Christopher Baucom

Part 3 - Agency and the Home Buyer

This is the third in a series of articles describing the concept of agency, as it applies to real estate transactions in North Carolina. The purpose of these articles is to educate people who are interested in buying or selling a home in the Gaston County, NC region about the value of representation when buying or selling a home. This information should be of particular interest to first time home buyers who have not previously gone through the process of buying a home.

Part 1 - "What is Agency?" can be found here.

Part 2 - "Agency and the Home Seller" can be found here.

Buyer Agency

What most consumers do not understand about agency is how it applies to prospective home buyers. This may be because just a few years ago there was no such thing as Buyer Agency. In those times every agent was considered a sub-agent of the listing broker, and therefore also owed their loyalty (aka. fiduciary duty) to the seller. Do you understand what you just read? That's right! Prior to the creation of Buyer Agency, when you contacted an agent to show you homes that fit your needs, that agent was technically working for the home owners. They owed their allegiance to the sellers, not you! I would be willing to bet that was never explained to their "clients"!

The Buyer Agency Agreement

This is the document that sometimes brings my pleasant chat with potential home buyers to a screeching halt. Most people have never heard of this agreement before I describe it in my mandatory review of the NC Real Estate Commission's "Working with Real Estate Agents" brochure, which provides a thorough explanation of real estate agency in North Carolina. (Every NC real estate agent that you've had meaningful buying or selling discussions with has reviewed and provided you with a copy of this document, right?)

Buyer Agency was designed to protect you, the buying public! Until you enter into an agency relationship with a licensed agent, he/she is legally bound, as a sub-agent of the seller, to represent the seller's best interest in the sale of their home. If you want the agent that you are dealing with to represent your best interest, then you need a Buyer Agency agreement with that agent. This is particularly true if you call the listing agent (from the number on a sign, for example) to view a property. They are already contractually obligated to serve the seller's interest, not that of potential buyers of the home.

But wait! There's more!

While the Exclusive Buyers Agency Agreement spells out the terms for the agent's compensation - as a home buyer, it is likely that you will not be the one to pay for your agent's representation. In most cases, the buyer's agent is compensated by the listing agent from the sales commission that they negotiated with the home seller. It's true! As a home buyer you will be shelling out fees right and left, but your agent's compensation usually isn't one of them!

Many people, when shopping for a home, believe that bypassing a buyer agent will allow them to negotiate a lower sales price. Not true! The sales commission is agreed to when the listing agreement is signed by the home seller. So, the choice to not work with a buyer agent simply means that the listing agent will take home the full commission amount when the property is sold - while you will have gone through the transaction without utilizing (free) professional representation.

Next...

In Part 4 of the series, "Dual Agency", I will discuss the agency relationship when the buyer's and seller's agents work for the same brokerage.

For a small town, there's plenty going on in Belmont this weekend...

Friday...

9:00 AM - 10th Anniversary Opening Weekend Celebration at Daniel Stowe Botanical Garden - Commemorating this milestone in our history. We're creating a special exhibit to show how we've grown since 1999. Friday thru Sunday 9:00 AM - 5:00 PM

7:00 PM - The Haunted Mill - Box office opens at 7:00 PM

7:30 PM - High School Football - South Point Red Raiders at Forestview Jaguars.

Saturday...

9:00 AM - 10th Anniversary Opening Weekend Celebration at Daniel Stowe Botanical Garden - Commemorating this milestone in our history. We're creating a special exhibit to show how we've grown since 1999. Friday thru Sunday 9:00 AM - 5:00 PM

2:00 PM - Yappy Hour at the Happy Dog Café - Stop by with your pet and let them enjoy an afternoon of socializing and playing. Free Doggie Treats Served. 2 - 4 PM

2:00 PM - Fish Fry & Music Jamboree at the Belmont Historical Society, 40 Catawba Street. Tickets - $8.00; 2:00 PM - 6:00 PM

7:00 PM - The Haunted Mill - Box office opens at 7:00 PM

9:00 PM - Eclipse is playing at Bentley's in downtown Belmont.

Sunday...

