwagon. Almost all of the big firms now offer home buyers the choice of being represented exclusively by a buyer's broker who is on their staff. This decision is usually made shortly after the house hunters meet with a prospective broker and an agency disclosure form is presented for them to sign.

State law requires that all home buyers be given the chance to sign such a contract with their real estate agent at the start of a home search. It's up to each buyer to decide whether they want to work with an exclusive buyer's agent or contact a handful of listing agents from different companies.

"We had a buyer tell us that a real estate company showed him only houses that posted their sign on the front lawn. This is a dangerous set-up," Huth says. Real estate companies should be showing a buyer all the listings that meet its clients needs, he says.

In most listing offices that offer the buyer's broker service, the company will show a buyer its own listings first, then go into the Multiple Listings Service (MLS) to see what other firms have to offer, Huth says.

"As a buyer's agent, I listen to my buyer's wants and needs and then search the MLS, For Sale By Owner (FSBO) homes, auction properties, expired listings and properties not even on the market," he says. The so-called FSBO sellers love working with him, he says, because he brings "only capable buyers to their home."

But buyers should remember that exclusive buyer's brokers do not have home listings of their own to show. A Medford / Melrose broker points out that a number of prime real estate listings are sold within a real estate office, often going under agreement before they hit the Multiple Listings Service. In larger active companies, the brokers on staff often have first dibs on the homes listed by their co-workers, keeping some of the more desirable properties out of the reach of their competitors.

In a hot seller's market where properties fly in and out of a real estate office in less than a week, a home buyer who works with an exclusive buyer's broker might be left out of the loop when it comes to the availability of some homes, the Medford broker warns.

A growing trend
Huth, a North Shore broker who started up his first Buyer's Choice company in 1990, now represents only the buyers on a home sales transaction, and his company has grown to include branches in Winchester, Andover, and Melrose.

Choosing a buyer's agent has become an accepted practice by both buyers and traditional brokers in the late 1990s, says exclusive buyer's broker Susan Cain. Buyers are particularly vulnerable when a seller's market prevails, she says. She notes the current market conditions remind her of the late 1980S.

"Buyers are often pressured into making quick decisions and paying too much for a home," Cain says. " I suggest buyers take six months to a year to narrow down their home selection." A buyer's broker is willing to spend more time with clients. "I'm not pushing for the sale. I'm pushing for my buyer to find a property they love at a price tag that is reasonable," she says.

As a buyer's broker, Cain says that she is free to sit down with the buyer and "strategize about submitting a well-thought-out offer." She says repeat buyers who are trading up or down benefit from the kind of advice she can offer, such as recent sales data, to help deter- mine a home's value.

Disclosing dual agency
An real estate agent who works as a buyer's broker in a large office must disclose " dual agency" if he intends to show his customer a home listing that belongs to some- one in the same office.

Companies like Hunneman, DeWolfe, and Carlson offer buyers the opportunity to contract with an agent who works solely for them.

First-time buyers are more likely to choose a buyer's broker, says Carlson manager Francine Cecieta. She says she has witnessed an increase in people opting for buyer's representation.

Hunneman's Lois Williams explains that as a buyer's broker "we sit down at the first meeting and tell the client about recent sales data and show them what's available in the different price ranges." If they go out to look at a Hunneman property, "we can facilitate the sale, but the buyer must make the offer on their own," Williams says. "We cannot tell a buyer what to offer if they are purchasing one of Hunneman's listings."

Williams, who is president this year of the North Shore Association of Realtors, agrees there has been an increase in the number of customers choosing to hire buyer's brokers. This specialty is an important one for transferees who depend on local realtors to help them choose not only a house but a community and a neighborhood, says the Topsfield / Boxford broker.

"A seller is not being served by a broker who does not compensate the buyer's broker the same as a regular seller's broker," Williams says, adding the initial resistance to buyer's brokers in the Topsfield / Boxford area has disappeared. "We're working for the seller," she says. "Whatever offer comes in, we evaluate it."

