Facts: We are thinking about buying our first home. A number of people told us we should engage a buyer’s agent to assist us.
Question: Is that really necessary? Answer: Although having a buyer’s agent is not “necessary,” there are many good reasons for engaging a buyer’s agent.
Buyer’s agents are defined in the NYS Real Property Law as “an agent who contracts to locate residential real property for a buyer or who finds a buyer for a property and presents an offer to purchase to the seller or the seller’s agent and negotiates on behalf of the buyer.” The important distinction between a buyer’s agent and a seller’s agent is that a buyer’s agent has a duty to work in the best interests of the buyer. All agents are obligated to disclose to the buyer whether they are working for the buyer or the seller. Such disclosure is important since it puts all of the parties on notice as to the loyalties of each agent.
One of the most important reasons for engaging a buyer’s agent when purchasing a home is the fact that most real estate agents work for the seller and have a fiduciary duty to act in the best interest of the seller. After all, the seller is the one paying the agent’s commission. For the buyer, the potential downside of this arrangement is that the agent representing the seller has no loyalty to the buyer and has no obligation to negotiate in the best interests of the buyer. If you are working with the seller’s agent, for example, what you believe you are saying to that agent in confidence may, in fact, be shared with the seller. This means that the seller may be privy to discussions you have with the agent about how much you may be willing to spend and what conditions you may be willing to accept in order to get the property at issue. It also means that the agent may be less inclined to advise you of critical facts about the property that could influence your decision to buy. For example, the sellers may be moving because a large commercial property down the street is being developed and they are concerned about increased traffic. Although you would likely want to know about the development before you agreed to purchase a house on the street, the seller’s agent has no obligation to share it with you.
In addition to the issues raised by the duty of the seller’s agent to the seller, the fact that the seller’s agent often refers the buyer to a home inspector, an attorney and/or a mortgage lender raises other concerns. Although ethical rules prohibit professionals from allowing referral sources to influence the service/advice they provide clients, there is always the possibility that the professionals referred by the agent are beholden to the agent for future referrals. If that is the case, the buyer may be at a disadvantage.
Buyers who have experience in real estate, who know the right questions to ask and who exercise due diligence generally fare well even when they work with a seller’s agent. However, first time home buyers and buyers who want the peace of mind of knowing that they are working with an agent who is on their side would do well to engage a buyer’s agent. Such agents are loyal to the buyer and must maintain the buyer’s confidences. Buyer’s agents are in a position to advise the buyer of facts that the seller may not wish to disclose. They can also negotiate on behalf of the buyer to insure that the buyer’s best interests are protected. Since buyer’s agents are generally paid a portion of the commission that the seller contracted to pay his own agent, engaging a buyer’s agent usually does not increase the closing costs for the buyer, making a buyer’s agent’s services invaluable.
Linda M. Toga of The Law Offices of Linda M. Toga, P.C. is an East Setauket, New York attorney with a general law practice focusing on estate planning, real estate, marital planning, small business services and litigation.