9:00 AM - 10th Anniversary Opening Weekend Celebration at Daniel Stowe Botanical Garden - Commemorating this milestone in our history. We're creating a special exhibit to show how we've grown since 1999. Friday thru Sunday 9:00 AM - 5:00 PM

This is the second in a series of articles describing the concept of agency, as it applies to real estate transactions in North Carolina. The purpose of these articles is to educate people who are interested in buying or selling a home in the Gaston County, NC region about the value of representation when buying or selling a home. This information should be of particular interest to first time home buyers who have not previously gone through the process of buying a home.

• Part 1 - "What is Agency?" can be found here.

Part 2 - Agency and the Home Seller

When a home owner signs an Exclusive Right to Sell Listing agreement with an agent, they enter into an agency relationship with that agent. The agent now owes his/her best effort to serve the home owner's interest, above all other considerations, to get the home sold. This should come as no surprise to anyone who has ever sold a home.

Under an exclusive listing agreement, a full service agent takes on the roles of project manager, subject matter expert, marketing director, advertising agency, and chief negotiator for the home seller.

Next...

In Part 3 of the series I will discuss the agency relationship as it relates to finding and purchasing a home.

"I'm not signing anything!"

How many times have I heard this from people who contact me to shop for property? I lost count long ago!

The thing is, I understand where they're coming from. I am very wary of signing any paper that is shoved in front of me. However, I understand that I usually find myself in this scenario because I want something from the person asking for my signature. So, I try to keep an open mind. My response is typically, "Convince me why I should sign." - or in more blunt terms "What's in it for me?" (aka. WIIFM).

Here's what's in it for you.

Representation in Real Estate is defined by the concept of "agency". This is how agency works in North Carolina...

Part 1 - What is "Agency"?

This is the first in a series of articles describing the concept of agency, as it applies to real estate transactions in North Carolina. The purpose of these articles is to educate people who are interested in buying or selling a home in the Gaston County, NC region about the value of representation when buying or selling a home. This information should be of particular interest to first time home buyers who have not previously gone through the process of buying a home.

An agency relationship is established when a principal (this is you, the buyer or seller) in a real estate transaction enters into a brokerage contract with a real estate broker. An agency relationship requires the broker to represent and act on behalf of you, the principal. This relationship is known as a fiduciary relationship. As a fiduciary of a real estate client, an agent is placed in a position of trust and is required to act at all times for the sole benefit and interests of that client.

So, there you have it. It's really that simple. When you enter an agency agreement with a real estate broker, they are making a formal commitment to act in your best interest as it relates to your real estate transaction.

Next...

In future installments I will discuss how the agency relationship varies with different roles an agent may play in real estate transactions.

I was just reading this article on CNNMoney.com. Local governments are bemoaning the fact that they are having difficulty spending federal grant money from the Neighborhood Stabilization Program. The problem? Private investors and home buyers are snatching up foreclosed properties before the local program administrators are able to.

"Getting hold of the houses, especially the right houses, can be a lot harder than they thought," said housing expert Alan Mallach, a non-resident senior fellow at the Brookings Institution. "They are finding there's a lot more competition for these properties, and they are losing out to investors."

Now, I'm certainly no economist. However, I am a taxpayer and I'm having a hard time understanding how this is a problem. Just because some of my tax dollars have been budgeted to prop up struggling neighborhoods does not mean that the government should feel obligated to spend it.

Each month I create a budget so that I know how much money I will need to meet my family's needs. Occasionally I find that I didn't spend as much as I had budgeted for variable expenses, such as groceries and entertainment. When this situation occurs, I do not feel compelled to quickly come up with new ways to get that money spent. I have learned over my lifetime that where there is a surplus today, there will eventually be an unplanned expense pop up - usually when least expected. It's in those times that I'm glad that I had enough discipline to hold onto some of that surplus.

There has been a lot of grumbling about how the banks are not doing their part to "stimulate the economy". I agree with most of those opinions. However, in this case, I think they've got it right and I agree with this comment...

Not everyone sees the increased competition for foreclosed properties as a problem. This activity will also bring stability to neighborhoods, said Joseph Pigg, senior counsel at the American Bankers Association.

"If the private market is coming back and buying houses and crowding the government out, that's not a bad thing," he said.

What do you think?