Normally, a commission is split evenly between a listing and selling broker, but some traditional brokers still refuse to give an equal cut to the buyer's broker.

"Ninety-five percent of the time it's split evenly," Cain says. Brokers who decide not to split the commission with a buyer's broker "are only hurting the sellers" because a buyer s agent will not take their customers to a home if they know they're not going to get paid. "They're eliminating some good buyers," she says.

In Medford and Newburyport, buyer's brokers have received a cold shoulder from some traditional brokers who refuse to share the commission, say some brokers.

The earlier a buyer's broker is brought in to assist, the more she or he can help the customer, Cain says. If the buyer has already seen a property a couple of times and then asks for help from a buyer's broker, splitting the commission becomes a difficult issue to resolve unless the buyer is willing to pay the buyer's agent. She stresses that the "purest form of representation" is to work with an exclusive buyer's broker.

No extra costs

A buyer's broker since 1993, Helen Phaneuf is sales manager at the Melrose office of Buyer's Choice.

"Our job is to find the home of their dreams, not sell the one we have listed," Phaneuf says. A buyer's broker is there from the start to finish, she says. Buyer's brokers walk their clients through all of the home-buying steps from finding a home to the home inspection to the closing day.

"This process does not cost the buyer anything extra," Phaneuf says. The commission is split the same way that a regular listing and selling broker split it.

"Some listing brokers pay us a lesser commission, but we do not let that stop us," Phaneuf says. Her main job is to protect the buyer.

A buyer's broker could even help you save money by negotiating a lower price on a property or connecting a home buyer to a good lender, Huth says.

People are not aware that they can be protected, Phaneuf says. They see an ad in the paper, and call up that realtor to make an appointment for a showing. " They do not realize that the broker is working for the seller," she adds.

"We begin a home search for our client by using the database provided by the Multiple Listings Service," Huth says. He also tells his clients about properties that are for sale by the owner. About one-third of the deals completed by Huth's Buyer's Choice company are homes advertised as "For Sale by Owner," he says.

If a client wants to live in a neighborhood where no homes are currently on the market, Huth says he calls every home in the area and tries to find someone who might want to sell their property.

During a seller's market, Huth says his job is to "package" his buyers to be very appealing to a seller. Buyers can facilitate the home transaction by getting pre-approved by a lender for a certain amount. That includes a complete credit check, Huth says.

"If we think it's in the best interest of a client to walk away from a deal, then we assist them in getting back the deposit and moving on to purchase something else," he says. However, if the buyer has his heart set on a house that has certain failings, the buyer agent would suggest ways to negotiate the deal to his advantage, Huth adds.

"We feel the neighbors have a lot to tell potential buyers," he says. He gives the names and numbers of neighbors to buyers so that they can call and ask questions. "Our focus is that of a consultant. We want to provide information that allows the buyer to move for- ward in the process," he says.

Huth is glad that recent legislation to establish "designated dual agency" was shot down by the State Legislature.

"This would have allowed situations that would be comparable to a law firm having one lawyer represent the plaintiff and another attorney represent the defendant," Huth says.

Anyone who contacts Buyer's Choice by e-mail has the opportunity to receive free information and daily updates on home listings, Huth says.

On a sheet of more than 100 services offered by his buyer's broker company, Huth lists the following: how much home can a buyer afford; understanding exclusive listings; comparing tax assessed values; how to know when to walk from a home deal; checks with the child molester registry; when to involve an attorney; interpreting the inspection report; the final walk-through; and even picking up the keys from the seller.

"Buyers don't want to find out about the defects after they purchase the home. After a thorough home inspection, it's better to renegotiate the price of a home," Cain says.

Brokers in a dual agency situation cannot give advice or counsel to either party if they are representing both sides, Huth says.

"They are put in an awkward position and can't give full fiduciary services to either party," he says. "The more the sale is kept at arm's length, the better it is for the buyer."