Whether you’re a veteran homebuyer considering a move, or a novice about to make your first purchase chances are you’re about to undertake one of the biggest financial moves you’ll ever make. It’s daunting. That’s one of the reasons — and there are many — buyers and sellers alike turn to real estate agents to help them through.
Research from the National Association of Realtors shows 97% of home buyers say they are satisfied with their real estate agent’s honesty and integrity, says NAR spokesperson Troy Green. However, a new report from the Consumer Federation of America says that what buyers and sellers are getting from those agents is not necessarily what they think. At the heart of the problem: Two-thirds of buyers and sellers, a 2018 CFA study showed, believe that the agents are required to represent the best interest of their clients, but that is not always the case says Stephen Brobeck, a Senior Fellow with the CFA. In fact, the agent a buyer hires to help them find a home to purchase may have loyalties to the seller of the home — which could cause a host of problems for the buyer including the agent having “no obligation… to help you find the right house at the right price,” Brobeck said in the report.
How Is This Happening?
When a homebuyer or seller begins the process, their agent typically has them sign a disclosure document which is supposed to make clear who the agent is working for. These disclosures, the report notes, are handed out sporadically — often not when you start working with an agent but instead right before the sale. They’re also not standardized across states and can be difficult to understand (all in states use more than 50 different terms to describe the roles of agents.)
Where’s the Loyalty?
This is a problem. Understanding the relationship between the agent and their client is important for a few reasons. For one, if a consumer discloses information about their finances to an agent that is also loyal to the other party in question, the agent can use that information to tell the seller what price to request, for example, if the buyer is willing to spend more than the house is worth. Or, an agent representing a buyer could try to get that buyer to purchase a home listed by their agency.
The CFA recommends that to fix this problem, all disclosures should clearly state to whom the agent is loyal. They also suggest the documents are all in writing so the consumer can read it at their will, it is presented upon first contact, it is short, written in “plain language,” and in “user-friendly format and type size,” it includes the agent’s information, and it should be required by all states, per the report.
In the meantime, however, there you can do to protect yourself. First, “remember that when you talk to an agent, or communicate by phone or email, or at an open house, that agent does not represent your interest no matter how friendly and eager they are. They are treating you as a customer, not as a fiduciary agent, so be careful about what you disclose in initial communications,” Brobeck says. Second, “when you seriously are considering employing that agent, you need to have a conversation about who they represent,” he adds. Consider it just another hurdle that you have to clear on the way to finding your home-sweet-home.
With Rebecca Cohen