The Buyer’s Agent
When the housing market slows, the buyer’s agents come out. Tough times for a commission estate agent means that a new source of income has to be found. By declaring himself to be a “buyer’s agent” the average commission estate agent is able to charge purchasers who are buying properties through competing estate agencies.
In this way, one property can provide two commissions for two different commission estate agents.
(See our Critique on “cluey buyer’s advocates”)
The Buyer’s Agent Myth
Commission estate agents have developed the concept of the “buyer’s agent” as an alternative means of tapping into the value of the consumer’s greatest asset – residential real estate.
The fact that a commission is charged, as opposed to a fee-for-service, is the first indicator that the service offered by the buyer’s agent cannot be justified on a cost-benefit basis.
Finding a property to purchase is not difficult, and certainly does not warrant the payment of a commission. A simple “spotter’s fee would compensate for such a service.
Beyond this the buyer’s advocate has no role, as the lawyer is the only person who possesses the skills and qualifications needed to negotiate and draft the precise terms and conditions required to give effect to any contract. Lawyers charge on a fee-for-service, varying according to the amount of work required in a particular matter.
(See our Critique on “cluey buyer’s advocates”)
Use A True Professional
Only a lawyer can represent a consumer in a true agent capacity when dealing with the legal issues involved in real estate negotiations. A commission estate agent on the other hand, is unable to provide legal representation, and cannot effectively negotiate on a purchaser’s behalf. This is because negotiation in real estate always involves the giving of legal advice and the preparation of legal documents.
To understand the importance of having a true legal professional acting on your behalf during real estate negotiations, see the following section “How We Deal With Buyer’s Agents”.
(See our Critique on “cluey buyer’s advocates”)
How We Deal With Buyer’s Agents
Because buyer’s agents are no more than commission estate agents in a purchasing role, their legal status remains the same as that of any other commission estate agent. This means that a buyer’s agent is prohibited by law from performing legal work or offering legal advice.
To operate within the law, the buyer’s agent must conduct all negotiations verbally (verbal negotiations are unenforceable, because the law requires real estate sales to be finalised in writing). When the time comes for a formal written offer to be made, the buyer’s agent must refer the purchaser to her own lawyer. This means that the true negotiations cannot begin until the purchaser’s lawyer has become involved in the matter, and a formal written offer has been submitted.
In effect, the role of the buyer’s agent is reduced to one of simply disclosing the purchaser’s position prior to the commencement of the real negotiations. We have previously mentioned that a commission estate agent can be turned against his own client, particularly where commission rage develops. The situation is the same with the buyer’s advocate, as the struggle to win a commission can easily become a struggle between the buyer’s advocate and his own client.
(See our Critique on “cluey buyer’s advocates”)
The Need For Thorough Legal Knowledge
In order to enter into any discussions or negotiation regarding the sale of real estate, an agent must have a thorough and up-to-date knowledge of the law. It is simply not good enough to have a general understanding of the law, as the giving of legal advice requires both expertise and the ability to carry responsibility for the advice given.
Knowing the law involves much more than simply being able to state a general legal proposition; it is equally important to know when the other party to the negotiations is wrong at law. Some negotiators may attempt to bluff or bully their way through a sale transaction, stating propositions or rules that do not exist. It is the task of the negotiator to be able to recognise and counter such methods.
The Importance Of Drafting Skills
Because the law requires real estate contracts to be in writing, it is essential that any person acting on behalf of another in real estate negotiations should be able to negotiate in writing. This means that the agent must possess advanced writing or drafting skills, and be capable of drafting contract terms and conditions that will give good legal effect to the client’s instructions.
Only a qualified lawyer is permitted to provide a client with legal advice as to the meaning and effect of contract terms and conditions, and to prepare such terms and conditions on a client’s behalf.
Unless the buyer’s advocate is a qualified lawyer, she must always refer the matter to the client’s lawyer. If the buyer’s advocate undertakes legal work or offers legal advice when she is not qualified to do so she commits a criminal offence, and becomes liable to a penalty of 2 years’ imprisonment.
An Example Of True Real Estate Negotiation
For an example of a real-life situation that called for legal knowledge, practical experience, and broad negotiating skills, see our item “The House That Sold Twice” on our “Real Estate Negotiation” information page.
Conclusion
The role of the Buyer’s Agent really does not exist. The only professional who possesses the skills and qualifications to truly represent a purchaser in an agent capacity is the lawyer.
(See our Critique on “cluey buyer’s advocates”)
